LONDON, January 14 (UBS/Corporate Partnership) - 2019 was the year the world woke up to the climate challenge, triggered by a very challenging IPCC report in 2018, a run of very hot summers, and increasing visibility of extreme weather events. During the year, 68 countries began exploring or adopted an official "net zero" target for 2050.

UBS’s view is that these targets offer too little, too late – and so the world will most likely not avoid dangerous climate change. But UBS describes how the bank might be wrong:

What UBS concludes is that to reach net zero, the world may start to impose restrictions on new fossil fuel investment. Not complete restrictions and not overnight, but enough to reduce cumulative fossil capex by about $10 trillion from now to 2050, or about 2/3 of what we would expect to invest at the current run rate.

The question is how those restrictions might come about?  UBS’ view is that legal and finance restrictions look much more likely to do the job than any coordinated global carbon tax.

How would this work? The problem with a global carbon tax is that countries must act together – as imposing a unilateral tax can be economically damaging. And although there are exceptions (such as the Montreal Protocol in 1987, banning CFCs), most attempts at globally coordinated green policies until now have not worked well, including unsuccessful efforts to achieve a global carbon tax at the COP 25 meetings in Madrid.

UBS thinks we are more likely to see legal & financing restrictions on fossil capex, with the leaders who introduce these first achieving sufficient political success for others to follow suit.