Escalating energy security crisis underscores imperative for accelerated net-zero transition

8 April 2022

A statement from the UN-convened Net-Zero Asset Owner Alliance:

As countries face critical choices in their energy strategies, amid heightened geopolitical tension and a rapidly warming climate, governments must ensure that energy security policies are compatible with net-zero scenarios mapped out by the International Energy Agency (IEA) or the Intergovernmental Panel on Climate Change (IPCC).

As confirmed by the latest IPCC Working Group III report on climate solutions, the world is still heading for an excess of fossil fuel-based energy use that will vastly exceed the carbon budget needed to meet the 1.5C Paris Agreement goal. This trend must be halted.

Choices made by policymakers now must not delay the longer-term adjustments that are needed for energy markets and infrastructure to align with the Paris Agreement and reach net-zero emissions, by 2050 at the latest.

Specifically, the development of new fossil fuel reserves will create lock-ins and stranded assets at an enormous opportunity cost. Among other things, governments must now rule out locking in long-term fossil fuel subsidies, which run contrary to net-zero policies and exacerbate market distortions.

In the short term, using all available energy resources – including the immediate scaling of energy efficiency – to diversify the energy supply must be a top priority for many countries, especially in Europe. In the medium to longer-term, the national security argument for accelerating the net-zero transition has strengthened considerably.

The only approach that can and will lead to long-term energy security is a massive scaling of low- and zero-carbon technologies – including new, breakthrough technologies – and infrastructure.

With the IPCC noting “sustained decreases” over the last decade in the unit costs of solar energy (85%), wind energy (55%), and lithium-ion batteries (85%), these are viable steps towards energy system resilience, a greener economy, the provision of green jobs, and the protection of businesses and consumers against future price spikes in oil and gas.

We echo the call by the UN Secretary General António Guterres to ramp up finance to help countries adapt to rising temperatures. Here, the Net-Zero Asset Owner Alliance’s work on combining and scaling public-private finance and its call to action for asset managers to collaborate on catalysing appropriate blended financial vehicles is supportive of the transition to a fairer net-zero world.

We will continue to engage with society to invest in climate change mitigation, adaptation, and clean technologies to ensure a just transition at an unprecedented scale.

This year, the Alliance is will be publishing a position paper to consider the implications of energy insecurity and net-zero emissions for the oil and gas sectors, following up on the publication of a position on thermal coal in 2020.

The Net-Zero Asset Owner Alliance Steering Group members are as follows: Günther Thallinger (Chair), Board Member at Allianz SE; Stephan van Vliet, CIO of Prudential; Lesley Ndlovu, CEO of African Risk Capacity; Charles Émond, CEO of CDPQ; Torben Möger Petersen, CEO of PensionDanmark;  Eric Usher, Head of UNEP FI; and David Atkin, CEO of PRI.

The Strategic Advisors include: Christiana Figueres, Global Optimism and Margaret Kuhlow, WWF.

About the UN-convened Net-Zero Asset Owner Alliance

The 71 members of the UN-convened Net-Zero Asset Owner Alliance have committed i) to transitioning their investment portfolios to net-zero GHG emissions by 2050 consistent with a maximum temperature rise of 1.5°C above pre-industrial levels; ii) to establishing intermediate targets every five years; and iii) to regularly reporting on progress. The Alliance is convened by UNEP’s Finance Initiative and the Principles for Responsible Investment (PRI). The Alliance is supported by WWF and Global Optimism, an initiative led by Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC).

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