Thursday, 21. January 2021

5 Years of the Paris Agreement

On December 12, 2015, the Paris Agreement was adopted at the UN Climate Change Conference in Paris by all of the Parties, at that time more than 190 countries, as well as the European Union, and it aims to reduce manmade global warming to well below 2 degrees Celsius of pre-industrial levels. The Paris Agreement came into force on November 4, 2016 after 55 countries that account for at least 55% of global CO₂ emissions ratified the agreement.

Necessary measures to achieve the 1.5-degree target.

By 2020, anthropogenic CO₂ emissions must peak and be reduced by half every 10 years thereafter. This means that CO₂ emissions must fall from around 40 billion tonnes of CO₂ to 20 billion tons of CO₂ in 2030, to 10 billion tonnes of CO₂ in 2040, and to 5 billion tonnes of CO₂ in 2050. At the same time, the share of climate-neutral energy sources must be doubled every five to seven years. The UNEP (UN Environment Program) mentions the expansion of solar and wind energy, the increase of energy efficiency as well as the reforestation of forests and a global stop to deforestation as the most important measures.

Pressure increases

The pressure on companies to achieve greater sustainability and define a CO₂ reduction strategy (including a decarbonization strategy towards climate neutrality) is increasing. A growing number of stakeholders are exerting this pressure on companies: from consumers to political institutions, as well as employees and investors who are integrating sustainability principles into their investment decisions.

Environmental principles are key priorities for most global investment firms, including those of the world's three largest asset managers (BlackRock, Vanguard, and State Street). According to a survey by Dow Jones and EuroStoxx50, 70% of the companies surveyed have indicated that they are transparent about their direct, indirect and other CO2 emissions (Scope 1, 2 and 3 emissions) and more than half of the companies have already outlined a CO2 reduction strategy.

The steps to decarbonization

The Footprint Analysis, the CO2 Footprint (Corporate Carbon Footprint)

A transparent overview of the corporate carbon footprint is the most important prerequisite for sustainable decision-making and the basis for defining measures, identifying climate risks and assessing the effectiveness of CO2 reduction measures.

Risk evaluation

Examples of risks associated with a carbon reduction strategy include, but are not limited to, political, legal, technological, or market changes resulting from societal efforts to mitigate and adapt to climate change.

Examples are changing political framework conditions, cost changes of conventional versus green energy sources or the uncertainty or increase of taxation of CO2 emissions. In addition, we are exposed to an increasing number of natural disasters (droughts, fires, floods, etc.) as well as the consequent impact of political instability and migration. These uncertainties should be factored in and estimated.

The transition to a net-zero CO2 economy must be made as effectively as possible to maintain a company's competitiveness. Among other things, this includes the following points:

Whenever possible, reduce your emissions per output quantity
Identify your climate risks in your company
Investigate your value chain for the greatest potential reduction (on-shoring instead of off-shoring))
Switch to green energy sources
How can you make your customer sustainable? How can you reinvent products in a more sustainable way? Are new transaction models possible (leasing instead of buying)?
How can the life cycle of materials and products be extended?
Where can CO2 emissions be avoided?

Avoid, reduce and compensate

If all effective means of CO2 reduction have been exhausted, it may be more cost-effective to support decarbonisation outside one's own organisation. The carbon offset mechanism supports climate protection projects that remove CO2 from the atmosphere or avoid greenhouse gas emissions. The most common projects include energy efficiency measures, promotion of renewable energy (solar, wind, hydropower), forest protection and reforestation projects.

Conclusion

The backbone of a credible carbon reduction strategy is a transparent carbon footprint analysis, sound carbon reduction targets, and a corresponding vision towards a carbon neutral company with a commitment to a net zero CO2 economy.