Progress Report: Heavy industry sets a course for ambition
Nigel Topping, CEO of the We Mean Business coalition
Welcome to the April edition of the Progress Report, where we focus on the developing plans to rapidly reduce emissions in the shipping and cement sectors, and also consider how the oil & gas sector is preparing for a below 2°C world.
It’s vital for the success of the low-carbon transition that the heavy emitting sectors are setting ambitious targets and following them up with real and measurable action. This month has seen two key milestones that show these sectors are taking climate action seriously.
These emerging pathways should be welcomed as the early shoots of a rapidly accelerating shift to a zero-carbon economy. However, more ambition, backed up with action, is needed if we are to reach the goals of the Paris Agreement and limit global warming to well below 2°C.
Global shipping deal is historic, but just the start
One of the most significant things to happen during this past month of progress on climate action came out of a meeting in London, attended by more than 100 member states of the United Nations International Maritime Organisation (IMO).
At that meeting, the shipping industry agreed to cut emissions by at least 50% by 2050 compared to 2008 levels, putting in place a major new international agreement. This plots a new course for an industry that has previously been excluded from climate agreements, but one that generates roughly the same amount of greenhouse gas emissions as a country the size of Germany.
It’s also significant because the initial strategy sets out a vision for the industry’s emissions to be phased out entirely, as soon as possible. As such, the strategy includes a specific reference to “a pathway of CO2 emissions reduction consistent with the Paris Agreement temperature goals”.
However it’s a compromise deal, with strong opposition coming from countries such as Brazil, Saudi Arabia and the US. This highlights the fact that it’s effectively just the start and more ambition is needed to create the shipping industry of the future, while action against this initial target is urgently needed.
Cement roadmap shows clear direction
This month also saw the launch of the cement sector technology roadmap, called Low-Carbon Transition in the Cement Industry, from the Cement Sustainability Initiative (CSI) and the International Energy Agency (IEA).
The report shows that a combination of technology and policy solutions could provide a pathway to reducing direct carbon dioxide emissions from the cement industry by 24% below current levels by 2050, under its 2°C scenario (2DS). The 2DS, as laid out by the IEA, plots an emissions trajectory consistent with at least a 50% chance of limiting the average global temperature increase to 2°C. Even so, those cement companies committing to the CSI roadmap can expect scrutiny from investors as to whether this ambition is sufficient to future proof their business plans against more ambitious future policy regimes.
The pathway for the sector highlights several key routes towards progress, such as reducing the clinker to cement ratio, energy intensity and alternative fuel use. However, it also relies on carbon capture and storage (CCS) at a rate in excess of 550 million tons of CO2 per year by 2050. This is roughly 15 times the current CCS capacity, underling the major task of rolling out sufficient CCS.
Meanwhile, a new report from CDP suggests cement companies have on average reduced their emissions intensity by 1% per year over the last four years. However, the report highlights that this is not enough for a 2°C trajectory and would need to more than double to meet a 2°C target. It’s also vital to note that the Paris Agreement calls for action to limit global temperatures to “well below” 2°C.
As part of the CDP report, Indian firms Dalmia Bharat and Ambuja topped the rankings as the best performing companies in terms of emissions reductions, followed by Colombian cement firm Cementos Argos in third place.
Cement companies taking definitive action to reduce their carbon intensity are helping to safeguard their future profitability. But more needs to be done to accelerate the transition and raise ambition further.
A lack of action on emissions could increase the chance that emerging innovations will radically disrupt the sector. Early examples of this can be seen in carbon-sequestering cement and the use of timber construction in high-density urban housing.
Ultimately, a host of solutions will be needed to achieve the aim of the World Green Building Council’s global project, Advancing Net Zero, which calls for 100% net zero carbon buildings by 2050.
Oil & gas sector needs more ambition
In other news from the heavy emitting sectors this month, BP has pledged to keep carbon emissions flat to 2025, despite an expected increase in oil and gas output.
Overall, the company plans to reduce CO2 emissions by 3.5 million tons by 2025, by switching more to gas production, reducing methane leakage and cutting flaring of excess gas. However, that planned CO2 reduction accounts for less than 7% of BP’s 2015 emissions baseline of 51.2 million tons.
BP’s pledge is less ambitious than that from rival Shell, who plans to halve its “net carbon footprint” by 2050, amid increasing investor pressure to act on climate. Shell’s strategy also includes Scope 3 emissions, which BP’s does not.
For companies in the sector to align themselves with a 2°C future, absolute emissions from oil and gas products need to fall by 35%, under the IEA’s 2DS. And to match the ambition of the Paris Agreement, using the IEA’s ‘beyond two degree scenario’ (B2DS), the emissions would need to fall 60%.
Shell’s Sky scenario lays out a 2 degree pathway for the sector overall, but a heavy reliance on CCS and delaying the bulk of action by decades raises major concerns about the speed of action from the sector.
The Science-Based Targets initiative is currently developing a methodology tailored to the oil and gas sector, with the aim to complete this in Spring 2019. In the meantime, the first step for oil and gas companies wanting to future-proof their growth is engaging with Science-Based Targets initiative, helping to develop the methodology for the sector and indicating their intention to set a target by committing to a call to action.
Taking radical action now will create the energy industry of the future and help transition companies away from fossil fuels. This has been been successfully demonstrated by forward-looking energy companies such as Orsted, which began as the fossil fuel company Danish Oil and Natural Gas, but has transformed itself into one of Europe’s leading renewable energy companies.
The sector will also have to consider how it reacts to disruptive innovations such as electric vehicles (EVs). The Sky scenario expects the transition to EVs to happen more rapidly than many others expect. It forecasts that passenger electric vehicles reach cost parity with combustion engine cars by 2025 and by 2035, 100% of new car sales are electric in the EU, US, and China, with other countries and regions close behind.
It’s great to see these companies from the shipping, cement and oil & gas sectors outlining plans in line with the lower end of Paris Ambition. We look forward to seeing innovation driving the confidence to step up even more.