The Marrakesh Accords, the Bali Roadmap, the Cancun Agreements, the Durban Outcomes, the Doha Climate Gateway, the Lima Call for Climate Action – the grand names given to decisions taken under the UN's Framework Convention on Climate Change (UNFCCC) stand in contrast to the meagre progress made on reducing emissions in the 18 years since the Kyoto Protocol was adopted.

In 2014, atmospheric CO2e concentration reached 400ppm for the first time and continues to rise.

It's become clear that a top-down, UN-negotiated, binding treaty like the Kyoto Protocol is an anomaly rather than the norm in climate talks. You need to be either incredibly optimistic or just not paying attention to think that, after years of political impasse, the UN's COP21 meeting in Paris in November can produce a binding global agreement to limit global warming to 2°.

But does the outcome from Paris really matter? Emissions have fallen in the EU and US, the world's two biggest economies. In the eight years to 2013, US power sector emissions declined by around 17%. In the EU it was 14%.

Yes, part of this is due to the global financial crisis; yes, some of the decline in North America can be attributed to the influx of cheap shale gas, public health campaigns targeting coal and increasingly stringent air pollution controls; and yes, the EU carbon market has played a role in Europe. However, a major component has been the surge in wind and solar power in the electricity mix. Installed solar and wind capacity has grown 27% globally year-on-year since 2005, and we now see more new net investment in renewable energy than in fossil fuels.

Driven by government subsidy programs, ongoing deployment of renewable energy technology has lowered costs. The standout example is solar panels, where module prices have fallen 66% since 2010. Wind energy has become cheaper too, falling 25% over a similar period.

While it's still more costly at utility scale than wind, gas or coal, solar is being deployed by more and more households and businesses to offset increasingly eye-watering power bills. Germany has added an average of 3.8GW per year over the past five years, the US 1.5GW, China 1GW and Australia 806MW. Rooftop solar has all the hallmarks of an industry that will grow exponentially in markets where cost and penetration thresholds are met.

So why should the international politics of climate change matter, if technology and economics is driving down emissions?

Technology costs will continue to fall – both solar and wind follow established experience curves that show cost reductions over time. For solar, module prices have fallen by around 24% for every doubling of capacity. For wind the drop is more like 14%. Adding this together, we expect utility-scale solar costs will be in the range of $33-82/MWh by 2040 on a levelised basis, while onshore wind will be at $37-76/MWh. That is much more competitive than coal and gas, at $65-123/MWh and $62-141/MWh, respectively.

 

The big uncertainty then is the pace of the energy transition, and whether we need a global agreement to put the world on a 2° pathway.

In the annual Bloomberg New Energy Outlook forecast, we strip out clean energy subsidies from 2020, leaving only established carbon prices and some strategically significant industries like offshore wind and nuclear with government backing.  This enables us to see how the economics alone will play out. As electricity makes up around a third of global emissions, it's a good way of seeing what trajectory the world are on.

We expect renewable energy will capture over US$8 trillion or around two-thirds of all investment in new power sector capacity. Solar will be the big winner, attracting US$3.7 trillion. About 60% of that will be rooftop, small-scale panels.

In Europe, a combination of more competitive renewables, rising carbon prices, tougher pollution regulations, weak or negative electricity demand growth and smarter ways of matching supply and demand will mean coal and even gas-fired power are increasingly forced out of the supply mix. As this happens, emissions will continue to fall such that by 2040 power-sector emissions will have fallen 61% from 2014 levels.

In the US, we see cheap gas and the shale revolution giving way to a dramatic uptake of rooftop solar panels. As in Europe, weak demand and pollution regulations, plus an increasingly toxic market for coal-fired power, means emissions will fall more than 1% per year for the next 25 years, and that's before we consider President Obama's new Clean Power Plan.

Even in China we anticipate emissions peaking about 2021 as coal consumption reaches its zenith, becoming more expensive than wind and solar in the presence of a moderate carbon price. By 2030-2040, we estimate that China's emissions will be down 25% from today.

But will this be enough? There's a compelling economic case that cheap renewable energy could get us to the 2º target. But even with the cost reductions we foresee, global emissions are likely to continue to rise.

The combination of strong growth in the demand for electricity, abundant low-cost local sources of fossil fuels and a dearth of pollution and emission controls in energy-hungry developing economies will bring a significant amount of new carbon-intensive coal and gas generation into play. In India, emissions from coal-fired power alone may well increase 40% by 2040. In Southeast Asia, emissions could climb 48%, and in Turkey they may rise 28%.

On balance, we don't expect global power-sector emissions to peak until 2029 in the absence of further policy intervention, as the increase in developing-country emissions overwhelms reductions elsewhere. By 2040, emissions will still be 13% higher than today. 

In this scenario we are still staring down a climate catastrophe. 

What we ultimately need is more emissions controls in developing countries and mechanisms that can bring down the cost of decarbonisation outside the OECD. And for that we need the UN negotiations – and probably many more grandly-named global agreements.