No more business as usual: how over $10 tln in covid-19 recovery packages are an opportunity for net zero recovery

THE ORGANISATION

Carbon Trust

A global, mission-led organisation that works to accelerate the delivery of sustainable, low carbon economies.

An increasing number of countries are setting targets to reduce their carbon emissions to zero, requiring innovation across the economy.
Many companies are not waiting for government, and are setting their own net zero goals for 2050.

Aleyn Smith-Gillespie
Associate Director, Carbon Trust

No more business as usual : How over $10 tln in Covid-19 recovery packages are an opportunity for net zero recovery

An increasing number of countries are setting targets to reduce their carbon emissions to zero, requiring innovation across the economy, says Aleyn Smith-Gillespie, Associate Director, Carbon Trust. Many companies are not waiting for government, and are setting their own net zero goals for 2050.

What is Carbon Trust and what is its purpose?

The Carbon Trust is a global, mission-led organisation that works with governments, investors, businesses and organisations to accelerate the delivery of sustainable, low carbon economies. We are an independent, expert partner of leading organisations around the world that are seeking to deliver sustainable, low carbon economies. We advise businesses on their opportunities in a sustainable, low carbon world, and also measure and certify the environmental footprint of organisations, supply chains and products.

What is the future of green industry?

An increasing number of countries are setting net zero targets. Meeting these will require unprecedented innovation across the economy and this is especially the case in traditionally energy intensive industries. As the deployment of renewable electricity and biomass sourced fuels, and plans to develop clean hydrogen accelerate, it is clear that all have a role to play in reducing, and ultimately eliminating, industrial carbon emissions.

Improving efficiency and decarbonising energy use within industrial and manufacturing sectors is critical to addressing the demand-side aspects of the energy transition. Capital investments made over the next two or three years will lock in energy use for the next 10-20 years or more, so it is vital that new technology is implemented rapidly and at scale. Programmes, such as the UK Government’s BEIS Industrial Energy Efficiency Accelerator, are demonstrating how innovators are going to be playing an increasingly important role in helping industry deliver on net zero aspirations.

From the perspective of energy production and distribution, countries need a smart and flexible energy system, one that has the ability to effectively match demand and supply. This can be achieved through technologies like demand-side response, energy storage, flexible generation and interconnectors. Our analysis has highlighted that, for example in the UK, deploying these technologies delivers significant cost reduction potential – up to £40bn by 2050 – whilst also reducing carbon emissions. The Carbon Trust is now leading a project, alongside Imperial College, that is investigating the role of a flexible energy system in achieving a net zero economy with findings expected in Spring 2021.

How will finance adapt to the need for a more sustainable approach by companies?

Public investment will never be sufficient to fund the scale of the transition to net zero, so action to leverage private sector investment is essential. Governments are taking steps to ’green’ finance by mainstreaming climate and environmental factors and embedding them into core financial frameworks and regulation.

A first step is to make disclosure of companies’ climate-related financial risks and opportunities to investors mandatory. This will accelerate the alignment of investment with net zero ambitions and position those industry sectors that take a lead at the forefront of global green finance. The impact investment market has also grown rapidly in recent years as investors increasingly allocate capital on the basis of both potential financial returns and the intention to generate positive societal and environmental impacts.

What do you think about the net zero goals pursued by companies?

The Science Based Targets Initiative (SBTi) has created a tidal shift in corporate climate ambition globally – with over 1,000 companies leading the net zero transition by setting emission reduction targets that are aligned with the Paris Agreement. The level of ambition that companies are setting for themselves within the SBTi framework has also been increasing – with an increasing number setting the most ambitious 1.5C-aligned decarbonisation target for their own operations (Scope 1 & 2 emissions) and wider value chain (Scope 3 emissions). These 5 to 15-year trajectories are aligned with long-term net zero goals, and many companies are now explicitly committing to net zero by 2050 or earlier.

The technology and means to achieve net zero are currently not available at scale, as this will require significant deployment of carbon capture and storage (CCS) – whether bio-based or technological. However large-scale commitment to this ambition by businesses and industry sends a powerful market signal to innovators and financers of these solutions while, in meantime, driving down carbon emissions.

How can economic growth be integrated with decarbonisation and renewable energy sources?

The relationship between government and business is realigning. Combined with governments’ record low borrowing costs, this provides an unparalleled opportunity to reshape our economies – ensuring they are climate-proofed for the future.

The case for a net zero recovery is strong. Governments have so far pledged to devote over US$10 trillion to economic stimulus measures globally. As they decide how to structure their response, there needs to be an urgent focus on how to ensure this unprecedented level of investment puts us on the path to a net zero recovery and not a business as usual, high-emissions recovery, vulnerable to climate risks.

The deployment of renewables to produce power and heat should be a priority in any net zero recovery plan. Renewable energy generates more jobs in the short-term when jobs are scarce in the middle of a recession, boosting spending and increasing short-term GDP multipliers. Renewables also have important co-benefits – from reduced air pollution (especially where coal continues to play a significant role in power generation) to increased rural electrification for those living off grid.

Could you describe your work and your project with Prysmian?

The Carbon Trust is helping Prysmian develop science-based targets across the company’s own operations globally (Scope 1 and 2) and its wider value chain (Scope 3). We are collaborating closely in this effort with the EHS team as well as multiple functions across the business including: R&D, procurement, and operations – all of which will contribute towards achieving an ambitions decarbonisation pathway.

Prysmian is also in a unique position, through its technology and solutions, to deliver the infrastructure enabling the decarbonisation of our economies. The Carbon Trust is therefore also working with Prysmian to develop methodologies for quantifying the positive enablement impact of the company’s technology. This builds on the Carbon Trust’s experience developing frameworks for quantifying ‘avoided emissions’.

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