There is no reason - neither technical nor financial - why the world economy should not be powered by renewable energy by 2040. However, a comprehensive energy infrastructure transformation would require political consensus within, and in between countries - a highly unlikely scenario.
Under these circumstances, the scarcity of fossil energy sources (decline of easily accessible and exploitable oil fields) combined with increasing demand from emerging economies and the lack of meaningful investment in alternatives will lead to significantly higher energy costs to businesses in the mid- and long-term future. In addition, the acceleration of climate change is leading to increased frequency of extreme weather events, leading to yet unforseeable costs and adding a high degree of uncertainty.
The combination of rising energy costs and increasing climate change impacts is affecting operational aspects and the bottom-line of businesses. Based on modelling of future energy developments and the connected climate change impacts, SolAbility has analysed the financial implications on different business sectors under three different scenarios: a BAU (business-as-usual) scenario, an energy Marshall plan scenario, and a TINA (there is no alternative) approach.
Key findings include:
- The cost implications of energy developments are still underestimated by most businesses
- Energy management and energy efficiency, are becoming key competitiveness drivers in many industries, in particular in energy intensive industries
- Business opportunities related to energy efficiency and renewable energy (both in terms of products and services) are still grossly underestimated
- Climate change will lead to increased and unforeseeable business disruptions through higher frequency and ferocity of extreme weather events
- Extreme weather events are leading to disruption and higher cost in the supply chain in all industries directly or indirectly depending on natural resources (water, agriculture, metals, fossil raw materials)
The lack of political consensus and/or will to tackle the fundamentals means that businesses will be left out in the cold to deal with the impacts of climate change and rising energy cost. In other words: businesses will need to develop their own counter-strategy to deal with the increasing frequency and ferocity of extreme weather events and rising energy costs.
Interestingly, risk (financial impacts) to businesses would be lowest and business opportunities highest under the Marshall scenario, which is based on the assumption of a swift implementation of an energy transformation roadmap through strategic guidance, tax and incentive revision, and large-scale investments.
SolAbility provides sustainable management advice to corporate clients and advanced sustainable investment research covering Pan-Asian equities for institutional investors.
SolAbility’s corporate clients have been recognised as sustainability leaders in their respective business fields. Three companies who have implemented sustainability strategies and management systems developed and designed by SolAbility are ranked as global super-sector leaders by the DJSI (most sustainable company globally in their respective industry).
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