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The challenge of curbing "Scope 3" GHG emissions generated by
the use of everyday carbon-intensive products will be the focus of
an IHS Markit webinar on Climate Readiness and the Journey to
Net Zero by 2050 on 16 and 17 June.
The question being asked is whether regulators, investors, and
corporations are ready to embrace this change. Do the regulatory,
financial, and industrial sectors still need to make more changes
to how they operate in the transition to a low-carbon economy? If
so, what are they, and what challenges do they face in that
journey?
The assembled speakers for the webinar, who include policymakers
in the US and UK as well as IHS Markit analysts, will tap their
expertise to answer those questions as they pertain to key
sectors—energy, transportation, and agriculture. They also will
discuss key developments in those sectors in light of new policies
and stakeholder demands rising around the globe.
Companies are under pressure not just from investors and
customers, but from governments to make sure whatever it is they
produce, be it power, a car, food, or a drug, results in net-zero
Scope 3 carbon emissions. These are GHG emissions generated
indirectly across the entire value chain of creating an end
product, beginning with sourcing the raw materials and continuing
through manufacturing, transporting, and using the product.
Investors are ready to take the plunge, but they want to know,
and they have a right to know, what risks they face in backing
technologies, products, and operations that add or detract from the
global carbon footprint and contribute to more frequent global
warming impacts.
And that is where the role of governments becomes important.
They not only need to set goals or signposts, such as a carbon
price, but also standards to ensure that all companies are
reporting their GHG emissions uniformly, allowing investors to
compare risks and decide where to employ their capital.
IHS Markit data show that all sectors, not just the energy,
transportation, and agricultural sectors that are key sources of
GHGs, have to figure out how to deal with Scope 3 emissions, IHS
Markit Chief Energy Strategist Atul Arya said in previewing his
webinar presentation.
In Arya's opinion, the power sector is best positioned today
among the various parts of the energy sector to meet the net-zero
goal, as the technologies for wind and solar generation are already
in place and affordable, though "oil and gas companies have to
figure this out."
Vijay Subramanian, director for global CO2 compliance in IHS
Markit's automotive group, will discuss the net-zero challenges
facing the transport sector, especially Scope 3 emissions.
Drawing investment
Attracting investment in clean energy solutions in communities
heavily reliant on fossil fuels is another challenge, not just for
the companies involved, but for the jurisdictions themselves.
All companies, but especially those in the energy sector, need
some sort of signpost like a carbon price to guide their net-zero
strategies to develop low-carbon, clean energy solutions, Arya
said.
Government policies, rather than how companies are structured,
will drive how the energy sector reaches net-zero carbon targets,
he said, adding that the policies in the US and Europe are
different to that being pursued in Asia.
Government investment also is needed to spur innovation through
research and development, and Arya said there is a major role for
private sector investment too.
Arya agreed with a recent Ceres report that private equity firms
that have trillions of dollars in assets under management have been
holding back. He said that is because they are waiting for clear
government policies. "Why would the private sector invest in carbon
capture unless there is clear government policy?" Arya asked.
North Dakota Commissioner James Leiman, who will deliver the
webinar's keynote address on 16 June, will focus on how he has made
low-carbon solutions a viable investment opportunity in a state
that is heavily reliant on fossil fuels.
The Great Plains state has benefited from the recent oil and
natural gas boom as it sits astride the Bakken Shale. But the state
is also set to be home to what its backers say would be the world's
largest carbon capture and storage facility announced yet. Known as
Project Tundra, the facility is set to capture up to 90% of CO2
emissions from coal-fired units at the 705-MW Milton Young Power
Station.
Leiman believes North Dakota is attractive to investors looking
to tap into carbon capture and storage because it already has the
infrastructure and regulatory structure in place to inject CO2 into
federally permitted underground wells.
Asia Pacific energy demand
The 17 July webinar will focus on the Asia Pacific (APAC)
region, which has traditionally relied on fossil fuels for power
and for its industrial sector, and is where much of the global
energy transition is expected to take place.
China has set an "ambitious goal" to reach carbon neutrality by
2060 because it has vast coal deposits, limited oil resources, and
cannot afford to import its gas needs, Sabrina Zhang, who heads IHS
Markit's APAC Strategic Governance Advisory and Environmental,
Social and Governance (ESG) Integration group, said in a preview of
her talk.
"That is why ESG investment is very important to facilitate the
transition," Zhang said.
Led by China and India, APAC is "the sink" for capital
expenditure in renewable energy over the next five years as the
region taps into the investment opportunities these energy sources
provide, according to Gauri Jauhar, IHS Markit executive director
for energy transition and cleantech consulting, who also will be
one of the webinar's speakers.
Between 2021 and 2025, IHS Markit expects $720 billion in
investment, which represents 55% of cumulative capital expenditure,
on renewables, be they wind, solar, biomass, or geothermal.
China continues to lead the pack in terms of record investments
in all forms of renewable energy sources, be it wind, solar, or
biomass. The world's second-largest economy by GDP is now looking
to build up its renewable capacity in anticipation of 2025 or 2027,
depending on what projections you follow, when its coal capacity is
expected to peak.
Uniform reporting standards
It is no surprise then to learn that investors are chomping at
the bit to find out when regulators will agree on a uniform set of
rules for disclosing climate risk. Corporations and investors with
more than $40 trillion in assets under management urged G7 leaders who met 11-13
June to back and adopt mandatory climate risk disclosures based on
the voluntary Task Force on Climate-Related Financial Disclosure
(TCFD) framework, which now serves as the gold standard in most
countries.
The leaders of Canada, France, Germany, Italy, Japan, US, and
the UK listened, and issued a joint communique that voiced
support for the TCFD framework, provided it is in line with
domestic regulatory schemes already in place. They also recognized
"the potential for high integrity carbon markets and carbon pricing
to foster cost-efficient reductions in emission levels, drive
innovation, and enable a transformation to net zero."
The G7 leaders also endorsed the newly launched Taskforce on
Nature-related Financial Disclosures and said they look forward to
its recommendations.
During her keynote speech on 17 June, Claudia Chapman, head of
stewardship at the UK's Financial Reporting Council, will discuss
the opportunity and responsibility investors have in the
stewardship of climate-related ambitions, along with the data and
reporting they need to effectively hold companies accountable for
their goals.
IHS Markit Americas Head of Regulatory Affairs Salman Banaei
will provide an update on where the US Securities and Exchange
Commission stands with respect to its rulemaking on requiring
climate risk disclosures. In March, the SEC sought public input on
approaches for tightening the current voluntary climate risk
reporting regime.
According to Banaei, who served with current SEC Chairman Gary
Gensler from 2009 to 2013, the proposed regulation, which the
agency expects to release in October, will ensure
standardization of climate risk disclosures and opportunities so
they are consistent, comparable and reliable.
"A particular focus will be disclosures that provide credibility
for net zero commitments," he predicted in a preview.
Consistency and transparency are key elements that have been
missing from company reports examined by nonprofit investor and
citizen groups that include Ceres, a nonprofit network of
institutional investors seeking climate-neutral and sustainable
solutions, as well as nonprofits Center for American Progress and
Environmental Defense Fund, they say.
Posted 15 June 2021 by Amena Saiyid, Senior Climate and Energy Research Analyst