Posts Tagged ‘Leadership’

Has the EU’s carbon trading system made business greener?

July 21st, 2015

Powered by Guardian.co.ukThis article titled “Has the EU’s carbon trading system made business greener?” was written by Jill Duggan, for theguardian.com on Wednesday 15th July 2015 15.15 UTC

The EU is celebrating 10 years of the world’s largest carbon trading system this year by looking at new reforms to keep it on track. The emissions trading scheme (ETS), which covers half of Europe’s CO2 emissions by limiting the number of carbon permits available to energy generators and industry, has been dogged by low prices and oversupply of allowances.

The problems are largely ones of success – carbon emissions are lower than anticipated. But much of the oversupply was caused by the recession in Europe, so has the trading system been a waste of time or has it changed business attitudes and operations?

To answer these questions the Prince of Wales’ Corporate Leaders Group commissioned a report, 10 years of Carbon Pricing in Europe – a business perspective, which was released last week. The report is based on interviews with a small number of companies from a variety of sectors that are mandated into the ETS to see what impact it has had on them.

For some, the responses were pretty much to be expected. EDF and Shell have long been advocates of the carbon market and higher prices. Energy companies need the price to justify the right investment decisions at the right time – and many of them are able to pass on the cost of carbon allowances to their consumers – so they would be in favour of a high carbon price.

Although they profess the importance of the carbon market, it is clear that other policies, such as those promoting renewables or nuclear energy, have had more impact.

Carbon trading driving emission cuts

But then there are the energy intensives. Often vulnerable to international competition and with limited options to reduce their CO2 emissions, these industries generally have not been enthusiastic advocates of the carbon price. But here the European carbon market does seem to have had a genuine impact. Steel company ArcelorMittel acknowledged the importance of monitoring and reporting emissions to manage them.

Tata Steel Europe said that even in the depths of the recession some of its facilities were taking steps that would have previously been unacceptable or impossible in order to stay afloat, because reducing emissions is synonymous with efficiency. To the same effect, cement company Italcementi uses CO2 intensity as an indicator of efficiency as it “combines most of the key levers to industrial excellence”.
It seems unlikely these companies would have got this far without the ETS.

Next, we should consider the industries that are within the ETS but for which energy is not such a significant cost or where there are other options. What is interesting here is how the most advanced companies have moved beyond compliance to more interesting and creative ways of cutting emissions.

There are plenty of examples of companies using their waste heat or buying heat from their neighbours, thus going the extra mile to improve efficiency. The bottling company O-I Group uses waste heat to pre-heat raw materials and to heat the floor in their plant. Others have created new business models that have provided a lucrative income stream from offering consultancy advice to others. Here the ETS has provided a valuable focus on carbon and underwritten the improvements made.

Finally, there are those companies that probably would not have gone beyond compliance if they had not had leaders with vision. Where senior managers decide to take carbon seriously there can be huge benefits, even where energy is a small proportion of total costs.

Jaguar Land Rover and GlaxoSmithKline have directed new resources to cutting carbon with astonishing success. This has been crowned by a reduced carbon liability. Clearly in these companies the ETS alone has not driven this transformation, but the senior management teams would not have had this on the agenda without the carbon price being discussed at board level. It is noteworthy that these businesses instigated action in 2007 and 2008 when the allowance price was relatively stable in the €20-€25 range.

What needs to happen next? Europe is embarking on reform of the ETS now. Clearly getting prices back up to the lofty levels of 2007 would help but, ironically, the companies that have focused on carbon have found the low hanging fruit of cheap emissions reductions to be almost limitless, which will make it a bigger struggle to raise the price.

Do we need a higher price then? Yes. To tackle the challenging industries that will need technological breakthroughs we will need higher carbon prices to incentivise more reductions and to fund innovation.

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Business leaders prepare for limited UN climate deal in Paris

May 22nd, 2015

Powered by Guardian.co.ukThis article titled “Business leaders prepare for limited UN climate deal in Paris” was written by Tom Levitt, for theguardian.com on Thursday 21st May 2015 21.04 UTC

Business leaders are preparing for a limited agreement on reducing carbon emissions at the crunch UN summit in Paris later this year, despite growing support from them for carbon pricing and a commitment to cut emissions by enough to avoid more than 2C of global warming.

More than 1,000 business leaders, including the CEOs of Carrefour, Statoil, Total and Unilever, turned up at a business summit on tackling climate change in Paris this week in response to calls from the UN for the private sector to take a more active role in tackling climate change.

They called on policymakers to agree on carbon pricing mechanisms, closer collaboration between business and government on climate policies and a joint public and private sector fund for investing in low-carbon technology, particularly in developing countries.

The meeting comes as UN negotiators are trying to pull together enough emissions reduction commitments to prevent more than 2C of global warming, the level political leaders agreed in 2009 as likely to prevent the worst effects of climate change. The final commitments are needed ahead of the summit of world leaders in December this year.

Business claims frustration

However, business leaders did not expect the necessary emissions reductions or their policy requests to be finalised in December.

“We have to be pragmatic,” French oil group Total CEO Patrick Pouyanné told the Guardian. “If we take the sum of commitments made by countries then I am afraid we will not be on the 2C trajectory. There will be a gap.

“But what is important from the UN talks in December is to have a convergence of companies on the one side and governments on the other. At least some commitments by governments and businesses, and a mechanism in place to improve it,” he said, adding that he is in favour of a carbon pricing principle.

A failure to bring enough emission cut commitments to put the world on track for avoiding global warming of more than 2C is likely to frustrate the majority of businesses, says the Carbon Disclosure Project (CDP), with more than 30 companies including Ford Motor Company, Unilever, Nissan and H&M having already pledged to set long-term, science-based climate targets. The targets will match the scale needed to meet the goal of limiting global temperature increases to 2C.

“A small minority of companies may be relieved to continue on a business as usual pathway in the short term, but it would lead to a build-up of systemic risk in the economy,” says CDP’s CEO Paul Simpson. “The vast majority of companies want to see a managed transition to a low-carbon future and not costly, last-minute regulation or climate chaos.”

French companies were represented in large numbers at this week’s summit, with Renault saying it would be “totally stupid” not to have the right regulations, framework and price signals in place after the UN talks. “We have made the investments and have the technology ready to implement on a larger scale,” said Claire Martin, director for sustainable development at Renault.

Private sector could help meet targets

While some have doubted the sincerity of energy-intensive businesses in particular in tackling climate change, Unilever CEO Paul Polman suggests the private sector could help close the shortfall in emission commitments made by governments. “It is very likely that all the agreements coming in will not add up to what we need to stay below 2C. [Those commitments] will be around 40% of that in reality. That is why we are mobilising the private sector. If we work together we can close that gap.”

However, Claus Stig Pedersen head of corporate sustainability at Novozymes, said the past five years had shown business could not tackle climate change without a strong political deal.

“We had this reaction after the UN talks in Copenhagen in 2009 of disappointment with politicians and I was part of a movement that said okay, let’s just do it ourselves. A lot of business jumped into this space and took some big steps forward, but after some years business in general realised that we couldn’t do this alone.

“There is no way we can do this without partnering with politicians and making agreements going forward. So if we should end up with a Paris failure, like we’ve had before, then I do think we’ve learnt we can’t do it alone. We have all the solutions needed, it’s just about applying it. And regulation, a carbon price and ambitious goals from the UN climate talks will drive that faster,” he added.

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