The world is approaching a tipping point, with renewable energy taking over from the fossil fuel industry. We now need to come together to give it a last push to help deliver the zero-carbon economy that world leaders agreed to at the recent UN climate talks in Paris (COP21). This is what We Mean Business will be discussing at the Climate Action 2016 Summit in Washington, D.C. this week, with 700 global leaders from businesses, national and sub-national governments, academia and civil society.
The evidence that the high-carbon energy industry is struggling is mounting. In the last few months, we have seen two of the world's largest energy companies, Peabody Energy and Exxon, facing financial troubles. Peabody, a privately-owned coal producer, filed for bankruptcy and Exxon's credit rating was downgraded by Standard & Poor's.
The picture is rather different on the other end of the energy sector. For the first time in the history of the industrialized world, global investment in solar, wind, and other renewable energy sources, including through the business-led RE100 pledge, has overtaken that of coal and gas-fired electricity generation. This record has largely been due to emerging economies investing in renewables, proving that the entire world is now seeing the benefits of switching to renewable power.
These stories sound a clear warning sign to the fossil fuel industry - that if they are to save millions of jobs, they must adapt to the inevitable energy transition and be innovative in changing their business models. This can be both profitable as well as good for the planet. Royal DSM, for instance, is a company in a high-emitting sector that is actively aligning its business with climate science and recently reported a strong first quarter.
In fact, forward-thinking businesses like Royal DSM and other so-called non-state actors are moving at speed in implementing their pledges, at times leaving policymakers running to catch up. This was demonstrated in the lead up to the Paris Agreement, for example at the Business and Climate Summit (BCS) in Paris last year. Businesses and investors will come together again at the second BCS in London in June to discuss their next steps. Meanwhile, 150 companies have committed to setting their own science-based emission reduction targets (SBTs) to reduce their emissions in line with the Agreement.
That means that the time is right for more companies to follow these examples and grab the opportunities available. The International Energy Agency calculates that, together, the national climate plans under the Paris Agreement alone represent a $13.5 trillion market in energy efficiency and low-carbon technologies through to 2030 - and this market is growing faster than the global economy as a whole, particularly given expanding opportunities in developing countries.
Last week, Indian Power, Coal, New and Renewable Energy Minister Piyush Goyal and French Environment Minister Ségolène Royal co-hosted an event on the International Solar Alliance, announcing an investment flow of up to $1 trillion into solar. Meanwhile, the World Bank has unveiled its ambitious plan to aid developing countries in fulfilling their COP21 pledges. The Bank will help countries add 30GW of renewable energy and mobilize $25 billion in private financing to clean energy over the next four years.
This goes a long way to overcoming the financial challenges facing the transition to renewable energy but more will need to be done. The next few years will be crucial to tackle some of these and other important challenges. The Climate Action Summit will discuss how we can work together to achieve this. For example, despite the huge growth in this area, investment in clean energy in the developing world is still challenged by the structural barriers of the financial services market. This results in limited instruments and capital available.
One area where this is most apparent is in small island states, where imported diesel is the most commonly-used fuel to generate power. Clearly, this is an economic as well as a climate absurdity, given the abundance of solar and wind resources at their disposal. We expect to see some big initiatives bundling solutions for these countries in the next 18 months.
With the energy transition gaining pace and leaving fossil-fuel industries behind, the Climate Action 2016 Summit will see leaders come together to look ahead at the opportunities and challenges of a successful energy transition. We Mean Business will be there to help keep up the momentum - we hope many more will join the conversation.