The turnaround in climate policy announced by the Biden administration is of global significance. Along with China, the US is the biggest climate polluter. Together, the two world powers are responsible for more than 40 percent of global carbon emissions. In addition to re-joining the Paris Climate Agreement, President Biden has announced investments in infrastructure renewal amounting to around USD 2 trillion.
As part of the plan, four million commercial buildings will be upgraded with state-of-the-art, energy-efficient technologies. In addition, investments will be devoted to further electrification based on renewable energy sources. The goal of completely decarbonizing electricity generation by 2035 is particularly ambitious. By 2050, the entire energy supply in the US is to be carbon neutral – on par with Europe and China’s ambitions.
Despite increasing global efforts towards energy efficiency, in the immediate future, energy demand will continue to increase. The two biggest drivers are the unchecked rise in global populations and GDP growth, led by the Asia-Pacific region. With appropriate measures, however, it is entirely possible that the level of global energy consumption will first plateau before reaching a point of slow decline by 2030 (see Figure 1).
But to do this, three measures are required simultaneously: 1) the electrification of fossil-fuel dependent heating and transport sectors, 2) stricter energy efficiency measures for other end-use sectors, and 3) substantial expansion of the share of solar and wind energy in electric power grids.
Despite optimism, our own estimates don’t see us achieving the 1.5°C scenario by 2050 – a scenario that would require complete carbon neutrality. It seems more likely that energy-related carbon emissions will be halved from today’s level to slightly below 20 gigatons per year by 2050 (see Figure 1). Even this, however, will only be possible if the percentage of electricity making up the global energy supply increases from its current share of 20% to 50%. In parallel, the ‘renewable share’ of electricity must rise from its current 30% share to 85%. According to our calculations, this would mean that electricity generation, driven by solar and wind, would have to increase by a factor of about six by 2050 – an entirely realistic scenario.
The transport sector, in particular, has shown the highest growth rates in energy demand. With a share of almost 30% of global energy consumption, and a heavy dependence on oil, it is one of the biggest carbon polluting sectors, driven not only by vehicles but also by air traffic.
The automotive industry is increasingly seeing that its carbon footprint can only be reduced sustainably through comprehensive electrification – encompassing both electric vehicles and the renewably generated electricity that powers them. Some automakers have already formulated self-imposed goals as a means of decarbonizing the automotive value chain starting with vehicle production, continuing through use and maintenance, and ending with vehicle recycling. What started with passenger vehicles will continue to spread to other transport subsectors, such that the entire sector will be electrified sustainably over time.
Hydrogen will also provide storage capacity to complement batteries, particularly in areas with high demands on weight and energy density. This will enable the comprehensive electrification of heavy-duty vehicles, ships and even aircraft (where promising pilot projects have already been announced). Despite its potential for energy storage, hydrogen fuel as an energy source only makes sense if it is produced in a carbon-neutral manner— only ‘green hydrogen’ meets that criteria. It is produced in an electrolyzer using a carbon-free process consisting of water, electrolysis and renewable electricity. However, current electrolyzer units are unable to produce the volumes of hydrogen needed for large-scale, industrial demand; broader market penetration is still years away
As with batteries, advances in electrolyzer technologies will surmount present barriers to make green hydrogen competitive (relative to current carbon-based hydrogen production methods) by 2030 at the latest. An abundance of green hydrogen would enable the large-volume and seasonal storage of renewable energy which could then be used not only to decarbonize transportation, but also other energy-dependent industrial processes (like heat generation for buildings, fertilizer for crops, semiconductor manufacturing, and steel production).
With the election of Joe Biden, the international community appears united in its quest for a sustainable global energy economy. With firm government commitments worldwide, momentum is accelerating towards a cost-effective and sustainable energy transition that includes low-cost renewable energy, smart energy grids, adaptable energy storage, and energy-efficient technologies that help reduce energy consumption.
With the world united in the fight against climate change, the global movement towards a sustainable energy supply is gaining considerable momentum
The future of energy is renewable, electric and efficient providing abundant investment opportunities across a diverse set of industry value chains. The RobecoSAM Smart Energy and Smart Mobility strategies offer investors exposure to these exciting trends in ‘decarbonization’ and ‘sustainable mobility’ that are driving us towards a clean energy future!
The Robeco Capital Growth Funds have not been registered under the United States Investment Company Act of 1940, as amended, nor or the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”)). Furthermore, Robeco Institutional Asset Management B.V. (Robeco) does not provide investment advisory services, or hold itself out as providing investment advisory services, in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act).
This website is intended for use only by non-U.S. Persons outside of the United States (within the meaning of Regulation S promulgated under the Securities Act who are professional investors, or professional fiduciaries representing such non-U.S. Person investors. By clicking “I Agree” on our website disclaimer and accessing the information on this website, including any subdomain thereof, you are certifying and agreeing to the following: (i) you have read, understood and agree to this disclaimer, (ii) you have informed yourself of any applicable legal restrictions and represent that by accessing the information contained on this website, you are not in violation of, and will not be causing Robeco or any of its affiliated entities or issuers to violate, any applicable laws and, as a result, you are legally authorized to access such information on behalf of yourself and any underlying investment advisory client, (iii) you understand and acknowledge that certain information presented herein relates to securities that have not been registered under the Securities Act, and may be offered or sold only outside the United States and only to, or for the account or benefit of, non-U.S. Persons (within the meaning of Regulation S under the Securities Act), (iv) you are, or are a discretionary investment adviser representing, a non-U.S. Person (within the meaning of Regulation S under the Securities Act) located outside of the United States and (v) you are, or are a discretionary investment adviser representing, a professional non-retail investor. Access to this website has been limited so that it shall not constitute directed selling efforts (as defined in Regulation S under the Securities Act) in the United States and so that it shall not be deemed to constitute Robeco holding itself out generally to the public in the U.S. as an investment adviser. Nothing contained herein constitutes an offer to sell securities or solicitation of an offer to purchase any securities in any jurisdiction. We reserve the right to deny access to any visitor, including, but not limited to, those visitors with IP addresses residing in the United States.
This website has been carefully prepared by Robeco. The information contained in this publication is based upon sources of information believed to be reliable. Robeco is not answerable for the accuracy or completeness of the facts, opinions, expectations and results referred to therein. Whilst every care has been taken in the preparation of this website, we do not accept any responsibility for damage of any kind resulting from incorrect or incomplete information. This website is subject to change without notice. The value of the investments may fluctuate. Past performance is no guarantee of future results. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. For investment professional use only. Not for use by the general public.