Companies Increasingly Engage in Climate Action, Decarbonization of Energy and Transport Picks up Momentum
26 April 2017: The Paris Agreement recognizes the need to engage with the private sector and stakeholder groups to combat climate change. Almost 18 months after its adoption, the impact of the Paris Agreement is starting to unfold as new partnerships emerge and companies across the economy are increasingly engaging in mitigation action.
This update covers recent developments in renewable energies, business and investment, and transportation. These activities contribute to Sustainable Development Goal (SDG) 7 (affordable and clean energy), 11 (sustainable cities and communities) and 13 (climate action).
Transition to renewable energy sources
In a significant move towards the decarbonization of the electric sector, the Union of the Electricity Industry (EURELECTRIC), Europe’s largest association of electricity companies, announced that its members have committed to building no new coal-fired power plants after 2020. In a statement adopted by the EUROLECTRIC board of directors in March, members reiterate their commitment to delivering carbon neutral power supply in Europe by 2050. They note that electricity is “on track to become a carbon-neutral energy carrier” that can generate more reductions if key sectors such as heating, cooling, and transport are electrified. The association also expresses its support for market mechanisms, noting that a reform of the EU’s Emissions Trading System (ETS) and the EU’s electricity market design is essential to produce reliable carbon price signals to stimulate investment in low carbon technologies. In a related press release, EURELECTRIC also announces the release of several policy papers on these issues. [UNFCCC Press Release] [EURELECTRIC Statement] [EURELECTRIC Press Release]
Other developments related to the transition to renewable energy came from the Russian Federation. According to the International Renewable Energy Agency (IRENA), the country could boost its share of renewable energy from 3% today to 11% in 2030 if it accelerates deployment of renewables under its national energy strategy. The Working Paper, titled ‘Renewable Energy Prospects for the Russian Federation,’ was published as part of IRENA’s REmap series of country studies. The document states that achieving this objective would require cumulative investments of US$300 billion up to 2030, or approximately US$15 billion per year. This investment would more than double the share of renewable energy in 2030 compared to the share expected under its current strategy.
The study further notes that while hydropower is currently the most prominent form of renewable energy, the Russian Federation has significant potential in all types of renewable energy, including the wind, solar and bioenergy. It stresses that developing these resources would not only reduce energy cost but also produce important health and environmental benefits and create opportunities for diversifying the country’s energy exports. The report thereby highlights the interlinkages among SDGs 7 and 3 (good health and well-being). The analysis finds that taken together, these benefits could exceed the cost of investment within a few years. [IRENA Press Release] [REmap 2030: Renewable Energy Prospects for the Russian Federation]
Climate action makes business sense
The cost effectiveness of investments aimed at mitigating climate change was also the focus of developments on the other side of the Atlantic. The largest US companies increasingly realize that addressing climate change makes good business sense, says the third edition of the ‘Power Forward’ report released by the World Wildlife Fund (WWF) and partners. According to the study, almost half (48%) of the companies belonging to the Fortune 500 list now have at least one climate or clean energy target, an increase of 5% over the last report published in 2014. The increase has been particularly strong among the smallest 100 companies where the number of companies with climate or clean energy goals increased by 19% since 2014 to reach 44% in 2016. While this share still lags that of the 100 largest companies (63%), small companies are catching up at an increasing rate.
The report further reveals a growing number of companies opting for 100% renewable targets, with 23 companies having joined the RE100 initiative as of January 2017. Other key findings include that: 81% of companies meet or exceed their targets within their specified timelines; more companies set science-based targets or opt to let third parties verify whether their targets are aligned with climate science; and more companies procure renewable power directly through power-purchasing agreements, a trend that supports investments in building renewable generation capacity. These developments contribute to achieving SDG target 7.2 (By 2030, increase substantially the share of renewable energy in the global energy mix). The report recommends that: companies continue to set targets and support policies that facilitate achieving those targets; policy makers establish clear, long-term carbon policies; investors invest in and engage with companies that are well-positioned for a low-carbon economy, and utilities provide renewable energy purchasing options that respond to corporate customer demand. The report was written by WWF, Calvert Investments, the Carbon Disclosure Project (CDP) and Ceres. [CDP Press Release]
In related news, the fifth Global Climate 500 Index published by the Asset Owners Disclosure Project (AODP) reports that most of the words biggest investors now act on climate change. Asset owners, such as pension funds, insurers, sovereign wealth funds, foundations and endowments, invest substantial amounts of capital in stock markets around the world. The publication states that managing climate risk is becoming an essential determinant for asset owners’ success in managing financial risks as 60% of the world’s 500 biggest asset owners now recognize and act on the financial risks and opportunities of climate change. The publication also finds that Europe and Australia have the highest share of climate conscious asset owners, whereas North America is lagging furthest behind, but catching up faster than in previous years.
The publication concludes that climate change is becoming a mainstream concern in the investment community which is gathering “unstoppable momentum.” One of the reasons or this momentum is that asset owners that are actively reducing their exposure to climate risk are starting to see real returns of this strategy. This creates stronger pressure to address climate risk and disclose significant action.
AODP is an independent not-for-profit organization aiming to protect retirement savings and other long-term investments from climate risk exposure by improving disclosure and industry best practice. AODP rates asset owners regarding three categories: governance and strategy; portfolio risk management; and metrics and targets. [AODP Press Release]
Efforts to reduce emissions from the transport sector will be key to achieving mitigation targets. Reducing absolute emissions from global freight transport will be particularly challenging as freight volumes are expected to grow at a much faster rate than passenger transport. To address this challenge in Asia, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) project on Transport and Climate Change (TCC) released a background paper titled ‘Green Freight in Asia in the Context of the Sustainable Development Goals.’ The paper outlines green freight policies and activities and demonstrates the co-benefits these measures can create for SDG implementation. Green freight includes measures such as: reducing freight transport intensity; improving vehicle utilization; switching energy sources; shifting freight to greener modes of transport, and increasing energy efficiency.
The publication shows that green freight contributes to 13 of the 17 SDGs as well as other international agreements and frameworks such as the Paris Agreement and the New Urban Agenda. It notes that while awareness of green freight in Asia is increasing, further action is necessary, including, for example embedding sustainability in freight system planning; collaboration and partnerships among ministries and freight enterprises; regional frameworks; and standardized indicators based on higher quality data. The paper was presented at the 10th Regional Environmentally Sustainable Transport (EST) Forum in Asia, held from 14-16 March 2017, in Vientiane, Lao PDR.
A green transport partnership of a different kind was launched by the UN Development Programme (UNDP) and ofo, a Chinese start-up company that operates the world’s largest bike-sharing platform. The partnership aims to raise public awareness about climate change and will support innovative projects urban environmental challenges; establish a joint scholarship program for environmental research; and provide small grants to green start-ups. Under the partnership, ofo will donate its income on the 17th of every month as a reminder of the 17 SDGs and initiate a project to redistribute abandoned bikes to rural areas to improve access to education. UNDP will advise ofo on project planning and implementation. [UNDP Press Release]