Only two years left of world’s carbon budget to meet 1.5C target, scientists warn

A new analysis from climate scientists indicates that at the current rate of emissions, the planet's remaining carbon budget to limit warming to 1.5C will be exhausted within two years, requiring future carbon dioxide removal to stabilize the climate. Global emissions reached a record high in 2024, and the Earth's energy imbalance has risen by 25% in the past decade, with sea level rise doubling, underscoring the urgent need for drastic emissions cuts to mitigate increasingly severe climate impacts, though experts note that the transition away from fossil fuels is not occurring quickly enough.

Analysis

The latest scientific assessment underscores an alarming acceleration of the climate crisis, indicating the global carbon budget to maintain a 66% probability of limiting warming to 1.5°C will be exhausted within two years at current emission rates, which reached a new record high in 2024. To achieve this 1.5°C target, a drastic 80% reduction in CO2 emissions from 2020 levels is required starting in 2025, a scenario appearing exceedingly improbable given that emissions are still rising. While the 1.5°C limit is increasingly viewed as likely to be breached, a 1.7°C target offers a slightly longer nine-year budget at current rates. Critical climate indicators show significant deterioration: the Earth's energy imbalance has increased by 25% over the past decade, and the rate of sea level rise has doubled to 4mm per year compared to the 1971-2018 period, with oceans reaching record high temperatures in 2024. Despite rapid expansion in solar and wind energy, which has mitigated worst-case warming scenarios, overall energy demand growth continues to drive increased fossil fuel consumption, indicating a failure to enact the transition pledged at Cop28. This situation signals profound and escalating physical and transitional risks across economies and markets.

Key Decisions for Investors

• Investors should intensify due diligence on climate-related risks, particularly physical impacts on assets and transition risks for carbon-intensive sectors, given the rapidly diminishing carbon budget and increasing likelihood of exceeding the 1.5°C warming threshold.
• Portfolio allocations should consider increased weighting towards renewable energy, energy efficiency, and climate adaptation solutions, while acknowledging the persistent, albeit increasingly volatile, role of fossil fuels in meeting rising global energy demand in the short-to-medium term.
• Closely monitor upcoming policy responses, especially from the Cop30 summit, as heightened regulatory pressure or carbon pricing mechanisms could significantly revalue assets and create dislocations or opportunities across various industries.