As Asia prepares for more extreme weather in the coming months, the region’s reliance on air conditioning as a cooling solution could instead worsen the heat problem it is trying to solve, warned a recent report.
Global demand for air conditioning, driven by Asia’s largest economies, could rival the electricity demand of data centres for artificial intelligence (AI), research firm MSCI Institute noted in its Transition Finance Tracker report published Monday.
Citing projections from the International Energy Agency (IEA), the report highlighted how the global stock of air conditioning units is expected to triple from about 1.6 billion in 2016 to 5.6 billion in 2050, driven by demand from China, India and Indonesia.
However, cooling units that run on coal- or gas-heavy grids could translate into more greenhouse gas emissions, totalling over 1 gigatonnes of carbon dioxide and its equivalents in 2022, it added.
The result is a “self-reinforcing loop that is the definition of maladaptation,” MSCI Insights said. “Whether air conditioning’s role in adaptation reinforces or undercuts the transition depends almost entirely on how these risks are managed.”
“For investors, demand for cooling signals both the scale of adaptation need in a hotter world and the transition risk that managing it can create,” it added.
Asia is expected to continue leading global demand for air conditioning, said MSCI Insights, citing United Nations data showing that the region is warming twice as fast as the global average.
On top of that, the onset of the El Niño weather phenomenon, driven by warmer ocean waters in the Pacific Ocean, are expected to drive global temperatures even higher from now until August, according to the World Meteorological Organization (WMO).
Although companies in Asia provide just under half of the world’s air conditioning solutions (48 per cent), they make up more than two-thirds (68 per cent) of those building air-conditioning capacity as an answer to rising heat, MSCI’s research showed.
Conversely, few companies in other parts of the world view air conditioning as an adaptation measure. In the United States, air conditioning companies comprise 22 per cent of the world’s providers, but only nine per cent of firms cite it as an adaptation measure.
The statistic reflects “lower concern with the risk of extreme heat than in the Asia Pacific region,” MSCI Insights said.
A chipmaker from Japan told the research firm that they “recognise the potential for physical risks” such as an increase in air conditioning costs due to the rise of outdoor temperatures.
