SPECIAL REPORT: Heat is on for radical action on a global scale

A new report says countries must take “unprecedented” action to slash carbon emissions to zero by 2050. Here we look at what countries need to do to keep global temperatures from rising more than 1.5C.

SPECIAL REPORT: Heat is on for radical action on a global scale

Emily Beament explains what countries need to do to keep global temperatures from rising more than 1.5C, and the devastating consequences if they fail to act.... and act fast.

A new UN report warns of the unprecedented changes needed by society to keep global temperatures from rising more than 1.5C above pre-industrial levels.

Here is what you need to know.

Q. What is significant about 1.5C of warming?

A. While warming of 2C above pre-industrial levels has widely been thought of as the threshold beyond which dangerous climate change will occur, vulnerable countries such as low-lying island states warn rises above 1.5C will threaten their survival.

Their concerns meant a pledge to pursue efforts to limit temperature rises to 1.5C was included — after tough negotiations — alongside the commitment to keep them “well below” 2C in the global Paris climate agreement in 2015.

Q. So why this report?

A. When the target was put into the Paris Agreement, relatively little was known about the climate risks that would be avoided in a 1.5C warmer world compared with a 2C warmer world, or about the action needed to limit temperature rises to that level.

So the UN’s Intergovernmental Panel on Climate Change (IPCC) was tasked with providing the answers.

Q. What does the report say?

A. It warns the world is well off track to keep to the 1.5C limit.

Even with the promises countries have made as part of the Paris Agreement to cut the greenhouse gas emissions that cause global warming, the world is set to breach the 1.5C threshold by around 2040.

Based on those promises, we are heading for 3C by 2100 and even warmer after that.

As more greenhouse gases lead to more warming, stabilising the planet’s temperature at any level will require emissions to fall to zero overall. To keep temperatures from rising to more than 1.5C in the long term, countries need to cut carbon emissions by 45% by 2030 and to net zero by 2050, with steep cuts in other greenhouse gases such as methane.

Methods to take excess carbon out of the atmosphere will also be needed.

Q. How can all that be done?

A. Well, it will require rapid, far-reaching and unprecedented change across the whole of society, according to the report.

Renewables would have to supply 70% to 85% of electricity in 2050, there would be a small role for gas power with technology that captured and stored its carbon, while coal would be virtually non-existent.

The feasibility of solar, wind and battery storage has improved significantly in recent years, which could signal the system is transforming, the report says.

But it is not just electricity: transport, buildings and industry would have to become significantly cleaner.

Taking excess carbon from the atmosphere requires measures such as planting new forests or, more controversially, burning plant material for energy and capturing the carbon to store underground, which is known as “BECCS”.

Millions of square kilometres would need to be turned into forest or used for growing renewable energy crops — which could undermine food production.

Q. Why make all that effort for 0.5C?

A. The report says a 2C rise will lead to more heatwaves and extreme rainstorms, more people facing water shortages and drought, greater economic losses and lower yields for major crops than 1.5C.

Sea level rises would be 10cm lower with a 1.5C temperature rise compared to 2C by the end of the century.

While coral reefs could decline 70% to 90% with 1.5C of warming, virtually all the world’s reefs would be lost at 2C, while far more creatures and plants across the world face losing a large part of their range.

The Arctic is likely to be ice-free in summer around once a century at 1.5C but at least once a decade if warming climbs to 2C.

Q. How has this report been drawn up?

A. The IPCC does not do any of its own research, so the report draws on more than 6,000 research papers to reach its conclusions.

The report’s authors and representatives of 195 governments, which are members of the IPCC, have then met to finalise the “summary for policymakers” report, which involves agreeing it line-by-line.

The aim is to make the report as clear as possible while still scientifically robust — and to ensure that everybody is behind the document.

What has the Irish Government been doing?

A. The Government has unveiled a range of national plans to tackle climate. These include a €500m Climate Action Fund which aims to support initiatives that contribute to the achievement of Ireland’s climate and energy targets.

The fund will be implemented by the Department of Communications, Climate Action and Environment and will be dispersed between now and 2027.

The first call for applications from the public and private sector to avail of the fund has already been published.

The National Policy Position on Climate Action and Low Carbon Development (2014) and the Climate Action and Low Carbon Development Act 2015 set out ireland’s objective of achieving transition to a competitive, low carbon, climate-resilient and environmentally sustainable economy by 2050.

These plans aim to achieve an aggregate reduction in carbon dioxide (CO2) emissions of at least 80% (compared to 1990 levels) by 2050 across the electricity generation, built environment and transport sectors

It also includes an approach to carbon neutrality in the agriculture and land-use sector, including forestry, which does not compromise capacity for sustainable food production.

Investors are betting on climate change getting worse

If electric cars and clean energy aren’t enough to prevent rising oceans, then there’s money to be made in seawalls, indoor agriculture, and emergency housing, says Christopher Flavelle.

Atop investment strategist for JPMorgan Asset Management sent a note to clients earlier this year with a dire forecast. Despite global efforts to stop climate change, sea levels are likely to rise dramatically, threatening the 40% of Americans who live along the coast. On the other hand, there will be some investment opportunities in seawalls.

“A storm-surge barrier system, protecting New York City and parts of New Jersey, could cost $2.7m per metre,” Michael Cembalest, the asset manager’s chairman of market and investment strategy, wrote in his annual, Eye on the Market energy newsletter in April. He added that governments would probably struggle to pay that cost, perhaps turning to either bonds or privatisation.

As the US grapples with a second straight year of record hurricanes, floods, and wildfires, a small but growing number of hedge funds, pension plans, and other investors are testing strategies to take advantage of climate change. Where they’re putting their money is a glimpse of the likely tangible impacts from higher temperatures. The investments include storm-and flood-protection along the coast, desalination plants in drought-prone regions, new approaches to agriculture, and even land far from the ocean, for when rising seas shift the real estate market.

“In the early stages, people will be nervous,” says Cembalest, who calls himself an advocate for better flood control. “And the returns will be higher.”

There’s a fatalism to investors’ calculations. Global greenhouse gas emissions reached an historic peak last year, along with the concentration of carbon dioxide in the atmosphere. The last three years were the hottest on record. That trend is expected to accelerate: Scientists expect temperatures to rise by 5F to 10F, from now to the end of the century. “There is no way, at this point, to stop climate change,” says James Everett, partner and co-founder at Ecosystem Integrity Management, a venture capital firm near Berkeley, California. “Pretty much every system is going to have to change. We’re going to have to adapt to this.”

Investors focused on climate change have traditionally bet on fixes, such as renewable power and electric vehicles. Mitigation and adaptation are grimmer projects. But Jay Koh, co-founder and managing director of the Lightsmith Group, a private equity firm focused on climate adaptation, says it’s necessary to acknowledge that things could get worse. “There is a requirement for some kind of psychological journey that people have to go through,” Koh says. “I’d rather have a strategy designed for the set of circumstances where we might not 100% win.”

Consider what might happen to food production. As precipitation patterns change and oceans become more acidic, outdoor environments will become less reliable and “more and more intolerant for crops or fish,” according to Liqian Ma, managing director at Cambridge Associates, in Boston.

Demand will increase for technologies that allow indoor agriculture and even aquaculture.

In other cases, making money off climate change can be as simple as thinking through the consequences of a hurricane. Last August, a week before Hurricane Harvey struck Texas, Rod Hinze had an idea. The principal and portfolio manager at Key Point Capital, in Dallas, Hinze invests in real estate investment trusts, or REITs.

As Harvey approached the coast, the cost of REITs that held hotels around Houston was falling, as investors assumed the hurricane would scare off tourists and business visitors, and maybe trash the hotels themselves. “People thought they’d be offline,” Hinze says.

“What they don’t realise is the demand in short-term housing after a hurricane like that, it’s astronomical.” So Hinze bought low — first in Houston, and then, as Hurricane Irma followed a week later, in South Florida.

We saw occupancy go to 100% in a lot of those hotels,” Hinze says. “We didn’t crush it. But we made 25%, 30% pretty quick.

The effects of climate change have also increased demand for new and more exotic types of insurance, against what Barney Schauble, managing principal at Nephila Advisors LLC, calls “weather risk.” Businesses can buy coverage for extreme weather, and Nephila finds investors willing to bear the other side of that risk in various forms. Schauble says his company recently helped a water utility that was worried about increasingly unpredictable precipitation patterns. So, it created a product that would protect the utility against swings. “We structured a hedge for them: In this band, your business is fine,” Schauble says.

“We can price that.” That business is exploding. Since last year, the amount of money coming in for extreme-weather protection has doubled.

David Vogel, founder and chief executive officer of the Florida-based quant fund Voloridge Investment Management LLC, says he believes rising seas, and worsening storms and droughts, will create opportunities in health care, insurance, and agriculture. He declined to discuss his firm’s specific investments. But he was willing to disclose one personal purchase: tracts of land around Asheville, NC, where he expects housing values to keep climbing, as climate change gets worse.

“It’s 2,000 feet above sea level,” he says. “Living in Florida, that’s where I see a lot of people moving.”

Some investors, who believe climate change will get worse, are even applying that premise to municipal bonds. Jonathan Bailey, head of environmental, social, and governance investing at Neuberger Berman Group LLC, says his company analyses the climate risk facing different cities, to find out which ones are more or less exposed. Credit-rating firms have been slow to incorporate those varying levels of risk into bond ratings.

As a result, Neuberger can buy and hold bonds issued by cities with lower climate risk, without paying a premium over bonds issued by cities facing greater threats from storms and other disasters. “If the market then changes its perception of those relative risks, then that can create an opportunity for us to then sell,” Bailey says.

The broader public’s failure to appreciate the risks of climate change is part of what makes it such a good area for investing, according to Schauble. He says that’s especially true in the US. “There is not a single other country where anybody smart isn’t a believer in these things,” Schauble says.

“If you can see something that other people just refuse to see, and you can make decisions on that basis, I suspect, over the longer term, that is going to put you in good stead.” The fund managers and advisers interviewed for this story expressed little worry that the science is wrong. For some, a bigger concern was seeming to be taking advantage of a slow-motion calamity.

“I would love to give up these investment opportunities in a second, if people would listen and stop polluting the environment,” Vogel says. In the meantime, he says, investors can be a societal warning system, alerting the public to a risk it has otherwise been reluctant to see.

“If people are making money off it, that gets attention.”

Key facts from report:

  • Global warming should be limited to 1.5C rather than 2C to ensure the impacts of climate change, from droughts to rising seas, are less extreme.
  • By 2100, global sea rise levels would be 10cm lower with global warming of 1.5C compared to 2C.
  • Coral reefs would decline by 70%-90% with warming of 1.5C, compared to more than 99% with 2C.
  • Human-induced warming reached approximately 1C above pre-industrial levels in 2017.
  • The global temperature is currently rising by 0.2C per decade.
  • If the pace of warming continues, the temperature would reach 1.5C around 2040.
  • 20%-40% of the global population have experienced more than 1.5C of warming in at least one season.
  • To limit warming to 1.5C, net emissions of carbon dioxide would need to fall by about 45% from 2010 levels by 2030, reaching “net zero” around 2050.
  • It will require a huge ramp-up in renewables so they generate 70%-85% of electricity supplies by 2050, while coal power’s share of the mix tumbles to almost nothing.
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