Climate Progress Dashboard: Marking progress one year on
One year after Schroders launched the Climate Progress Dashboard, we take a look at the advances made in curbing global temperature rises.
The Climate Progress Dashboard was created to help Schroders’ analysts, fund managers and clients track climate action. Meeting global leaders’ commitments to limit temperature rises to 2°C will require action across a range of areas, by a range of stakeholders.
The dashboard plots the long-run rise in temperatures implied by efforts in each area, providing a bird’s eye view of the speed and scale of climate action across the spectrum of areas that will need to change. It provides a more complete view than any indicator in isolation.
When we launched it a year ago, the Climate Progress Dashboard pointed to a 4.1 degree temperature rise. Since then, it has fallen slightly to 4 degrees. Indicators are moving in the right direction, and there are reasons for optimism looking at individual indicators, but it is also clear that far faster action is needed and far more disruption lies ahead.
One step forward, one step back?
Stepping back to review the last twelve months, the chart below plots the changes in the temperature rises implied by each indicator since the dashboard is launched. While moves in the wrong direction (toward higher temperatures) equal the number pointing to improvements, there are reasons for optimism in the overall picture.
Absolute change in temperature rise implied by each indicator since mid-2017 (degrees Celsius)
Source: Schroders Climate Progress Dashboard. Note: compares the absolute change in temperature rise implied by each indicator, comparing the most recent values to those published when we introduced the dashboard.
On the negative side, we previously highlighted a global slowdown in financial flows into climate solutions such as clean energy. Yet despite setbacks in the US, where the political backdrop is doing little to encourage investment, other regions seem committed to promoting action. For example, the European Union (EU) has unveiled a package of new policy proposals aimed at mobilising capital markets to help meet the €180 billion annual investment in climate solutions it targets.
Fossil fuel production also rose further than more ambitious climate scenarios implied. After falling for the previous three years, global coal production rose in 2017, according to the most recent BP Statistical Review.
On the positive side, average global carbon prices have more than doubled since the middle of last year, following reforms announced to the EU Emissions Trading Scheme. China’s plans for a nationwide carbon trading scheme, also announced in late 2017, adds to our confidence that more widespread and material carbon prices will provide impetus for further action.
While fossil fuel production rose more quickly than environmental groups hoped, there is some encouragement from declining investment in that industry. Tracking capital investment and where it is made - relative to the industry’s current assets - helps us gauge the pace of future demand growth. Amidst lower prices and pressure on the industry to show restraint, investment in new capacity has fallen in recent years. The test of that resolve will become clearer in coming quarters, as the traditional stimulus of higher oil prices feeds into decision making.
Finally, continued rapid growth in both electric vehicle sales and renewable energy capacity highlight the pace of change in those technologies, where declining costs are redefining economics in power generation and road transport. The World Economic Forum has concluded that renewable energy is already lower cost than fossil fuels in over 30 countries and will be cheaper globally by 2020. Electric vehicles similarly benefit from rapid cost declines, which autonomous driving will accelerate. In short, technology advances in key areas are driving change even without tougher political intervention.
In summary, the 2018 scorecard shows a mixed picture, with a small move in the right direction overall. However, we believe the overall picture is more positive than the headline figure suggests. In particular, growing use of electric vehicles and clean energy technologies underline the falling reliance on politicians to drive climate action, which given their limited impact to date should prove positive.
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