Speaking at a Politico Energy Visions event in Brussels, Harry Brekelmans, Shell Projects and Technology Director, looks at how governments and companies like Shell can help the world reach the goals of the Paris Agreement.

The Paris Agreement has sent a signal around the world… the time to act on climate change is right now. The Ministerial on Climate Action that concluded amplifies this signal. The world needs to keep the global average temperature increase well below 2 degrees Celsius. But how can the people of the world do this?

Shell’s latest scenario, called Sky, considers the mutually-reinforcing actions that society, markets and governments need to take to reach the goals of the Paris Agreement, which Shell fully supports. Sky is not a forecast, or a plausible route, nor is it a policy proposal.

In fact, the Sky scenario, at this time, isn’t even likely, it is a technically possible way towards meeting the goal of the Paris Agreement. It offers a description of what actions society might take.

These actions involve… a tripling of energy efficiency… an end to deforestation… and substantial technological advances to solve challenges like large-scale battery storage.

Sky also relies on government-led carbon pricing mechanisms, like the EU Emissions Trading Scheme and the scheme being developed in China. These point consumers and businesses in the direction of lower-carbon solutions. Under Sky, every new passenger car could be electric by 2050…and the five-fold growth in electricity demand by 2070 could be met largely by renewables.

But some parts of the economy cannot be electrified, or at least not easily or affordably.

Like heavy transport by air or sea and the production of iron, steel, cement, plastics and chemicals. The carbon emissions that inevitably remain from these sectors could be dealt with through solutions like carbon capture and storage and natural offsetting measures like new forests.

It is a lot of work to do… and that is just part of it… but the world can succeed if it wants to. Provided we work together. And this brings me to this room. It brings me to us. We all have a role to play.

What can governments do?

Before I talk about what companies like Shell can do, let us consider how governments can help. To start, governments can help by making sure that the Paris Climate Agreement works effectively. This means that this December, at the global climate summit in Katowice, Poland, the participating countries need to complete the Paris rulebook. The EU and China, the two most influential forces in support of Paris and focus for this evening’s discussion, will play a crucial role in making this happen. This rulebook must enable countries to compare and verify emission cuts and other efforts to reduce greenhouse gases.

And the rulebook can help to put an effective price on CO₂ emissions by governments establishing clear rules on how carbon credits are granted, traded and accounted for.

This brings me to the second way governments can help to reach the goals in the Paris Agreement: by providing strong market signals. There have already been promising developments in this regard.

For example, recent reforms to the EU Emissions Trading System – which Commissioner Arias Canete and his teams helped to introduce last year – have made a positive impact. The European carbon price has already trebled since last year. It stands at around 15 euros per tonne of CO₂ right now. Many think this is still not high enough to stop emissions on a big enough scale, nor to encourage the right amount of innovation. But there is hope. Analysts forecast that the reforms will result in an average price per tonne of 25 euros in the next decade.

However, the effect of such a government-led carbon price can be diminished by other governmental policies. For example, by subsidies that coal plants receive for providing electricity that is used as back-up when renewables cannot produce enough power. Policies should reinforce and complement each other. This is why many believe the EU should implement the Commission’s proposed emissions performance standard for the power sector, represented by the 550g CO₂/kWh limit, as soon as possible. And no later than 2025.

Lastly, governments can be of huge help by encouraging innovation and incentivising companies to scale-up their cleaner energy products and services. That is what the Chinese government has done, and now: 40% of all wind turbines in the world are produced in China… one in every two electric cars in the world is in China…China produces 55% of global lithium-ion batteries.