Paris Agreement Will Boost Demand for Cleantech

On December 12, 2015, delegations from 195 nations reached consensus on a historic climate accord. The Paris Agreement was the culmination of a process that began in Rio de Janeiro in 1992, when the United Nations Framework Convention on Climate Change (UNFCCC) was created.  The three central objectives of the Paris Agreement are:

(a) Holding the increase in the global average temperature to well below 2°C (3.6°F) above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C (2.7°F) above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change;

(b) Increasing the ability to adapt to the adverse impacts of climate change and foster climate resilience and low greenhouse gas emissions development, in a manner that does not threaten food production;

(c) Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.

At the heart of the agreement are Intended Nationally Determined Contributions (INDCs)—each country’s commitment to cut its emissions of greenhouse gases (GHGs). Some 187 nations, including the world’s largest carbon polluters, already have announced their INDCs.  The European Union has committed to reduce its carbon emissions by 40% by 2030 as compared to 1990 levels.  The United States has pledged to cut its carbon output by 2025 by 26% to 28% from 2005 levels.

China’s emissions will peak by 2030. This is hugely significant because China had never been willing to place an absolute limit on its carbon emissions.  It would only commit to reduce carbon dioxide production as a percentage of gross domestic product.  In November 2014, President Obama and Chairman Xi Jinping announced a bilateral agreement.  China—the world’s largest carbon polluter by far—would cap its emissions by a date certain.  Many observers believe China’s emissions actually will peak well before 2030 because it is investing so heavily in renewable energy and more efficient electric power generation.  China’s coal consumption already appears to have peaked as it has rapidly closed dozens of inefficient coal-fired power plants and industrial facilities.

The implications for cleantech are enormous. In 2014 China invested $83 billion in renewable energy, Europe invested $57 billion, the US $38 billion and Japan $36 billion.  Worldwide investment in clean energy was approximately $270 billion last year.[i]  The International Energy Agency projects that global investment in renewable energy will reach $7.4 trillion by 2040, at which point renewable energy will generate 25% of the world’s energy.[ii]

Bill Gates was in Paris to introduce the Breakthrough Energy Coalition, a group of 28 billionaire entrepreneurs and venture capitalists who will invest in innovative clean energy companies.  This private initiative complements Mission Innovation, an agreement among 20 major countries that was announced in Paris by Gates, flanked by Presidents Obama and Hollande, Prime Minister Modi, and other leaders of the member countries.  The Mission Innovation mission statement represents a substantial commitment to cleantech research and development in the near term:

Each participating country will seek to double its governmental and/or state-directed clean energy research and development investment over five years. New investments would be focused on transformational clean energy technology innovations that can be scalable to varying economic and energy market conditions that exist in participating countries and in the broader world. Research and development projects would be designed and managed to attract private investors willing to advance commercialization.[iii]

If the EU, the United States, China and five other large polluters deliver on their INDCs, clean energy production will more than double, from 8,900 terawatt hours in 2012 to 19,900 terawatt hours in 2030.  (This compares to 4,000 terawatt hours of electricity consumed in the US from all sources—renewable and conventional.)[iv] Resources are flowing not only into solar (photovoltaic and thermal) and wind (onshore and offshore) technologies, but also into energy efficiency, including in industry and in the built environment (lighting, HVAC, etc.), mass transit, electric vehicles and infrastructure, biomass, energy storage, and the smart grid. As a result, opportunities abound for cleantech developers and investors, and are sure to expand rapidly.

[i] Global Trends in Renewable Energy Investment 2015, Frankfurt School-United Nations Environment Programme Collaborating Centre for Climate & Sustainable Energy Finance and Bloomberg New Energy Finance.
[ii] Cited in T. McDonnell, 4 Charts Show Bright future Ahead for Clean Energy, Mother Jones, November 13, 2015.
[iii] Mission Innovation Joint Launch Statement, November 20, 2015,
[iv] K. Ross and T. Damassa, Assessing the Post-2020 Clean Energy Landscape, World Resources Institute, 2015.

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