China pledges to achieve net zero emissions by 2060 – Why?

There has been a strong reaction to the announcement that China (the world’s largest CO2 emitter 28% of global emissions) will achieve net zero emissions by 2060 and the pressure this may place on the equivocal position which the US maintains on emission reduction.

The announcement by Xi Jinping was light on details about what net zero means in the mind of the Chinese government, but some of this will become clear when the next five year plan emerges. Some have been sceptical about the timing, to quote the New York Times:

“Pledging to do more on the climate could at least counterbalance the rising anger China faces in Europe and beyond over its record of oppression in Xinjiang and Tibet, its territorial conflicts in the Himalayas and the South China Sea, military threats toward Taiwan and a sweeping crackdown on Hong Kong’s autonomy.”

Undoubtedly their may be some short-term benefits from the announcement, but this is a major policy change, not a short term tactical ploy, so what are the reasons for it?

In my book Zero Carbon Our Choice, I set out the difficult decisions and the scale of change in moving from our current carbon economy to a net zero economy and how it affects all sectors of the economy, private as well as public and business. Democracies may struggle to achieve agreement to these changes in the timescale needed to achieve the target.

China has the advantage that it can make policy happen relatively quickly. A brief digression. A western visitor asked the manager of a Chinese steel mill how they could expand to justify the increased iron ore purchases they were discussing. The manager said there would be a new steel plant over there pointing at the neighbouring town. When asked what would happen to the town, he answered, we will move it. China has an advantage in achieving dramatic change quickly.

China suffers, like some other countries from poor air quality. Net zero is a way to tell the population that this will be sorted out.

Net zero by 2060 is a long time away, it is a major policy change, but its achievement won’t be clear for a long time. It does however provide a policy framework which only the Communist Party can achieve, and it will be undoubtedly branded in the same way as the economic leap which started in the eighties.

China holds a dominant position in the production of equipment for a net zero global economy. In solar panels and wind turbines and as the largest manufacturer of electric cars and buses and with a strong position in battery production. It is able to implement infrastructure projects like the Three Gorges dam. China can exploit this technological lead. It also has a dominant position in rare earth mining and has mining joint ventures around the world which ensure security of supply for its manufacturers.

As a form of soft diplomacy, this policy change plus its dominant position in supply will be very powerful.

The key signs about how serious China is on net zero will be in its policy on coal powered electricity generation. Given the life of a power station, it will need to start a moratorium on building coal plants in the 2020s and definitely by 2030. As this is a net zero pledge, it will be interesting to see how aggressive China is in using offsetting. Will it be just domestic or will China invest in offsetting elsewhere as well? What will the target for new trees in China be (it will have to be very big).

For all the reasons above the announcement makes sense and gives China a big policy to come out of the Covid era. China has the levers of power domestically to achieve it and the manufacturing sector which will benefit from an acceleration of investment in renewables. The devil will be in the detail. The interesting question will be how does the US respond and how does this affect the balance of power between China and the US?

© Chris Lenon and http://www.zerocarbonourchoice.com  2020. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and www.zerocarbonourchoice.com with appropriate and specific direction to the original content.

Schroders work at home and Metropolitan life – Consequences

“Fund manager Schroders will allow thousands of its employees to continue working from home even after the pandemic, marking a huge shift in the way the City works.

In a recent interview, Schroders’ chief executive Peter Harrison said the pandemic had “changed society irrevocably”.

“The contract between society and business has changed forever,” he said. “The office will become a convening place where you get teams together, but the work will be done in people’s homes.”

This is likely to raise fresh fears among government figures that the shift in working patterns triggered by coronavirus will be permanent.” City am.

This illustrates the change being considered currently and the scale of that change. We are possibly seeing peak metropolitan life. While the Schroders decision is covid provoked, there are other carbon emission issues which will erode metropolitan life.

As my book, Zero Carbon Our Choice describes, Metropolitan areas contribute to emissions but are poor at emission mitigation, ie in terms of renewable power investment in particular, and conversion to non carbon heating is more challenging in higher rise buildings. The changes will be enormous, if Schroders and other firms adopt this business model then city CBds will be hollowed out (walk round the City of London to check this out). The ancillary service jobs will migrate or disappear. Demand for public transport will decline (many systems are radial from the CBD or focussed on it).

No solar panels. London terrace houses.

Cities are considering how to replan for a low or zero emission future. Paris is considering a “15 minute city” where you can walk to all your daily needs. There is no reason why employment patterns will not follow this. This means that cities will need to create a planning strategy to make these changes over the next decades.

Smaller cities will find it easier to adapt to this future and it is not surprising that the press is full of stories about the attractions of non metropolitan life. If Covid is making people consider the scale of change we see, thinking about zero emissions will require even more dramatic change.

© Chris Lenon and http://www.zerocarbonourchoice.com  2020. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and www.zerocarbonourchoice.com with appropriate and specific direction to the original content.

Investment priorities and Emission reduction – words or action?

The attached piece from the Financial Times https://on.ft.com/2WUcRYI is fascinating. Under the headline “Climate Change: asset managers join forces with eco warriors”, the piece argues that 2020 has been a turning point in investors attitude to climate change and more particularly emission reduction.

However, the detail in a survey by ShareAction provides questionable data to support this.

Respondents had to pick five key priorities. While Disclosure in line with the Task Force on Climate-related Financial Disclosures, Better Disclosure of Climate related risks, Emission Reduction and Setting Climate Related targets all scored over 50%, these priorities are about disclosure and targets, not about actions.

The following priorities scored less than 50% in descending order. Corporate strategy alignment with a scenario of a rise of less than 2C, Linking remuneration to climate related KPIs, Scenario stress testing, Supply Chain emission reduction, Measuring and reducing Scope 3 emissions and Withdrawal from Trade Associations (the last three scored less than 20%).

So less than half of investors prioritised aligning corporate strategy with a scenario of a rise of less than 2C. This is a key action for corporates if they are really supporting reducing climate change, if it is not then corporate strategy is about business as usual without regard to this key objective.

Just over 30% were in favour of linking remuneration to climate related Key Performance Indicators (in other words what bonus and pay rise you get). Well if most corporates have other objectives than climate change in KPIs then it is reasonable to think that staff will prioritise those objectives rather than climate change as that is the signal, that management is giving as to its priorities.

Just under 30% would include scenario stress testing. Again, this means the vast majority of investors do not prioritise climate mitigation or see it as a priority.

If climate targets are a real priority, then supply chain emission reduction would be a key priority and action requirement for a corporate, with a score in the high teens from investors, it clearly is not in those surveyed.

Measuring scope three emissions scores just over 10%. Scope three emissions are both upstream and downstream in the business (so procurement and customers) including Purchased goods and services, Business travel, Employee commuting, Waste disposal, Use of sold products, Transportation and distribution (up- and downstream), Investments and Leased assets and franchises. As a result 90 % of investors don’t think this is a priority, the interesting question is how do they think a business will achieve net zero if it doesn’t measure and reduce these emissions (who else is responsible for them?)

The graphic from Siemens does demonstrate a methodology to reduce emissions.

Siemens – progress to date

What is striking about this survey, is that investors prioritise complying with regulations and setting targets.

When it comes to actions, the incentives of remuneration, the emissions in their supply chains and managing scope three emissions (which are all key actions in achieving emission reduction) the priority they ascribe is very low. Actions speak larger than words, and in this case, investors seem more concerned about words.

This survey is depressing, for those countries with 2050 net zero targets, we have approaching 29 years. If the concern of investors is reporting and targets rather than actions and putting emission reduction at the heart of their business strategy, then a 2050 net zero target will not be achieved.

© Chris Lenon and http://www.zerocarbonourchoice.com  2020. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and www.zerocarbonourchoice.com with appropriate and specific direction to the original content.