How is climate change affecting us today, and why is it important to act now?
What action is currently being taken, and why is the 1.5°C goal so important?
How can existing market systems be used to mitigate climate change?
What is causing the problem?
Human activity is changing the temperature on our planet by releasing high quantities of Greenhouse Gases (GHGs), such as carbon dioxide, into the atmosphere. At the same time, the parts of nature that use carbon and remove it from the atmosphere, such as forests and soil, are being degraded or destroyed. This inflicts severe damage to our environment in various ways.
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The value of protecting and restoring nature is substantially larger than the price of destroying it.
A budgeting approach to carbon emissions
To stabilise global temperatures, only a limited amount of emissions can be released before global emissions need to reach net zero. A “carbon budget” regulates the CO2 input to the atmosphere with output (storage) in the carbon reservoirs on land or in the ocean.
Global Remaining Carbon Budgets
+1.5°C | 66%
With a 66% probability budget will be exhausted in approx. 4.5 years at current emissions levels
+1.5°C | 50%
With a 50% probability budget will be exhausted in approx. 8.25 years at current emissions levels
+2.0°C | 66%
With a 66% probability budget will be exhausted in approx. 22 years at current emissions levels
+2.0°C | 50%
With a 50% probability budget will be exhausted in approx. 30 years at current emissions levels
High importance of rapid and decisive action regarding climate change mitigation.
Why the Paris targets matter
Limiting warming to 1.5 °C could reduce the number of people worldwide who are exposed to climate-related risks and resulting poverty by hundreds of millions of people, compared with a rise of 2 °C
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Climate solutions toolbox
When it comes to the goals of the Paris Climate Agreement and the necessity of decarbonisation on a global scale by the middle of the century, industrialised countries such as Germany are particularly challenged. A diverse set of tools are needed to help us in mitigating climate change and empowering nature again:
Voluntary Carbon Markets
Aims to tackle climate change by driving resources to projects that leverage the power of nature to deliver independently verified and additional emissions reductions on a global scale. Including regenerative land use and Oceans.
There are a broad range of technologies being developed with the objective of helping to decarbonise different sectors of our economy in order to meet the Paris Agreement objectives. Including Clean Energy Systems, Materials and Circular Economy.
Compliance Carbon Markets
These are mandatory schemes that enforce specific sectors of the economy to comply with a regulatory act to reduce their emissions.
ESG Investing has consolidated as an effective way to create sustainable growth and have a long-term impact on society and the environment. It allows the investors to identify material risks and obtain positive returns.
This is our ‘use it or lose it’ moment: the decisions we take over the next 2-3 years will determine our growth and climate future.
Voluntary Carbon Markets
Voluntary carbon markets (VCMs) can play a critical role in scaling and accelerating climate action. Corporations enter these voluntary markets to achieve self-determined emissions goals. They channel significant private sector finance into projects with high potential to restore or protect the natural capital of the planet (and therefore act as carbon sinks), with the final objective of reducing or avoiding greenhouse gas emissions. Apart from net emissions reductions, VCM projects can carry beneficial side-effects such as biodiversity protection, localised economic support or improved air quality and health.
Current state of the market
- Current price is insufficient to drive climate action
- Demand is expected to increase 5x or even 10x over the next decade as companies seek to deliver on their net zero emissions pledges.
- Projected price by 2030: € 50 per tonne CO2, which would help to scale up nature-based solutions and incentivise emissions reduction.
Climate tech is an umbrella term for solutions to reduce greenhouse gas emissions by utilising technology across energy, transport, the built environment, industrial processes, food and land use, as well as active removal of CO2 from the atmosphere.
Innovative nature-based technology solutions
Carbon Capture and Storage (CCS)
Decarbonisation filter for industrial emissions. Currently 42 large scale CCS plants are in operation or under development, but achieving the Paris goals may require >1000 facilities by 2050.
Bioenergy with Carbon Capture and Storage (BECCS)
70–95% less water and >90% less land intensive harvesting with up to 80% higher yields. It could help reduce agriculture emissions and enhance global food security.
Compliance Carbon Markets
In economic terms, carbon emissions represent a market failure because the market incentives do not take into account the negative externalities associated with climate change. To mitigate this issue, we need to put a price on carbon emissions that reflects the costs of climate change imposed on the planet and the people who live on it. In practice this is achieved either through a carbon tax or through compliance carbon markets (Emissions Trading Schemes, ETS) based on so-called ‘cap-and-trade mechanisms’.
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How a cap-and-trade ETS work:
Projections for net-zero pathway*:
(current CO2 price, EU ETS)
Source: Project Drawdown (2020)
Source: Climate Council (2021)
Source: Trove Intelligence (2021)
Source: Climate Action Tracker (2017)
Source: Voluntary Carbon Markets give nature a monetary value, which is closely linked with the key recommendations of the Dasgupta Review
Source: Expert estimates
Source: Our World in Data (2018)
Source: Bloomberg Ltd. (2021); expert estimates
Source: IEA (2021)