It is a vision that involves the mass migration of half a billion people, resource scarcity as the world’s bread baskets begin to buckle and parts of the world become uninhabitable.
Forget the targets of 2050, advised Michael Azlen, Founder and CEO of Carbon Cap, it’s time to act and act quickly.
We are seeing the fallout now and getting worryingly close to positive feedback loops, such as forest fires and the melting of polar sea ice.
Even if global economies are successful in transitioning to net zero, limiting the earth’s warming to 1.5 degrees as compared to pre-industrial levels, the world could continue to emit carbon dioxide through these feedback loops.
“We could get to a place where the planet itself emits carbon dioxide, even if we stop,” said Azlen. “The Amazon rainforest has already become a net emitter of CO2.”
Turning the super tanker
What is needed to bring about the scale of change necessary to turn the “biggest super tanker the world has ever seen” could well be capitalism, he thought.
“Change will not be driven by morals and ESG but by supply, demand, capital and pressure as it is the most efficient way to allocate labour and capital in the market,” he said.
The best way of creating a market that will incentivise climate action is to put a price on carbon. “When you put a price on emitting, then people take it on board,” he said.
The launch of carbon trading markets in Europe, China, New Zealand, South Korea, Mexico, and other countries around the world are what will really “move the needle”, thought Azlen.
He urged delegates to provide solutions and products directly related to capping and reducing carbon emissions.
“Speak truth to power because [the climate crisis] really is an existential issue,” he said. “After the final ‘no’, there comes a ‘yes’. On that ‘yes’, the future of the world depends. I’m sorry to hand you the torch but that burden is in your lap.”
Building a renewable future
There is huge opportunity to provide new risk transfer solutions as the world transitions to net zero and creates new markets for carbon, said Neil Eckert chairman of IncubEx and co-founder, Conduit Re.
Just as there was the collective will to solve challenges such as Acid Rain and the hole in the Ozone Layer, so too can the public and private sector galvanise its expertise to reduce emissions and capture carbon before it is too late.
We need “every tool in the toolbox” – including lifestyle changes, renewable technology, carbon trading, and insurance, said Eckert.
“Energy security is the biggest watchword of our time,” he said. “You’ve got to ‘dig for victory’, make your own power and make sure it’s renewable. Once you’ve created a market that prices carbon, that impacts the cost of fossil fuel. The change in behaviour will be driven by pure economics.”
Power storage will be the ‘holy grail’ of the energy and power transition.
A combination of solutions to storing the energy produced by renewables, including lithium-ion batteries and hydrogen technologies, present differing challenges, explained Mark Tarry, Head of Asset Development, AMP Clean Energy.
While batteries have a high level of efficiency, hydrogen provides the means to store energy for longer.
Tarry thought the days of countries having very large power stations were over. “As we get more demand and users connecting to the grid, there’s going to be more consumption locally. We need to be able to generate power renewably, flexibly, and close to the point of consumption as this is more efficient.”
Time to innovate
Power imbalances in the grid must be managed carefully. Eckert thought insurance solutions could help to hedge the peaks and troughs and said there was also a market for products to insure risks attached to carbon offsets.
Underwriters should stop introducing blanket exclusions for risks they are uncomfortable with and instead start innovating was his advice.
Parametric solutions are one way to get around the lack of data available from new and emerging technologies.
Capacity from the traditional markets is not nearly enough and re/insurers and brokers will need to tap the capital markets as solutions evolve. The key is to seize the opportunity before you become a “financial refugee”, thought Eckert.
“We are in the early stages of the development of this market, but innovation is what the London market does best and where we have a competitive edge.”
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