Building a Climate Resilient Business: Managing Risks & Exploit Opportunities in a Climate Changing...

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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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


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


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


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


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


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


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


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)


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)


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


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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Without more mitigation, global mean surface temperature might increase by 3.7° to 4.8°C over the 21st century

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> 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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30

40

50

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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

60

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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New methodology was developed to translate global carbon budget to company targets based on sectoral approach


> 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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http://www.sciencebasedtarget.org/

© ECOFYS | |

Current sectoral coverage of the SDA methodology


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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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


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


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


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


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


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.


http://upload.wikimedia.org/wikipedia/commons/e/ec/2011_flooding_in_Ayutthaya_Province-EO-1_merged.jpg

© 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


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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


© 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.


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


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