Green power is set to draw around $11 trillion of investment in the coming decades as the cost of renewables plummets and more of the world’s energy comes from electricity.
That’s the latest analysis from BloombergNEF in its annual New Energy Outlook report. It’s further evidence of how cheap renewable power sources will continue to push aside fossil fuels in the energy mix.
Despite the massive sum, BNEF said the pace of building out new renewables will need to increase further to limit global warming to less than 2 degrees Celsius by the end of the century.
The projected increases in renewable energy and battery technology — wind and solar will grow to 56% of global electricity in 2050 — are set to cause emissions to peak in 2027 and then fall 0.7% annually until 2050, BNEF said.
That would lead to a warming of 3.3 degrees Celsius by 2100, well short of the 6% annual emissions reduction needed to keep warming below 2 degrees and the 10% reduction required to achieve 1.5 degrees of warming.
Below are four key takeaways from this year’s report:
The only fossil fuel to increase its share of demand over the coming years will be gas. That’s largely driven by its use in heavy industry and to heat buildings. A key reason for the growth of gas to warm buildings is the weak economic argument for using heat pumps. BNEF doesn’t see cost parity with gas boilers until 2040. In the U.S., an abundance of cheap gas will delay the energy transition, but renewable power will still overtake the fuel by 2041.
The future of oil demand will be shaped by the uptake of electric vehicles. BNEF sees primary oil consumption peaking in 2035 and then gradually declining.
Meanwhile, the thirst for oil in road transport tops out in 2031, according to BNEF. The fall will be sped up by EVs reaching price parity with traditional engines before 2025, at which point people will start buying plug-in cars at a faster rate, offsetting oil’s growth from aviation, shipping and petrochemicals
. By 2050, some 65% of all passenger-vehicle kilometers will be made in electric vehicles. The current fleet of EVs is displacing 1 million barrels of oil a day.
Governments, energy companies and lobbyists have been touting hydrogen as a way to decarbonize vast swathes of the world’s economy.
If that is realized with hydrogen made by machines powered by renewable energy, the world will need a lot more of it. For so-called green hydrogen to provide just under a quarter of energy in 2050, it would require 38% more power than is currently produced globally. Making all that hydrogen with wind and solar farms would require a land area the size of India.
Air travel will continue to be one of the most difficult sectors to decarbonize. Aviation emissions are up 80% since 1990 and they’ll double again by 2050. It’s one of the few sectors, along with shipping, that struggles to electrify. Heavy planes and ships that need to travel long distances would require batteries to significantly improve in order to make them commercially viable for the sector. Sustainable fuel alternatives and ammonia would need more government support than currently expected to make them cost competitive with fossil fuels in the coming decades.
©2020 Bloomberg L.P.
Investment firms cautious on reopening plans, notification procedures – Investment Executive
Banks in particular face future earnings, ratings challenges due to pandemic
Current spending levels of 1.3% of GDP could soar to 4.2% by 2041, says report
- By: IE Staff
- November 27, 2020
November 27, 2020
Canada among the housing market leaders, both short and long term
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Takeaways from our 2021 investment outlook: Legacy of the lockdowns – Investors' Corner BNP Paribas
Here we summarise the big picture for investors at the end of 2020. This constitutes the starting point for our 2021 investment outlook.
- Since the 2008 global financial crisis, the global economy has been mired in anaemic growth and weak demand, tempered by consistently rising asset prices.
- In 2020 the global economy faced a crisis of unprecedented magnitude (see Exhibit 1 below) after the pandemic lockdowns. After a contraction of 4.4% in 2020 the IMF forecasts global growth of 5.4% in 2021. Overall, this would leave 2021 GDP some 6.5% lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperilling the significant progress made in reducing extreme poverty over the last 30 years. Countering inequality is a key challenge to be met in 2021 and beyond.
Exhibit 1: Largest decline since WWII – graph shows change in world gross domestic product (inflation-adjusted, in %)
Source: BNP Paribas Asset Management, as of 26/11/2020
- Under the best-case scenario, one or more vaccines for COVID-19 become widely available by the second half of 2021. Otherwise, the disease remains a longer-term threat requiring us to ‘live with’ the virus – repeated lockdowns will not be a sustainable long-term strategy.
- In 2020, advanced economies loosened the monetary and fiscal reins most spectacularly. Debt-to-GDP ratios soared, rising for many countries by more than they did in the years after the Global Financial Crisis (GFC). Major central banks have largely financed the increase in budget deficits, monetising an expanding national debt, much as Japan has done.
- One way to understand the weakness in aggregate economic demand is to study real interest rates (the ‘price’ of money in the economy). In 2006, the real yield of the 10-year inflation-protected US Treasury bond was between 2% and 3%. Since 2010, its yield has mostly been below 1%, including a spell in negative territory both in 2012 and again in 2020. Negative real yields are now common to the G3 economies (see Exhibit 2 below) and beyond. In 60% of the global economy — including 97% of advanced economies — central banks have pushed policy interest rates to below 1%. In one-fifth of the world, policy rates are negative.
Exhibit 2: Real yields are now negative for G3 sovereign debt – graph shows changes in real yields for US, Japanese and eurozone government debt between 1997 and 16/11/2020.
Source: BNP Paribas Asset Management, as of 26/11/2020
- In 2020, these meagre interest rates, along with cheap, low-risk liquidity from central banks, led asset prices higher. Risk premia for risky assets shrank. Companies whose revenues have plummeted — cruise lines, airlines, cinemas — were able to borrow money in 2020 to survive. Investors had few higher-yield options. Will central banks continue to supply such liquidity in 2021?
- And how is all this debt to be paid for? The appropriate historical parallel is perhaps the post-World War II period, when central banks capped bond yields at levels well below the trend GDP growth rate to gradually reduce the national debt as a proportion of GDP.
- Alternatively, instead of financial repression and inflation (as post WW2), the extraordinarily low real interest rates we have seen over the past decade could help achieve fiscal sustainability. It would, however, be imprudent to count on it. No policymaker should expect real interest rates to remain persistently below the growth rate of real GDP. Indeed, forecast imbalances in planned global savings and investment could drive real interest rates higher (ageing societies save a lot, but old societies do not).
- Another risk is that improved real trend growth does not come to the rescue. Lower global growth after the pandemic accompanied by inadequate fiscal stimulus would leave marginal sections of the economy vulnerable to collapse. Such an outcome would test the paradigm of modest growth, low inflation and supportive central bank policy that has supported asset prices since 2008.
Today we face three interconnected crises – health, economic and climate. The instability provoked by the pandemic presents a window of opportunity to pivot in a new direction. Long-term environmental viability, equality and inclusive growth are essential pre-conditions to a sustainable economy. By taking a holistic, systemic, long-term view, we are less likely to be surprised by crises and better able to manage them.
For in-depth insights into what’s next for the global economy and markets, read our 2021 investment outlook, ‘Legacy of the lockdowns’
Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. The views expressed in this podcast do not in any way constitute investment advice.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
Fossil Free Lakehead pleased with university investment decision – CBC.ca
A decision by the Board of Governors at Lakehead University to divest itself of fossil fuel investments is being hailed as a victory for one student group on its Thunder Bay, Ont., campus.
On Thursday, the board committed to not holding any investments involving fossil fuel extraction by 2023.
“Our decision to divest from fossil fuel companies reflects Lakehead’s goal of becoming a leader in sustainability as reflected throughout our current Strategic Plan and Sustainability Action Plan,” said Board of Governors Chair Angela Maltese in a statement.
Just over two per cent of the university’s investments are in fossil fuel organizations.
About 40 members of Fossil Free Lakehead have been working to convince the school since 2013, that it should no longer hold the investments.
Lakehead is the sixth university in the country, the group said, to divest itself of fossil fuel revenues.
“I think many people believe that burning and extracting is the only way forward, because that’s what we’re used to,” said Shaidya Aidid, a member of Fossil Free Lakehead.
“I think that progress doesn’t happen because we want to stay in our comfort zone,” she said, noting she got involved in the group, believing that Lakehead needed to lead the way when it came to promoting alternative fuels.
“A lot of the groups of students and members who are involved with our movement all believe in that message, that fossil fuels will not be fuelling our future.”
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