Megacities are predicted to multiply by 2030, and this growth is likely to come from emerging economies, including Mexico, Indonesia, Brazil, India and China. What we are likely to see over the next decades is a collision of arguably two of the most powerful structural trends in the global economy: on the one hand, huge swathes of the population will continue to migrate from rural to urban areas; on the other, our awareness of, and willingness to take action on, climate change will reach unprecedented levels.
So what does all this have to do with air conditioning? Nearly 40% of all energy-related CO2 emissions globally come from buildings, and of that the vast majority is demand for heating and air conditioning (AC). And this trend is set to continue. According to the International Energy Agency (IEA), energy demand for building cooling will triple by 2050 in the IEA’s baseline scenario and double in the most efficient cooling scenario (assuming all end markets adopt the most efficient AC units available).
AC is a vital ingredient to boost economic growth in rapidly urbanising emerging markets – the long-term demand case is clear. But if we look at current AC penetration levels, it is also apparent that in the countries that are predicted to experience the highest urbanisation growth, which also have some of the hottest and most humid climates, penetration is extremely low! The opportunity for more energy-efficient AC systems to gain share in these rapidly urbanising and hot climates is evident over the longer term.
Ed Geall, thematic analyst, Newton Investment Management.