Forecasting what to expect in the year ahead is always a mug’s game. Where will oil prices go? Will there be another Fukushima? Will aliens invade our planet? As Black Swan author Nassim Nicholas Taleb wrote, “The casino is the only human venture I know where the probabilities are known.” Who would have guessed the actions of Russian President Vladimir Putin would have western leaders worried about a new cold war? Or that U.S. President Barack Obama would loosen his country’s embargo on Cuba?
The unexpected or improbable happen, sometimes for good, sometimes for bad. We can only hope for the former. Heck, maybe we’ll see a true breakthrough in that elusive goal of nuclear fusion power production – you just won’t see me predicting it here. That said, certain sustainability themed events in 2014 do offer a sense of what we can reasonably expect to witness in 2015, even if based on momentum alone. Here are a few to consider:
Despite confident talk out of TransCanada chief executive Russ Girling, the Keystone XL pipeline project will likely get the official thumbs down, to the delight of critics such as billionaire Tom Steyer. The United States, for one, is flush with domestic shale oil and doesn’t need Canada’s oil as much anymore, and some of Obama’s final comments in 2014 suggest a rejection is coming. For example, speaking on The Colbert Report in early December, Obama called Keystone a potential contributor to climate change and said there “aren’t a lot” of jobs likely to be created from it. “Essentially, this is Canadian oil passing through the United States to be sold on the world market,” explained the man who can veto any attempts to get Keystone built. “It’s not going to push down gas prices here in the United States. It’s good for Canada.” Since when has a U.S. president approved something just because it’s good for Canada?
Pope pumps up Paris
There’s a general sense out there that the UN climate summit in Paris (COP21) won’t be just another bureaucratic gabfest leading to nothing. Progress was made at the Lima conference in December, and the chorus of influential stakeholders urging action – political, business and religious leaders of all stripes, as well as major international institutions and institutional investors – has grown substantially louder. The U.S.-China climate deal, despite its flaws, carried tremendous symbolic weight and the voice of climate skepticism has faded into irrelevance. The voice of the world’s 1.2 billion Catholics, on the other hand, is expected to grow substantially after Pope Francis issues a clarion call to action in the lead-up to Paris. As reported in the Guardian, the Pope is also expected to address the UN general assembly and meet with leaders from the world’s other main religions to build support for his message. On the ground, public calls for climate action have grown increasingly intense, as demonstrated by the People’s Climate March in September. All forces appear to be aligned and determined. Obama has even made it a ballot issue in the 2016 election.
Demands on disclosure
Investors, meanwhile, will grow increasingly aware of “carbon bubble” risks in 2015 as more of the world’s central bankers – following in the footsteps of the Bank of England – recognize such risks as both real and material. As momentum builds on climate action, so too will pressure on companies to be more transparent about climate risks and on major asset owners to disclose both the carbon intensity of their holdings and their exposure to climate risks – from resource scarcity to extreme weather to regulation and carbon pricing. The spotlight is shining particularly bright on the spending of oil companies.
Green bond breakout
The flipside of climate risk is climate opportunity, and nowhere is this clearer than in the area of green bonds. The market more than tripled in 2014 and could triple again in 2015 to nearly $100 billion. That’s still a tiny portion of the $80 trillion global bond market, but it’s a psychological milestone that gives green bonds some much-needed credibility beyond niche circles. Expect more governments – federal, subnational and municipal – to embrace green bonds as a way to fund low carbon, climate-resilient infrastructure, and a double-downed commitment from international lending agencies such as the World Bank. For an in-depth overview of the green bond market, check out Bernard Simon’s special report this month in Corporate Knights magazine and online.
A look-ahead piece wouldn’t be complete without some sort of comment on low-carbon transportation, particularly electric vehicles. Sales in 2014, of both plug-in hybrids and pure electrics, didn’t live up to projections. In the U.S., for example, Obama set a target of one million cars by 2015. But by the end of 2014 there were only about 270,000 plug-in vehicles on U.S. roads. Annually, such vehicles still represent less than 1 per cent of total vehicle purchases. EV critics will point to that as failure, but haters gonna hate, right? Fact is, plug-in vehicles at this stage in their development are outpacing the growth of hybrid vehicles, and in 2015 carmakers will continue to expand the number of models that are commercially available. Deutsche Bank analyst Rod Lache recently said battery costs for EVs continue to fall, choice in the market continues to climb, and compliance with efficiency regulations will make internal combustion engines more expensive. As climate regulations tighten, countries will lean more on the potential of using low-carbon electricity to power transportation. Low gasoline prices, meanwhile, are a blip that will not derail the long-term trend. I’ll go out on a limb, however, and declare there will be a big announcement regarding energy storage in 2015, and it won’t come from Tesla. I’ll also declare attempts by Hyundai, Toyota and Honda to introduce fuel-cell vehicles in 2015 will fall flat – again. And expect electric utilities to more actively support EV growth in 2015. As this Edison Electric Institute report concludes, their survival depends on EV proliferation.
Crowdfunding jumps shark
Crowdfunding sites were all the rage in 2014, so much so that it’s quite possible general-purpose crowdfunding sites such as Indiegogo and Kickstarter will jump the shark in 2015. Such sites have become dumping grounds for projects that haven’t been able to get funding support anywhere else – and for good reason. Sure, there are some good quality projects hidden within the garbage, but finding them has become too time consuming. As well, the number of crowdfunding promotional e-mails entering inboxes has grown exponentially, causing crowdfunding fatigue to set in. Not that crowdfunding doesn’t serve a noble purpose, but the novelty is wearing off. If I’m right on this, we’ll see the crowdfunding marketplace become increasingly fragmented in 2015, with more sites emerging that target a particular type of funder. This means increased reliance on Google-style tracking as part of efforts to build loyal networks that support well-defined causes. We’re already seeing this with some sites supporting serious scientific research and renewable energy projects.
Smart home delivers
Could 2015 be a pivotal year for the smart home? Based on observations while shopping this holiday season, it looks like smart home technologies are ripe and ready for mainstream adoption. You can sense it by reading the weekend flyers from Best Buy, or walking through Home Depot. Intelligent LED light bulbs, switches, thermostats and sensors are cheaper and easier to install. There’s more selection. They synch easily with your home’s existing Wi-Fi and you can control them with free iOS and Android apps downloaded to your smart device. I recently purchased an IP security camera for $99, connected it to my home Wi-Fi in minutes, and effortlessly downloaded an app that lets me watch my dog while I’m at work. While not a sustainability app per se, it’s an illustration of the ease with which these technologies can be installed and used. Expect choice on the market to explode in 2015, costs to fall, and adoption to rise substantially – and not just because we’re driven to make our households more efficient. There’s a reason why Google purchased Nest, the “learning thermostat” company, last January. When it comes to the “web of things” the bottom line is that people love their gadgets, perhaps even more than saving money.
Canada: Benchmarking buildings, pricing carbon
Closer to home, expect at least two Canadian municipalities in 2015 to embrace mandatory energy reporting for large public and commercial buildings, starting with Toronto. Mandatory reporting has been in place for several years now in a dozen or so U.S. jurisdictions, including New York City, Philadelphia and Washington, D.C., and is widespread in Europe. Evidence suggests it is quite effective at reducing the carbon footprint of a city’s building stock – on average, buildings see a 7 per cent annual reduction in energy use after three years. Also, expect Ontario to reveal details of plans to introduce a carbon tax in the province, a move that will stimulate province-led discussions of a national carbon pricing strategy. For a look at where Ontario may be heading, look to our January 22 issue of Corporate Knights.