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.

Coal – Germany and the UK – How the German Greens are increasing emissions

Dattlyn 4 Coal Power station

Last week saw two announcements about coal power generation.

In the UK, no coal was burnt generating power for a continuous two month period.

In Germany, a new coal power station opened.

This may seem surprising, that Europe’s largest economy is opening coal powered power plants, but the reason is the need for baseload power as more power generation comes from intermittent renewables.

In the UK, that baseload comes from nuclear and gas. But in Germany it is from coal because nuclear is being phased out, as a result of Green Party pressure within the government. So, due to Green opposition to nuclear, Germany’s emissions will stay high and may increase as the use of coal continues for the next twenty years at least.

A bizarre outcome. And until power storage is increased dramatically to store renewable electricity, the issue of baseload will continue. Is it really better to use coal rather than nuclear?

© 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.

Why is the OECD not reviewing the taxation of aviation?

I have written about the need to review the taxation of aviation given the low level or zero level of taxation. Aviation produces significant emissions, and yet as I have described in my book, Zero Carbon Our Choice, its emissions are taxed as a much lower level than other sectors, a policy framework which makes no sense and contradicts the policy of reducing global emissions to zero.

Carbon Watch has suggested “There are several options to implement a tax on aviation, ranging from taxes on fuel to ticket taxes, or per flight taxes. Independently from national measures taken, a deeper and more transparent dialogue among the Member States or clearer guidelines directly from the European Commission are required to better harmonize a possible European aviation tax.”

The European Commission has a role to play in this, but the body which has the most influence in developing global frameworks and standards is the OECD.

The most recent OECD document which a google search produces states:

“The momentum behind climate action is growing, with more countries taking action to price carbon and regulate emissions. But achieving the targets countries have set for themselves will require a sharp acceleration of effort,” said OECD Environment Director Simon Upton.


“Countries are running out of time to make the policy adjustments needed to meet their targets and keep alive the long-term goal of limiting the temperature rise to 2 degrees. Governments need to construct a policy pathway that will lead to zero net carbon emissions by the end of the century.” 2015

One might expect that the OECD would be reviewing all aspects of carbon pricing, but that is not the case with aviation emissions. There are no current projects to review aviation in both consumption and environmental taxes (there is no budget for this work). Surely, this should be a priority policy review area for the OECD as we look forward to what the economy should look like after Covid 19 and in terms of a decarbonising world economy?

OECD Headquarters

Such a review, as Carbon Watch suggests, should include:

Taxes on airline tickets or flight taxes

VAT treatment of ticket sales

VAT and treatment of airline fuels – what is the justification for zero rating?

Duty treatment of airline fuels

“Taxing aviation kerosene sold in Europe [by duty on all departing flights to all destinations of €0.33/litre] would cut aviation emissions by 11% (16.4 million tonnes of CO2) and have no net impact on jobs or the economy as a whole while raising almost €27 billion in revenues every year, a leaked report for the European Commission shows.” Airport Watch

A failure to conduct such a review would call into question how serious the OECD is about policies to reduce emissions. Now is the time to scope and start such a review. It should be an urgent priority for the leadership of the OECD.

© 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.

EU priorities: Airline bailouts. State Aid vs Emission reduction

France has proposed a euro 7bn bailout for Air France and the Netherlands a 2 – 4bn euro bailout for KLM.

The European Commission requires DG Competition to review whether these bailouts are acceptable in terms of EU state aid rules, which are the foundation of the EU regulatory regime for the Single Market (which was and is the raison d’etre of the EU).

In my previous pieces on the Airline industry and bailouts, I’ve argued that any bailouts of airlines need to be primarily assessed in terms of the transition to a zero-carbon economy not in terms of the existing global economy. For each country, this dilemma needs to be reviewed in deciding the financial support to be provided by governments.

The same dilemma applies to the European Commission, and EU as a whole. I think this poses the question as to which policy issue should decide the approval of any bailouts proposed by EU governments for the airlines? Should the primary focus be the roadmap to emission reduction driving this decision, or should it be the state aid rules which protect the purity of the Single Market.

As it struggled for relevance in the 14th and 15th centuries, the medieval papacy entertained disputes about how many angels could dance on a pin head. The EC and EU is in danger of focussing on single market dogma in the face of the climate crisis. Of looking backwards in focusing on the single market and state aid for airline bailouts. The bigger question is in terms of climate change, which policy on airline bailouts is appropriate? Surely emission reduction is more important?

© 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.

Airport expansion in Europe – Emissions consequences

Copenhagen Airport Expansion

I have written about the issues regarding the third runway at Heathrow. But the same issues apply to European airports and as I’ve pointed out if one expansion does not go ahead but another does more emissions result.

The following is from the Airports Council international website:

“Airport capacity is one of the most pressing issues facing European mobility today. As competing global hubs in the Middle East and other emerging economies power ahead with their own infrastructure roll-outs, European air traffic is set to be heavily congested in the coming decades. EUROCONTROL estimates that by 2040 up to 1.5 million flights will not be accommodated, meaning 160 million passengers unable to fly. Yet expansion of airport capacity in Europe faces a range of obstacles, from economic regulation and planning rules to political intervention and financing challenges. There is a need to both invest in new airport capacity and to make the best use of existing capacity. This should be achieved through integrated operations and collaborative decision-making, as well as through the airport slot allocation system. Airports need to see their capacity enhanced and allocated so as to develop air connectivity to the socio-economic benefit of the regions they serve, while limiting environmental impacts.” 

The question is do we need those 1.5 million extra flights? Those 160 million passengers “unable to fly” would create an extra 80 million tonnes of carbon on their 1.5 million flights.

Its interesting that there is no indication how environmental impacts are limited by ACI. An extra 80 million tonnes of carbon a year doesn’t appear to be a limited environmental impact.

To put this in perspective, these additional emissions are over twice Denmark’s annual emissions, being added every year, when the aim is to reduce emissions to zero. More flying means more emissions, so how can this be described as “limiting environmental impacts”?

Helsinki Airport expansion gets 230m euro loan from European Investment Bank

And why does the European Investment Bank fund this?

© 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.

Is propping up airlines the right thing to do after Covid 19?

The international shutdown of airlines as a result of Covid 19 is causing havoc with the viability of the business model of airlines. Reports of the scale of rescue plans needed to keep these businesses in operation abound, Airlines for America representing the five largest in the US has asked for over $50bn, Virgin Atlantic £500m.

Already, some commentators have questioned how much support should be provided for airlines and whether the lessons of the global financial crisis bailouts have been learnt? I have previously written about the levels of government borrowing which will arise from the expenditure on Covid 19 by governments, the question of how this debt will be repaid and the impact on expenditure to reduce emissions.

The queue of business sectors asking for bailouts is lengthening as the recession deepens and lockdown reduces economic activity. Any bailouts will add to the level of government debt and the cost of both financing this and repaying it.

The question that needs to be asked as the economy recovers from Covid 19 is what sort of economy should it become? Should we revert to business as usual or adopt a different approach? If governments take climate change seriously, and the emission reductions required, then their expenditure to reboot the economy should be consistent with this policy aim.

Bailing out airlines to either maintain or expand current levels of flying is clearly inconsistent with emission reduction. The difficult policy question to answer is what is the right level of flying, to achieve emission reductions and what are the measures needed to achieve this?

In addition, the major aircraft manufacturers – Airbus, Boeing and Comac – will also be affected. The order books of these businesses will fall, if airlines fly fewer flights due to financial measures which are introduced to reduce flying. Some businesses in the supply chain will be directly affected, as for instance some engine manufacturers are paid based on the miles flown by their engines.

This poses real policy challenges, the environment against existing jobs (Airbus employs over 130,000 people, BA 45,000, US passenger and cargo airlines 750,000). How steadfast will governments be in prioritising emission reduction where the consequence is job losses in carbon sector jobs such as aviation? That will show how serious governments are about emission reduction.

© 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.