Future Bright’s IPCC summary

Future Bright’s Summary of the IPCC, UN Climate Report 2014

Future Bright – kcoulson@optonline.net

The summary for policy makers and the full report can be found here: http://www.ipcc.ch/report/ar5/wg3/

The IPCC working group was charged with assessing scientific research related to the mitigation of climate change. One of there key findings was that current trajectory of economic activity, GHG (global greenhouse gas) emissions and mitigation is inconsistent with widely discussed goals of limiting global warming at 1.5 to 2 degrees above pre-industrial levels.

The purpose of this post is to condense the summary for policy makers and to suggest possible business opportunities embedded in the necessary mitigation strategy.

Below is my summary of the key points of the IPCC report along with notes, suggestions, business ideas or investment opportunities associated with the finding. Future Bright is an advisory and think tank on sustainability looking at economic, social and cultural investment opportunities.

• Sustainable Development: Best case mitigation calls for rapid improvement for energy efficiency, tripling of low carbon or renewable energy sources, nuclear, fossil fuel with carbon capture and growth in bio energy land use and afforestation.

o Business Opportunity: A banking structure whose mandate is to invest in local community infrastructure and efficiency. Offers substantially above market dividend.

• Mitigation Policy: could devalue fossil fuel activities and assets

o Investment Opportunity: Future Bright’s equity thesis is focuses on capturing risk in future unrealized waste liability while benefiting from investing in sustainable business models. A long short portfolio of top ten Solar (L) vs. Fossil Fuels (S) returned > 60% in 2013. The ratio of market capitalization of these two groups is still well over 100:1.

• Energy efficiency: Efficiency gains in retrofitting of buildings and existing structure can range between 16%-70%. Best case mitigation scenarios calls for reduced final consumption of energy use of 20%-30% in building and industry.

o Conclusion: The opportunity for securitization and scaling in energy efficiency is huge. Market size is between $500B to $1T (Deutche Bank 2012)

• Renewable Energy: Half of all new energy supply in 2012 was from renewable sources (RE). Best case scenarios call for growth of share from RE to 30% by 2030 and 80% by 2050.

 o Conclusion: RE investment funds focusing on mature segment plus new technologies and infrastructure growth should benefit. This is Future Bright’s central thesis.

• AFOLU: Agriculture, Forest and Other Land Use play a central role in food security and sustainable development. Afforestation, grazing land management and restoration of organic soils are keys to effective mitigation.

o Investment Opportunity: Organic healthy food systems and indoor farming technologies have experienced significant growth over the last decade. Opportunities for early cycle investment exist. Contact Future Bright to learn more. Think large scale production orientation of EDEN PROJECT

• Investment Flows: Over the next two decades annual investment in fossil fuels is expected to decline by $30B, Low carbon electricity supply investment is expected to increase by $147B and investment in energy efficiency is expected to increase by $336B.

o Conclusion: Follow the cash flows. Renewable Energy equity, securitization, storage technologies, efficiency funds should all benefit from shifts in investment flows.

Other Key IPCC Points
• Integrated Approach: An Integrated design approach is necessary: institutions both public and private must focus on societal and cultural dividends as well as economic goals to achieve success in GHG mitigation.
• Global Cooperation: A global approach is necessary. Mitigation efforts can be derailed by independent pursuit of economic goals with a disregard for coordinated GHG reduction.
• Current State: Amidst the technological advancements in efficiency and clean technology, global GHG emission have accelerated in absolute terms between 2000-2010
• Coordination: Mitigation today can avoid self-perpetuating climate change.
• Low Carbon Energy Sources: Worse case scenarios assume market share from low carbon sources to increase 105% by 2030 to ~20% and 190% by 2050 to ~42%. Best case scenario, described above as necessary to avoid greater than 2 degree temperature increase, call for increased share of low carbon sources of 145% by 2030 to 25% and 310% by 2050 to 60%.

o Conclusion: Renewable Energy is past the bubble stage. It is a proven technology that is in the deployment and growth phase.

• Targeted Reductions: Scenarios to keep temperature increase below 2 degrees call for 40-70% lower GHG emission in 2050 relative to 2010.
• AFOLU: Best case mitigation scenario calls for widespread adoption of afforestation and bioenergy with CCS (Carbon Capture Sequestration) in the later half of the century.
• “Delaying mitigation efforts beyond 2030 will substantially increase the difficulty in transitioning to lower long term emission levels while narrowing the options consistent with maintaining a temperature change below 2 degrees relative to re-industrial level (high confidence)”
• Costs: Best case scenarios costs in consumption growth, assuming global cooperation, technological availability and single carbon price, are estimated at 0.04% to 0.14% against a scenario where consumption growth is 300%-900% over the century.
• Development: Infrastructure lock-in for high GHG vs. low GHG assets will be a key determinant in adopting mitigation and policy framework.

o Conclusion: This should be a transparent election issue.

• Urban Migration: The next two decades present an opportunity for integrated urban planning based on sustainable development.

o Business Opportunity: City planners, builders and policy makers that embrace integrated design and balancing economic with societal and cultural dividend should benefit.     Operational costs savings, Clean and local food production, clean transport and service based durable goods providers should benefit.

• Tax–Based Policy: In some countries, tax based policy had proven to weaken the link between GHG and GDP.
• Policy: Credit insurance, feed-in tariff, power purchase agreements and rebates have all proven effective at promotion private investment in mitigation measures.

Other Conclusions
• Technology that focuses on resource productivity and transparency of resource use should be in high demand.
• Operational Cost Savings (OCS) opportunities exists across energy supply, industry, building and residents segments.
• Accountant embracing Full Cost or other forms of closed loop balanced accounting should be in high demand.
• Energy collectives, Investment Trusts and other forms of financial instrument innovation are ripe for development.

Sources

– IPCC WGIII AR5: Summary for Policy Makers
– Natural Capitalism (2001, Hawkins, Lovins)
– Homeenergysaver.gov

 

Future Bright is an advisory and think-tank in sustainability started by Ken Coulson to assists innovators in project development and financial presentation, study sustainability and develop tools for understanding a natural economic paradigm. Future Bright is developing framework and visualizations as it pertains to investing and the formulation of investment products. Contact Ken Coulson at kcoulson@optonline.net

Bright Ideas

If you’ve ever lived in a place with electricity, it is by no means certain that you’ve fallen victim to the – freak lightbulb blowout / “I swear I just replaced this bulb” / “I forgot to get lightbulbs at the store, so I’ll just get by on less light” situations.

The New(ish) Product: LED alleges that it has aesthetically caught up to general home light CFL / incandescent counterparts and has surpassed them in efficiency, life and safety.

The Game: On a rainy day such as today, we thought what better way to spend our afternoon (apart from the newly-purchased “Treasure Hunt in a Bottle” puzzle) than a “bulb-off”? With several rooms currently using the standard GE 60 watt and the occasional CFL lightbulbs, we set off to challenge each other to identify and/or rate which bulbs had been replaced with LED.

The Findings: In the vast majority of cases, the standard bulb was selected as the LED, with the explanation that it was “brighter”.  If you’re like me, your experience with LED bulbs extends to the blinding high-beam-seeming headlights coming at you on your commute home. This was not the case. The LED had a bright, yet not “harsh” luminescence.

The Numbers:

A standard 60 watt bulb claims to last 2000 hours.

The new LED bulbs claim an average of 14 years of life, at 3 hours a day. That’s potentially 5113.5 hours of usage.

Finally, the kicker: Each bulb uses fraction of the energy 1.8W vs. 60W!!

They look great

The Punchline: They look great. I’m ordering replacements for the barn and we’ll let you know what the % change in energy savings is!

The Challenge: Change your lights once every 10-14 years with less heat emitted. This means, when you have the lights on during that summer party, your A/C has to work less hard — further energy savings! I hope you’re ready for a hassle-free long-term relationship.

Generating electricity for buildings and homes represents a major portion of our total fossil fuel usage (Transportation being the other big chunk — more on that soon). What would the reduced impact be if everyone made the correct economic decision as well?

Be well and be the change

Future Bright