It is generally agreed that COP21 was a great success. In welcoming the historic climate agreement, Executive Director of the UN Global Compact Lise Kingo said that: “Never before have we seen this level of engagement from business and it is clear that the momentum is unstoppable.” Those words were echoed by Mindy Lubber, President of the non-profit organization Ceres, who speaking to 500 investors at a UN climate event last week said that Paris was “the “most meaningful climate moment in history.”
The target agreed to by some 195 countries is to hold the global average temperature to below 2°C, with a commitment to pursue efforts to limit the temperature increase to 1.5 °C. Achieving this goal will require dramatic reductions in greenhouse gas emissions (GHGs) through greater fuel efficiency, renewable energy resources (like wind and solar), and methods for capturing carbon that is already in the air (e.g. carbon capture and storage).
A frequently noted consequence of this is so-called stranded assets, fossil fuels in the ground that must remain there to meet this goal. Ben Caldecott, Director of the Stranded Assets Programme at Oxford University’s Smith School of Enterprise and the Environment, noted at a conference on stranded assets that “The scale of potential asset stranding from a 2°C degree carbon budget constraint is significant, not just for upstream resources like oil, gas, and coal, but also for downstream energy infrastructure like power stations. Significant net dismantling of fossil fuel assets prior to the end of their working lives is implicit in any 1.5 °C or 2°C degree target."
According to the International Energy Agency (IEA), 80% of the world’s global energy consumption comes from fossil fuels (oil, gas, and coal). The IEA has also calculated that about $300 billion in investments in fossil fuels could be stranded. As explained by CarbonBrief, this follows from the fact that we have already used up two-thirds of our carbon budget of 800 billion tons. The Global Carbon Project is a good source for details on this.
When put in these stark terms and being realistic about the effectiveness of multilateral agreements like COP21 (previous meetings, such as the ones in Kyoto and Copenhagen had little impact), one could understandably reach the conclusion that it is hopeless and that we should just focus on mitigation and prepare for disaster. But that would be wrong for a very simple reason. The sources of where most of the carbon comes from are relatively few and practical steps can be taken to address each of them. This is not to say it will be easy. Each one will require tough decisions in both the public and private sector, with new strategies and business models, technological innovation, and the courage to take the risk of being a leader and trying things that haven’t been done before.
Based on data from the Fifth Assessment Report of the Intergovernmental Panel on Climate Change and analysis by the Boston Consulting Group’s Energy & Environmental Sector Practice, five economic sectors account for virtually all of the world’s carbon emissions: energy production (35%); agriculture, forest, and other land use (24%)—something most people are unaware of; industry (21%), transport and infrastructure (14%); and buildings (6%). For other major sectors, such as financial services, health care, and technology and telecommunications, their carbon emissions come from their use of these sectors—such as the energy they use, the transportation they rely on, and the buildings they work in.
Within each of these five sectors there is also a great degree of concentration. For example, residential buildings account for 74% of energy consumption, versus 26% for commercial ones. In agriculture, forest, and other land use, land use change and forestry and enteric fermentation (e.g., animal digestion resulting in methane gas) account for around 60% of carbon emissions. Animal digestion alone is 43%.
The three largest segments in the industrial sector are ferrous and non-ferrous metals (22%), chemicals (15%), and cement (13%). which all have a huge impact. Within the transport and infrastructure sectors, shipping and aviation, at 11% each, are minor in comparison to road transportation (72%). Finally, carbon emissions in the energy sector are concentrated in electricity and heat (73%) and fuel production and transmission.
Mitigation and adaption strategies for these five sectors should be based on the most efficient and greenest technologies. For energy production this will come from renewables, such as solar and wind. In agriculture, forest, and other land use the main solutions are based on agro-ecology, more efficient land use, food waste management, and agricultural education and training for farmers. In the industry sector, more efficient and less energy intensive production processes can substantially reduce carbon emissions. For transport and infrastructure, the solution is in less carbon-intensive fuels (e.g., diesel and gasoline) and hybrid and electrical vehicles bolstered by better batteries.
Finally, carbon emissions from buildings can be reduced through LEDs, better insulation, and more efficient electrical equipment. All of these technologies are available and for most, if not all, substantial R&D dollars are being spent to improve them through higher quality and lower cost. As a result of COP21, these investments are expected to increase, including through specialized financial instruments like “green bonds.”
One of the outputs of COP21 was Intended Nationally Determined Contributions (INDCs), the climate change commitments made by each country who participated in the conference. Meeting these commitments, and the expected increasingly ambitious ones in the future through a ratcheting up process, will require substantial efforts by all companies in these sectors and others. For this they will need the support of the investment community and this is rapidly being mobilized as witnessed by the “Investor Summit on Climate Risk: Advancing the Clean Trillion,” held at the UN Headquarters on January 27, 2016 and hosted by Ceres and the United Nations Foundation.
Commenting on this summit, Lubber said, “Investor focus on climate-related risks and opportunities is unparalleled and it’s only going to get stronger as more countries, including China and India, boost their attention. One of the keys is how quickly investors can unleash the capital flows that will be needed to help countries achieve their ambitious climate commitments. We’re talking literally about needing to unleash trillions of dollars to clean energy solutions, which is exponentially higher than the few hundred billion we’re seeing invested in clean energy each year today. It’s encouraging to see institutional investors shifting more capital to low-carbon activity and away from risky high carbon sectors, but it’s still not nearly at the levels that are needed.”
But in the end, the success of countries, companies, and investors will depend upon the support of individual citizens—which means all of us, the Generation S. The way we live, including what and how much we eat and buy and how we invest our money, will ultimately determine whether this 2°C target—and hopefully lower—can be achieved. We know where the carbon comes from, and increasingly, we know the part we all have to play in creating a more sustainable world.
