Almost a decade on from the signing of the Paris Agreement in 2015 it seems a reasonable time to reflect on progress and what that means for ‘Paris aligned’ investors. Unfortunately, 2024 was not a good year for climate mitigation progress and annual average temperatures continued to rise, hitting +1.5C for the first time.
Even as Los Angeles burned earlier this year, the political mood music was sombre for climate action. Biden’s Inflation Reduction Act (IRA) sparked a big, multi-year shift towards renewable energy investments in the USA, which Trump threatens to unwind. Further, rapid technological advancements in China have led to an influx of low-cost climate mitigation products that have been received unenthusiastically in the West with both Europe and the US seeking to implement trade barriers such as tariffs on Chinese Electric Vehicles (EVs).
Geopolitics has not been the only headwind for Western progress on climate mitigation. Strong competition from China as well as slow local policy progress and underfunding in Europe has led to companies scaling back production of clean technologies such as lithium-ion batteries, EVs and hydrogen projects. With political parties that do not prioritise climate mitigation attracting a greater share of votes and some rotation within central parties away from climate-positive policy rhetoric (e.g. Germany), companies are no longer being penalised for rolling back on their previous climate commitments. In the US, Trump’s choice for Energy Secretary is the CEO of a shale gas company who calls Net Zero 2050 strategy “unachievable and perhaps undesirable” where “the cure is far worse than the disease”. This is a new type of climate scepticism. Where previously cynics would refute that climate change was man-made, they now argue that the problem is over-blown and there are other, more urgent, issues to address.
