Literally thousands of scenarios exist to navigate the uncharted, turbulent waters of reversing climate change. As we wait to see which will prevail to fuel the massive shift toward an investment in renewables, we believe:
The politics of climate change are controversial within countries and across the globe. The path forward is highly uncertain and depends critically on the degree to which global governments, businesses, and consumers take action to reduce emissions. What are the inherent challenges and indispensable components of the transformation ahead? And what investment opportunities can be drawn from the decarbonization theme?
Efforts to reduce carbon emissions are most likely to be concentrated in those sectors that use the most coal and petroleum. With 90% of coal demand coming from power generation, and 68% of petroleum coming from transportation, the opportunities in the U.S. are clear.1
A crucial element in a decarbonized electricity generation sector is how to provide a reliable, steady source of electricity. Yet, while wind and solar power are proven technologies whose cost efficiency has already surpassed many fossil fuel options, the wind doesn't always blow, and the sun sets.
The investment potential of the decarbonization theme transcends economic sectors, industries, and strategies. Market participants should consider assessing the possibilities while staying mindful of the risks, time horizons, policy tipping points, and alluring shiny objects.
1Intergovernmental Panel on Climate Change 2014.
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