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What is the message?
The central message of the article “A Blueprint for a Livable — and More Prosperous — Planet” by Boston Consulting Group (BCG) is the urgency and importance of accelerating the transition to renewable and low-carbon energy sources to combat climate change.
- The article emphasizes that this transition is critical not only for preserving a livable planet but also for reshaping the global energy landscape and promoting greater prosperity.
It highlights the following key points:
Urgency of the Energy Transition: The article stresses the need to shift to renewable and low-carbon energy sources three times faster than any previous energy transition. Unlike past transitions, renewables must replace traditional energy sources, not just meet additional demand.
Economic and Competitive Impact: The transition to clean energy will not only address climate change but also transform the economics of energy systems and markets, affecting global competitiveness.
Inadequate Progress: The article points out that current policies are insufficient, and without significant changes, global warming is projected to reach 2.7°C by 2100.
Blueprint for Action: BCG has created a blueprint that outlines actions for policymakers, energy users, energy producers, infrastructure providers, and investors to accelerate the energy transition.
Actions for Public Sector: The public sector is urged to prioritize actions such as closing the cost gap, setting ambitious deployment targets, redesigning energy markets, streamlining planning processes, rethinking liability frameworks, and ensuring an equitable energy transition.
Role of Energy Consumers and Infrastructure Providers: Energy consumers and infrastructure providers must lock in green energy supply, plan for future demand, and collaborate across sectors and supply chains to decarbonize effectively.
Measures for Manufacturers and Tech Players: Manufacturers and tech companies are encouraged to secure supply chains, leverage scale to reduce costs, and balance innovation with standardization.
Importance of Financial Firms: Financial institutions are called upon to engage with regulators and governments, integrate carbon into asset valuations, and provide financial support for low-carbon technologies.
The Need for Policy and Collaboration: The article emphasizes that while the tools for achieving a net-zero future exist, effective policies, business cases, and capabilities must be in place globally to accelerate action.
Overall, the central message is a call to action for all stakeholders, both private and public, to follow the blueprint provided to accelerate the transition to a sustainable, low-carbon energy future.
The article underscores the urgency of the climate crisis and the need for immediate and concerted efforts to address it.
DEEP DIVE
A Blueprint for a Livable — and More Prosperous — Planet
BCG
September 2023
Next week marks the start of Climate Week NYC, a summit that occurs alongside the UN General Assembly, gathering leaders from the public and private sectors to speed up progress on global climate action and drive the energy transition. BCG is a knowledge partner for the UN’s SDG Digital Day at the summit.
The need to accelerate the transition is urgent. We have to shift to renewables and other low-carbon solutions three times faster than any previous energy transition, such as that from coal to oil and other hydrocarbons. And unlike past transitions, renewables must do more than meet additional demand — they have to replace traditional energy sources.
The energy transition is critical to preserving a livable planet. But it will also change the economics of energy systems and markets and remake the global competitive landscape. Speeding up this process can bring greater prosperity and expand access to electricity to the 775 million people who don’t have either today.
But progress so far has been too slow. Current policies would lead to warming of 2.7°C by 2100 — with the energy transition in sectors such as industrial manufacturing and buildings especially insufficient.
How can we drastically speed up change and meet the necessary targets for 2030 and beyond?
Taking Action Across the Energy Ecosystem
BCG has created a blueprint that outlines how to scale up new low-carbon technologies, what the global implications of the shift will be, and which critical actions policymakers, energy users, energy producers, infrastructure providers, and investors should take.
Public sector leaders should take advantage of the full power of market forces while maintaining the ability to course-correct. This means prioritizing actions on six fronts:
- Close the cost gap, implementing policies that make nongreen offerings more expensive and green products more cost competitive.
- Get granular, offering detailed, year-by-year deployment targets that lead to ambitious goals for 2030 and 2050.
- Redesign energy markets, providing price signals that balance supply with short-term demand and encouraging consumers to shift greater energy use to off-peak hours.
- Dramatically cut planning and permitting times by streamlining these processes, particularly in expanding electric grids.
- Rethink liability frameworks, minimizing risks for investors in newer technologies such as hydrogen and carbon capture, utilization, and storage.
- Ensure a just energy transition, aiming for an equitable distribution of the positive and negative impacts of changes across regions and society.
The emerging energy system will require energy consumers and infrastructure providers to play a bigger role than they have in the past. They must take three interlinked actions:
- Lock in green energy supply and infrastructure, ensuring reliable access to low-carbon energy and to required infrastructure.
- Design capital expenditure plans with a long-term view, taking into account how fast demand will rise.
- Build and support low-carbon ecosystems, understanding that collaboration across sectors and along the entire supply chains will be critical.
These players must aim for flexibility and resilience as they decarbonize, pursuing these priorities:
- Ensure a responsible and resilient supply of oil and gas as demand for fossil fuels declines and the risk of price shocks and volatility goes up. And remember that there can be innovative ways to avoid passing on higher supply costs to customers.
- Take the lead on low-carbon energy production, making use of strong balance sheets and technical and operational know-how to help orchestrate complex energy systems and ecosystems.
- Develop tailored energy supply portfolios, understanding that different markets will need different mixes of low-carbon energy sources.
- Design the right solutions, helping customers find pathways to transition effectively over time and avoid disruptions.
Manufacturers and tech players must secure their supply chains and push for standardization. To advance the transition, they should adopt the following measures:
- De-risk and diversify supply chains, ensuring there isn’t too much reliance on suppliers in any one country.
- Monetize the power of scale, bringing down costs and, eventually, prices by taking advantage of supportive policies — for example, the production tax credit in the Inflation Reduction Act in the US.
- Balance innovation and standardization, providing ways to lower costs in the medium term — not only for the component manufacturing industry, but also for the downstream value chain.
The energy transition is impossible to achieve without a step change in the levels of investment in low-carbon solutions. To drive that outcome, financial firms should do the following:
- Engage with regulators and governments, installing long-term investment signals, including standards for measuring emissions, and verifying that companies have taken decarbonization action.
- Don’t lose sight of infrastructure investments, which the success of the energy transition will depend on.
- Consistently integrate carbon into asset valuations, taking into account regulated carbon costs, internal carbon costs, Scope 3 carbon costs, and value created through the company’s decarbonization efforts.
- Apply a programmatic approach, directly financing companies deploying low-carbon technologies and enabling them to move capital between projects as situations evolve.
We have the tools to get to net zero, but we do not have the policies, proven business cases, and capabilities in place everywhere to massively accelerate the pace of action. Climate Week offers a great opportunity to jump-start the work that must get done.
All stakeholders, private and public, need to follow the blueprint that will allow them to effectively unlock concrete progress. There’s no time to waste.
https://www.linkedin.com/pulse/blueprint-livableand-more-prosperousplanet-boston-consulting-group/
