Ready for the low-carbon economy?
Many of our clients ask for support in transitioning towards a low-carbon economy, often as an integral part of an overarching sustainability strategy. Here are some of the key lessons we´ve learned.
But first, a bit of background. According to a number of energy experts, the energy market is currently undergoing massive change.
For the first time since industrialisation we are seeing signs of a decoupling between energy demand and GDP growth. This is being driven by a number of issues, including the fact that larger proportions of GDP are services-based. In addition, increased energy efficiencies and an increase in electrification, largely fueled by renewables, are paving the way towards a low-carbon economy. Indeed, over half of all new power plant installations in 2018 were renewable (solar and wind), and it is estimated that 2/3 of our energy demand will be met by renewables by 2050. The EU has set ambitious targets of at least 32% renewables in the energy mix by 2030, increasing to at least 80% by 2050.
Oil demand is expected to peak around 2030, while gas will probably continue to be a necessary part of the energy mix to provide stable 24-hour on-demand energy and to power energy-intensive industries such as metal smelting. According to McKinsey, gas is not expected to peak until after 2040. This does not, however, factor in the huge savings that can be made if we upscale efforts in the transition towards a circular economy (recycling aluminum uses only 10% of the energy required to produce from virgin materials, 26% for steel production) as well as the quantum leaps being made in second life batteries that can quickly make gas redundant.
In 2017, the EU had reduced total GHG emissions by over 20% and is on target to meet its 40% reduction by 2030. Norway, unfortunately, is lagging way behind. Norway’s commitment to transitioning towards a low-carbon economy and its target of 40% reduction in GHG emissions by 2030 and 80% by 2050 is bound by law (klimaloven). Despite this, absolute GHG emissions have actually increased by 3% since 1990, and CO2 has increased by nearly 25%, according to SSB. This is perhaps not surprising for a country whose main export is oil and gas, which accounts for over 27% of GHG emissions. Industry and transport however are also huge polluters, with 26% of CO2 emissions coming from manufacturing and industry, and 20% of CO2 from private cars, despite the massive success of electric vehicles (which now account for just under 10% of the total car pool in Norway).
Considerable policy change and investment in innovative low-carbon technologies, particularly in energy and manufacturing sectors, is desperately needed to meet Norway’s targets. Digitalisation is already helping individuals realize energy efficiencies at home, for example www.tibber.com. At work, www.ducky.eco are driving change through building awareness of how to reduce emissions at work, from eating less meat to walking or cycling to work.
On a larger scale, communities are taking control over their own energy supply and selling excess energy to the grid, with community energy projects in the UK providing inspiration across the globe and paving the way for massive disruption, threatening the existence of large, centralized energy companies.
So what have we learnt from the clients we have worked with?
1. Bring data to the table, not just good intentions. We see an increasing interest in science-based targets and a data-driven approach to setting and monitoring goals. Start by creating a baseline to understand how much energy your operations use, and map energy sources to understand how carbon intensive you are.
2. Engage with suppliers early on. Scope 3 emissions can account for up to 80% of your total GHG emissions, so reaching goals that are aligned with the Paris Agreement and latest scenarios from IPCC depend on collaboration throughout your supply chain.
3. Set up a team internally to develop a decarbonization plan. Its good practice to involve other stakeholders, including supply chain partners during the development stage. A decarbonization plan sets outs the roadmap for a long-term transition towards net-zero emissions, while providing key milestones along the way.
4. Implement a variety of coordinated initiatives, initially based around energy efficiency. While energy efficiency measures are not sufficient on their own, a continued focus on energy efficiency is a key part of any decarbonisation plan, and will save costs along the way, bringing a smile to the faces of both your sustainability team and your CFO.
5. Engage employees through using innovative tools, such as Ducky to build awareness, set individual or team goals, and drive behavior change aligned with your decarbonisation plan.
6. Don´t be constrained by current perceptions of how energy is generated and distributed – digitalisation, the low cost of renewables, coupled with emerging policy and legislation aimed at liberalising the energy market and opening up for smart grids will disrupt energy supply and demand. This needs to considered in any long-term decarbonisation plan.
7. Start off small and local (HQ, office, or plant) and scale up as you learn more. Share learnings with others, especially supply chain partners.
8. Don’t wait until 2050 to bring out the champagne! Celebrate each milestone to maintain momentum. Communicate results annually, including success stories along the supply chain.
Written by Marcus Borley, Senior Advisor