At this year’s World Economic Forum Annual Meeting, we were reminded that the future must be defined by sustainable and clean economic growth, and by the opportunities this will present to create prosperity. To achieve the targets set by the Paris Agreement and the UN Sustainable Development Goals, the nexus of technology, economy and ecology is of utmost importance, as without advanced clean industrial and energy technologies sustainable growth is impossible. It’s now up to climate policy and finance to fuse this nexus and carry the energy transition forward. Responsible business, in turn, must deliver on larger societal values – including eliminating emissions.
Since 1973, when the first Davos Manifesto was published, little progress has been made. More than 75% of global energy demand is still being satisfied by unabated fossil fuels, despite headlines proclaiming a green revolution. None of the 10 largest economies have reduced their transport emissions since 1990. Industrial decarbonization remains a climate blind spot, characterized by a lack of policy blueprints delivering meaningful action and technology deployment.
Carbon emissions continue to rise. The planet is on fire. Even worse, there are no signs of reversal.
Almost all our remaining carbon budget as defined by the Paris Agreement will be depleted by emissions from current, under construction and operational infrastructure. And this doesn’t even account for planned new, unabated industrial and power infrastructure. Growing urbanization and population will also bring increasing energy demand and a rise in the need for carbon-intensive products such as steel and cement. Hence, while continuing to build out clean and renewable sources of energy at even greater speed, the commercialization of clean energy technologies, particularly carbon capture and storage (CCS), will be key to significantly and quickly reduce emissions from hard-to-abate industrial sectors and power plants.
CCS will be important not only in solving our emissions lock-in problem; it will also be a vital tool to lower the CO2 concentration in the atmosphere. It can facilitate the large-scale production of low-emission hydrogen, which many see as the clean energy vector of the future. Finally, the technologies’ deployment will not only create new clean growth opportunities but also build new industries, create and retain employment and sustain local economies.
Today, there are 19 large-scale CCS facilities in operation globally. To reach climate and sustainable development goals, some 2,000 are needed, equating to a 100-fold scale-up between now and mid-century. Yet achieving this will not require extraordinary measures. It requires commitment from governments and the private-sector to tackle climate change. In fact, the measures that will accelerate the deployment of CCS will also be vital to catalyzing the green transition. It is larger policy and financial frameworks that matter, not technology favouritism.
The first step is to cease building new sources of unabated emissions, preventing any further emissions lock-ins. At the same time, we need to retrofit existing infrastructure while creating technological capabilities to draw down carbon, such as through direct air capture. Most importantly, we need to deploy technological solutions and get them out of the lab to the sources of emissions, and design policy and investment measures that help them overcome the technology valley of death.
Governments can incentivise investment flows towards low-carbon technologies through the introduction of a value on carbon that reflects the externalities of pollution. There are different ways to attribute a value on carbon; in the US, the most progressive CCS-specific incentive provides tax credits that reward the permanent storage of CO2; other countries use a cap and trade system or carbon taxes.
The High-Level Commission on Carbon Prices recommended a carbon price of $40-80 by 2020 to drive change consistent with the Paris Agreement. The International Monetary Fund recently put forward $75 by 2030, up from a global average of $2 today. According to the International Energy Agency, more than 450 million tonnes of CO2 could be captured and stored with a value on carbon of $40 a tonne of CO2. Most importantly, investing in the energy transition could bolster economic growth by some additional $26 trillion and create more than 65 million jobs, according to the Global Commission on the Economy and Climate.
Overall investment in energy was more than $1.8 trillion in 2018, according to the IEA, with slumping investment in renewables and energy efficiency. Capital flows, just like policy, remain unaligned with global climate ambitions. As such, the next step is mobilizing green finance to repurpose and build clean infrastructure, including the deployment of CCS.
The latest movements here spark hope; in 2018, according to the Climate Bonds Initiative, almost $170bn of green bonds were issued, a figure that has grown continuously over the past few years. The HSBC Centre for Sustainable Finance recently argued that we need a better understanding for risk and reward associated with low-carbon technology; after all, the perception of risk defines the rate of deployment. In fact, the analysis shows that taking into account the environmental rewards of CCS coupled with a comprehensive policy framework can significantly shift the risk perception. Discussions on Sustainable Finance Taxonomy for sustainable investment at the European level are well underway, sparking initiatives globally on how to finance the future of a carbon-neutral economy. Such definitions of what constitutes green investments are vital and can be an answer to shift perceptions of risk.
Companies can make a difference beyond responding to these measures and incentives. Aiming to deliver on climate ambition, first-movers in the private sector should aim to work with peers, governments and financial institutions to implement CCS. Shouldering the initial risk can draw in new participants, enabling knowledge-sharing and a focus on core expertise, in turn catalyzing further deployment. The Northern Lights project is a good example, as are partnerships in the US to decarbonize ethanol, cement and power production. Future-proofing products for net-zero emissions is not only a moral imperative but also good for business, and will increase the ability of firms to attract diverse talent.
To address the climate crisis, policy, finance and private-sector action must come together. A framework to deliver on the Paris Agreement and sustainable development will be required to harness the strengths of each; triggering action in the energy transition, fusing expertise and influence for a net-zero future, including the commercialization of CCS.
Written by
Brad Page, CEO, Global CCS Institute
This article is republished from the World Economic Forum under a Creative Commons license. Read the original article.