Valuation and risk as the rhetoric-action gap on climate mitigation closes

Most rhetoric about mitigation has focused on new energy infrastructure technologies but there is no longer time left to deploy them at sufficient scale. Mitigation will be delivered almost entirely by closing processes that cause emissions by their chemistry and electrifying everything else, and we won’t have as much electricity as we want. This realisation shines a new light both on valuation and on investment risk. Markets cannot currently value climate risk as corporate plans depend mainly on untestable rhetoric.
Julian Allwood, who is Professor of Engineering and the Environment and leads the largest and most inter-disciplinary research group in the University of Cambridge dedicated to climate mitigation, has proposed a new mechanism (ZERPAs) to allow proper valuation, based on pre-purchasing access to the scare resources required to deliver mitigation. This, or some similar instrument, will allow investors to revalue assets in the light of future resource scarcity, and to reallocate capital towards businesses compatible with more achievable pathways to real mitigation.

Show Notes

About Professor Julian Allwood

Julian Allwood is Professor of Engineering and the Environment at the University of Cambridge. From 2009-13 he held an EPSRC Leadership Fellowship, to explore Material Efficiency as a climate mitigation strategy – delivering material services with less new material. This led to publication in 2012 of the book “Sustainable Materials: with both eyes open” - listed by Bill Gates as “one of the best six books I read in 2015.”

Julian was a Lead Author of the 5th Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) focussed on mitigating industrial emissions. Amongst others, he was elected as a Fellow of the Royal Academy of Engineering in 2017.

From 2019-24 he is director of UK FIRES – a £5m industry and multi-university programme aiming to explore all aspects of Industrial Strategy compatible with delivering zero emissions by 2050. ‘Absolute Zero’, the first publication of UK FIRES attracted widespread attention including a full debate in the House of Lords in Feb 2020, and has led to a string of other reports, research and impact.

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