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This Insight brings together much of the thinking and action that we at EdenTree have invested in climate change during 2016. The energy sector narrative around future fossil fuel demand has not materially changed, but we show how in our view, the energy sector is now trailing behind strong public policy commitments that could lead to forced change.

The Energy Paradox

Neville White Neville White Head of RI Policy & Research
The Energy Paradox
Amity Insight reports

The Energy Paradox

The Energy Paradox
Neville White


Head of RI Policy & Research

The COP21 Paris climate talks in December 2015 resulted in the first Pan-Global agreement on climate since Kyoto in 1997. The breakthrough in Paris, led by joint action from the US and China, brought 196 countries into ‘common cause’ on climate action via 196 country commitments or ‘Intended Nationally Determined Contributions’ (INDCs). Paris confirmed a determination to keep atmospheric warming to within two degrees of pre-industrial temperatures, and to set a more ambitious and aspirational target of keeping to within one and a half degrees.

There is still much to do, but coming into force within a year, COP21 potentially sets the world on an agreed path towards transition, mitigation and adaptation. At the same time, the energy sector, as this Insight shows, is largely maintaining its long-held narrative that fossil fuels will be the primary source of energy for decades to come, and at least until beyond the mid-century point.

The sector argues, not unreasonably, that the requirement to provide energy for a potential nine billion human population will see coal and oil survive as the only viable and abundant energy sources. This is the ‘energy paradox’: The need to reconcile a tough response to climate change whilst providing energy continuity
at a time of acute population growth.

This Insight brings together much of the thinking and action that we at EdenTree have invested in climate change during 2016 – what is an appropriate investor response to climate change, what are the drivers that could result in ‘stranded assets’ and what will add value for clients? We also update our Insight from 2013 on fracking, and take a look at what drove China to come to the table in Paris.

The energy sector narrative around future fossil fuel demand has not materially changed, but we show how in our view, the energy sector is now trailing behind strong public policy commitments that could lead to forced change.

 

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As always, we hope you enjoy this Amity Insight, and we welcome your comments and feedback.

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