Need to Know – IPCC Working Group 3 Report
The Intergovernmental Panel on Climate Change (IPCC) is the United Nations (UN) body for assessing the science related to climate change. Its purpose is simple – it was established and endorsed by the UN to provide political leaders with periodic scientific assessments concerning climate change, its implications and risks, as well as to put forward adaptation and mitigation strategies. It has 195 member states.
The IPCC has three working groups – Working Group 1, which deals with the physical science basis of climate change; Working Group 2, which deals with impacts, adaptation and vulnerability; and Working Group 3, which deals with the mitigation of climate change.
This latest Report is from Working Group 3. We wrote about Working Group 1’s Report here and we wrote about Working Group 2’s Report here.
The Synthesis Report of all three contributions is due in late 2022. The Report draws upon 34,000 studies and involved 270 authors from 67 countries. It carefully examines the intensifying impacts of climate change and future risks, and it has explicit regard for developing countries and less resilient parts of the world.
Should I Pay Attention to this Report?
Yes – the entire report is almost 3,000 pages long and is available here. As IPCC Working Group III Co -Chair Jim Skea has stated “It’s now or never, if we want to limit global warming to 1.5°C (2.7°F),” said. “Without immediate and deep emissions reductions across all sectors, it will be impossible.”
Somewhat more soberly, Antonio Guterres noted when releasing the Report that “climate activists are sometimes depicted as dangerous radicals, but the truly dangerous radicals are the countries increasing the production of fossil fuels. Investing in new fossil fuel infrastructure is moral and economic madness”.
What Does the Report Say?
The Report makes a large number of findings, but the “need to know” findings are as follows:
Temperature Increases
Global net anthropogenic GHG emissions were 12% higher in 2019 than in 2010 and 54% higher than in 1990. This is the highest increase in average decadal emissions on record;
In 2019, approximately 34% of GHG emissions came from the energy supply sector, 24% from industry, 22% from agriculture, forestry and other land use, 15% from transport and 6% from buildings.
Without a strengthening of policies beyond those that are implemented by the end of 2020, GHG emissions are projected to rise beyond 2025, leading to a median global warming of 3.2 [range of 2.2 to 3.5] °C by 2100.
Mitigation after 2030 can no longer establish a pathway with less than 67% probability to exceed 1.5°C during the 21st century. This means that there is only a 33% chance that 1.5°C will be achieved.
Implications for Carbon Based Industry
Among other findings, the Report states that:
If existing and currently planned fossil fuel infrastructure is operated until the end of useful life, 1.5°C cannot be achieved. The Report makes clear that the only way that climate change targets can be met is accelerated coal asset closure.
Technology is coming to the rescue, but needs support. From 2010–2019, there have been sustained decreases in the unit costs of solar energy (85%), wind energy (55%), and lithium-ion batteries (85%), and large increases in their deployment, e.g., >10x for solar and >100x for electric vehicles (EVs), varying widely across regions. The mix of policy instruments which reduced costs and stimulated adoption includes public R&D, funding for demonstration and pilot projects, and demand pull instruments such as deployment subsidies to attain scale.
A lot of money will be left on the table and in the ground. Limiting global warming to 2⁰C or below will leave a substantial amount of fossil fuels unburned and could strand considerable fossil fuel infrastructure. The combined global discounted value of the unburned fossil fuels and stranded fossil fuel infrastructure has been projected to be around 1–4 trillion dollars from 2015 to 2050 to limit global warming to approximately 2⁰C, and it will be higher if global warming is limited to approximately 1.5⁰C.
Coal assets are projected to be at risk of being stranded before 2030, while oil and gas assets are projected to be more at risk of being stranded toward mid-century. A low-emission energy sector transition is projected to reduce international trade in fossil fuels
Government action is critical, and there is a clear role for the finance sector. Clear signalling by governments and the international community, including a stronger alignment of public sector finance and policy, and higher levels of public sector climate finance, reduces uncertainty and transition risks for the private sector. Depending on national contexts, investors and financial intermediaries, central banks, and financial regulators can support climate action and can shift the systemic underpricing of climate climate-related risk by increasing awareness, transparency and consideration of climate-related risk, and investment opportunities
Translating to Strategy
There are two types of risks that companies need to understand and actively plan for – transition risk and physical risk. This report makes clear that physical risk is coming, that 1.5°C is slipping away, and that the most likely outcome is 3.2°C by 2100. This is an increase from previous “stated policy” outcomes of 2.7°C by 2100.
These are not small political risks for Governments, and those manning data watchtowers will need to pay careful attention to an escalation and acceleration of policy and targets which could alter current transitional risk settings. Research undertaken by Macquarie University has shown that under a 3.0°C scenario, the number of heatwaves would jump from three to seven a year and their duration would blow out from seven to 16 days. The number of days hotter than 35 degrees in Sydney, for example, would jump from an average of 3.1 to 11 each year, while in Melbourne the jump would be from 11 to 24. In Darwin, the average number of days hotter than 35 degrees would go from 11 to 265 – essentially, every day would be designated a heat stress day. As well as this, diseases normally found in the tropics will likely spread to more temperate areas across Australia, including cities, noting climate-sensitive infectious diseases such as the Ross River virus will be of particular concern. Put simply, we are entering a period of time where industry should not discount the possibility of sudden policy responses by Government towards quick wins on rapid carbon reduction.
The COP27 summit, to be held in Egypt in November 2022, will be critical – there will be considerable and growing pressure on governments to both reset and entrench pledges into legislation, and for developed countries to demonstrate their solidarity with vulnerable nations.
