IPR releases climate policy and progress assessment for Quarter Two

Momentum still positive towards 1.8°C despite global headwinds

LONDON: 30/06/2022 12:00 BST: Global climate momentum remains positive with developments around increased ambition reinforcing a 1.8°C pathway according to the latest quarterly analysis released the latest Inevitable Policy Response Quarterly Forecast Tracker (QFT).

The QFT provides investors with an ongoing assessment of key climate energy, land use and transition policy and technology developments*. Over one hundred and sixty policy measures have been tracked since the Glasgow conference and weighted on relevance, credibility and impact.

From April to June 2022, sixty-one global climate policy and technology developments were tracked. In the context of IPR forecasts, thirty-six were relevant, twenty-six reinforcing the probability of a 1.8°C outcome, five indicating a slight acceleration towards a 1.5°C outcome and two developments indicative of deceleration, relative to forecasts. Given that Brazilian deforestation is dependent on the upcoming election and that US Federal climate policy has somewhat stalled, the overall impact is at best, in line with the 1.8C Forecast.

The QFT reporting suite for Quarter 2 also includes a Just Transition lens with an in-depth analysis prepared by the Grantham Research Institute on Climate Change and the Environment assessing to what extent policies reflected in the QFT integrate Just Transition principles. In general, many do, but more could be done.

Also included is accompanying IPR paper by Kaya Advisory examining how the re-election of ‘Lula’ da Silva would make an end to illegal deforestation activity by 2030 (if not well before) and the achievement of net zero emissions from the Brazilian Amazon possible. The re-election of incumbent Jair Bolsonaro with a conservative Congress would be of grave concern.

QFT Summary – Quarter 2, 2022

• In terms of net impact, we note that on policy the EU edges in the positive direction longer term, China has been somewhat positive, but the US has not moved ahead

• Recent policies and proposals in Brazil are likely to increase deforestation

• On technology developments, including deployment, there have been positive trends particularly on EV deployment which accounted for 10% of sales in 2021 (outpacing IPR outlook of 5%)

• Offsetting this short term has been the security crisis brought on by the Ukraine War leading to use of more fossil fuels in power. The long-term issue is whether this gets ‘locked in’

• In the Quarter 1 QFT Report we addressed this in terms of potential overbuild of capacity for security reasons but with emissions trajectories still manageable through capacity utilization

• Finally, the world economy is slowing short term, which would result in lower growth in emissions

• Overall while there are still significant challenges, IPR believes developments are confirmatory of FPS 1.8°C while falling well short of RPS 1.5°C

Brazil in Focus

• In October 22 Brazil will hold elections for the president and National Congress. This is a particularly crucial election given the negative trends for deforestation under President Bolsonaro and the more positive stand that opponent and former President Lula takes.

• The conclusion is that an end to Net Deforestation by 2025 as required in the 1.5°C RPS looks virtually unattainable.

• If Lula is elected, this leaves open the door to an end to illegal (90%+ of activity) deforestation and net zero emissions when combined with afforestation by 2030 as forecast in the 1.8°C FPS.

• IPR notes a number of private sector initiatives which are working to end commodity-driven deforestation.

Mark Fulton, Project Director, Inevitable Policy Response:

“The latest QFT reflects that the majority of climate developments in 2022 remain on the positive side of the ledger, despite the ongoing international instability and volatility. However, developments in the US and Brazil around elections remain important to delivering a below 2°C outcome”.

Brian Hensley, Partner, KAYA Advisory:

“ Anyone interested in saving the Amazon or concerned about the Paris Agreement targets needs to have a date in mind, October 2nd 2022. The Brazil General elections may impact the fate of both.”

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