Vital Signs: a 3-point plan to reach net-zero emissions by 2050



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Richard Holden, UNSW

Every January Larry Fink, the head of the world’s largest funds manager, BlackRock, sends a letter to the chief executives of major public companies.

This year’s letter focused on climate risk. “Climate change has become a defining factor in companies’ long-term prospects,” Fink wrote. To put sustainability at the centre of its investment approach, he said, BlackRock would stop investing in companies that “present a high sustainability-related risk”.




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Now business leaders – even big money managers – express opinions all the time, and major companies keep doing what they are doing. But this was different.

Fink, who’s in charge of US$7 trillion (that’s not a typo – $7,000,000,000,000), says in his letter: “In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.”

It’s emphasised in bold type. That’s something to which chief executives pay attention.

Even before the letter was sent – but knowing what was coming – major US companies like Amazon, Delta Air Lines and Microsoft announced new climate action plans.

These three companies are in different industries with different abilities to take action. But the plans they’ve outlined illuminate the three key strategies needed to achieve net-zero carbon emissions by 2050.

Delta Air Lines

Delta, being an airline, burns a lot of fossil fuels. Bar an extraordinary technological shift in aircraft, it will burn a lot of fossil fuels well into the future.




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The airline’s goal by 2050 is to cut its carbon emissions to half the levels they were in 2005. It plans to do this through a combination of fuel-efficiency measures and helping spur the development of more sustainable jet fuels. In the medium term (up to 2035), its goal is “carbon-neutral growth”, buying carbon offsets for any increases in emissions from jet fuel due to business growth.

Delta Air Lines operates about 5,000 flights a day. Jet fuel accounts for about 99% of its total emissions.
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Let’s consider the economics of the Delta plan – at least up to 2035.

Buying carbon offsets increases the airline’s costs. These are passed on to customers – in which case it is simply a form of carbon tax – or paid for by shareholders through lower profits. I’m betting it’s not the shareholders who will pay.

So Delta is essentially imposing its own carbon tax in the hope customers who care about the environment will be more attracted to its brand or that other airlines follow suit.

Amazon

Amazon, which reported a carbon footprint of 44.4 million metric tons in 2018, is doing two broad things.

The company has a fleet of about 30,000 delivery vans. It plans to have 100,000 electric vehicles by 2024. This will reduce the company’s carbon footprint so long as the vans are charged with power from sustainable sources.

Amazon’s founder, Jeff Bezos, has also announced the Bezos Earth Fund, which will give away US$10 billion in grants to anyone with good ideas to address climate change or other environmental issues.

Again, let’s consider the basic economics at play here.

Moving to electric vehicles is a smart hedge against rising fuel costs from a price on carbon – something that already exists in California.

The Bezos Earth Fund, meanwhile, is an excellent example of taking money generated from maximising shareholder value – Amazon is valued at about US$1 trillion and Bezos’s personal fortune (pre-divorce) was about US$130 billion – and redistributing it to socially productive causes.

Microsoft

Finally, Microsoft – the least-carbon-intensive business of the three mentioned here – plans to be carbon-negative by 2030, and by 2050 to have offset all the emissions it has been responsible for (both directly and through electricity consumption) since its founding in 1975.

Since 2012 it has had an “internal carbon tax”, which in April 2019 was doubled to US$15 a tonne. This price mechanism is used to make Microsoft’s business divisions financially responsible for reducing emissions.

On top of this, Microsoft has developed the AI for Earth program, which provides cloud-computing tools for researchers working on sustainability issues to process data more effectively.

Lessons for Australia

Australia’s Coalition government and Labor opposition would do well to heed the lessons of these three companies.

Together they show three clear strategies:

  • a technological push to lower emissions
  • a price on carbon to drive technological innovation and uptake
  • clear goals to reduce emissions.

Our political parties both have one out of three. Right now Labor has announced a goal. The Coalition is promising a technology plan some time soon.

Prime Minister Scott Morrison is right to criticise Labor for not having a plan. Opposition Leader Anthony Albanese is right to criticise the Coalition for not having a suitable goal.

But neither of them advocates a price on carbon, without which neither technology road maps nor ambitious goals will translate into sufficient emissions reductions.




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Technology investment, a carbon price and clear goals are all necessary to effectively reduce carbon emissions. Without all three we are bound to fail.

And we no longer have time for that, according to climate scientists.The Conversation

Richard Holden, Professor of Economics, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Australia’s biggest property companies are making net-zero emissions pledges – now we can track them



Huge crowds marched last week to demand progress towards net zero emissions – and companies are listening.
AAP Image/James Ross

Amandine Denis, Monash University

Corporate Australia is taking action on climate change. Most recently, at the UN Climate Summit, Atlassian cofounder Michael Cannon-Brookes announced the A$26 billion Australian software company’s commitment to net zero emissions by 2050.

Net zero pledges like this are becoming more common but currently there is no way to really track momentum towards net zero emissions across different sectors of the economy.




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Now, a Net Zero Momentum Tracker initiative has been established by ClimateWorks Australia and the Monash Sustainable Development Institute to track emissions reduction commitments made by major Australian companies and organisations, as well as state and local governments.

The tracker aims to place all commitments to net zero emissions in Australia in one place and evaluate how well they align with the Paris climate goals.

Property sector tracking towards net zero emissions

We began by assessing Australia’s property sector. Last week we released a report examining all property companies listed in the ASX 200, plus all of those required to report their emissions under the National Greenhouse and Energy Reporting Act.

Among the companies we looked at are Dexus, Mirvac, Stockland Corporation, GPT Group, and Lendlease. They develop, own or manage some of Australia’s largest corporate offices, commercial properties, retail centres, retirement villages, and residential developments.




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The report found almost half – 43% – of Australia’s largest listed property companies have made commitments that closely align with the Paris Climate Agreement, aiming to achieve net zero greenhouse emissions before 2050 for their owned and managed assets.

Significantly, the six companies with the most ambitious net zero targets represent 36% of the ASX 200 property sector. Among these six, several major companies – Dexus, Mirvac, GPT Group, and Vicinity – are aiming for net zero emissions by 2030, demonstrating the business case for strong climate action.

Sector leaders can inspire copycat action

By highlighting what action organisations are taking and how, the Net Zero Momentum Tracker initiative aims to encourage more organisations to make and strengthen commitments to reduce their emissions, in line with the goal of net zero emissions by 2050.

For example, Australia’s largest owner and manager of office property, Dexus, has a comprehensive strategy for reaching its goal of net zero emissions across the group’s managed property portfolio. This includes reducing energy use, shifting to renewable electricity, electrifying their buildings, and reducing their non-energy emissions from waste, waste water and air conditioning.

Of particular significance is Mirvac’s pledge to be “net positive” by 2030. This means the company aims to go beyond net zero, reducing emissions by more than its operations emit. Mirvac has established an energy company to install rooftop solar on their commercial buildings and is selling power to occupants, among other initiatives. The company also has a “house with no bills” pilot project, to explore how their upstream indirect emissions can be minimised for residential developments.




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Another major company, the GPT Group, has extended its commitment beyond the assets it owns and manages to all buildings it has an ownership interest in, including buildings it co-owns or does not manage.

These companies will get multiple benefits from their action, including reduced operating costs, better health and productivity for occupants, and increased sales prices, rents and occupancy rates.

Need to accelerate action

While many property companies are tracking in the right direction, none of the companies we considered had net zero targets which comprehensively covered all of their emissions – such as those from co-owned assets, their supply chains and investments.

There is still significant opportunity for property companies to strengthen their commitments towards net zero emissions. This requires targets which address the full scope of direct and indirect emissions within each company’s influence, supported by detailed plans to achieve this.




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By making these public commitments to reduce emissions, the property sector is helping build momentum towards achieving this goal across the entire Australian economy.

The next assessments to be undertaken by the Net Zero Momentum Tracker initiative include the banking sector and state and local governments.The Conversation

Amandine Denis, Head of Research, ClimateWorks Australia, Monash University

This article is republished from The Conversation under a Creative Commons license. Read the original article.