As part of the Paris Agreement in 2015, world leaders pledged to limit global warming to 2 degrees Celsius, while encouraging efforts to limit the increase even further, to 1.5°C by 2030. This commitment effectively creates a “carbon budget”, as we can only emit a limited level of greenhouse gases (GHG) before global warming exceeds the 2-degree mark.
Warming is the hallmark of climate change. In the Caribbean for example, average temperatures have increased by 1 degree Celsius over the last century and the area is expected to warm a further 2-3 degrees. 1 degree may sound trivial, but this could not be further from the truth. Think of the human body. A change in body temperature from 37°C to 38°C will trigger uncomfortable symptoms such as fever, sweating, chills and headaches. In the same way, a 1 degree increase in temperature on the planet triggers reactions such as rising sea levels (warm ocean waters expand), floods, droughts, wildfires and so on.
Our bodies are part of the same earth system threatened by anthropogenic global warming (that is to say that we too are threatened by our own human activity on this planet). In the case of the Caribbean, the warming of the sea is contributing to coral reef bleaching, meaning a whole ecosystem of other species which feed on the coral, die with it. The warming climate is also increasing the frequency and intensity of weather events. Last summer, two hurricanes (Irma and Maria) intensified overnight from tropical storms to Category 5 hurricanes, the most deadly of hurricane intensities.
Since 1980, there has been a four-fold increase in major flooding events while the number of major storms, droughts and heat waves has also doubled. From an economic perspective, the losses from extreme weather worldwide rose by 86% between 2007 and 2016 (€117 billion in 2016 alone).
Reducing our carbon emissions is imperative if we are to avoid the worst effects of climate change. However, current levels of investment are not sufficient to support our transition to a low carbon economy. In Europe, approximately €180 billion needs to be invested every year if we are to achieve EU climate and energy targets by 2030. In response, the EU has committed to making at least 20% of its budget climate-relevant, with a view to increasing this expenditure to 35% by 2020. A significant proportion of these funds are channelled through the European Fund for Strategic Investments (EFSI), with almost one third of investments made last year directed towards energy, environmental and resource efficiency projects and social infrastructure.
The EFSI is managed by the European Investment Bank (EIB) and follows the same procedures as with traditional EIB loans or for lending organised via an EIB partner. The initiative aims to invest €500 billion by 2020, with at least 40% of the EFSI targeted at financing infrastructure and innovation for climate change action. As the EIB is never the only investor in a project, this means that for every euro invested, third party investment worth several times the initial amount will be generated.
The sectors needing most investment are clean energy infrastructure (such as solar power), energy efficiency, low-carbon transport and environmental resources such as forestry. Investors in these assets typically tolerate long-term timelines in exchange for creating significant social and environmental impacts that address the risks of climate change.
The biggest investment gap currently is in energy efficiency, where the level of investment in building renovation needs to triple in order to achieve EU reduction targets for 2030. Building and housing alone are responsible for 40% of energy usage and 36% of CO2 emissions in the EU.
The EU’s commitment to decarbonising the region’s economy is supported by both large scale investment and changes in policy, some of which are currently in the preliminary phase of review and public consultation. With these steps, the European Commission aims to reduce the overall risk of investing in climate-related projects, while creating jobs and boosting economic growth. The opportunities that this energy transition offers for innovation, collaboration and growth cannot be underestimated. It will also improve air quality and reduce air pollution-induced health problems which are estimated to cause 6.5 million premature deaths globally each year.
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