AFR busines summit 2024: Orderly transition requires at are deep, liquid, trusted financial markets
Already a subscriber?With 25 years of runway to 2050, there’s little time left to develop and scale the financial markets and instruments required to achieve net-zero emissions.is about huge systemic change. The world needs to shift how it powers homes and cars, the types of machinery in factories and farms, and what is used to construct property and infrastructure.
Take electric vehicles for example. Battery technology is now economically efficient and proven to the point that it can help to significantly reduce transport emissions. For EV manufacturers, the obstacle to scaling output may not be the technology but access to reliable, consistent raw materials that go into the EV and the ability to manage the price risk of these commodities.Commodities are known for their volatility.
Consider that the world’s first lithium futures contract – a metal ubiquitous in our phones, EVs and utility-scale batteries – started trading on the CME Group Inc’s derivatives marketplace only in 2021.To support an orderly transition, we need financial markets that are deep, liquid, trusted and ready to provide the risk management required by the consumers as well as producers of these commodities. With 25 years to go, the urgency has never been greater.
At the same time, a reliable carbon price provides a crucial economic signal that can help accelerate the technological and industrial change required for the energy transition. Markets play a critical role in scaling down the cost curve for emerging climate technologies, bringing these to market earlier and allowing them to be used in direct decarbonisation efforts.
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