Tuesday, 2 March 2010

What Now for Corporate Carbon Management?

The following article was originally published in the 15 February 2010 issue (Number 92) of the Institute for Environmental Management and Assessment journal 'the environmentalist'.

Much has been written about the lack of a comprehensive global treaty at the December 2009 Climate Change Summit in Copenhagen, but relatively less attention has been focused on some of the positive outcomes.

Government leaders agreed at the summit to work together to limit global average temperature rises to less than 2 degrees Centigrade.  They also agreed a framework for addressing the deforestation that accounts for at least twenty percent of global greenhouse gas emissions.  The Copenhagen Accord negotiated between the Brazil, China, India, South Africa and the United States calls on developed countries to set specific carbon reduction targets for the year 2020, to define specific actions for reaching the targets, and to report on each country’s emissions and actions at least every two years.  It also calls for the USA, United Kingdom and other developed countries to provide new and additional funding in order to help the developing world pay for climate change mitigation, adaptation, technological development, and capacity building.  Taken together, these are important positive steps that take us closer to a low-carbon future.

To date, however, the pledged commitments from the largest polluting nations do not add up to deliver the level of reductions scientists believe is required to forestall the worst climate change impacts.   Bolder action is required.  Faced with politicians’ unwillingness to commit to more ambitious goals, it is more important than ever for individuals, communities, and organizations to take voluntary action to reduce their own carbon footprints.

Copenhagen – a backdrop for leading companies
The writing is on the wall – the risks of ignoring climate change are high, and if companies wait for multi-lateral treaties before they act, they are likely to miss vast market opportunities for new products and processes designed for a low-carbon economy.

The private sector seems to be getting the message. As we discussed in “Beyond Compliance” (issue 84), leading multi-national companies are not waiting for global treaties to embark on carbon reduction initiatives.  The writing is on the wall – the risks of ignoring climate change are too high, and if companies hold out for multi-lateral treaties, they are likely to miss the vast market opportunities in designing new products and processes for a new low-carbon economy. A wide array of companies used the Copenhagen summit as a backdrop against which to reaffirm their commitment to greenhouse gas reductions and position themselves as low-carbon leaders.

For example, as an official vehicle supplier to the climate summit, the BMW Group provided locally emission-free hydrogen-powered models, models with extra-fuel-efficient diesel engines, and all-electric models vehicles for the talks. Since this past summer, users in Berlin and other cities have been field testing new BMW electric car models as part of a 600-car worldwide trial, evidence of the company’s commitment to remaining a transportation leader in a lower-carbon future.

Low carbon to zero carbon – companies race ahead of governments
Many leading companies not only have a low-carbon plan in place with targets exceeding those discussed at Copenhagen, but are already planning for a zero-carbon future. Northern Europe’s largest utility, Vattenfall AB, with CO2 emissions from electricity and heat production of 82.5 million tonnes in 2008  and 4.7 million retail customers in Denmark, Finland, Germany, the Netherlands, Norway, Poland, Sweden, and the UK, has projections to produce 100% zero-carbon energy by 2050.

Last month [January-ed.], Wal-Mart announced the completion of three more solar power projects in California, as part of its plan to nearly double its solar energy use in California. “The completion of these facilities marks another important step in our drive to become more sustainable and achieve our goal of being supplied 100 percent by renewable energy,” said Kimberly Sentovich, vice president and regional general manager for Wal-Mart.

British Telecom, having already reduced its carbon footprint by 58% in the UK through extensive use of renewable energy, has set a target to achieve an 80% reduction in its carbon intensity worldwide by 2020.  BT is one of the UK's largest purchasers, with an environmental influence that extends well beyond that of its own staff and workplaces.

A similar story is unfolding around the world, as firms realize that reducing their carbon footprint leads to improved financial performance, increased staff and customer satisfaction and a greater commitment to environmental stewardship.

One of the drivers for this emphasis is investor pressure.  The Carbon Disclosure Project (CDP), a not-for-profit organization funded by some of the world’s largest institutional investors, asks listed firms to disclose their carbon footprint, explain their exposure to climate change impacts, and detail the steps they are taking to reduce their greenhouse gas emissions.  Because much of the data submitted to the CDP is made public, companies often find themselves in a race to keep pace with other companies that have responded to the organisation’s queries.

Regulation as backstop
While many companies continue to take further strides in renewable energy and low-carbon initiatives, governments across the globe are not standing still, and the impact of their decisions cannot be ignored. The failure to reach a legally-binding agreement at Copenhagen means that government actions remain uncoordinated, but they still have the potential to impose material business risks for firms that have to date been slow to take action.  At the same time, they continue to raise the bar for firms that want to go beyond compliance.

The European Union’s Emissions Trading Scheme (EU ETS) has stimulated many European utilities and companies to embrace renewable energy technologies, while the associated carbon offset markets have helped fund technologies such as wind and solar in developing countries and emerging economies like China and India.  Since 2005, the EU ETS has served as a much-needed prod for companies, requiring large emitters to measure their footprint and consider the cost of carbon in their planning and investment decisions. 

The French Government, meanwhile, is planning to supplement the EU ETS with a carbon tax on transportation and industry to drive faster reductions.  Large U.S. polluters, anticipating the eventual emergence of a national cap and trade scheme in that country, are postponing or canceling plans for new coal fired power plants.

The UK continues to provide a leading policy framework for greenhouse gas reductions, with measures such as the Carbon Reduction Commitment (see our CRC article in issue 76).  The British Department for Energy and Climate Change estimates that by 2020, the CRC will increase competitiveness by reducing CO2 emissions by 4 millions tonnes each year and by achieving cost savings of about a billion pounds sterling each year. 

Belgian Climate Minister Paul Magnette believes that raising the EU's emissions reduction target from the current 20 percent cut in carbon emission to a 30 percent cut by 2020 could give European firms a "first mover advantage" in the change shift to a green economy – which could lead their peers in India, China and the United States to follow their example.   Not wanting to be left behind, U.S. companies are pushing for stronger government guidance.  On 21 January 2009, more than 80 leading U.S. companies released a letter calling on the government to enact legislation that “will unleash innovation, drive economic growth, boost energy independence and decrease...carbon emissions.”

In October 2009, British Prime Minister Gordon Brown referred to the importance of the Copenhagen Summit by announcing that "there is no Plan B".  Given the promising but limited outcomes, we must hope he was wrong.  We may not be able to rely on government action alone to deliver the emissions cuts we need to stave off the worst impacts of climate change.  Fortunately, companies, organizations and individuals are discovering the benefits of going beyond compliance and taking voluntary action to achieve ambitious greenhouse gas emission reductions.

As Tony Hayward, Chief Executive, BP noted, “It’s dangerous to promise too much too soon… [the Copenhagen meeting] was “just one step on what will be a long journey to a lower carbon world – and that journey will be hard and long.”

This new decade may well usher in a new level of corporate activity and government commitment in tackling climate change - whether this will be enough to deliver the deep carbon reductions that scientists say are required remains to be seen.

Suzy Hodgson, AIEMA is a Principal Consultant and Jamal Gore, MIEMA/ CEnv is Managing Director at carbon managemnet company Carbon Clear Limited.