The fast, furious – and fair – energy transition

Gregor Vulturius, SEB’s Lead Scientist and Advisor within Climate & Sustainable Finance shares his thoughts on the rapid transition needed to meet the Paris Agreement target and the huge opportunities for innovation.

The most recent edition of SEB’s flagship report on sustainable finance – The Green Bond – is dedicated to question how we can scale energy transition technologies at the speed required to reach net-zero emission in a manner that is fair amid a wave of populism and trade impeding policies.

To have a realistic chance of meeting the Paris Agreement target and reaching net-zero emissions by mid-century, global energy investment needs to average USD 4.84 trillion per year between 2024 and 2030. This is almost triple the USD 1.77 trillion spent in 2023. To achieve this, we need to scale clean technology at a ferocious speed: Investments in renewable energy need to double, spending on electrified transport to triple, funding for hydrogen to grow by 600 per cent and financial backing of carbon capture and storage needs to explode by an almost unimaginable 46 times.

This is not the first time that the global economy has gone through the process of rapid technology adoption. Cars replaced horse carriages, personal computers started to take off in the nineteen-nineties and the first iPhone was launched only as recently as 2007. Some of the clean technologies that we need to limit global warming are already well advanced on the adoption S-curve – like wind and solar power – while other technologies like electric cars are just starting to take off or are still waiting for the tipping point like green steel and utility scale energy storage.

What excites me about this energy transition are the abundant opportunities for innovation. With net-zero commitments covering 88 per cent of global emissions, 92 per cent of the world’s GDP and 89 per cent of people on earth, the market potential of clean energy, energy efficiency and production processes with lower environmental impact are basically endless. Coupled with other megatrends like urbanisation and artificial intelligence, scaling business in for example. battery manufacturing, flexible energy trading systems, sustainable chemical production, efficient water management or replacing fossil fuels in hard-to-abate sectors like steel and cement makes economic sense.

At the same time as we need to scale energy transition technologies at twice the historic rate of technology adoption, we need to make sure that the transition will be fair. The recent demonstrations of farmers and before that the yellow vest protest movements have highlighted that commitments to net-zero need to be underpinned by social inclusivity. Corporates and financial institutions wanting to embed just transition into their business could:

• anticipate, assess, and address the social risks of the transition
• identify and enable the social opportunities
• ensure meaningful dialogue and participation in net zero planning.

The Green Bond report includes contributions from SEB experts as well as alternative asset manager Brookfield, industrial heat start-up Coolbrook, SEB Greentech VC and the International Labour Organisation.