Our Low Carbon Future is here now – 2021 is the inflexion point. One needs to look no further than the fresh government commitments from the top emitting countries, the imminent approach of COP26, a private sector focus across a variety of industries on embedding climate change into investment decisions, and the increasing and important role of financial regulators in raising the pressure on lenders and investors around climate risk disclosures and capital allocation to industries facing significant physical and transition risk due to climate change.

With 80% of emissions coming from outside the power sector, our low carbon future must go beyond the power sector and beyond renewable energy as a solution. A low carbon future is contingent on decarbonising all four key areas of the energy system - Power, Transport, Buildings, and Industry – backed by the rise of sustainable finance. For each of these sectors there are choices to be made on when, how fast and how to decarbonise, as well as what role new technologies will play, how carbon pricing will influence those choices, how heat and cooling requirements will be met and how countries, companies and sectors can collaborate to achieve more together will all be questions we need to answer out of the COP26 summit and beyond.

To make our commitments to 2030 and 2050 happen, 2021 is the year when transition must become transformation, where we must deliver on the promises and commitments, we have made to a low carbon future and to “Build Back Greener”.

Transitioning to a Net Zero energy system is clearly a huge challenge but there is no reason that, if well planned, we cannot achieve it–and the result need not be any more expensive, less resilient or less secure than our energy system today. Indeed, it could even be cheaper, more resilient and more secure if it is well planned and well executed. It is essential that throughout the Net Zero transition, energy costs remain affordable to consumers and that industries remain competitive.

Follow Baringa Partners on LinkedIn for more updates and thoughts on the run up to the COP26 conference and our obseravations and take-aways during the event itself.

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