Despite a worldwide effort at government level to reduce CO2 emissions by 2050 – as highlighted in the Paris Agreement – we are still too far away from becoming net-zero.
According to GlobalData’s climate change thematic research, only 36 out of the 197 countries that endorsed the Paris Agreement have submitted their 2030 Nationally Determined Contributions, which are countries’ pledges to reduce greenhouse gas (GHG) emissions.
While Global North countries have seen a decrease in emissions, emerging economies will need to balance economic growth with sustainability. As reported by independent analysis resource Climate Action Tracker, countries pledges are not enough to reach the Paris Agreement’s goals. Countries such as China, Indonesia and South Africa were considered critically insufficient while Kenya, India and the Philippines are set to become more carbon reliant.
The industry steps up against global warming
While at the government level things are moving rather slowly, non-governmental and stakeholders from everywhere in industry have stepped up and become agents of change when it comes to fighting global warming.
Through a mechanism that the report calls feedback loop, companies in every sector are becoming more invested in their role as polluters, with the approval of stakeholders.
Companies have moved away from answering only to their shareholders to answering to a wider range of stakeholders – such as NGOs and the civil society.
By disclosing their climate action, companies attract more stakeholders who choose to invest in them, driving reputational competitive advantage in the companies’ respective fields, therefore generating more climate action.
GlobalData analysts explain that initiative to increase transparency and climate-related information are becoming important parameters for stakeholders.
“Both institutional and individual investors increasingly use climate information (and sustainability more broadly) to guide their decisions and align their investments with their social and environmental goals,” reads the research.
The feedback loop, says the GlobalData report, is facing several issues such as greenwashing, a reporting system that is too complex, and a small number of companies participating.
“There have not yet been enough net-zero pledges and commitments to put the global economy on course to reach net zero by 2050,” continues the report.
To accelerate the feedback loop, analysts believe that regulation to set communal standards are needed.
“Regulation is needed to set standards and limits – for example, on methane emissions – and provide clear competition rules, as it did in driving the fuel efficiency standards that set the stage for EVs,” analysts say. “Then again, the feedback loop might prove to be more flexible and responsive than regulation.
“For example, asset managers such as BlackRock can, without waiting for regulators, ratchet up the stringency of the climate plans they require of their portfolio companies.”
Despite setbacks, the feedback loop method has been shown to be working. Through programmes such as the Science-Based Targets Initiative and Amazon’s Climate Pledge, stakeholders can make more informed choices which will reward climate-conscious companies more.
“There is every reason to think that the forces driving the feedback loop will only gather strength,” reads the research. “Relatively soon – in a matter of years, not decades – stakeholders will have multiple options for net-zero companies for the products and services they need.
“Steadily and with growing speed, markets are figuring out how to address climate change.”
Reduce, capture and offset
To become carbon neutral, companies can choose from three different strategies: emission reduction, carbon capture and storage (CCS) and carbon offsets.
Obtained by switching from fossil to renewable fuels, emission reduction is the quickest way for companies to become net-zero, especially given the competitive price alternative fuel have.
“It can also be the most cost-effective solution and one that can push companies and sectors to compete and innovate and, ultimately, deliver better products,” say analysts in the report.
Switching from fossil to renewable fuels in the short-term is proving more difficult for the aviation sector, especially when compared to others.
This is why a lot of companies prefer offsetting carbon and CCS to renewable fuels. Carbon offsetting is considered by many to be a band-aid on the way to decarbonisation, and has drawn criticism for its lack of efficiency and legitimacy, but for several industries it remains the most viable option.
“High-quality and verifiable offsets may be the best option, at least until low-carbon alternatives can be discovered or developed,” reads the report. “Still, for many companies and processes, improving energy efficiency and shifting to low-carbon energy sources is already the most cost-effective way to pursue emissions reduction.”
“An array of technologies that counteract global warming either by trapping GHG emissions from sources […] or by taking GHG out of the atmosphere and then storing it”, CSS is quite an effective technology, but it is also expensive, complex and potentially harming to the soil.
As researchers from the University of Stanford have found, the pressure created from the capture of huge quantities of CO2 could trigger seismic events that in turn could release the emissions back into the atmosphere.
“Additionally, CO2 reservoirs can leak, contaminating soil, air, and groundwater,” says the GlobalData paper. “Therefore, while CSS has interesting potential, its costs and risks must be addressed before it can be deployed on a commercial scale.”
Aviation and the fight against climate change
Responsible for 2% of the total CO2 emissions, airlines are increasingly relying on the expansion of Sustainable Aviation Fuels (SAF) to reduce their carbon footprint.
US airline consortium Airlines for America have committed to become net-zero by 2050 through the use of SAF, which are supposed to reduce GHG emissions by 75% compared to normal fuels. But to reach those percentages, SAF production will need to increase by 84% annually, GlobalData analysts say.
Operators are already investing heavily in the technology, with Delta giving $2m to determine the feasibility of a biofuel facility to produce SAF, while JetBlue pledged to source 10% of total jet fuel from SAF by 2030.
Airlines are also focusing on adjusting technical procedures to improve their environmental performance. After pledging to become carbon-free by 2050 and improving its fuel efficiency by 45% since 1990, United Airlines has introduced a series of measures – single-engine taxing, electric tow vehicles and more frequent engine washing – to minimise its environmental impact in every part of operations.