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Building a Climate Resilient Business: Managing Risks & Exploit Opportunities in a Climate Changing World
Building a Climate Resilient Business: Managing Risks & Exploit Opportunities in a Climate Changing World
Christian Petrangelo, Senior EHS Regulatory Consultant at Enhesa
Giel Linthorst, Programme Leader Science-based Targets at Ecofys
Sarah Hendel-Blackford, Senior Consultant at Ecofys
Compliance is our Business. Enhesa is the market leader in global environmental, health and safety assurance providing support to businesses worldwide.
GLOBAL COVERAGE.EXPERT ANALYSIS.
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Enhesa Webinar Series:An Overview
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©2015 Enhesa. All rights reserved.
Building a Climate Resilient Business:Risks & Exploit Opportunities in a Changing Climate Webinar Agenda
• Regulatory landscape of climate change policy & initiatives
• Mitigation measures– Aligning your GHG reduction targets with a 2°C
climate goal– What internal and external carbon prices are driving
mitigation actions of companies• Adapting to Climate Change
– Physical, legal, financial and transitional risks
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Today’s Presenters
©2015 Enhesa. All rights reserved.
Christian PetrangeloSr. EHS ConsultantEnhesa
Giel LinthorstProgramme Leader Science-based TargetsEcofys
Sarah Hendel-BlackfordSenior ConsultantEcofys
Building a Climate Resilient Business:Risks & Exploit Opportunities in a Changing Climate Webinar Agenda
Regulatory landscape of climate change policy & initiatives
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Regulatory Landscape of Climate Change Policy & Initiatives
©2015 Enhesa. All rights reserved.
Goal: Emissions Reduction Targets
Carbon Tax
Emission Trading Schemes
GHG Inventories Renewable Energy Incentives
Energy Efficiency Incentives
Mandatory Measures Voluntary Measures
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Mandatory GHG Inventories
©2015 Enhesa. All rights reserved.
What?Reporting of GHG emissions from broad sectors of the economy
Why?Provides necessary data to set economy-wide emission reduction targets
How Many?40 countries(as of Oct. 2015)
Government parties to the UN Framework Convention on Climate Change (UNFCCC) must submit annual inventories of GHG emissions
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Mandatory GHG Inventories
©2015 Enhesa. All rights reserved.
USA: Tracks facility-level emissions from the largest sources of GHGs
European Union: Compiles annual GHG inventory impacting 6 sectors across member countries: energy, industrial processes, solvent and other product use, agriculture, land use, and waste
Australia: Tracks GHG emissions according to facility and corporate group thresholds
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Emissions Trading Schemes
©2015 Enhesa. All rights reserved.
United States: Regional programs include:
• California Cap-and-Trade Program
• Regional Greenhouse Gas Initiative (RGGI) encompassing 9 Northeastern states
European Union: • The first and biggest
international system for trading GHG emission allowances.
• It regulates over 11,000 industrial manufacturing facilities and power stations in 31 countries.
China: • National-level ETS
launching in 2017 will cover “key industry sectors such as iron and steel, power generation, chemicals, building materials, paper-making, and nonferrous metals”
• Existing pilot program covers 7 provinces
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Carbon Taxes
©2015 Enhesa. All rights reserved.
Governments put a price on carbon dioxide and
other GHG’s
GHG price is tax intended to reduce
emissions
15 countriesDiffers from ETS in that there is no defined cap on the amount of GHG’s that may enter into the atmosphere
Often used on the national level to supplement regional ETS plans
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Mandatory Carbon Taxes
©2015 Enhesa. All rights reserved.
Mexico: Covers import, sales, and use of fossil fuels
France: Applies to the use of gas, heavy fuel oil, and coal, transport fuels, and heating oil not covered by EU ETS.
Japan: Tax on fossil fuel use
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Renewable Energy Incentives (Voluntary)
©2015 Enhesa. All rights reserved.
USA:President Obama’s Clean Energy
Incentive Program: A voluntary “matching fund”
program for states to incentivize solar or wind projects that
generate carbon-free mWh
India:Regional governments (Delhi,
Gujarat, Tamil Nadu) provide tax breaks and other financial
incentives to companies that manufacture or install solar
infrastructure
Netherlands:Private sector companies may
deduct 36-41.5% of their renewable energy investment
from their taxable profit
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Energy Efficiency Incentives (Voluntary)
©2015 Enhesa. All rights reserved.
Australia:Emissions Reduction Plan provides financial assistance for projects to reduce GHG emissions, including energy efficiency in buildings and industrial energy efficiency.
South Africa: Allows any entity with a taxable income to claim a deduction based on the amount of energy saved through energy efficiency standards
United States/ Italy/Netherlands: Tax incentives to retrofit existing buildings with energy efficiency technology
Germany: Preferential loan and grant program to retrofit existing buildings with energy efficiency technology
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Regulatory Landscape of Climate Change Policy & Initiatives
©2015 Enhesa. All rights reserved.
Goal: Emissions Reduction Targets
Carbon Tax
Emission Trading Schemes
GHG Inventories Renewable Energy Incentives
Energy Efficiency Incentives
Mandatory Measures Voluntary Measures
Building a Climate Resilient BusinessGiel Linthorst, Sarah Hendel-BlackfordNovember 2015
© ECOFYS | | Building a climate resilient business05/11/2015
Mitigating climate change
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© ECOFYS | |
GHG emissions accelerate despite reduction efforts. Most emission growth result from fossil fuel combustion and industrial processes
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Source: IPCC AR5 WGIII Mitigation of Climate Change, 2014
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Companies are responsible for large share of the global emissions
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Source: IPCC AR5 WGIII Mitigation of Climate Change, 2014
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Without more mitigation, global mean surface temperature might increase by 3.7° to 4.8°C over the 21st century
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Source: IPCC AR5 WGIII Mitigation of Climate Change, 2014
> To prevent the most severe impacts of climate change, parties to the United Nations Framework Convention on Climate Change (UNFCCC) agreed in 2010 to commit to a maximum temperature rise of 2 °C above pre-industrial levels.
> Limiting global temperature rise to 2 °C corresponds according to the scientific community with a carbon budget of about 1,000 Gtonnes CO2 from 2011 onwards.
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2010 2015 2020 2025 2030 2035 2040 2045 20500
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Global 2 oC scenario
GtCO
2eq
From global carbon budget to company targets: two methodologies already existed
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ABSOLUTE REDUCTION1
ECONOMIC ALLOCATION2
> Apply global or OECD/non-OECD absolute emissions reduction pathway to each company, or
> Apply linear absolute reduction per year towards 2050 (1.5% p.y.)
> Apply global or OECD/non-OECD intensity reduction pathway to each company (2.2% p.y.)
2010 2015 2020 2025 2030 2035 2040 2045 20500
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20
30
40
50
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0%
50%100%
150%200%
250%300%350%400%
Global 2 oC scenario
GHG (GtCO2eq)GHG intensity (GtCO2eq / GDP contribution)GDP index
GtCO
2eq
GDP
grow
th
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© ECOFYS | |
New methodology was developed to translate global carbon budget to company targets based on sectoral approach
05/11/2015 Building a climate resilient business
> For the Science Based Targets initiative, Ecofys developed with CDP, WRI and WWF a new methodology, called the Sectoral Decarbonization Approach (SDA)
> The SDA methodology is based on the least-cost modelled 2oC scenario (2DS) developed by the International Energy Agency (IEA) as part of its publication, Energy Technology Perspectives 2014
> Development of the SDA methodology involved intensive stakeholder consultation
> The SDA methodology is freely available
> Scientific backing published in Nature Climate Change
Source: www.sciencebasedtargets.org, 2014/2015
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© ECOFYS | |
Current sectoral coverage of the SDA methodology
05/11/2015 Building a climate resilient business
Currently, over 60% of the global GHG emissions are covered by the methodology.
However, not covered and related to corporate emissions are:> Other Energy, e.g. fossil fuel extraction and
production> Agriculture, forestry and Land Use
(AFOLU). However a methodology for 10 major agriculture and forestry commodities is being developed by Ecofys, University of Aberdeen and PBL Netherlands Environmental Assessment Agency
AFOLU
Transport
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© ECOFYS | | Building a climate resilient business05/11/2015
Key benefits of setting science-based targets and signing up for Science Based Targets initiative:
1. Demonstrate leadership and influence policy
2. Build credibility and reputation and get potential recognition by NGOs
3. Drive innovation and transform business practices
4. Save money and increase competitiveness
Key benefits of setting Science-based Targets
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Source: We Mean Business, The climate has changed, 2014
© ECOFYS | | Building a climate resilient business05/11/2015
More and more measures to mitigate emissions are becoming feasible and mitigation provides many business opportunities
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Management and behavior change Energy efficiency
Renewable energy Low carbon innovations
Photographs: krysztof-baranski/Freeimages, scanrail/Fotolia, rudy-tiben/Freeimages
© ECOFYS | | Building a climate resilient business05/11/2015
However carbon pricing is crucial to drive emissions mitigation action of companies on large scale
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Source: The World Bank, State and Trends Carbon Pricing 2015
© ECOFYS | | Building a climate resilient business05/11/2015
Next to mandatory schemes for heavy emitting sectors, more and more companies are using internal carbon pricing
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Source: The World Bank, State and Trends Carbon Pricing 2015
© ECOFYS | | Building a climate resilient business05/11/2015
Towards COP21 in Paris bold commitments from companies and investors on climate action is growing rapidly
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Source: CDP, Road to Paris map 26 10 2015
© ECOFYS | | Building a climate resilient business05/11/2015
Adapting to climate change
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Adapt to what?
• Average temperature changes of 0.8°C/1.4°F have occurred since 1880s• We are locked into 1.5°C temperature change• Is your business resilient to today’s weather…and tomorrow’s climate?
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Infographic: the World Bank 2014
Building a climate resilient business
© ECOFYS | |
Risks to business: Electronics and automotive industries
Case study: Flooding in Thailand 2011 has a global impact on electronics and automotive industries
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Satellite photographs showing flooding in Thai provinces: Left Before flooding July 2011, right, after flooding October 2011. ©Wikimedia Commons
Impacts: Global supply shortages and prices increases
• Honda: moved to a three day week at its UK plant in November 2011
• Toyota: the floods in Thailand contributed to their drop in one year from first to third in the ranking of the world's biggest car manufacturers.
• Sony: delayed launch of a new camera was due to the floods.
Building a climate resilient business
© ECOFYS | |
Risks to business: chemicals industry
Operations: > Greater risks of fire> Increased risks of floods,
accelerated corrosion> Water scarcity, increase
in commodities prices: water efficiency, recycling and re-use becomes a priority
> Temporary work suspension
Supply chain /product delivery disruption
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Photograph: ©Ecofys
Building a climate resilient business
© ECOFYS | |
Potential legal liabilities of not adapting?
> Private Sector: Fiduciary duty on companies to take into account environment
> Public sector: statutory duties on local authorities to extend their civil protection duty beyond emergency planning to address risks to local businesses
> Examples of international case law
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Photograph: ©Africa/Fotolia
Building a climate resilient business
© ECOFYS | |
Being prepared to realize market opportunities
• Diversify networks of suppliers: 2011 Thailand floods Nissan diversified its suppliers: so whilst it was also hit by the floods it was able to respond more quickly and recover more quickly.
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• Build resilience to safeguard raw materials:
GSK teamed up with research sector to develop a blackcurrant crop for the drinks brand Ribena, which is resilient to erratic weather patterns faced over the next 70 years to secure its supply.
Building a climate resilient business
Photograph: ©bgoode/Fotolia
© ECOFYS | |
Solutions to build in resilience: an integrated approach
> Understand your current vulnerabilities and risks –and how these change over time.
> Identify critical points of intervention to build in adaptation measures and resilience: within your company and between your key stakeholders.
> Diversified supply chains, logistics and markets can build in flexibility and resilience for faster recovery to realise new market opportunities.
> Have an integrated strategy: low carbon, and climate resilient!
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Photograph: ©Simonlaprida/Fotolia
Building a climate resilient business
© ECOFYS | |
A selection of organisations that we served
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