How to save economy and climate together
There’s growing agreement by economists and scientists: Covid-19 needs the world to rescue both economy and climate together.
Is a carbon-neutral world possible by 2050? Yes. Will it happen? Again, yes. No politician will be able to ignore the social and economic pressures as climate impacts become more severe – but the longer it takes, the more expensive it will become. Governments, states, cities, businesses and investors know this.
The Paris Agreement provides an international framework for countries to set clear goals and increase their ambition, over time, to reach a net-zero carbon world. The Carbon Neutral Coalition – comprising 26 countries, 15 cities, 17 regions and states, and 192 companies – is spearheading ambitious efforts to implement policies and incentives that will support the process. The 20 cities of the Carbon Neutral Cities Alliance are taking action to drive aggressive emissions reductions. The Under2Coalition of 205 jurisdictions – representing 43 countries and six continents – is developing deep decarbonisation plans for 2050. And 412 companies have committed to set ‘science based targets’ to achieve the same aim.
Setting a clear goal that aligns with climate science takes bold leadership – mainly because it may not be possible to clearly articulate exactly how it will be achieved. But the intent sends a powerful signal to customers, investors, employees and other stakeholders about the direction of travel, which in turn helps to drive policy, behavioural changes and investment in solutions that will ultimately support the ability of companies to achieve the goal.
Mahindra is one of the companies not only setting this goal, but encouraging others to do the same. Anand Mahindra, chairman of the Mahindra Group, issued a challenge to the business community in Davos this year: he wants to see 500 businesses commit to setting science-based targets in time for the Global Climate Action Summit in California in September. It will take just 88 more companies to realise this call to action.
Setting a target is one thing; delivering it is another. Most companies begin this journey with the win-win solutions that can typically be realised through increasing energy productivity and switching to low carbon sources of power. These actions alone can make a big difference in reducing a company’s carbon footprint, as well as reducing operating costs.
An increasing number of companies are setting – and achieving – targets to consume 100% renewable power and the market is responding to support this. It is not necessarily true that the more power you use, the more difficult it is to switch. It has more to do with the options for accessing renewable power and these are increasing due to increased affordability and demand.
Reducing emissions from transport can be trickier – but solutions in this sector are also accelerating. The long-term trend towards the electrification of ground transport means that power utilities have a huge market opportunity as demand moves from gasoline to electricity. However, for this to be a carbon-smart choice, it does require an alignment of low-carbon power transition to be part of the solution. New partnerships across cities, power providers and electric vehicle companies are sprouting up to help ensure that the shift to electric vehicles also means a shift to clean mobility. And 18 companies have joined the EV100 initiative, setting a goal to switch to 100% electric vehicles.
Implementing the financially viable actions that can reduce emissions today makes business sense. But it won’t be long before tougher investment decisions need to be made. For some sectors that rely on fossil fuel for energy or industrial processes, government intervention to create mechanisms necessary for low-carbon transition is essential.
Rules that will come into play in 2021 for the aviation sector will drive the need for net-zero growth, which is achievable in the near-term through using the carbon market to offset emissions. The implementation and development of innovative low-carbon fuels and technologies, meanwhile, will play an important role in the longer term.
The shipping sector has also created a framework that will push for more aggressive carbon reduction through the implementation of improved technology. Other sectors that come under the remit of the Paris Agreement are seeing government intervention to support the transition through inclusion in carbon pricing schemes – whether through increased taxation or inclusion in carbon pricing regimes that enable market forces to determine the optimal economic choices.
But it is not just the fossil fuel-intensive sectors that are facing challenges in reducing their emissions. The land use sector is also increasingly under the spotlight. The nature of the food, agriculture and land use system means it is trickier to navigate political, ideological, social and environmental issues to put pressure on these sectors to reduce their emissions. However, the growing need to not only curb emissions from the sector, but to also ramp up the ‘carbon absorption’ capabilities of forests, soil, oceans and other natural sinks means it is time to address this challenge. It is a simple scientific fact that if the global goal of carbon neutrality by 2050 is to be met, the role of natural carbon sinks (forests, oceans and soils, as well as other natural systems that ‘suck up’ carbon) will play an increasingly important role.
This, in turn, is sparking greater interest in the value proposition of nature-based solutions. For companies that rely on land, ocean or water-based resources within their value-chain, multi-stakeholder collaboration has helped drive efforts to address a broader range of sustainability issues. As a result, the carbon and climate benefits are not always a major focus. As intervention from governments and businesses that will rely on nature-based solutions to meet carbon-neutral goals becomes increasingly necessary, this area is gaining fresh attention and innovation. Whilst there are still challenges surrounding methodologies to effectively measure, verify and account for carbon emissions, smart technology is helping to increase transparency and build credibility. Robust accounting mechanisms along with appropriate governance are also needed to enable new financing flows.
All of these things together may not achieve the net-zero goal entirely. But as the price of carbon increases, as new innovations and technologies become more affordable, and as consumer behaviours shift, what may now seem unrealistic could soon play a role in dealing with the most stubborn carbon reduction challenges. These solutions range from affordable carbon capture and storage technologies, new forms of clean energy, carbon absorbing materials such as plastics and cement, to diets based on lower protein intake from meat.
The longer it takes to reduce greenhouse emissions and restore natural carbon sinks, the more extreme the climate impacts will become. The sooner we act on the low-hanging fruit at the same time as discussing workable solutions to the more challenging areas for mitigation and adaptation, the better chance we have to build a carbon-neutral world by 2050. Businesses have a huge role to play in this process. In the run up to 2020, as governments are developing their plans to deliver the Paris Agreement, now is exactly the right time to be part of building a carbon-neutral world with rules that make business sense.
February 4, 2020