Climate Change & Energy Investment

Climate Change & Energy Investment Threats and Opportunities Hal Harvey CEO Energy Innovation Policy & Technology LLC

Overview • Climate Change • What is causing climate change? Why should we pay attention? How bad could it realistically get? • Promise of Renewable Energy • Today, wind, solar, hydro, and geothermal make up just 3% of world energy supply. Evidence shows that it can scale in time to meet the challenges, but we have to start now. • Opportunities for Business and Investors • Clean energy will remake the $11 trillion energy system. The opportunities are staggering.

Climate Change: Beyond the Basics We drive climate change through multiple mechanisms. Source: IPCC WG1 AR4

Feedback Loops • Ice albedo (reflectivity) • Water vapor capacity • Soot covering ice • Land use change: forest losses, desertification • Less CO2 absorption by the oceans Source: NASA Goddard Space Flight Center • Methane releases (from peat bogs, permafrost, subsea ice)

A Carbon Budget Waiting only makes things more difficult. No matter what we choose as our target CO2 concentration, we still need to bring emissions down to a very low level. If we don’t balance our emitted CO2 with the Earth’s ability to remove CO2, we will not stabilize at any target. Human emissions rate 650 550 450 350 • CO2 in Atmosphere Natural CO2 removal rate

Agriculture Impacts • By 2050 in developing countries (avg.): • 16.5% fewer calories per day • 23% more child malnutrition Much worse in the hardest-hit areas 37% 11% 111% 52% 2050 price increases due to climate change (NCAR model) – e.g. the difference between the blue and orange bars Source: International Food Policy Research Institute

Water Impacts Many dry regions will experience significant water losses. Conflict over water is possible, for instance, along the Tigris-Euphrates or Indus rivers. Source: IPCC 2007 Synthesis Report

Climate Refugees • People seeking affordable food and access to water will move. Some population flows: • Migration from the countryside to the cities. • Increased illegal immigration to developed countries.

Species Loss & Migration 10-14% of all species on Earth extinct by 2100 due to climate change Increased human exposure to tropical diseases. Malaria epidemic risk due to climate change Source: Martens, P. et al. Potential impacts of climate change on Malaria risk. Environmental Health Perspectives 103(5), 458-464.

Summing It Up Climate change impacts would make this UN population projection unlikely. Significant warming would lock in climate changes for a long time, likely thousands of years. Source: United Nations

Move to Clean Energy A very rapid move to clean energy is possible, without sacrificing economic growth or prosperity. Germany is an example. German eco-taxes cut fossil fuel consumption without harming GDP growth A feed-in tariff promoted wind and solar development.

Renewable Price Drops Price drops for both solar and wind energy systems have been dramatic. Photovoltaic Module Cost ($/watt), 1976-2012

Energy: Largest Market in the World Every year, we spend: $5 $6 + Trillion Trillion on energy-related infrastructure on energy This is 14% of the global economy And that number will grow in the future…

Growth of the Middle Class Middle Class Population (billions) • 3 billion new middle-class people will want • Heating • Cooling • Lighting • Mobility • Manufactured goods Asia Pacific N America & Europe Rest of World Source: OECD, The Emerging Middle Class in Developing Countries

Increasing Resource Scarcity and Cost • Natural resources are becoming more expensive to extract. • Copper • We need to mine 50% more ore than we did in the mid-1990s to obtain the same amount of copper metal • Oil • Onshore drilling in Texas used to be important • Now, most big finds are deep under water, far offshore, or locked in Canada’s oil sands • Break-even price is now $70-$80 per barrel • With rising middle-class demand and continued depletion, prices will continue to rise.

Coming Boom in Renewables Residential Solar Installs in the U.S. 2001-2015 Market projected to quadruple in next four years. Market doubled in two years. Sources: BNEF, EIA, LBNL, PG&E

Innovate and Scale We need to (1) accelerate innovation in clean energy technologies and (2) provide the funding and support they need to reach commercial scale. Lightweight, efficient cars Ubiquitous solid-state lighting Zero-energy buildings Efficient manufacturing Grid-scale storage

To Scale Requires a Long View • Investment firms have long time horizons. They are well-positioned to enable the scaling of new energy technologies (and to reap the rewards) • Identify the innovations that can address our energy challenges • Give them the support they need to innovate and to scale up Source: US Energy Information Administration

Hedge Against Fossil Fuels Fossil fuels have high price volatility, and investment firms are already heavily invested in fossil fuels.

Key Benefits for Investors Less price volatility, hedge against fossil fuels Great economic returns Reduce climate change impacts

Climate Change & Energy Investment