Swiss Re report uses a scenario-based approach to outline possible energy futures, investigating the evolving global energy mix and the impact of sustainable energy sources on climate change to provide a framework for decision-making
Zurich (Jan. 21, 2013) – Swiss Re’s latest report, Building a Sustainable Energy Future, describes the impact of the changing global energy mix on climate change. Using a combination of economic analysis and scenario building, the report provides a framework for decision-makers when it comes to questions of renewable energies, greenhouse gas emissions and how to adapt to climate change. The report concludes with a look at how insurance can enable development in the energy sector.
The composition of our future global energy mix is uncertain. On the one hand, renewable energy sources are established in the market and the growth in energy production from sources such as solar and wind will continue to grow. On the other hand, existing fossil fuel and nuclear technologies will continue to play an important role in meeting the energy needs of a growing global population.
Swiss Re’s report looks at how new sustainable energy technologies, shifts in public perception, market forces and the policies set by global and national decision-makers will influence the way we power society in the future.
At the centre of the report is the link between decisions on the global energy mix and their consequences for how we mitigate and adapt to global climate change.
“This study clearly shows that renewable energy will play an important role in the global power mix of the future,” says Andreas Spiegel, Head of Sustainability & Political Risk at Swiss Re and author of the report. “At the same time it shows that adaptation to climate change will increase in importance because the window of opportunity for mitigating climate change is getting much narrower.”
Building a Sustainable Energy Future‘s approach is based on an economic analysis of different future energy mix scenarios. These scenarios range from a future with no attempt to curb global warming to more moderate scenarios which reflect a slow greening of the economy or the influence of technological advances and political action on the global energy mix.
In the best-case scenario, a successful mix of political, social and technological factors would mean that low-carbon technologies could supply 92% of the global power supply by 2050. This would cap the global temperature increase at 3�C. However, reaching this goal would involve global policy consensus, relatively stable economic conditions and strong public support for the replacement of fossil fuel technologies with low-carbon energy sources.
The report also provides a framework for decision-making and emphasises the need for a realistic approach to the energy issue. In doing so, it tackles some of the difficulties that need to be overcome in diversifying the energy system. For example, as renewable energies become more prevalent in the energy mix, demand for fossil fuel technologies will sink. This suggests that increased renewable energy demand would make fossil fuels more attractive from a relative price perspective.
The changing energy landscape will provide new growth opportunities for insurers. According to the scenarios presented in the report, the Asia-Pacific region will drive growth in the energy sector and is expected to account for 50% of the total annual global energy financing by 2030.
As investment and infrastructure develop, the need for insurance protection will also increase. Under one scenario, the total annual losses across the energy sector could reach up to USD 42 billion by 2030. Insurers can provide financial protection against these losses as well as risk management expertise to help avoid losses in the first place.
“Insurers should support the further development of low carbon-intensive power production,” says Agostino Galvagni, CEO Swiss Re Corporate Solutions. “They need to be innovative and provide solutions along the whole value chain. For example, insurers can enable project financing through construction insurance and reduce cash flow volatility of intermittent energy production through weather risk transfer solutions.”
Building a Sustainable Energy Future is available from the Swiss Re web site.
About the Financial Services Commission of Ontario
The Swiss Re Group is a leading wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. Dealing direct and working through brokers, its global client base consists of insurance companies, mid-to-large-sized corporations and public sector clients. From standard products to tailor-made coverage across all lines of business, Swiss Re deploys its capital strength, expertise and innovation power to enable the risk-taking upon which enterprise and progress in society depend. Founded in Zurich, Switzerland, in 1863, Swiss Re serves clients through a network of over 60 offices globally and is rated “AA-” by Standard & Poor’s, “A1” by Moody’s and “A+” by A.M. Best. Registered shares in the Swiss Re Group holding company, Swiss Re Ltd, are listed on the SIX Swiss Exchange and trade under the symbol SREN. For more information about Swiss Re Group, please visit www.swissre.com or follow us on Twitter @SwissRe.
About Swiss Re Corporate Solutions
Swiss Re Corporate Solutions offers innovative, high-quality insurance capacity to mid-sized and large multinational corporations across the globe. Our offerings range from standard risk transfer covers and multi-line programmes, to highly customised solutions tailored to the needs of our clients. Swiss Re Corporate Solutions serves customers from over 40 offices worldwide and is backed by the financial strength of the Swiss Re Group. For more information about Swiss Re Corporate Solutions, please visit www.swissre.com/corporatesolutions or follow us on Twitter @SwissRe_CS.