Navigant Research Blog

A Disruptive Approach to 100% Decarbonisation of the Global Energy System by 2050

— May 8, 2018

Decarbonisation of the global energy system is one of the big challenges society faces today. The Paris Agreement, adopted in 2015, states that efforts should be pursued to limit the temperature increase to 1.5°C above pre-industrial levels. This is a tightening of earlier agreements that put the limit at 2°C.

What Does Such Increased Ambition Mean for the Global Energy System?

The temperature effect of CO2 emissions is not primarily determined by the level of emissions in a future year; rather, it is by the cumulative amount of emissions, or the carbon budget. To stay within the carbon budget, emissions need to be reduced—and fast. If we keep on emitting CO2 at the current pace, the carbon budget to limit the temperature increase to 1.5°C will be exceeded in one or two decades.

What Could a Fast Energy Transformation Look Like?

Population and GDP growth results in an increasing demand for energy services like space heating and cooling, transportation, and materials production. There are several critical levers to constrain emissions against the background of these developments:

  • Ongoing efforts to deliver all energy services in an efficient way
  • Electrifying energy consumption, especially for buildings and transportation
  • Fast penetration of wind and solar in the electricity sector
  • Adopting a range of other renewable energy technologies, from solar heat to electricity-based hydrogen
  • Bioenergy as a fuel source for the manufacturing industry and specific transportation needs and a role for carbon capture and storage (CCS) in specific sectors

By giving preference to options that have high social and political acceptability, Ecofys, a Navigant company, developed a decarbonisation scenario where maximum feasibility is achieved. With strong energy efficiency improvement, this decarbonisation scenario shows it is possible to bring global energy use below current levels to 435 EJ, which is a strong contrast to business as usual growth to about 800 EJ. However, while the total primary energy supply in the scenario is reducing slightly, electricity demand is expected to almost triple. We estimate that all this energy can be supplied from zero-carbon or low carbon energy sources because of the unprecedented scale up of technologies such as solar PV, wind turbines, EVs, and heat pumps.

(Source: Ecofys, a Navigant company)

Despite the global energy system’s rapid reduction of CO2 emissions in our disruptive decarbonisation scenario, cumulative CO2 emissions beyond 2014 are calculated to be 680 billion tonnes, likely exceeding the carbon budget. However, combined with options such as afforestation and agricultural carbon sequestration, it seems possible to stay within a carbon budget compatible with a maximum temperature increase of 1.5°C.

Fast Global Action Is Needed

Fast global action is needed, and the way we live, produce, consume, and dispose of products and services needs to be redesigned to reduce dependence on future negative emissions. An energy system transformation as set out in a recent report by Ecofys, a Navigant company, Energy transition within 1.5°C, is feasible but highly disruptive because it is based on technologies that are already available. Nevertheless, it will influence all players in the energy system due to strong electrification and the increased use of bioenergy. Existing businesses will need to be completely reoriented and new business lines developed to cope with the energy technology requirements of the future.

 

In a “Daytona 500” Rally for Climate Pledges, 2018’s Race Is on from Davos to Denver

— April 5, 2018

At the World Economic Forum (WEF) in Davos, Anand Mahindra, chairman of the Mahindra Group, challenged 500 businesses to set a science-based target (SBT) aligned with the Paris Agreement ahead of September 2018’s Global Climate Action Summit in California (dubbed the Mahindra Challenge). Today, there are 369 companies committed to the SBT Initiative.

Racing Forward

On March 1, 2018, companies raced forward with pledges at the 2018 Climate Leadership Conference (CLC) in Denver. VISA committed to 100% renewable energy by 2019 and L’Oréal intends to reach carbon neutrality across all its US-based facilities after a deal to procure renewable landfill gas. After being bestowed CLC awards, 15 other companies also put points on the scoreboard.

At WEF New York on March 20, McDonald’s put forward its Scale for Good climate commitment as the first restaurant company to adopt a SBT, including:

  • Partnering with franchisees to reduce restaurant and office emissions offices 36% by 2030 below a 2015 base year.
  • Collaborating with suppliers and producers, McDonald’s committed to a 31% reduction in emissions intensity per metric ton of food and packaging across the supply chain by 2030 below 2015 levels.

McDonald’s expects to prevent 150 million metric tons of CO2 equivalent from being released to the atmosphere by 2030.

On March 27, MIT hosted the XLI Global Change Forum with the title, Science-Based Targets: Rationale and Challenge. The opening panel was led by Navigant and highlighted the practice of setting targets with two pharma titans, Novartis and Biogen, and perspectives from the UN Framework Convention on Climate Change (UNFCCC).

Officials and Race Organizers

The SBT Initiative defines and promotes best practices in target setting and offers guidance to reduce barriers, and independently assesses and approves companies’ targets. It also maintains an online site that lists all companies setting SBTs.

We Mean Business (WMB) is a global coalition of the most influential businesses acting on climate change. It catalyzes businesses to drive policy and accelerate the transition to a low carbon economy. WMB maintains an online site that recognizes companies taking action.

We Are Still In is a national coalition of more than 2,700 cities, states, businesses, and universities demonstrating an American commitment to tackling climate change, a clean energy future, and upholding the Paris Agreement. To date, We Are Still In is the largest US coalition in support of climate action.

SBT setting is already a part of the yearly CDP climate questionnaire and scoring process, and the data is used regularly by institutional investors.

Publicize a Pledge

Companies have sights set on four events: the Global Climate Action Summit, Climate Week NYC, UNFCCC COP24, and WEF 2019 Davos. At these events, and at the BSR and Net Impact conferences, new climate pledges will be publicized. 

Why Is 2018 a Special Year?

Public awareness focuses on five things as 2018 serves as a pivot point:

  1. The June 2017 White House announcement threatening the Paris Agreement
  2. As global stock takes dates, 2020 and 2030 loom closer on the calendar
  3. Climate impacts are getting more intense
  4. Investors and other stakeholders are demanding plans (e.g., Black Rock)
  5. Governor Brown hosting the Global Climate Action Summit in California

Tuning Up Strategies

Like Daytona, engines in the race to tackle climate change need tuning. From diagnostics to data management to testing the efficacy of abatement measures, Navigant improves strategies, gets them approved and recognized, and identifies the best places for amplification on a global stage. Now is the time to join the 2018 race. Start your engines!

 

The Positive Side of Negative Emissions

— February 15, 2018

In recent years, awareness has grown on the need for CO2 removal to avoid dangerous levels of climate change, and companies are increasingly looking to include negative emissions in corporate climate strategies. As a part of Navigant, Ecofys finds that sufficient scalable and affordable options for negative emissions exist, and that instead of being a burden, they carry many environmental and social co-benefits.

The Need for CO2 Removal

A key element of Paris-consistent scenarios are technologies that enable the removal of CO2 (greenhouse gases [GHG]) from the atmosphere, which need to absorb up to 3 GtCO2 per year as soon as 2030 to meet the “well below 2˚C target.” This is comparable in scale to roughly all of the European Union’s current annual CO2 emissions. The rationale of engaging in CO2 removal (CDR) is threefold:

  1. Even the most ambitious mitigation strategies will see residual emissions in hard-to-abate sectors, such as aviation or agriculture, and in order to reach net-zero emissions around mid-century, compensation with CDR is essential.
  2. The speed at which global emissions are reduced is limited because of inertia in the global energy system, but with CDR this process can be accelerated. An immediate, steep downward trajectory is needed to avoid overshooting climate targets and to avoid more negative emissions later this century—CDR can support such a trajectory.
  3. CDR puts a cap to the cost of emissions reductions, thereby improving the cost-efficiency and feasibility of achieving carbon budgets.

This makes CDR especially relevant for organisations that will play a key role in the transition to a zero-carbon economy, such as energy-intensive industries, agriculture and food companies, and governments. Through studies for the UN Environment Programme and the UK Committee on Climate Change (amongst others), Ecofys, a Navigant company, is at the forefront of developments in this field. The team observed that these projects often carry more benefits than their potential to draw carbon from the atmosphere.

A Worthwhile Investment

Methods for GHG removal are incredibly diverse, and some options are already being deployed at limited scale, while others are facing obstacles or may appear futuristic, such as bioenergy with carbon capture and storage, or the direct capture of carbon from the atmosphere. Given the multiple co-benefits CDR can deliver, some of the more developed methods are frequently referred to as no-regret options and reflect the social, environmental, and financial ROI that may result from their application. Such options are illustrated in the figure below.

Environmental Benefits of CO2 Removal Options

(Source: Ecofys, a Navigant Company)

Looking at opportunities with investment costs <$20/tCO­2, the global potential for these methods is estimated at 4.1 GtCO2/yr in 2030, which indicates that a significant share of the 3 GtCO2/year removal needed by 2030 to meet the well below 2˚C target could be achieved through the discussed methods. The examples provided illustrate that, while beneficial to the environment and people, CDR can make economic sense as well. However, it should be noted that business cases may differ strongly between regions and policy context, meaning that opportunities for negative emissions should be identified on a case-by-case basis—first within the scope of existing business activities and lastly by looking outward for other low-hanging fruits.

Get in touch with one of our experts to discover the potential options for CO­2 removal related to your business supply chains.

 

Finding a Cost-Effective Path to Climate Leadership

— January 9, 2018

A new wave of climate change regulations is coming, and this time to all corners of the world. Following the Paris Agreement, more than 80% of countries have already drawn up plans on how to contribute to the low carbon transition. Some have realised plans that put a price on greenhouse gas (GHG) emissions. While the majority still have to translate those into concrete regulations, the uncertain timing and cost effects of these regulations create risks for businesses.

Internal carbon pricing (ICP) can help companies navigate the tentative regulatory waters. Assigning an internal price to their carbon footprint enables companies to translate future effects of climate change regulations into a monetary metric. This allows decision makers to compare climate measures on equal financial terms and implement the most cost-effective ones. Already, almost 1,400 companies—including more than 100 Fortune Global 500 companies, representing about $7 trillion in annual revenue—have reported to CDP that they are using an ICP, or plan to do so in the coming 2 years. Most companies use ICP to manage exposure to climate-related risks, while a smaller subset uses it for scenario analysis of these risks, as recommended by the Financial Stability Board Taskforce on Climate-related Financial Disclosures. Only a few progressive companies try to utilise the full potential of ICP to find the cheapest measures to prepare for regulatory risks, discover new revenue opportunities, and reduce their carbon footprints.

Framework for Best Practice ICP

Source: Ecofys, a Navigant Company

Ecofys, a Navigant company, The Generation Foundation, and CDP developed a new 4D framework to help companies find the most cost-effective way forward in the low carbon transition as follows:

  • Have a carbon price level capable of affecting decisions (Height). Saint-Gobain uses two carbon prices, one for capital expenditure decisions and a higher price to stimulate R&D in disruptive low carbon technology.
  • Cover the GHG emissions hotspots in the value chain that can be influenced (Width). Carrefour decided to use ICP on GHG emissions related to energy use from its stores, which covers 90% of emissions it could directly influence.
  • Integrate it into business decisions (Depth). DSM has integrated ICP in existing business processes and has made it a mandatory factor in the financials for large investment decisions.
  • Evaluate regularly in line with business strategy (Time). Danone updated its ICP in 2016 to align it with its target to achieve carbon neutrality by 2050.

Three Success Factors to Setting Up an ICP Approach

With each dimension affecting the next, companies will have to decide between tradeoffs of acceptability, accuracy, administrative burden, and effect. Optimal combinations of model will vary depending on goals, GHG emissions profiles, influence in the value chain, and company culture. Nonetheless, three overarching success factors were identified for setting up a best practice ICP approach:

1. Obtain board-level support early on. The CFO and other strategy directors are especially important because well implemented ICP will influence financial decisions.

2. Engage the organisation from the start. Take the affected teams on board to create a sense of ownership and improve internal buy-in.

3.Start simple and learn by doing. Try embedding it in daily decisions. Over time, you can gradually increase the effect of ICP in the decision-making process.

Building on industry interviews and public consultation, Ecofys, a Navigant company, the Generation Foundation, and CDP published a guide detailing a four-step approach to establish a best practice ICP. Accompanied by a C-suite guide for executives, it allows companies to identify the most promising ICP approach for their organisation. Using ICP in a best practice way helps to actually ride the wave of new climate change regulations, not be overwhelmed by them.

 

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