The world is facing a financial time bomb due to economic risks from climate change. Climate change is causing billions in losses globally and affecting the economy. Transitioning to a low-carbon economy is necessary to reduce emissions, but difficult for financial institutions. An abrupt market sell-off could trigger a financial crisis
For the last 300 years, fossil fuels have been the first love of economic development; they symbolise prosperity and happiness. Historically energy transition is to move from a less economical and efficient form of energy to a more efficient and more economical form, i.e., wood/biomass to coal and then to oil, and finally, the emergence of renewable energy sources such as solar, wind and green hydrogen. Earlier transitions were more because of commercial incentives, which bolstered economic growth and allowed greater energy access to the broader population. Nevertheless, this energy transition is different and is driven by the need to meet climate targets, the challenge of environmental change, and the market to decarbonise the global energy system.
[This article has been reproduced with permission from the Indian School of Business, India]