A tremendous opportunity
Year 2021 is going to be a defining year for climate action. Decarbonisation and climate change is on the agenda of global policy makers and business leaders as evidenced by the June G7 summit and Dubai Expo 2020. In July this year European Commission adopted roadmap to EU climate neutrality by 2050 with an intermediate target of 55 per cent reduction in emission.
This global coalition is growing rapidly. As per UN, more than 130 countries have now set or are considering a target of reducing emissions to net-zero by 2050. More ambitious climate commitments expected by governments in COP26. The world will take a decisive turn towards net-zero economy.
I believe achieving net zero is possible. The technology to drive emission reductions till 2030 is mature enough to be deployed on a war-footing globally. I refer to wind and solar power, battery storage systems, energy management systems etc. This decade, the world must double down on renewable energy to achieve a major part of the 45 per cent reduction in CO2 emissions required by 2030. The annual capacity addition from renewable energy must go up to 1 TW (1,000 GW) by 2030 from 250 GW in 2020. Annual clean energy investments need to triple by 2030 from the current levels of around $750 billion. Increase in clean energy capacity must also be accompanied by electrification of transportation, industry and building heating. Increased building efficiency standards must also play a key part.
Post 2030 decarbonisation must rely on the next wave of zero carbon technologies such as green hydrogen, energy efficiency solutions, bioenergy and carbon capture, utilisation, and storage solutions. Green hydrogen and carbon capture and storage are critical for decarbonizing industrial processes which can’t be electrified. These technologies are still not commercially viable and are under development but must be responsible for over 40 per cent of GHG emission reductions by 2050. Such breakthrough technologies must be market-ready by 2030.
Easier said than done! Solar and wind technologies took 30 years to reach the current level of maturity and we expect these breakthrough technologies to achieve that in one-third of that time. Annual private investment and public support of $300-500 billion would be needed by 2030. Mobilizing such capital for risky, breakthrough technologies requires development of innovative financing mechanisms and effective collaboration between multiple stake holders. Governments, investors, corporates, banks, research institutions, academia all will have to work in sync to develop an enabling environment for commercialization of these technologies.
A circular economy also needs to be ready for recycling of wind turbines generators, solar modules, and Li+ batteries. The end-of-life batteries from EVs should also be able to find a second life in homes and there is talk of third life as well.
Corporates are the most important participants in the journey to net-zero. It has been heartening to note the surge of net-zero commitments by companies. Almost one-third of the 1,000+ largest listed European companies aim to reach net-zero by 2050 across their entire carbon footprint. Besides there are other global initiatives – UN’s race to zero, climate action 100+, the climate pledge, science-based targets, transition pathway initiative – signing up corporates with net-zero targets. Under climate action 100+, 83 of the most polluting companies of the world, in sectors such as oil & gas, metals and mining, utilities and industrials have committed to net-zero by 2050.
What does this mean for corporates? It means a radical reimagining and reinventing of their operations and supply chains and product use to achieve and end decarbonisation. Following the template of net-zero I laid above, till the year 2030 corporates need to have a laser sharp focus on maximizing renewable energy, maximising operational efficiencies, and adopting digital way of working. They must invest in building efficiency solutions to reduce the carbon footprint of their properties.
Beyond 2030, corporates must deploy innovative zero carbon technologies that use either electricity or hydrogen as energy source. Companies must act now and collaborate across industries, organisations to develop such technologies. For eg steel companies can work on scaling green hydrogen for low-carbon steel manufacturing. Similarly cement companies can work on developing kiln electrification technologies.
The surge of net-zero announcements by companies has also led to doubts on the credibility of their commitments towards making a material impact on carbon emissions. There is a lack of standardisation of commitments which has led to noises on greenwashing. To me, meaningful net-zero targets are those that are achieved earlier than 2050, have verifiable interim goals, and address emissions across their entire value chain.
Net-Zero operations also bring cost savings and build resilience in operations of corporates. These corporates will also have stronger relations with employees, customers, communities, governments, and investors.
Net Zero is also a tremendous opportunity for India to overcome the lost opportunities in the past and take leadership of the technological innovations that are required for a green and sustainable future.