Climate emergency: can green technology save us?

Fossil fuel consumption at an all-time high

Economic growth and prosperity have been intrinsically linked to a rise in fossil fuel consumption since the industrial revolution – the primary cause of our climate crisis.  The "Carbon Atlas" shows unmistakably how rising prosperity in China, for example, correlates with growing emissions of CO₂. 

In its latest report, the Intergovernmental Panel on Climate Change (IPCC) warned that we are running out of time to achieve the Paris climate goals. To do so, emissions in 2030 would have to be 50 percent lower than in 2019, and 80 percent lower in 2040. Although the increase in greenhouse gas emissions slowed somewhat in the 2010s, the trend has yet to be reversed.

At the same time, the world's population continues to grow and is estimated to reach 10 billion by 2060.

And it is also clear that with every delay, with every tenth of a degree of temperature increase beyond the 1.5 degrees of the Paris climate targets, damage will worsen and the costs of climate change will rise. Already, an estimated 3.3 to 3.6 billion people worldwide live in regions that could become uninhabitable due to climate change.

Now, more than ever, we need to find ways of responding to the climate emergency, which is why Deutsche Bank is working hand in hand with its clients to help them embark on the transition to greener business models.

Can green tech save us?

"We’re on a highway to climate hell with our foot still on the accelerator" – this is the stark warning United Nations Secretary-General António Guterres issued in the run-up to the most recent climate conference, the COP27 in Sharm El-Sheikh, Egypt. And he called for concerted efforts to phase out fossil fuels. Energy consumption in industrial production and private consumption is the biggest driver of climate change, responsible for more than 70 percent of the greenhouse gases in our atmosphere.

The authors of the IPCC report also believe that the greatest lever for halting climate change is a rigorous expansion in renewable energies. But can they replace fossil fuels worldwide quickly enough? And what will be the impact of the energy crisis caused by Russia's war of aggression against Ukraine? 

Energy crisis gives wind and solar power a boost

In its Outlook 2022, the International Energy Agency (IEA) clearly concludes that the current energy crisis is a strong driver for the expansion of renewable energies. The head of the IEA, Fatih Briol, even speaks of a historic turning point. Capacities are expected to double globally in the next five years, replacing coal as the largest source of electricity generation. Especially in the key markets of China, the United States and the European Union, governments have launched further massive investment programmes to boost renewables.

According to the International Renewable Energy Agency (IRENA), almost two-thirds (62 percent) of renewables are already cheaper than the cheapest fossil fuel source. In 2019, this figure was only 30 percent. Overall, solar power is now the cheapest form of electricity ever.

This is an encouraging trend overall. Martin Stuchtey, founder of the think tank Systemiq and the Landbanking Group, puts it like this: “In 2015, the year of the Paris Climate Agreement, none of the required technologies were commercially viable. Today, about one quarter are market-ready and commercially competitive. We expect that, by 2030, that proportion may even rise to three quarters.”

For things to develop along this trajectory, however, great investments will be necessary. According to an IEA report, emerging and developing countries alone would have to increase their investments sevenfold by 2030 in order to achieve net-zero emissions: from 140 billion US dollars in 2020 to more than one trillion US dollars in 2050. For this reason, there was also a strong call at COP27 for industrialised countries to finally meet their payment obligations to the poorest countries; after all, rich countries have historically been responsible for the majority of emissions.

What opportunities do technologies offer that are not yet competitive?

Take carbon capture and storage, for example, in which carbon dioxide is separated from the air using various processes and then stored underground or on the seabed. Here, the Intergovernmental Panel on Climate Change was still sceptical two years ago.

It was concerned that investments in this area would then be lacking elsewhere, namely in the switch to renewable energies. This could send the wrong "business as usual" signal to industries. In the meantime, the situation is different. Now the Intergovernmental Panel on Climate Change sees carbon capture as one important technology among many to achieve the climate targets – especially when you consider that it is likely nearly impossible to avoid carbon emissions completely – in the cement, lime and glass industries, for example.

Another technology that has gained in significance alongside carbon capture and storage is nuclear fusion. It made the headlines last December when scientists in the United States carried out a controlled nuclear fusion reaction and produced more energy than the amount needed to initiate it. However, the timescales involved with developing fusion as an energy source are too big to help with the most pressing climate concerns.

The future market for green hydrogen

Compared to carbon capture or nuclear fusion, hydrogen is already being used in many ways. In recent years, numerous countries have developed strategies to promote the uptake of green hydrogen, which – as it is produced using renewables – can reduce emissions, especially in the steel, chemical and heavy industry, and can be used to decarbonise the transport sector wherever electrification is impossible or too expensive, for example the railways, shipping and also the aviation industry.

Since now renewable energy sources are becoming more readily available, the "International Renewable Energy Agency" (IRENA) sees now as the right time to promote the hydrogen market more strongly.

Our expert from Deutsche Bank Research, Eric Heymann, takes a similar view. For him, green hydrogen is not (yet) a cure-all, but rather one puzzle piece in the global energy mix. At present, the costs associated with its use – such as conversion, cooling and transport – are still high. Public and private investments are called for and, he says, it is still unclear who will champion this technology.

New technologies need public funding and private capital

The example of hydrogen also shows how important predictable public funding is for developers of the technology. Our client Alstom is one of the leading manufacturers of hydrogen-powered trains. Currently, however, it still costs more to purchase a hydrogen-powered train than its diesel counterpart. Here, too, national hydrogen strategies come into play: the German government, for example, subsidises 40 percent of the additional costs for the purchase. That is one reason why hydrogen-powered trains from Alstom are already running in the German states of Lower Saxony and Hesse.

Space tech: detecting wildfires from space

Commercial space technology has not been around for so long. It is now helping fight one of the consequences of global warming: forest fires. Munich-based start-up OroraTech sends its own thermal imaging cameras into space on miniature satellites and helps their customers to detect forest fires earlier.

Data Economy and CO₂ emissions

While you’re reading this article online, did you know that data transfer is responsible for two percent of global CO₂ emissions nowadays? This is also an issue for us as a bank. We rely more and more on technology and data, which is why we are always looking for ways to reduce our carbon footprint, for example with cloud-based solutions.

Is technology a way out of the climate crisis? The authors of this dossier say: yes, it can be – provided there are clear development strategies in place, political support is strong and enough is invested. We also need to be open to innovation at all levels. With all this talk of technology, it might not always be the most efficient way to help fight climate change; sometimes, the best thing you can do is to swap your electric car for your trusty bicycle. Either way, it’s time to act!