Climate change and global warming are of comprehensive concern for the world community. Ice melting, sea levels rising, and saline water intrusion and inundation are adversely impacting biodiversity, creating climate refugees and testing human civilisation. 

Moreover, natural disasters are becoming regular phenomena. As a result, many people are losing their lives and homes, while our wildlife is suffering from the effects of extreme weather on natural habitats. Everything, it seems, is under serious threat. 

According to a report from Swiss Re, one of the world’s largest reinsurance companies, as much as $23tn’s worth of global economic output will be lost worldwide as a result of climate change. 

The history of climate pledges

At the 21st Conference of the Parties (COP21) in 2015, the parties to the UN Framework Convention on Climate Change adopted the Paris Agreement. This was a historic agreement — the first global legal framework binding the parties in a joint effort to combat climate change. The agreement, which aims to create sustainable pathways and limit global warming to 1.5 degrees Celsius above pre-industrial levels, had 196 signatories.

The implementation of each party’s responsibilities under the agreement is primarily reflected through their submitted Intended Nationally Determined Contributions (INDCs) — their specific plans to address climate change. At the same time, developed countries pledge that they would provide $100bn each year to the Green Climate Fund, with the amount increasing every five years until the targeted reduction of global warming is reached. 

Energy is the prime mover of economic progress, and it threatens the sustainability of the Paris Agreement if it is not consistent with a sustainable development pathway. Most carbon emissions come from the burning of fossil fuels. Decarbonisation of the energy sector, therefore, requires urgent action on a global scale — and while a global energy transition is underway, further action is needed to reduce carbon emissions and mitigate the effects of climate change.

According to Morgan Stanley, climate-related disasters cost the world $650bn between 2016 and 2018. Since then, increasingly variable weather has likely made it more difficult for growing crops. A warming world could depress growth in agricultural yields by up to 30% by 2050, according to the Energy and Climate Intelligence Unit (ECIU), and affect as many as 500m small farms worldwide.

Carbon-neutral energy generation can make a big difference to the global economy and energy transition. Renewable energy reached its highest recorded share in the global electricity mix in 2020 at an estimated 29%, according to think tank Ren21 — due in large part to low operating costs and preferential access to electricity networks during periods of low demand. 

In the meantime, more than 256 gigawatts (GW) of renewable power capacity was added globally during the year, surpassing the previous record by nearly 30%. While the renewables sector proved to be notably robust during this period, the fossil fuel industry largely struggled, particularly the global coal and oil industries, according to Ren21. 

The costs of producing electricity from wind and solar energy have dropped significantly in recent years. These declines mean that for most of the world’s population, electricity production from new renewables is more cost-effective than from new coal-fired power plants. In a growing number of regions, including parts of China, the EU, India and the US, it has already become cheaper to build new wind or solar photovoltaic plants than to operate existing coal-fired power plants.   

Increasing investment

Global investment into new renewable energy capacity reached $303.5bn in 2020, up 2% from 2019. For the sixth year running, developing and emerging economies surpassed developed countries for renewable energy capacity investment. Though it was by a smaller margin than in previous years, investment reached $153.4bn, while renewable energy projects represented nearly 60% of all climate finance during 2017 and 2018, averaging $337bn.

The divestment movement continued its upward trend in 2020, with more than 1300 institutional investors and institutions worth $15tn committing to divesting partially or fully from fossil fuel-related assets. Most of these investments came from public, private and institutional sources, according to Ren21.

By 2050, electricity will be the main energy carrier, with more than a 50% direct share of total final energy consumption — of which 90% would be supplied by renewables, followed by 6% from natural gas and the remainder from nuclear, according to the International Renewable Energy Agency (IRENA). The use of fossil fuels in power generation will be greatly diminished. 

Therefore, a new mindset focused on renewable energy and low-carbon technology is required to boost investment in a significant way, by diversifying the sources of financing used for emission reductions and mitigating climate change. Governments should continue taking major steps to ensure uninterrupted power supply through increased installed generation capacity, an expanded transmission and distribution network, reduced system loss due to energy leakage, increased electricity coverage, a greater share of renewable energy, and cost-effective cross-border energy trade. 

Following the Paris agreement, 196 countries submitted INDCs. This includes Bangladesh where I am based, which updated its INDC in August 2021. Bangladesh has now pledged by 2030 to unconditionally reduce its greenhouse gas emissions by 6.73% from the business-as-usual (BAU) scenario in energy, industrial processes and product use, agriculture, forestry, and other land use and waste. (This is an increase from the 5% it pledged in 2015.)

Subject to technology and knowhow transfer, and financial and investment support from the international community, Bangladesh has committed an additional 15.12% (increased from 10% in 2015) reduction of carbon emissions. This means that altogether, 21.85% of the emissions — equivalent to 89.47m tons of carbon dioxide — will be reduced from the BAU scenario in 2030.

Although the revised incremental commitment in percentage change terms is marginal (1.73 percentage points), the absolute amount of reduction would be significant, due to the incorporation of additional sectors and the revision of base-year from 2011 to 2012, which is the same base-year used in its first submission, to set the BAU scenario in 2030. The unconditional target of carbon emission reduction in the updated INDCs more than doubled from 12m tonnes of carbon equivalent (MtCO2e) to 27.56 MtCO2e. The same for conditional commitment increased from 24 MtCO2e to 61.91 MtCO2e. Of the total reduction commitments in the updated INDCs, 96% would be in the energy sector.

In cumulative terms, the 1.5 degrees Celcius scenario would have an additional energy-system cost (the net effect of increased investment and reduced operation costs) of $30tn over the period to 2050, but would result in a payback, through reduced externalities from temperature rises on human health and the environment, of between $61tn and $164tn. 

Job opportunities

The 1.5 degrees Celcius scenario implies a lower impact of climate damages on gross domestic product, supporting the benefits of transitioning swiftly to a clean energy future. A transformed energy sector will have 122m jobs in 2050, according to IRENA. Qualifications, skills and occupations under the ambitious target are increasingly concentrated in manufacturing, followed by fuel supply. The energy transition will be enabled by IT, smart technology, policy frameworks and market instruments.

An important aspect of this situation is that $100bn per year is no longer an adequate amount to tackle the impacts of climate change, which will require trillions of dollars from now on. This will require each country — rich or poor — to mainstream their work against climate change — both through mitigation and adaptation — into national development investments, particularly in light of the Covid-19 pandemic. A pledge of $100bn will accelerate further investment, and assist developing and underdeveloped countries to move forward with equal steps to confront the challenge of climate vulnerability. 

The Climate Vulnerable Forum countries, under the leadership of Bangladesh’s prime minister, Sheikh Hasina, have demanded that developed countries present a plan for delivering $500bn to cover five years, from 2020 to 2024. They also demanded that half of this amount is directed to support adaptation activities in the most vulnerable developing countries (something UN secretary-general António Guterres is trying to get developed countries to abide by).

Bangladesh has taken several initiatives, including proposing the Mujib Climate Prosperity Plan. This is designed to maximise renewable energy’s share of power generation, efficiency improvement and energy storage infrastructure development in the total energy mix; and to take advantage of the deflationary price trajectory of domestic renewable electricity generation and storage.

Bangladesh is a pioneer of allocating nearly 8% of the national budget — well over $2bn to tackle climate change — to 20 ministries, as well as through civil society organisations. Global support in terms of investment and finance, technology transfer and capacity development will further speed up the implementation of those initiatives. This is an example that must be followed by international communities to move forward, tackle the climate, and save the planet. 

Dipal C Barua is a councillor at the World Future Council (WFC) and was a lead author on a chapter published in 2015 by the Intergovernmental Panel on Climate Change (IPCC) on investment and finance issues in addressing climate change. He is also the co-founder of Grameen Bank, a microfinance and community development bank in Bangladesh.

This article first appeared in the October/November print edition of fDi Intelligence.