THE 3D RESET: Decarbonization
Accelerating the response to climate change.Decarbonization explained
As countries around the world accelerate their response to climate change, we are in the midst of a transition from an overwhelming reliance on fossil fuels to greener energy sources. We believe momentum will continue as economies face larger physical damages related to higher temperatures and more volatile weather.
Countries are likely to rapidly accelerate the decarbonization of power generation as emissions need to fall by more than 40% in the next seven years as a vital step toward meeting net zero requirements by 2050. The shift to net zero emissions represents a new key structural trend for the global economy as it will require a radical change in the energy system and in other key sectors of the economy.
Key takeaways
More change to come
Response to climate change has accelerated in recent years, but there is more change to come as economies face larger physical damages due to higher temperatures.
Growing momentum to drive change
Policymakers around the world are using legislation, subsidies, and taxes to force through change, with growing momentum towards carbon pricing.
Geopolitical tensions
Recent geopolitical tensions have accelerated the need for countries to end their dependence on traditional energy sources and strengthen the appetite for action on the energy transition.
Limited quantities of key minerals
Key minerals like cobalt, nickel and graphite are needed for clean energy technologies. But the limited quantities of these materials and the competition for them will complicate the energy transition and will potentially fuel inflation or greenflation.
Technological innovation
Technological innovation will be a key factor in the longer-term fight against climate change. The move to reducing carbon emissions will drive greater investment in green technology and needed infrastructure over the next decade.
Stagflationary pressures
Reconfiguring economies around renewable energy is likely to come at cost. They are likely to take a toll on productivity as higher carbon pricing discourages production and lower overall economic output. That is why acclerating climate action is expected to be a stagflationary force, stagflation being a combination of slowing growth and accelerating inflation.
D-cipher video series: Decarbonization explained
D-cipher is the video series to help you understand the 3D Reset. In this video, we discuss the long-term trend of decarbonization.
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