Market Catalysts: How We Keep Warming to 1.5°C

From drought to heatwaves, to catastrophic fires and more intense hurricanes, our world is already experiencing climate change. But we as a civilization still have a say in how bad it gets.

To prevent the worst effects of runaway warming, the global climate movement has aligned on a goal to keep long-term warming below 1.5°C, as articulated by the Intergovernmental Panel on Climate Change in a 2018 special report.

The question now is how we get there. Getting to 1.5°C is a challenging goal and will require steep and rapid emissions reductions across the real economy, requiring unprecedented transformation in scale if not speed. As such, business as usual and tweaks to existing systems won’t cut it; we need bold, systemic transformation.

A new series of insight briefs by RMI’s Strategy Team provides insights into how to achieve this transformation. This includes both a look at the current climate and energy scenarios, as well as an examination of the use of “market catalysts” such as data and transparency, design and efficiency, and technology innovation.

Market catalysts work like levers in the real economy, amplifying efforts to achieve disproportionate results. Other organizations analyzing the energy transition have also identified these catalysts as important drivers of change.

In this blog, we’ll look at each of these catalysts. It is important to understand that they should not be understood in isolation; instead, the combination of these catalysts working together has the potential to spur the kind of rapid, rapid systemic shifts that we need.

Climate and Energy Scenarios

But before we get to the catalysts, the Strategy Teams’s first brief in our series takes a look at the use of climate and energy scenarios, such as those put out by the International Energy Agency, oil majors such as BP and Shell, and national governments. One of the ironies of our current situation is that these scenarios are easily misunderstood, and if not put in their proper context can confirm limiting biases—including an expectation that the future will look like the past.

Using Climate and Energy Scenarios to Inform Strategy and Policy provides guidance on how to best use such scenarios. The brief notes that it is important to develop a broad view of the opportunity space by comparing future snapshots shown in several scenarios, and also to compare scenarios that make use of different methodologies.

Ultimately, the map is not the territory, and no scenario can tell us everything. But maps are essential tools—and are more useful if you know how to use them correctly. As such, the authors recommend that you make use of the “white space of their omissions.”

As one of these “white spaces,” one fundamental problem with scenarios is that the energy transition is a fast-moving space, whereas both data collection and scenario building take time. This means scenarios typically rely on data that is years old, and many scenarios will necessarily lag real-world developments.

 

Design and Efficiency

One place that energy scenarios often fall short is missing the transformative potential of efficient, integrative design. The second brief in this series, Design and Efficiency: Critical Drivers of Low-Carbon Growth, talks about the transformative potential of integrative design. It notes that deep opportunities for efficiency are available not only at the component level, but also at better whole-systems design.

The authors cite the example of the smartphone, which integrates multiple devices (a phone, a camera, a computer) into a single one. By doing so it reduces both consumption of raw materials as well as energy inputs while providing equal or better services than the devices it replaces.

However, integrative design isn’t something that happens on its own; it takes vision. In order to reap these benefits it is necessary to think differently, to reconsider the design of existing systems, and to innovate up and down the supply chain.

 

Data and Transparency

And as the demand for solutions that can scale to meet the climate challenge grows, there is a corresponding need for data to show various actors what needs to be done and what it will cost to do it, and to provide other relevant information. This data can also quantify the benefits of climate solutions, such as increased health, job creation, etc. In short, data is needed to navigate many aspects of the complex process of transformation.

As explored in our new report, the Revolution Will Be Digitized, as climate action advances, and as solutions become more sophisticated, the need for data grows. One example that RMI has studied deeply is the use of a telematics-based data framework in Shenzhen, China, to provide clarity on how electric logistics vehicles (ELVs) are using charging infrastructure. Such data has been shown to be critical in designing programs to advance ELV charging with a minimum of wasted time, effort, and subsidies.

But this is only one of the many uses of data; other applications include target setting and pathway development, product differentiation and sustainable procurement, business intelligence, risk management—the list goes on and on.

 

Technology Innovation

Perhaps the most well-understood of market catalysts in our current energy transition is technology innovation. The learning curve effects at play in the rapid cost declines of solar, wind, and lithium-ion batteries have famously allowed the deployment of these technologies to blow past even the most optimistic forecasts. And this has been a challenge for forecasters to model, as they tend to assume linear growth.

But solar, wind, and EVs are far from the end. We are going to need more technology innovations, and there are developments in artificial intelligence, automation, internet of things, and hydrogen electrolysis that have the promise to lead to new, disruptive technology combinations.

These disruptive technologies have the potential to lead to dramatic change. However, as we explain in Climate Tech’s Perfect Storm, the rate of change needed to get to 1.5°C alignment demands that we create supportive ecosystems to maximize technology development. Crucially this includes not only support for R&D, but also deployment of nascent technology.

It’s also notable here that technology development holds promise for individual national economies. As such, governments around the world are racing to make sure that they capture the benefits of clean technology manufacturing and supply chains, to avoid being left behind in the economy of the future.

 

A Combination of Forces

These are just some of the market catalysts available; future insight briefs will include the role of finance and other levers.

Ultimately, we cannot rely on any one of these market catalysts to provide the crucial advantages to realize 1.5°C. Each of these interacts with the others, and together they can provide the leverage needed to fully transform our economy at the speed and scale needed.

But these market catalysts won’t necessarily develop fully on their own. It is up to policymakers, business leaders, and other stakeholders to understand these forces and make the right decisions to deploy these levers to maximum effect.

The clean energy transition is underway, but there is no guarantee that we will transform our economy in time to align with a 1.5°C future. There are ways to do this, but we must be strategic and consider many factors.

RMI hopes that we can contribute to this task by sharing our understanding of the transformative power of market catalysts, to both reap greater benefits from a clean energy economy and avoid the worst effects of climate change. The future is still up to us.