Investors in coastal cities and low-lying regions need to consider more pesimistic scenarios, warns a new report from PwC. Photograph: Jenny E Ross/Corbis
PricewaterhouseCoopers, the world's largest professional services firm, is not known for scaremongering. So it is worth paying particular attention to its latest annual low carbon economy index.
Behind the understated language, it points to a catastrophic future unless radical action is taken now to combat climate change.
"Business leaders have been asking for clarity in political ambition on climate change," says partner Leo Johnson. "Now one thing is clear: businesses, governments and communities across the world need to plan for a warming world – not just 2C, but 4C or even 6C."
The trigger for its dire warning comes from the failure of the global community to reduce carbon emissions by anywhere near the amount needed to restrict temperature rises.
PwC's latest report shows the required improvement in global carbon intensity to meet a 2C warming target has risen to 5.1% every year from now to 2050. The improvement in 2011 was just 0.7% despite the global economic slowdown, and since the turn of the century the rate of decarbonisation has averaged 0.8%.
PwC, the largest of the big four accounting firms, points out that even if the 5.1% improvement might be achievable in the longer term, it is unrealistic to expect that decarbonisation could be stepped up immediately – which means that the reduction required in future years is likely to be far greater.
"We have passed a critical threshold – not once since the second world war has the world achieved that rate of decarbonisation, but the task now confronting us is to achieve it for 39 consecutive years," says the report.
It adds: "Even doubling our current rate of decarbonisation would still lead to emissions consistent with 6 degrees [C] of warming by the end of the century. To give ourselves a more than 50% chance of avoiding 2 degrees [C] will require a six-fold improvement in our rate of decarbonisation.
"Governments' ambitions to limit warming to 2C now appear highly unrealistic. This new reality means that we must contemplate a much more challenging future. Whilst the negotiators continue to focus on 2C, a growing number of scientists and other expert organisations are now projecting much more pessimistic scenarios for global temperatures. The International Energy Agency, for example, now considers 4C and 6C scenarios as well as 2C in their latest analysis."
It is worth remembering what a world might look like if we fail to rapidly decarbonise the global economy.
Mark Lynas, in his book Six Degrees: Our Future on a Hotter Planet, wrote that at 4-5C warming, much human habitation in southern Europe, north Africa and the Middle East will be uninhabitable due to excessive heat and drought. If we reach 5-6C of warming, average global temperatures will be hotter than they have been for the last 50 million years. Sea levels will rise so rapidly that coastal cities across the world will be abandoned by environmental refugees in their millions. Past 6C of warming, perhaps 90% of species will become extinct.
What should business be doing to adapt to this possible reality?
PwC says any investors in long-term assets or infrastructure, particularly in coastal or low-lying regions, need to consider more pessimistic scenarios. Sectors dependent on food, water, energy or ecosystem services need to scrutinise the resilience and viability of their supply chains. More carbon-intensive sectors need to anticipate more invasive regulation and the possibility of stranded assets.
"It's the boy scout motto – be prepared," says Jonathan Grant, PwC's director for sustainability and climate change. "Businesses need to be prepared for unpredictability – whether that's policy, climate or consumer change. Extreme weather events have become more common, and unpredictability looks set to increase. Businesses that have failed to prepare will find it difficult to keep their operations running smoothly as the risk of disruption increases.
Grant add: "Tools like real options analysis, developed as part of the investment decision-making process in the oil industry for example, analyse the impact of significant uncertainty on a decision.
"Working with our clients, the reality is we will have to advise on a much wider range of climate scenarios. Resilience is the watch word. Businesses need to get engaged on the areas materially relevant to their business. For example if you're a consumer goods company you need to consider the longer-term security of supply of the resources you need, where you will source them from, and the more day-to-day issues of how you deal with the potential for disruption to their supply or delivery caused by extreme weather events."
Doesn't the latest analysis just make Grant want to give up? "Doing the analysis makes you realise the sheer scale of the issues we face," he says. "It would be too easy to hold your hands up and say what's the point? We can see from the businesses, NGOs and policymakers we work with that climate change is on the agenda. But we do need more progress, faster."
On a more fundamental basis, what needs to change?
PwC's report says there will need to be radical transformations in the ways the global economy currently functions, a rapid uptake of renewable energy, sharp falls in fossil fuel use or massive deployment of carbon capture and storage, removal of industrial emissions and halting deforestation.
It also warns against seeing the dash for gas as a long-term panacea. While the boom of shale gas in the United States may buy some time to help limit emissions growth, low prices may also reduce the incentive for investment in lower-carbon nuclear power and renewable energy.
Malcolm Preston, PwC's global lead, sustainability and climate change, tells me: "Even with progress year-on-year in emissions reduction, the reality is the level of corporate reduction is nowhere near what is required. The new normal for businesses is a period of high uncertainty, subdued growth and volatile commodity prices. If regulatory certainty doesn't come soon, businesses' ability to plan and act – particularly around energy, supply chain and risk – could be anything but 'normal'."
Wonderful. PwC gets it, sort of, but please let's not kid ourselves that 6 degrees C is something that can be adapted to.
ReplyDeleteNow that the world's largest accounting firm has made some calculations about the seriousness of what the science is saying, perhaps they could consider a further repositioning of their part in the climate debate?
In the interests of their clients and their clients' shareholders (not to mention the world's poor and vulnerable who for the most part sit a lot closer to the cutting edge of climate change impacts), perhaps PwC could become a little more active within their business networks to raise the voice of the corporate sector?
Those in the community and ENGO sectors might really appreciate their to help achieve the 'regulatory certainty' (or even political leadership?) that might help us to decarbonise at the rate required for our collective survival, even if this involves recognising the climate emergency as the threat it is, and mobilising the world economy accordingly?
Calling for an end to both the shadowy, and the blatantly unapologetic, networks financing climate science denial, would be a good start. Advising a rethink of donations towards political parties devoted to blocking or seeking to repeal progressive climate policies might also be worth pursuing?
Creating the political space for the needed response and to help end the '#climatesilence' is surely not beyond our collective grasp? As PwC has begun to outline, the alternative is certainly not very pretty.
Having become a cynic, I have to wonder if this publication is primarily a CYA maneuver by PwC.
ReplyDelete