This document discusses the need for transformative change to address climate change through short-term and long-term policy signals from the upcoming Paris climate agreement. It argues that while some incremental positive shifts are underway, the scale of change needs to be much greater to limit global warming to 2 degrees Celsius. The agreement provides an opportunity to secure policy signals to guide national climate commitments and emissions pathways. It is in the private sector's best interest to help shape the agreement to include strong, clear signals and for companies to set internal targets aligned with transitioning to a low-carbon economy.
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Driving Transformative Change: The Role of the Private Sector
1. WORKING PAPER | October 2015 | 1
WORKING PAPER
CONTENTS
ExecutiveSummary........................................................1
I. Introduction................................................................2
II. The Role of the Paris Agreement in Shaping
Short- and Long-Term Policy Signals............................5
III. The Business Opportunity.........................................8
IV. The Way Forward: Private Sector Leadership...........13
Conclusion..................................................................17
Annex I: Feasibility.......................................................18
Endnotes......................................................................22
Working Papers contain preliminary research, analysis,
findings, and recommendations. They are circulated to
stimulate timely discussion and critical feedback and
to influence ongoing debate on emerging issues. Most
working papers are eventually published in another form
and their content may be revised.
Suggested Citation: Morgan, J., K. Levin, and Jiawei Song, with
J.P. Osornio. “Driving Transformative Change: The Role of the
Private Sector in Advancing Short-Term and Long-Term Signals
in the Paris Climate Agreement.” Working Paper. Washington DC:
World Resources Institute. Available online at: http://www.wri.
org/driving-transformative-change
DRIVING TRANSFORMATIVE CHANGE: THE ROLE OF THE
PRIVATE SECTOR IN ADVANCING SHORT-TERM AND
LONG-TERM SIGNALS IN THE PARIS CLIMATE AGREEMENT
JENNIFER MORGAN, KELLY LEVIN, AND JIAWEI SONG
WITH CONTRIBUTING AUTHOR: JUAN PABLO OSORNIO
EXECUTIVE SUMMARY
The risks and opportunities involved in addressing climate
change are becoming better understood in cabinet and
board meetings around the world. This is leading to an
increase in both the number and ambition of countries’
climate action plans and a shift from high- to low-carbon
investments in corporate supply chains. The private sector
is also taking more aggressive climate actions than before,
such as the adoption of emissions reduction targets,
programs to improve energy efficiency, and fuel switch-
ing to renewable energy sources. However, the pace and
scale of these changes are not yet enough to avoid serious
disruption in the decades to come. Indeed, there is a risk
that the current incremental approach of our transition
to a low-carbon economy is camouflaging the scale of
emissions reductions that is necessary, and lulling society
into the belief that we are taking sufficient action. Rapid
and transformational solutions will either be embraced or
forced upon us.
In this context, businesses will need to consider whether
they want to be disrupted and left behind, or be the
disruptors who take proactive actions to grow into the
change and benefit from new opportunities. Investors will
increasingly seek out those companies that are taking the
latter approach. Literature shows that companies’ engage-
ment and action on climate change is becoming a defining
factor in their business performance, affecting the flow of
investment.1
2. 2 |
For the international community as a whole, the question
is whether it will make the changes required to trans-
form our approach to the challenge now, proactively, or
whether it will take the more painful route of doing too
little now and facing the prospect of abrupt, costly, and
risky change later.
The clarity and predictability of future changes will be
fundamental in avoiding the disruptive pathway. Cur-
rently there is no “north star” or clear policy signal coming
collectively from governments to the private sector or
to citizens about the change that can be expected in the
coming decades. Experience shows that short-term and
long-term policy signals are critical to catalyzing action
and shifting investment patterns, whether toward a dif-
ferent form of energy or a different type of food product.
Empirical examples also indicate that it is in the private
sector’s best interest to support the development of clear
and predictable policy signals.
The upcoming negotiations in Paris provide an
opportunity to secure such policy signals. In the case
of short-term signals, the Paris Agreement can include
a mechanism for regular strengthening of country
commitments, for example every five years. These
commitments can also be guided by a long-term policy
signal, or an agreed upon goal, that provides direction for
the scale and rate of emissions reductions.
While the outcomes of the Paris negotiations are relevant
to all countries, cities, and citizens, this paper focuses on
those elements of the Paris Agreement that are of specific
relevance to the private sector and its potential role in
incorporating rational and clear signals in the agreement.
The paper is organized as follows. Section I provides
a brief summary of the current scientific literature on
the consequences of delaying climate action. Section II
describes the role of the Paris Agreement in providing
adequate short- and long-term signals that can drive the
transformation to a low-carbon economy. Section III
describes why short- and long-term signals are in the
private sector’s best interest. Section IV concludes with a
description of what role the private sector can play, includ-
ing (1) shaping policy outcomes in the Paris Agreement to
secure strong short- and long-term policy signals, and (2)
taking steps internally that are consistent with the changes
that governments should be making—adopting short- and
long-term internal targets consistent with a phase out of
emissions. The Annex includes a short literature review of
the feasibility of an accelerated pace of change.
I. INTRODUCTION
A fragmented but positive shift is underway in the world’s
economies, from a traditional low efficiency, resource
intensive, and high-carbon model of economic develop-
ment, to higher efficiency and cleaner modes of opera-
tion. This shift is visible in the energy sector, where a
number of governments, companies, and other actors are
identifying the financial, health, and environmental risks
of carbon-intensive fossil fuel sources, such as coal, and
making efforts to shift to renewable energy sources. It is
visible in the agriculture sector, where some companies
are attempting to move away from extensive land-clearing
practices. It is visible in cities around the world that are
scaling up public transportation infrastructure in order to
reduce dangerously high levels of air pollution and grid-
locked traffic. And, not least, the shift is visible in compa-
nies that are adopting internal emissions reduction targets
to prepare for a future low-carbon world, and generating
savings as they do so.2
Many people are looking for a dif-
ferent, higher quality of life that provides stability for their
businesses, their countries, and their families.
There are a number of reasons why this incremental shift
is underway, including the high health costs of air pollu-
tion, the interest in greater energy security, and diminish-
ing land resources due to deforestation and inefficient
agricultural practices. There is also a growing under-
standing of the risks of climate change. At the same time,
experience with more efficient, clean, and productive ways
of conducting business and advancing economic develop-
ment has grown. Renewable energy prices are dropping
around the world, with solar and wind costing less than
coal and gas in some markets.3
There have also been some
improvements in land and water management that have
led to more efficient practices in communities, reversing
land degradation and boosting annual income and food
yields.4
Advances in material science and digitalization
are increasing the efficiency of product use.5
These factors,
combined with the fact that US$90 trillion will be invested
in infrastructure in the coming 15 years,6
offer tremendous
opportunities to those who are ready to grasp them and
who are looking for alternative development pathways
that avoid the resource intensive, high-carbon pathway.
While this incremental positive shift is important and
begins to address many of today’s challenges, adequately
addressing the issue of climate change will require much
greater effort. Climate change poses unique problems to
3. WORKING PAPER | October 2015 | 3
Driving Transformative Change
society. In 2014 alone, the United States experienced eight
extreme weather events, each one costing society over $1
billion.7
Coastal populations around the world are increas-
ingly vulnerable to flooding.8
There have been rapid
increases in food and cereal prices after climate extremes
in key producing regions.9
These impacts and associated
damages will most likely not continue in a linear fashion,
but will accelerate around the world, hitting the poorest
and least developed countries hardest. In the absence of
efforts beyond those already in place, according to the
Intergovernmental Panel on Climate Change (IPCC), the
global average surface temperature is projected to be
3.7–4.8°C above pre-industrial levels by 2100.10
This level
of warming would bring disastrous impacts.
The science tells us that we need nothing short of a
transformation of our energy, industrial, and transpor-
tation systems, land practices, economic systems, and
behavior. The timeline and trajectory of this transforma-
tion will determine the extent to which risks and costs
are minimized and whether or not we can avoid the worst
impacts of climate change. To date, the pace and scale of
change we have witnessed is not commensurate with that
required to address the problem. The solutions exist and
low-carbon technologies are being deployed, but their
deployment has been too slow and piecemeal. However, it
is still possible to reduce the damages from climate change
to people, national economies, and ecosystems and to
achieve the transformative development pathway that is
needed.
Our current slow and fragmented shift can induce a sense
of false security, a belief that the world is addressing the
problem. In reality, incrementalism now means more
radical shifts are required later. The choice that govern-
mental and private sector decision-makers face is whether
to continue with the incremental pace of change, and
endure abrupt economic, societal, and political changes in
the decades ahead, or to adopt a more steady transforma-
tional pace of change that can avoid tremendous economic
and human costs in the near- and long-term future. Box 1
summarizes the emissions reductions that will be required
and the consequences of delay.
The rational choice is clear—a steady transition that draws
on the best of human ingenuity, while avoiding high costs
and risks, must be the way forward for society. There are
many factors that will make that steady, transformational
pathway possible for governments and businesses around
the world. It is clearly technically feasible (see Annex I).
However, it requires signals now, both short-term and
long-term, if the costs and risks of transformation are to
be minimized, existing technologies are to be more widely
deployed, and investment in technology research and
development is to be accelerated.11
A set of clear and predictable global and national policy
signals is needed. Policy signals provide direction for both
the scale and rate of change and, if strong enough, can
provide predictability and certainty for low-carbon invest-
ment and increased commitments. Short-term signals can
provide direction for governments and investors over a
short time period, for example, five to ten years, regard-
ing when further commitments are needed. In the context
of the climate negotiations, a short-term policy signal
would be provided if governments agreed on a process by
which countries would submit commitments on a regular
schedule, for example, every five years, increasing their
ambition with each subsequent commitment. Long-term
signals convey a globally shared vision, over a timespan of
more than one decade, for tackling climate change. They
can guide the direction of short-term commitments and
future decision-making and determine emissions path-
ways toward a low-carbon future. In the context of the
negotiations, a long-term signal could be provided if coun-
tries collectively agreed on a certain percentage of emis-
sions reductions that must be achieved by mid-century,
the timing of a phase out of emissions, decarbonization of
the economy, and/or the timing for peaking of emissions
globally.
The upcoming meeting in Paris in December 2015, the
culmination of years of negotiations, offers a tremendous
opportunity. The world will gather to agree on an interna-
tional climate agreement. At these negotiations, countries
will decide on a new form of international cooperation,
a new international legal agreement to address climate
change. Along with a range of other important linked
issues, such as how to support developing countries to
build resilience to the impacts of climate change and
shift to a lower-carbon economy, is the question of what
short- and long-term signals the agreement will provide to
investors, business, governments, and the public. The way
the world answers this question—whether adequate policy
signals will foster a deliberate, transformational path, or
whether they will be absent, thus condemning the world
to abrupt changes later, with greater costs and risks—will
affect billions of people around the world.
4. 4 |
The international community has adopted a
goal that the average global temperature should
not rise above 2°C relative to preindustrial
temperatures. According to the UN Environment
Programme’s Emissions Gap Report, for there
to be a likely chance of meeting the 2°C target,
annual global emissions in 2020 should be
no more than 44 gigatonnes of carbon dioxide
equivalent (GtCO2
e). Global emissions should
also peak by 2020 in order to stay on a least-
cost pathway that has a likely (≥ 66%) chance
of limiting warming to 2°C. In 2025, global
emissions should be no more than 40 GtCO2
e
on average and should drop to 35 GtCO2
e by
2030. By 2050, annual global emissions levels
should fall to 22 GtCO2
e in order to have a likely
chance of keeping warming within the 2°C limit.
(Annual global emissions in 2010 were roughly
50 GtCO2
e.a
)
The IPCC Fifth Assessment Report finds that,
if we are to have a likely chance of limiting
warming to 2°C, GHG emissions should be zero
or below zero by 2100, requiring a phase out
of greenhouse gas emissions. CO2
emissions
should be zero or below zero by 2070.b
The more we delay necessary reductions,
the greater the need for rapid reductions in
subsequent decades. This will involve greater
risks of economic and environmental disruption,
as carbon-intensive technologies are needed
to be suddenly displaced, but many have
been locked in for years ahead, and unproven
technologies are introduced to achieve negative
emissions. Delay will also increase the risks of
higher temperatures, which would lead to higher
adaptation costs and challenges.c
Stated in terms of greenhouse gas emissions, the
choice is as follows: the global community can
ensure that emissions levels are below 50 GtCO2
e
by 2030 and maintain an annual reduction rate of
about 3 percent for the next two decades (steady
transition), or it can allow emissions to grow to
more than 55 GtCO2
e by 2030 and try to achieve
an annual reduction rate of around 6 percent
thereafter for the next two decades. Reductions
are rare in history; the only cases of decline were
associated with the collapse of the Soviet Union
or certain cases of policy intervention in France
and Sweden.d
Delaying action until 2030 will
give us only a 50:50 chance of limiting warming
to 2°C, whereas concerted action now will
reduce the risks of delay, as well as the risks of
overshooting the 2°C target, and also allows us to
realize the co-benefits of mitigation.e
Figure 1, drawn from UNEP, outlines the
choices. In Example A, action is delayed and
thus emissions need to be reduced sharply in
future years. In Example B, action is taken earlier
to reduce emissions, which allows for higher
emissions in the second half of the century
(because the carbon budget has not been used
up as quickly as in Example A). Example C
demonstrates the consequences of continued
delay and, therefore, increasingly radical shifts
needed to bring emissions down (requiring
significant negative emissions, which are not
proven at scale). The IPCC states that delay is far
more costly than a systematic transition.f
With climate change, delaying decisions does not
simply mean that benefits are delayed. Delay can
lead to lock-in of carbon-intensive technologies
and behavior that can lead to overshooting of
temperature targets. Also, it is not an option to
put off reductions since some portion of carbon
dioxide stays in the atmosphere for thousands of
years,g
as build up continues.
Box 1 | Required Emissions Reductions and the Consequences of Delay
Notes:
a. On average among modeling runs.
b. Negative emissions could be realized through carbon dioxide removal (CDR) technologies. The report notes significant risks associated with CDR, such as the availability of
land for bioenergy with carbon capture and storage (BECCS), the difficulty of storing such significant amounts of carbon, and the lack of BECCS plants that have been built and
tested at scale.
c. Clarke, L. et al. 2014. “Assessing Transformation Pathways. In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth
Assessment Report of the Intergovernmental Panel on Climate Change.” Cambridge and New York: Cambridge University Press. Available at: http://www.ipcc.ch/pdf/
assessment-report/ar5/wg3/ipcc_wg3_ar5_chapter6.pdf
d. Clarke, L. et al. 2014
e. UNEP. 2014. “The Emissions Gap Report 2014.” Nairobi: United Nations Environment Programme (UNEP). Available at: http://www.unep.org/publications/ebooks/
emissionsgapreport2014/portals/50268/pdf/EGR2014_LOWRES.pdf
f. Clarke, L. et al. 2014.
g. U.S. Environmental Protection Agency. 2014. “Climate change indicators in the United States, 2014.” Third edition. Washington, D.C.: EPA 430-R-14-004.
Available at: http://www3.epa.gov/climatechange/pdfs/climateindicators-full-2014.pdf
The private sector can play a large role in shaping this
outcome, and should be interested in doing so, given the
significant potential benefits. For example, such signals
can lower the risks and costs of investment, reduce future
compliance costs, offer returns on investment and savings,
and provide opportunities for new products and markets.
In addition, companies’ engagement and action on climate
change are becoming defining factors in business perfor-
mance, affecting the flow of investment.12
While the outcomes of the Paris negotiations are relevant
to all countries, cities, and citizens, this paper focuses
specifically on the critical role that the private sector can
play in advocating for short- and long-term policy signals
in the Paris Agreement and why it is in their interest to
play such a role.
5. WORKING PAPER | October 2015 | 5
Driving Transformative Change
II. THE ROLE OF THE PARIS AGREEMENT
IN SHAPING SHORT- AND LONG-TERM
POLICY SIGNALS
Negotiations are underway for a new international legal
agreement on climate change under the United Nations
Framework Convention on Climate Change (UNFCCC),
which will be completed in December 2015 in Paris. A
number of elements of the agreement are relevant to both
the pace and the orderliness of the transition to a low-
carbon future. There are two major elements in particu-
lar—short-term cycles of commitments and the adoption
of a long-term goal—that are under negotiation and,
depending on their design, have great promise for provid-
ing adequate short- and long-term policy signals.
Regarding short-term policy signals, the agreement can
include a signal (for example, in the form of an agreed
process or mechanism) for regular strengthening of com-
mitments, which would be a significant departure from
the current regime. All countries are now in the process of
tabling their national commitments, known as intended
nationally determined contributions (INDCs), for 2025 or
2030. These commitments indicate the level of effort and
ambition each country is willing and able to take in the
near term. They will include emissions reduction targets
as well as policies and measures in the various sectors,
and they are the foundation of the new Paris Agreement.
It remains to be seen how the commitments should be
updated and strengthened. In other words, what regular
short-term signals should the agreement provide to ensure
steady progress along an emissions reductions pathway?
Coupled with short-term policy signals, the agreement
can provide a long-term policy signal. In 2010, countries
agreed to keep the global average temperature increase
below 2°C in comparison to pre-industrial levels in order
to fulfill the objective of the Convention, which is to avert
dangerous climate change. While this is a vitally important
long-term policy signal, it is not the most effective one,
because the 2°C goal is challenging to translate into daily
economic and business decision-making. This under-
mines the ability of the signal to drive transformative
change. Therefore, countries are now negotiating a clearer,
additional long-term signal that will provide a means of
operationalizing the 2°C goal as well as ways to measure
progress toward that goal. A number of possible fram-
ings for an objective have been put forward by countries,
including a carbon-neutrality goal,13
a global decarboniza-
tion goal,14
percentage reduction goals,15
a limit on the
amount of fossil fuels that can be used before the 2°C
threshold is crossed,16
or a phase out of GHGs to net zero
within a certain timeframe, for example, mid-century.17
The inclusion of a long-term signal, combined with short-
term improvement cycles, in the Paris Agreement would
provide the predictability and clarity that can drive more
transformational and thus predictable change. Indeed, the
Figure 1 | The Implications of Delayed Emissions Reductions
Source: UNEP Emissions Gap Report 2014
2100
0
2100
0
2100
0
AnnualglobaltotalCO2
emissions
Date
Example A Example B Example C
start emissions level
net negative
CO2
emissions
6. 6 |
Agreement for Climate Transformation 2015 (ACT 2015)
has presented ideas for how the complete agreement could
function, based on research and stakeholder convenings
in 15 countries around the world.18
Short-term cycles of
increased ambition undertaken by every country, coupled
with a long-term signal, should be complemented by a
support cycle for developing countries (although the issue
of support is outside the scope of this paper) so that they
have the capacity, technology, and finance to enable them
to make a steady and equitable transition.
The question is whether the world will grasp this
opportunity and create a transformational Paris
Agreement that avoids the disruptive high risk, high cost
pathway by including short- and long-term signals that
catalyze the much greater pace and scale of change needed
to address climate change. The business opportunities
are tremendous and facilitate leapfrogging beyond past
practices and improving human well-being, particularly in
developing countries.
Below, we explore the options regarding short- and long-
term signals under the agreement.
Short-term Signals
Difficult political situations can result in putting off tough
decisions. Even in the face of overwhelming evidence
about the risks of significant—or even catastrophic—
consequences of inaction, we tend to make decisions
that disregard this information and reflect very short
time horizons.19
Indeed, it is the tendency of our political
institutions to make decisions that give greater weight to
society’s immediate policy interests and delay required
behavioral changes. It is, therefore, critical that the
agreement include signals provided by a mechanism that
creates a regular schedule of strengthening mitigation
commitments. A long-term signal alone will not provide
the certainty for limiting warming—because temperature
is related to cumulative carbon dioxide emissions20
—or
the short-term clarity needed to avoid very steep annual
reduction rates of emissions in the future.
It will be important to consider the timing of innovation
cycles when making decisions about the appropriate
timeframe for short-term signals. There is a vast literature
on this matter.21
Addressing climate change will require
research, development, and deployment of many types
of technologies. Some technologies will require more
time to go through the technology lifecycle (e.g. related to
infrastructure) while others will innovate and change on
an annual basis.22
There are, of course, many reasons to
encourage more rapid or shorter timeframes for innovation.
While an international climate agreement has limited
ability to influence innovation pathways, one function of
the agreement is to accelerate the pace of change.23
Within
the negotiating text for the Paris Agreement, the main area
of debate concerns the length of the upcoming and future
commitment or target periods. While some countries
are advocating for a ten-year cycle of improvement,
many are noting that a five-year cycle would be more
appropriate, because factors are changing so rapidly,
both in the economy and in the climate, and that only a
five-year signal will work to influence short-term business
decisions.24
One could potentially combine a five-year
target in the agreement with a ten-year indicative target
if countries wish to have another signal in between five
years and the long-term goal, but including only a ten-year
target will not capture the opportunities that innovation
will bring.
Five-year cycles of commitments would allow countries
to respond to advances in technology and thereby
benefit from the best available mitigation and adaptation
practices. Much technological innovation occurs over
short timeframes. If governments have to wait ten years
to respond, their signals will be ineffective and behind
the times. A five-year review can send timely signals
to companies and innovators, allowing governments
to take advantage of and to catalyze new technological
developments more regularly.25
By creating national
moments on a shorter timeframe, a five-year cycle
would avoid locking in low-ambition commitments for a
longer period (e.g. for ten years).26
Changes in scientific
understanding regarding the risks of climate change can
also change quickly, and there should be an opportunity
for policymakers to change course accordingly, and not
have to wait for a moment ten years in the future to adjust
rates of emissions reductions.
Long-term Signal
The ultimate objective of the UN Framework Convention
on Climate Change is as follows: “To achieve, in accordance
with the relevant provisions of the Convention, stabilization
of greenhouse gas concentrations in the atmosphere
at a level that would prevent dangerous anthropogenic
interference with the climate system. Such a level should be
achieved within a timeframe sufficient to allow ecosystems
to adapt naturally to climate change, to ensure that food
production is not threatened, and to enable economic
7. WORKING PAPER | October 2015 | 7
Driving Transformative Change
turning point, and send a loud and clear signal to citizens
and the private sector that the transformation of the global
economy is inevitable, beneficial, and already underway.”32
There are a number of proposals on the table in the nego-
tiations33
that further specify the 2°C goal. The proposals
vary, including goals for the timing of an emissions peak,
economic decarbonization, and phase out of carbon diox-
ide or GHGs to net zero, as well as others (see Box 4).
The impacts of warming to date have been widespread, affecting
both natural and human systems on all continents and across
the oceans.a
The world faces increasingly dangerous climate-
change impacts with every additional degree of warming. At
warming levels greater than 2°C, we are expected to see:b
▪▪ Roughly 0.79 meters (2.6 feet) of sea level rise above
1980–99 levels by the end of the century
▪▪ Average annual runoff decreasing 20–40 percent in the
Danube, Mississippi, Amazon, and Murray-Darling river
basins
▪▪ Average annual runoff increasing about 20 percent in the
Nile and Ganges river basins
▪▪ Forest fires almost doubling by 2050 in Amazonia with
1.5°C to 2°C temperature increases above pre-industrial
levels
▪▪ The risk of crossing thresholds (tipping points) in Earth’s
systems (e.g. West Antarctic ice sheet disintegration and
Amazon dieback) increases
▪▪ The frequency of bleaching events exceeds the ability of
coral reefs to recover
▪▪ A high risk of abrupt and irreversible changes to ecosystems
like forests, which would lead to “substantial additional
climate change” (e.g. trees sequester significant amounts
of carbon dioxide that could be abruptly released to the
atmosphere)c
Notes:
a. IPCC. 2014. “Summary for policymakers. In: Climate Change 2014:
Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects.
Contribution of Working Group II to the Fifth Assessment Report of the
Intergovernmental Panel on Climate Change.” Cambridge and New York:
Cambridge University Press. Available at: http://ipcc-wg2.gov/AR5/images/
uploads/WG2AR5_SPM_FINAL.pdf
b. For more information, see the World Bank, “Climate Change.” Available at:
http://www.worldbank.org/en/topic/climatechange
c. IPCC. 2014.
Box 2 | The Impacts of a 2°C Worlddevelopment to proceed in a sustainable manner.”27
This
objective has guided negotiations since 1992 and still holds
great political weight for countries. It emphasizes that the
pace of change must occur rapidly enough to avoid food
shortages and ecosystem disruption and other impacts
affecting sustainable development.
In 2010, at the Cancun Conference of the Parties,
countries decided to define this objective further, agreeing
to keep the global average temperature below 2°C in
comparison with pre-industrial levels, with a possibility
of revising this goal to 1.5°C after a scientific review,
given the risks associated with even 2°C of warming (see
Box 2).28
The 2°C goal has been a guiding post for many, and it is
the measure by which UNEP and independent think tanks
assess whether the UNFCCC goal is being achieved. It has
also been used to estimate the gap that exists between the
global temperature expected to result from the implemen-
tation of Parties’ emissions reductions commitments and
the 2°C goal.29
While it is immensely useful to keep this
target in mind, it is a challenging goal to operationalize.
What does this mean for countries, companies, investors,
cities, citizens? Box 3 provides a brief summary of recent
climate science findings regarding necessary long-term
emissions reductions that are consistent with a likely
chance of limiting warming to 2°C.
Further specifying the long-term goal is now a central
question under negotiation and a topic of debate among
ministers and heads of state. In June 2015, the G7
committed to a decarbonization of the global economy
over the course of this century, which includes “the long-
term objective of applying effective policies and actions
throughout the global economy, such as carbon market-
based and regulatory instruments.” The G7 called on other
countries “…to join us, to incentivize investments towards
low-carbon growth opportunities.”30
The G7 communiqué
was followed by the German-Brazilian statement in
September, which included language to provide some
support and differentiation for developing countries.31
More recently, the Leaders’ Working Lunch on Climate
Change, held at the United Nations in New York on 27
September 2015, addressed this issue. The summary
language stated that: “A Paris agreement will need to
articulate a comprehensive long-term vision of a world
freed of poverty through the social and economic oppor-
tunities created by the transition to a low-emission and
climate resilient future… A Paris agreement must be a
8. 8 |
While there are differences among approaches, they all
require a similar transformation from carbon-intensive
to low-carbon goods and processes. Decarbonization can
be achieved in two major ways: displacing high-carbon
content fuels with low-carbon content fuels, and reducing
energy requirements per unit of GDP.34
In the lead-up to Paris, it will be important for countries
and stakeholders to consider the most important
characteristics of a long-term signal that is designed to
send the clearest signal possible. Potential criteria include
clarity of the end goal, clarity of timing, the nature of the
goal (a collective goal or specific national goals), as well
as the equity of the goal(s). If the signal is to be effective,
it will need to be complemented by the right incentives
and support for countries to act, especially for developing
countries who may need additional resources to make the
transition to a low-carbon economy.
III. THE BUSINESS OPPORTUNITY
The creation of short- and long-term policy signals in
the agreement is imperative if society is to transform in
a more orderly fashion rather than make delayed and
abrupt changes that can lead to significant risks and costs.
Businesses can play active roles in making possible the
transition to a low-carbon future, by both reducing GHG
emissions and developing and bringing to market the
necessary technologies and solutions. Clear and predict-
able policy signals from the international community, and
from national governments implementing the agreement,
provide essential direction for decision-making on assets,
investments, and business strategies.35
They create a busi-
ness environment with more predictability and strengthen
the confidence of the private sector, allowing businesses to
reap significant benefits.
The influence of short-term and long-term signals on busi-
nesses’ activities is difficult to discern in the literature.36
However, the following case studies (Boxes 5–9) illustrate
the promise of policy signals that have already contributed
to better practices and motivated change. It should be
noted that the majority of case studies describe the results
of domestic policy signals as opposed to international
policy signals. Nonetheless, given the patterns emerging
in various country contexts, it can be inferred that such
benefits and results would only be strengthened if strong
signals were provided by an international agreement,
which would level the playing field for businesses in all
countries. Also, any policy signal provided by the interna-
tional agreement will have to be implemented domesti-
cally. Below we describe some of the benefits that policy
signals can provide to the private sector:
▪▪ INCREASING SAVINGS: Climate change can increase
business costs in the form of higher prices for energy
and raw materials, higher rates of taxation, and
potential upstream and downstream supply-chain
disruptions.37
In this context, policy signals that
incentivize a transition to a low-carbon economy
can help companies generate savings. For example,
companies can adopt clean energy technologies or
green their supply chains more easily with the support
of clear and predictable policies, thereby improving
energy efficiency and reducing costs in operations,
buildings, and facilities management.38
Also, policy
signals that motivate companies to increase their use
of renewable energy sources can lead to fewer GHG
emissions and lower costs given an eventual price on
carbon, which can offer savings to businesses in the
The science regarding the timing of a phase out of GHG
emissions consistent with the 2°C goal has recently advanced.
For example, the IPCC’s Fifth Assessment Report finds that
in the majority of scenarios predicting GHG concentrations
between 430 and 480 ppm CO2
e by 2100 (concentrations
consistent with a likely chance of limiting warming to 2°C)
greenhouse gas emissions are brought to zero or are negative by
2100. Further, power generation and industrial CO2
emissions
are brought to zero in about 2070 in RCP 2.6 (which provides a
likely chance of limiting warming to 2°C).a
To achieve a greater
probability of staying below 2°C, the timeframe for phasing out
emissions to zero is shorter.
The UNEP Emissions Gap Report 2014 more specifically calls
for global carbon neutrality (CO2
only) between 2055 and 2070
and total greenhouse gas emissions (all GHGs) shrinking to net
zerob
between 2080 and 2100.c
Notes:
a. Levine, M. et al. 2007. “Residential and commercial buildings. In: Climate
Change 2007: Mitigation. Contribution of Working Group III to the Fourth
Assessment Report of the Intergovernmental Panel on Climate Change.”
Cambridge and New York: Cambridge University Press. Available at: http://
www.ipcc.ch/pdf/assessment-report/ar4/wg3/ar4-wg3-chapter6.pdf
b. Net zero takes into account sinks, carbon capture and storage, and
negative emissions to balance out any emissions.
c. UNEP. 2014. “The Emissions Gap Report 2014.” Nairobi: United Nations
Environment Programme (UNEP). Available at: http://www.unep.org/
publications/ebooks/emissionsgapreport2014/portals/50268/pdf/EGR2014_
LOWRES.pdf
Box 3 | Long-term Emissions Reductions
Necessary for a Likely Chance of
Limiting Warming to 2°C
9. WORKING PAPER | October 2015 | 9
Driving Transformative Change
Box 4 | Who Supports a Phase out Goal and What are they Calling For?
Various Parties have proposed different
versions of how a long-term goal could be
formulated. Three options were discussed in
the Ad Hoc Working Group on the Durban
Platform. First, there are proposals to peak
global and domestic GHG emissions then
reduce net emissions to zero by 2050, with dif-
ferent timeframes for developed and develop-
ing countries.a
Second, there are proposals
to include a science-based, long-term, zero
emission sustainable development pathway
to reduce emissions/stabilize GHG concentra-
tions by a certain amount by a certain year.b
Third, there are proposals that involve keeping
future emissions within the global emissions
budget that is consistent with the goal of
limiting temperature rise below 1.5 °C, and
distributing the budget among countries, based
on their historical responsibility, ecological
footprint, level of development, and capacity.c
Currently, around 130 countries support the
inclusion of a long-term mitigation goal in the
Paris Agreement.d
From France and Germany’s
Joint Statement,e
to the G7 communiqué,f
to
the Germany-Brazil Joint Statement,g
countries
have emphasized the need for deep cuts in
GHG emissions and the decarbonization of the
global economy. The Joint Presidential State-
ment on Climate Change issued by the United
States and China, the world’s two biggest
economies, and biggest emitters, showed their
willingness to increase ambition over time and
helped to build support for short-term cycles
of commitments with greater ambition in the
Paris Agreement.h
In addition, the European
Union urged net emissions levels near zero, or
below, in 2100,i
and 44 members of the Alli-
ance of Small Island States and 48 of the Least
Developed Countries also expressed their
support for a long-term goal, and proposed net
zero emissions and/or full decarbonization by
2050.j
Several Latin American and Caribbean
countries showed their willingness to set a low
carbon target and to achieve carbon neutrality
by mid-century to stay below 2ºC.k
Support for a long-term goal reaches beyond
governments. For example, at the 2015 Busi-
ness and Climate Summit, business networks
representing 6.5 million companies in more
than 130 countries requested governments
to take collective action on reaching net zero
emissions over the course of this century.l
The B Team leaders,m
the CEOs of some of the
world’s largest companies, have supported
a goal to phase out GHGs to zero by 2050 in
order to have a higher probability of staying
below 2°C, and called upon businesses to
match this ambition. Through the Institutional
Investor Group on Climate Change, more than
100 investment companies urged countries to
support a long-term carbon emissions goal
under the UNFCCC, and the submission of
short- to medium-term national emissions
pledges and country level action plans.n
The Interfaith Summit, representing more than
50 faith and religious leaders from 20 coun-
tries has also called for a phase out of fossil
fuels by mid-century.o
The long-term goal is
one of the top priorities for many civil-society
advocates for the Paris Agreement. The Climate
Action Network, a network with more than 850
member organizations in 100+ countries, is
calling for phasing out fossil fuel emissions
and phasing in 100 percent renewable energy
by 2050.p
Notes:
a. UNFCCC. 2015. “Scenario Note on the Tenth Part of the Second Session of the Ad Hoc Working Group on the Durban Platform for Enhanced Action.” Available at: http://
unfccc.int/resource/docs/2015/adp2/eng/4infnot.pdf
b. UNFCCC. 2015
c. UNFCCC. 2015
d. Allen, P. et al. 2015. “Who’s Getting Ready for Zero: A Report on the State of Play of Zero Carbon Modelling.” The Center for Alternative Technology and Track 0. Available at:
http://track0.org/works/whos-getting-ready-for-zero-full-report/
e. France and Germany. 2015. “Petersberg Dialogue Call for Climate Action - Joint Statement from Angela Merkel and François Hollande.” Available at: http://www.diplomatie.
gouv.fr/en/french-foreign-policy/climate/events/article/petersberg-dialogue-call-for
f. G7. 2015. “G7 Leaders’ Declaration.” Available at: https://www.whitehouse.gov/the-press-office/2015/06/08/g-7-leaders-declaration
g. Brazil and Germany. 2015. “Brazilian-and-German Joint Statement on Climate Change.”
Available at: http://www.itamaraty.gov.br/index.php?option=com_contentview=articleid=10945:brazilian-german-joint-statement-on-climate-changecatid=578:press-
releaseslang=enItemid=333
h. The White House. 2015. “FACT SHEET: The United States and China Issue Joint Presidential Statement on Climate Change with New Domestic Policy Commitments and a
Common Vision for an Ambitious Global Climate Agreement in Paris.” Available at: https://www.whitehouse.gov/the-press-office/2015/09/25/fact-sheet-united-states-and-
china-issue-joint-presidential-statement
i. Track 0. 2015. “August Briefing on Countries Supporting the Long-term Decarbonisation Goal.” Available at: http://www.theroadthroughparis.org/sites/www.
theroadthroughparis.org/files/documents/Track%29_August%20briefing%20of%20countries%20supporting%20LTG%20.pdf
j. Track 0. 2015.
k. Track 0. 2015.
l. Allen, P. et al. 2015.
m. BP Global. 2015. “Oil and Gas Majors Call for Carbon Pricing.” Available at: http://www.bp.com/en/global/corporate/press/press-releases/oil-and-gas-majors-call-for-
carbon-pricing.html
n. Sir Richard Branson, Arianna Huffington, Dr. Mo Ibrahim, Guilherme Leal, Strive Masiyiwa, Blake Mycoskie, François-Henri Pinault, Paul Polman, Ratan Tata, Zhang Yue,
Professor Muhammad Yunus and Jochen Zeitz alongside Mary Robinson and Dr. Gro Harlem Brundtland as Honorary Leaders of The B Team.
o. Climate CEOs. 2015. “Open Letter from Global CEOs to World Leaders Urging Concrete Climate Action: CEO-led Initiative to Create A Fertile Ground for a Responsible
and Global Climate Deal in Paris 2015.” Available at: https://medium.com/@ClimateCEOs/open-letter-from-global-ceos-to-world-leaders-urging-concrete-climate-action-
e4b12689cddf
p. Climate Action Network. 2015. “Non-Paper: Options for A Long-term Mitigation Goal in the Paris Accord.” Available at: http://www.climatenetwork.org/sites/default/files/
can_non-paper_long-term_mitigation_goal_in_the_paris_accord_august_2015.docx.pdf
10. 10 |
Raytheon, a technology and innovation company specializing in
defense and homeland security, has participated in the Climate
Leaders program initiated by the US EPA since 2002. The
company set an internal climate goal to cut its carbon emissions
by 33 percent between 2002 and 2009.a
Raytheon exceeded
its target at the end of 2008 and set a new goal for the period
2008–2015. The company invested in projects such as “high
efficiency lighting; variable speed drives for motors, pumps and
fans; premium-efficiency motors; and state-of-the-art automated
energy management and control systems.”b
The company saved
more than $100 million between 2002 and 2012, while reducing
energy use by 19 percent.c
Catalyst Paper, western North America’s largest mechanical
paper producer, pursued a target of reducing its GHG emis-
sions by 70 percent by 2010 from a 1990 baseline. It was one of
the most aggressive emissions reduction targets in the private
sector.d
The company applied three major strategies to achieve
the goal, including fuel switching, energy efficiency, and recy-
cling initiatives. Between 2002 and 2005, the company saved $5
million in electricity costs through efficiency, and $13 million
through reducing the use of fossil fuels by 46 percent.e
Through
these measures, Catalyst brought to market its Catalyst Cooled
manufactured GHG-neutral paper and its lighter basis-weight
paper, allowing the company to competitively differentiate itself
from the interchangeable commodities market.f
Although both companies adopted voluntary goals, as opposed
to being driven by strong short- and long-term policy signals,
they gained significant savings, suggesting a potential scale-up
of benefits in the presence of strong policy signals.
Notes:
a. U.S. Environmental Protection Agency. 2010. “Clearing the Air: Raytheon
is Passionate about Going Green.” Available at: http://www.epa.gov/
climateleadership/documents/x03epa_040610.pdf
b. Raytheon. 2008. “Raytheon Company Corporate Responsibility Report
2008.” Available at: http://media.corporate-ir.net/media_files/irol/84/84193/
CRR_09/HTML/pdfs/energy_and_the_environment.pdf
c. CDP and World Wildlife Fund. 2013. “The 3% Solution: Driving Profits
Through Carbon Reduction.” Available at: https://c402277.ssl.cf1.rackcdn.
com/publications/575/files/original/The_3_Percent_Solution_-_June_10.
pdf?1371151781
d. World Wildlife Fund. 2014. “Climate Savers Factsheet: Catalyzing Change
for the Better in the Paper Industry.” Available at: http://climatesavers.org/
wp-content/uploads/2015/01/Catalyst-_-Factsheet_APPROVAL_002.pdf
e. World Wildlife Fund. 2014.
f. World Wildlife Fund Canada. 2014. “Rethink Business: How Addressing
Climate Change Can Improve the Bottom Line-Learnings From WWF
Climate Saver Companies.” Available at: http://www.catalystpaper.com/sites/
default/files/reports/wwf-canada_climatesavers.pdf
Box 5 | U.S. Companies Realized Significant
Savings from Taking Action on Climate
longer term. Lastly, predictable policy signals and
successful mitigation of the effects of climate change
can help avoid costly disruptions, such as interrupted
supply chains or spikes in commodity prices. See Box
5 for an example of U.S. companies realizing savings
from taking action on climate change.
▪▪ LOWERING THE RISKS OF INVESTMENT: Clear and predict-
able policy signals help reduce business risks created
by policy uncertainty. If designed correctly, policy
signals can also help create a favorable global busi-
ness environment through a combination of legal
frameworks and market mechanisms39
that lower the
risks of low-carbon investment. In addition, busi-
nesses have already incurred costs related to extreme
weather events and other changes in the climate.40
Therefore, long-term signals are in the interest of the
private sector because they can motivate collective
climate actions from all sectors to reduce longer-term
investment risks caused by climate change. See Box 6
for an example of business and investor support of the
U.S. Clean Power Plan.
▪▪ PROVIDING OPPORTUNITIES FOR NEW PRODUCTS,
MARKETS, AND INNOVATION: Policies that might be
implemented to meet a long-term goal, such as
carbon pricing or tax credits, could guide the flow
of investment to the clean energy sector, which is
more aligned with the future low-carbon economy.
Such policies can also help unlock investment in
infrastructure,41
enabling the scale-up of low-carbon
businesses. Third Generation Environmentalism
(E3G) estimated that new climate policies may lead
to approximately €3 trillion ($3.42 trillion USD)
in additional investment in low-carbon markets
worldwide by 2030.42
A recent report on global
trends in renewable energy investment observed
an increase of 17 percent, to $270 billion, in clean
energy investments globally between 2013 and
2014, with a rapid expansion of investment flowing
into new markets in developing countries.43
In these
circumstances, consumers might become more
aware of climate change, thereby increasing demand
for more environmentally friendly products.44
By
attracting investment and shaping market demand, a
long-term goal can provide companies with profitable
opportunities for new low-carbon products and
markets, and technology innovation. See Box 7 for
an example of how short-term policies promoted
opportunities for renewable energy generation in India.
11. WORKING PAPER | October 2015 | 11
Driving Transformative Change
Box 6 | Businesses and Investors Sent Letters in Support of the U.S. Clean Power Plan
In July 2015, 364 companies and investors
sent letters in support of the U.S. Environmen-
tal Protection Agency’s Clean Power Plan to
29 governors in the United States. The Clean
Power Plan requires emissions reductions
from existing electric power plants and sets
targets for each state by 2030, but allows
states flexibility in how to achieve their targets.
The letter states that “clean energy solutions
are cost-effective and innovative ways to
drive investment and reduce greenhouse-gas
emissions. Increasingly, businesses rely
on renewable energy and energy-efficiency
solutions to cut costs and improve corporation
performance.” The letter includes signatories
from Fortune 500 leaders as well as small
local companies and it represents the largest
group of signatories to support the Clean
Power Plan.a
▪▪ SECURING INVESTMENT IN RESEARCH, DEVELOPMENT, AND
DEPLOYMENT OF LOW-CARBON TECHNOLOGIES: Policy
signals may be coupled with increased public sector
funds for research, development, and deployment
(RDD) of low-carbon technologies. At the same time,
clear policy signals, especially long-term signals, can
help increase the demand for low-carbon products
and services and give businesses a better sense of
predictability in demand. In this context, more busi-
ness investment in RDD of low-carbon technologies
will be attracted by the potential profits of successful
developments.45
▪▪ CATALYZING LONG-TERM STRATEGIC THINKING: A long-
term signal in particular can provide a clear signpost
to guide strategy and decisions, forcing companies to
think long term about necessary transitions and road-
maps for achieving them.46
Box 7 | Short-term Policies Promoted Renewable Energy Generation in India
Between 2003 and 2013, India successfully
adopted a series of policies and mechanisms
to promote investment in, demand for, and
supply of renewable energy. New institutions
were created, such as the Ministry for New and
Renewable Energy (MNRE) and the National
Action Plan on Climate Change (NAPCC).
Targets for various renewable energy sources
were embedded in each cycle of India’s Five-
Year Plans and formed the basis for annual
goal setting. A series of policies was launched
to support the development of each source of
renewable energy.a
They included the National
Solar Mission, as well as supporting policies
and mechanisms for industry, including
exemptions on import duties, tax conces-
sions, generation-based incentives, renewable
purchase obligations, and tradable Renewable
Energy Certificates (REC).
As a result, installed power generation capacity
from renewable energy sources expanded to
more than 30 GW of grid-connected instal-
lations and 1 GW of off-grid installations in
2014, among which the installed capacity from
solar power increased from 2 MW in 2002
to more than 2 GW in 2012.b
Manufacturing
of wind energy systems grew dramatically in
India, with Suzlon emerging as one of the big-
gest wind energy companies internationally.c
The improved investment and regulatory
environment in India provided Suzlon with
opportunities to expand its business to the
solar power sector in 2014.d
The market, and
demand, for renewable energy also increased
very quickly. For example, more than 70MW of
solar capacity have been accredited and 26MW
were registered under the tradable Renewable
Energy Certificates (REC) scheme.e
In addition,
renewable energy sources became more cost
competitive, with wind energy being almost at
grid parity with conventional energy.f
Notes:
a. International Partnership on Mitigation and MRV. 2014. “Developing Renewable Energy Targets and Supporting Strategies.” Available at: http://mitigationpartnership.net/gpa/
developing-renewable energy-targets-and-supporting-strategies
b. International Partnership on Mitigation and MRV. 2014.
c. International Partnership on Mitigation and MRV. 2014.
d. Chadha, Mridul. 2014. “India’s Largest Wind Energy Company Set To Enter Solar Power Sector.” Available at: http://cleantechnica.com/2014/12/19/suzlon-energy-india-
largest-wind-energy-company-solar/
e. International Partnership on Mitigation and MRV. 2014.
f. International Partnership on Mitigation and MRV. 2014.
Notes:
a. Ceres. 2015. “365 Companies and Investors Announce Support for EPA’s Clean Power Plan: Send letters to 29 Governors Urging ‘Timely’ Adoption of State Implementation
Plans.” Available at: http://www.ceres.org/press/press-releases/365-companies-and-investors-announce-support-for-epa2019s-clean-power-plan
12. 12 |
Box 9 | China Enhanced the Energy Efficiency of Industry through a Ten-Year National Program
Box 8 | A Ten-Year National Energy Plan Helped Vietnam Build Capacity for Sustainable Development
Between 2006 and 2015, China implemented
a national energy efficiency program that
was targeted at the top energy consuming
companies. These companies are required to
develop energy saving and conservation plans,
adopt energy estimation and management
systems, and report regularly on their energy
use.a
The program first targeted the top 1,000
enterprises, and achieved energy savings of
156 million tons of coal equivalent (tce) in
the first three-and-a-half years, and was later
expanded to the top 10,000 enterprises in
various sectors.b
With three years remaining,
more than 70 percent of the 250 million tce
energy saving target had been achieved by
2012.c
The government policy signal helped
remove institutional and technical barriers
for implementing low-carbon activities and
allowed these climate actions to yield a larger
return on investment. More companies were
motivated to internalize the targets and make
investments and operational decisions that
are more aligned with the future low-carbon
economy.d
Between 2006 and 2015, Vietnam imple-
mented its first comprehensive national energy
efficiency plan, the Vietnam Energy Efficiency
Program (VNEEP), to improve energy efficiency
and conservation across all sectors of the
country’s economy. The program achieved
energy savings of 3–5 percent between 2006
and 2010 and a further 5–8 percent between
2011 and 2015.
The ten-year program helped the country build
capacity for sustainable development.a
First,
as a number of workshops, trainings, and
exhibitions were offered to energy manage-
ment authorities and key enterprises, entities
enhanced their capacity to implement energy
efficiency and conservation activities.b
Second,
classes in schools and public campaigns were
launched to disseminate knowledge of energy
efficiency and conservation, raising public
awareness of sustainable development.c
Third, access to financial sources was
improved. Various financial facilities were
established to improve investment in activities
related to energy efficiency and conservation.
The program also helped attract funding from
international investors.d
Fourth, a uniform
policy, legal, and regulatory framework system
was established,e
enabling the long-term
transition to a low-carbon economy.
▪▪ LEVELING THE PLAYING FIELD: Clear and predictable
policy signals can level the playing field and increase
fairness during the transition to a low-carbon
economy. In the absence of policy signals, there are
situations in which taking carbon action may create
short-term competitive disadvantage because of
increased upfront costs. Therefore, it is critical to
establish long-term policy signals that incentivize
Notes:
a. International Partnership on Mitigation and MRV. 2015. “Implementation of Viet Nam’s comprehensive national energy efficiency program targeting all sectors of the
economy.” Available at: http://mitigationpartnership.net/gpa/implementing-national-energy-efficiency-programme
b. International Partnership on Mitigation and MRV. 2015.
c. International Partnership on Mitigation and MRV. 2015.
d. International Partnership on Mitigation and MRV. 2015.
e. International Partnership on Mitigation and MRV. 2015.
Notes:
a. International Partnership on Mitigation and MRV. 2015. “The Top-10,000 programme: a national energy conservation policy targeting the top energy-consuming
enterprises and entities.” Available at: http://mitigationpartnership.net/gpa/implementing-national-energy-efficiency-programme-0
b. International Partnership on Mitigation and MRV. 2015.
c. International Partnership on Mitigation and MRV. 2015.
d. International Partnership on Mitigation and MRV. 2015.
comparable actions across the economy or within
sectors to minimize negative impacts on business
competitiveness. It is also important to build a shared
measuring, reporting, and verification framework
that provides transparency and a means to evaluate
fairness.47
Leveling the playing field can be relevant
to international trade, energy subsidies, and sectoral
policies, among others.
13. WORKING PAPER | October 2015 | 13
Driving Transformative Change
▪▪ ENHANCING LEARNING WITHIN OR ACROSS SECTORS: If
well designed, the policies to implement long-term
goals should be accompanied by capacity building
programs to help scale up climate action plans. They
can include trainings (see Box 8) and remove barriers
for implementation (see Box 9). The long-term goal
can also galvanize initiatives and networks, such as
the We Mean Business Coalition, Climate and Clean
Air Coalition, and Business for Social Responsibility,48
to exchange best practices, share resources, and build
mutual support.49
In addition, a global accounting
and reporting framework will allow organizations not
only to manage those climate action initiatives against
internal climate targets but also to benchmark their
efforts against those of their competitors.50
IV. THE WAY FORWARD: PRIVATE
SECTOR LEADERSHIP
The private sector can play two primary roles in helping
facilitate the transition to a low-carbon economy in the
lead-up to the Paris Agreement.
First, the private sector should actively inform policymak-
ing by advocating to national governments in favor of
adopting short- and long-term climate signals in the Paris
Agreement. Active participation in the policymaking pro-
Box 10 | Businesses in Brazil Sought to Influence the
UN Conference on Sustainable Development
In 2012, more than 100 Brazilian organizations, including large
global companies, worked with Instituto Ethos to put together a
proposal to influence the negotiations of the UN Conference on
Sustainable Development (Rio+20). In doing so, they called for
participating countries to commit to “pricing carbon and the
creation of an internal carbon market,” because they saw the
benefits of a price on carbon.a
Notes:
a. UN Global Compact. 2013. “Guide for Responsible Corporate
Engagement in Climate Policy: A Caring for Climate Report.” Available at:
http://www.wri.org/sites/default/files/guide_for_responsible_corporate_
engagement_in_climate_policy.pdf
Box 11 | The Private Sector Played an Active Role in Program Design in Chile
Between 2012 and 2015, Chile implemented
a national carbon-management program
(PNGCa
) to help both public and private sector
entities calculate and monitor their GHG emis-
sions and identify mitigation and adaptation
opportunities. The program set a precedent for
the country by including consultations with
the private sector in many decisions related to
the initiative. Many significant Chilean firms
voluntarily measured and reported their carbon
footprint, driven by internal demands for
sustainability and efforts related to environ-
mental and corporate social responsibility.b
In
this context, the government initiated several
low-carbon programs, and recognized the need
to standardize the carbon footprint estimation
tools, monitoring protocols, and reporting
tools.c
During the process, stakeholders from
the private sector collaborated closely with
the Ministry of Environment in the design
of the program, for example, with regard to
institutional arrangements and the selection of
monitoring, reporting, and verification tools.d
The program was beneficial for businesses
because it provided clear timelines and incen-
tives, as well as management tools, which were
essential for those companies with voluntary
commitments to evaluate the risks and benefits
of taking climate action. This participatory
approach was well accepted among stakehold-
ers in the private sector, and the policy has
been able to create effective incentives for the
involvement of the private sector in the initia-
tive and more generally in policymaking for
low-carbon development.e
Notes:
a. Programa Nacional de Gestión del Carbono
b. International Partnership on Mitigation and MRV. 2015. “Development of the national carbon management programme (Programa Nacional de Gestión del Carbono) for
the estimation of GHG emissions, monitoring of carbon footprints and identification of mitigation opportunities by public and private sector entities.” Available at: http://
mitigationpartnership.net/gpa/developing-public-private-carbon-management-programme
c. International Partnership on Mitigation and MRV. 2015.
d. International Partnership on Mitigation and MRV. 2015.
e. International Partnership on Mitigation and MRV. 2015.
cess can demonstrate to governments the strong support
of their business constituencies and can allow companies
to have some control over the outcome. Companies can
identify opportunities to engage and influence policy. They
can consider the implications of policy options, align their
positions with their actions on climate change, and report
on corporate policy positions, influences, and outcomes.51
See Box 10, 11, and 12 for examples of how businesses have
14. 14 |
engaged in various policymaking processes. Companies
that have made low-carbon goods and services a business
priority have a particular interest in seeing that the energy
transition is mandated by governments around the world,
because it will stimulate their markets and give them an
edge over less well-prepared competitors.
Second, the private sector should adopt short- and long-
term internal targets, consistent with the climate science,
that lead to a phase out of GHG emissions. See Box 13 for
more information on science-based targets.
Box 12 | EU Businesses Get Involved
in Climate Policy
The Prince of Wales’ Corporate Leaders Group on Climate Change
brings European and multinational companies together to “communicate
the support of businesses for the EU to move to a low-carbon
society…” The group makes public comments on climate policy and
has urged decision makers to take action. It has also engaged with other
industry groups in informing policymaking on climate change and
seizing opportunities that are important to their businesses.a
Notes:
a. UN Global Compact. 2013. “Guide for Responsible Corporate Engagement in
Climate Policy: A Caring for Climate Report.” Available at: http://www.wri.org/sites/
default/files/guide_for_responsible_corporate_engagement_in_climate_policy.pdf
Adopting internal targets brings significant benefits to the
private sector. Internal targets can:
▪▪ LEAD TO SIGNIFICANT EMISSIONS REDUCTIONS. According
to the 3% Solution analysis conducted by WWF/CDP/
McKinsey, companies with ambitious GHG reduction
targets deliver larger emissions reductions with higher
financial returns than companies without such targets. 52
▪▪ BOOST FINANCIAL RETURNS ON INVESTMENT. The
financial returns from climate action have expanded,
especially because renewable-energy sources have
become more cost-competitive with traditional
energy resources, creating considerable profits for
investors.53
Currently, the returns on low-carbon
investments (for example, those that reduce GHG
emissions) are now, on average, larger than those on
overall capital expenditures. This was found to be the
case for 79 percent of U.S. companies in the SP 500
that report to the Carbon Disclosure Project (CDP).54
In the longer term, experience gained in taking
climate action, in terms of production processes,
technologies, and knowledge, can be applied to future
projects and drive up financial profits.55
Moreover,
CDP found that companies with internal emissions
reduction targets are achieving a better financial
return on low-carbon investment relative to their
peers.56
The 3% Solution Analysis identified a similar
trend, finding that companies with internal targets
Box 13 | The Objectives of the Science-Based Targets Initiative
Science-Based Targets is a joint initiative
co-launched by the Carbon Disclosure Project
(CDP), the UN Global Compact, the World
Resources Institute (WRI), and World Wildlife
Fund (WWF). The purpose is to incentivize
companies to increase the level of ambition
on climate actions, to adopt “science-based
targets,” that is, targets that are aligned with a
level of decarbonization consistent with limit-
ing warming to below 2°C compared to pre-
industrial temperatures, and to act as a positive
influence in the Paris negotiations.a
Under the initiative, a new GHG emissions
reduction target setting methodology and tool
were developed—the Sectoral Decarboniza-
tion Approach (SDA) and the related SDA
Calculation Tool and Target-Setting Manual—
which help companies design, evaluate, and
implement science-based emissions reduction
targets.b
To galvanize the adoption of science-
based targets, the initiative recently released
the Mind the Science Report, highlighting the
rationale of science-based targets, and began
design of an online Climate Data Explorer
(CAIT) Business Target Tracker that allows
companies to track the processes toward
science-based reduction levels.c
Other ongo-
ing activities such as the “Call to Action and
Corporate Engagement” are also designed to
facilitate companies’ action on climate change.
See more information on
http://sciencebasedtargets.org/
Notes:
a. Science Based Targets. 2015. “Science Based Targets Initiative.” Available at: http://sciencebasedtargets.org/wp-content/uploads/2015/05/Science-Based-Targets-initiative-
overview.pdf
b. Science Based Targets. 2015
c. Science Based Targets. 2015
15. WORKING PAPER | October 2015 | 15
Driving Transformative Change
Box 14 | Marks Spencer’s Climate Actions Contributed to Staff Motivation and Brand Enhancement
Marks Spencer (MS), a major UK retailer,
implemented a five-year climate-action plan
called “Plan A” between 2007 and 2012. The
plan aimed to achieve carbon neutrality, zero
landfill waste, and sustainable sourcing of
products.a
After reaching its major pledge of
becoming carbon neutral in all its UK stores,
the company introduced 100 new commit-
ments in Plan A 2020.b
The upfront costs of
Plan A were paid back in two years, as the
company increased savings through initia-
tives on climate change and waste reduction.
According to MS’s business case study
on Plan A, this initiative contributed to staff
motivation and brand enhancement.c
In inter-
views and surveys conducted internally, Plan
A was often listed as one critical reason why
candidates wanted to join MS; it was also
cited as a significant contributor to employee
satisfaction.d
In addition, Plan A differenti-
ated MS from other retailers, attracted more
customers into the company’s stores,e
and
demonstrated the accountability of MS to its
stakeholders.f
The company also received posi-
tive media coverage of its efforts to improve
sustainability. The company suggests that Plan
A may been a key boost for the MS brand and
awards have supported this idea.g,h
Notes:
a. Ernst Young. 2010. “The Business Response to Climate Change: Choosing the Right Path.” Available at: https://www2.eycom.ch/publications/items/other/2010_cc_right_
path/201004_EY_Business_Response_CC_right_path.pdf
b. Marks and Spencer. “About Plan A.” Available at: http://corporate.marksandspencer.com/plan-a/our-stories/about-plan-a
c. Marks and Spencer. 2012. “The Key Lessons From the Plan A Business Case.” Available at: http://corporate.marksandspencer.com/documents/plan-a-our-approach/key-
lessons-from-the-plana-business-case-september2012.pdf
d. Marks and Spencer. 2012.
e. Ernst Young. 2010
f. Marks and Spencer. 2012.
g. 2012 Interbrand Best Retail Brand–MS placed 2nd in the UK (Plan A highlighted as a driver); Goodbrand 2011 Social Equity Index–MS placed 3rd and top for the UK;
WPP Top Green Brands Index 2011–MS placed fourth; Kelkoo UK Best Brand Survey 2011–MS placed third and top for Trust and Environment; Havas Media Meaningful
Brands–MS top UK retailer
h. Marks and Spencer. 2012.
secured nine percentage points higher on overall
return on investment than their peers without
targets.57
Because ambitious targets do not guarantee
immediate returns, leveling the playing field through
the adoption of strong climate policies, as described
above, is essential to fairness.
▪▪ MANAGE STAKEHOLDER RISKS AND ESTABLISH GOOD
CORPORATE IMAGE. Currently, levels of environmental
and climate change awareness are higher than
ever before.58
A McKinsey study observed that 87
percent of global consumers are concerned about the
environmental and social impacts of products they
buy. For a company, lack of an internal emissions
reduction target may undermine its financial access,
generate negative publicity, and increase employee
dissatisfaction with the company’s development
strategy.59
In contrast, setting targets means being
more accountable, enabling differentiation from
competitors. Companies can improve their brand
image by proactively marketing their climate change
strategies.60
In addition, the adoption of targets and
disclosure of how companies manage climate risks
can provide confidence to investors, consumers, and
other stakeholders.61
See Box 14 for an example of how
Marks Spencer’s climate actions contributed to staff
motivation and brand enhancement.
▪▪ REDUCE FUTURE OPERATIONAL, COMPLIANCE, OR
REGULATORY COST. If sufficient information is gathered
in the process of setting targets, companies can
better understand the impacts of climate change and
embed climate scenarios into investment decisions
to reduce future costs.62
Adopting ambitious climate
goals, including improving energy efficiencies or
switching fuel sources, can lower future compliance
or regulatory costs63
and, at the same time, help
companies take full advantage of tax incentives,
subsidies, or stimulus funding.64
In addition, because
every year of delay will escalate the cost of addressing
climate change, taking early action is a good way to
reduce future costs.65
16. 16 |
▪▪ HELP IDENTIFY OPPORTUNITIES TO MAKE SMART, COST-
EFFECTIVE BUSINESS DECISIONS. Compared to the
competition, the services or products of companies
that have taken early climate actions aligned with
the future low-carbon economy are more adapted
to, and competitive in, the new low-carbon business
environment. In the long term, these companies can
maintain or generate competitive advantage over
their peers.66
Goldman Sachs predicts that as much
Sprint, a wireless communication company,
set and exceeded its GHG reduction goal of
20 percent between 2007 and 2017, achieving
a reduction of 29 percent by 2013.a
The
company increased its energy efficiency by
using the Building Automation Systems (BAS)
to monitor heating and cooling activities,
thereby lowering energy costs, reducing HVAC
and lighting maintenance costs, and increasing
worker productivity.b
With an internal goal, the company became
more innovative in finding attractive business
opportunities and maintaining competitiveness
among peers. By replacing multiple networks
with a single more energy efficient network, the
company achieved greater energy efficiencies
and also enhanced the service and capacity of
its network.c
In addition, Sprint also expanded
the deployment of hydrogen fuel cells, which
helped the company keep emissions low and at
the same time significantly improve its network
resilience with longer back-up power.d
DuPont, a global science and technology
company, was one of the first companies
to establish a voluntary carbon emissions
reduction goal. The company has set a number
of emissions reduction goals and has managed
to exceed targets ahead of schedule. Between
1994 and 2000, the company set and achieved
a 40 percent reduction goal. It revised the goal
to achieve a 65 percent reduction by 2010, and
then surpassed that target in 2003.a
For DuPont, setting climate goals delivered
major energy and cost savings. Since 1990,
the company has saved over $6 billion
in cumulative energy purchases.b
Most
importantly, the company differentiated its
businesses by embedding sustainability
thinking into RD and product development,c
which created profitable products and services
for the company. For example, DuPont™
Tyvek® HomeWrap® provides energy-saving
insulation, enabling a reduction of energy use
in buildings; DuPont™ Solamet®, Tedlar®
and Elvax® produce essential materials for PV
solar panels, allowing consumers to convert
sunlight directly into electricity.d
Notes:
a. U.S. Environmental Protection Agency. 2015. “Sprint Recognized as EPA’s 2015 Climate Leader for Excellence in Greenhouse Gas Management. ” Available at: http://yosemite.
epa.gov/opa/admpress.nsf/0/5B0EA469685831E285257DF7005F5683
b. U.S. Environmental Protection Agency. 2015.
c. WWF. 2013. “Climate Savers Factsheet: Driving Climate Protection Through the Network and Beyond.” Available at: http://climatesavers.org/wp-content/uploads/2015/01/
SPRINT_-Factsheet_APPROVAL_0021.pdf
d. Goodman, Ann. 2014. “For Sprint, Communication is Core to Climate Resilience.” GreenBiz News. Available at: http://www.greenbiz.com/blog/2014/10/23/sprint-climate-
resilience-networks
Notes:
a. CDP and World Wildlife Fund. 2013. “The 3% Solution: Driving Profits Through Carbon Reduction.” Available at: https://c402277.ssl.cf1.rackcdn.com/publications/575/files/
original/The_3_Percent_Solution_-_June_10.pdf?1371151781
b. CDP and World Wildlife Fund. 2013.
c. CDP and World Wildlife Fund. 2013.
d. DuPont Media Center. 2006. “Ceres Report Ranks DuPont #1 in U.S., #2 Globally on Climate Change.” Available at: http://www2.dupont.com/Media_Center/en_US/news_
releases/2006/article20060321c.html
Box 15 | Sprint Identified Profitable Business Opportunities by Adopting a Climate Target
Box 16 | Dupont’s Climate Target Paved the Way for RD and Product Development
as 15 percent of total cash flow may transfer from
the least carbon-efficient organizations to the most.
The transfer is even greater in the most carbon-
intensive industries, where as much as 60 percent of
cash flow may switch hands from the least carbon-
efficient organizations to the most.67
See Boxes 16 and
17 for examples of companies that found business
opportunities by adopting emissions reduction targets.
17. WORKING PAPER | October 2015 | 17
Driving Transformative Change
CONCLUSION
It is not every year—or even every decade—that there
exists a political opening to secure the right short- and
long-term signals that will help us achieve the transition
to a low-carbon future in a manner that is equitable, and
involves the least cost and the least disruption possible.
The upcoming decisions at the Paris negotiations present
an opportunity to put our global community on the
right path, providing appropriate short-term signals
for investors and innovators as well as a strong long-
term signal that guides the phase out of greenhouse gas
pollution.
It is now well established that the private sector’s response
to climate change will define its performance in the
future.68
There are numerous benefits to acting now. And
there are many risks involved in adopting a “wait and see”
attitude to future governmental actions and their possible
consequences. The longer we delay emissions reductions,
the more difficult and expensive it will be to limit global
warming.
Companies around the world can reap the benefits of a
low-carbon future by (1) advocating for strong short- and
long-term signals to be adopted in the Paris Agreement,
as well as (2) adopting ambitious internal climate targets
consistent with climate science. The private sector can
play a critical role in defining our global emissions
trajectory and determining whether we embrace a
steady transformation that avoids the worst impacts of a
changing climate.
18. 18 |
ANNEX I: FEASIBILITY
Various scenarios have been developed to model the trans-
formation to a low-carbon society. Some of them achieve
zero net GHG emissions, and demonstrate the changes
that would be required at a sectoral basis. Below, we pro-
vide a brief summary of the feasibility of, and options for,
driving sectoral emissions pathways that are consistent
with deep transformation. Studies make it clear that, while
technically feasible, transformation in each sector will
occur only with guidance from short- and long-term policy
signals, as described below.
It should be noted that the studies’ assessments of neces-
sary emissions reductions in each sector depend on the
emissions trajectories modeled, including the timing of
emissions reductions and whether emissions are phased
out completely. They also depend on reductions realized in
other sectors; most modeling studies are able to determine
the necessary reductions in each sector based on what a
cost-effective allocation of emissions reductions would be
across all sectors. They also differ in their technological
assumptions.69
It is beyond the scope of this paper to pro-
vide an overview of all differing assumptions of modeling
studies; instead we describe the pathways for decarboniza-
tion in each sector.
Energy Supply
The greatest potential for emissions reductions lies in
the energy system.70
There are several key opportunities
for reducing emissions in the sector, such as increasing
renewable energy and nuclear power, energy efficiency
gains, and deployment of carbon capture and storage
(CCS).71
Different combinations of such mitigation opportuni-
ties lead to different emissions reductions pathways.
For example, according to one study by Höhne et al., it
is possible to phase out GHG emissions by mid-century
in one of two ways. Scenarios assume either 100 percent
renewable energy by 2050, coupled with efficiency gains;
or they assume that renewable energy can be increased
to a very high share, but not quite 100 percent, while CCS
is deployed at a large scale.72
The Deep Decarbonization
Pathways study’s models were able to achieve 85 percent
reductions in emissions below 2010 levels by 2050 in the
energy supply sector.73
The New Climate Economy report
found that significant mitigation is possible in the energy
sector through the elimination of fossil fuel subsidies
and establishment of a carbon price through taxes.74
The
IPCC’s mitigation scenarios find that for an emissions
pathway that is consistent with a likely chance of limiting
warming to 2°C, the share of low-carbon electricity supply
can be increased to 80 percent by 2050 (from 30 percent
today) and fossil fuel power generation without CCS can
be phased out almost entirely by the end of the century.75
Constraints facing renewables are related less to their
technical potential and more to costs, and demands for
electricity and system integration—challenges that vary
by location, sector, and technology.76
However, the cost of
most renewable energy technologies has already declined
and further cost reductions are expected with anticipated
technical advances.77
While studies show that it is possible to achieve the neces-
sary scale of change, short- and long-term signals will be
essential for any of these transitions. Replacing fossil fuel
power generation requires time. Most power plants have a
lifetime of around three decades.78
A high share of renew-
ables will require investments in storage systems.79
Many
renewable energy technologies also require direct sup-
port, such as feed-in tariffs or renewable energy quotas,
or indirect support, such as through carbon prices, if their
shares are to increase.80
The longer we delay, the more we
risk carbon lock-in in our current systems, larger scale and
more costly retrofits, ever greater reliance on advancing all
technologies at greater scales (including CCS and nuclear),
and overall higher costs.81
Transport
Given current trends in demand for travel, and in the
absence of policy interventions, transport-related emis-
sions could more than double by 2050 and more than
triple by 2100.82
However, there are significant oppor-
tunities to reduce emissions in the transportation sec-
tor consistent with phasing out emissions and limiting
warming to 2°C. Opportunities include the transition
to low-carbon fuels, more efficient vehicles and engine
performance, modal shifts, and avoided journeys, among
others.83
The IPCC notes that technical potential exists
right now to substantially reduce emissions per passenger
or per tonne kilometer of freight for all modes of transport
by 2030 and beyond.84
By 2100, hydrogen and electric-
ity could amount to almost a quarter of the share of final
energy use in the sector.85
Energy efficiency measures have
the largest potential for emissions reductions in the short
term; reductions can be achieved through an increase in
energy efficiency and performance of 30–50 percent in
2030 with respect to 2010 levels. Modal shifts have the
19. WORKING PAPER | October 2015 | 19
Driving Transformative Change
potential to reduce GHG intensity by 20–50 percent in
2050 compared to 2010 levels.86
However, the IPCC notes how difficult it will be to reduce
transport-related emissions given the growth in passenger
and freight activity, which could counteract progress from
mitigation achieved through efficiency gains.87
Short- and
long-term policy and regulatory signals will be essential.
For example, they are necessary for avoiding future lock-
in, given the slow turnover of vehicle stock and infrastruc-
ture and expanding urban sprawl, and for making prog-
ress in the face of increased growth in demand.88
Realizing
energy efficiency potential will depend on significant
investments by vehicle manufacturers, which will, in turn,
require catalyzing incentives and policies.89
It also takes
time to change the behavior of consumers, which will be
a necessary element of any modal shifts. The IPCC notes
that private sector initiatives to decarbonize freight trans-
port have started but also need support from policies.
There are other examples of policies working to cata-
lyze transformation, such as fuel economy standards
that encourage demand for more efficient vehicles, and
modal choices enabling a shift to low-carbon modes.90
Given rebound effects that can reduce the CO2
benefits
of efficiency improvements, a basket of policies can help
stabilize price signals and avoid unintended outcomes.
Industry
Several opportunities exist for mitigation in the industry
sector. Höhne et al. find that phasing out GHG emis-
sions by mid-century can be achieved through: boosting
material efficiency, more than doubling energy efficiency,
fuel switching away from fossil fuels, carbon capture and
storage, and phasing out of HFCs.91
The IPCC agrees that a
multi-prong strategy is required for reducing emissions in
the sector; while energy efficiency improvements are not
sufficient to achieve a full transformation, additional inter-
ventions can assist in reducing emissions (for example,
material use efficiency, emissions efficiency (via CCS and
fuel-switching), recycling/re-use of materials and prod-
ucts, product-service efficiency, and demand reductions).92
Under the Deep Decarbonization Pathways Project
scenario, a fully decarbonized electricity supply alone does
not get heavy industry onto the phase out pathway,93
but
electrification can help achieve lower carbon intensities.
To bring industrial emissions to a level consistent with a
likely chance of limiting warming to 2°C, the IPCC notes
that the sector’s final energy demand decreases by roughly
20 percent in 2030 and by 30 percent in 2050 from the
baseline scenarios in those respective years, and the share
of low-carbon energy in final energy supply increases by
above 35 percent in 2030 and 50 percent in 2050 from the
baseline scenario.94
The energy intensity of industry can be reduced by 25
percent compared to today’s levels through deployment
of best available technologies and upgrading and replace-
ment of outdated equipment. However, more would have
to be done. According to Höhne et al., no technological
options exist for about 15 percent of industrial energy
use, and therefore innovation programs would have to be
developed.95
According to the IPCC, an additional reduc-
tion of about 20 percent in energy intensity can be realized
through innovation.96
As with the sectors discussed previously, significant
investments will be required in industry to avoid the use of
less efficient higher emissions technologies, especially in
developing countries where there are significant opportu-
nities to leapfrog. Short- and long-term policy signals are
necessary for driving such investments. But there are sig-
nificant co-benefits to mitigation in the sector, including
profits resulting from efficiency increases, new business
opportunities, and reductions in water and air pollution,
and waste.97
Buildings
Many opportunities exist in the building sector to reduce
emissions, including increasing energy efficiency through
low-energy building codes, building retrofits, and appli-
ance labeling.98
As with the industry and transport sectors,
as buildings become more efficient in their final energy
consumption (for example, through reducing heating/
cooling needs) and use more low-carbon energy on site,
the impacts of greening of the electricity supply on GHG
emissions reduction can be amplified in the sector.
To be consistent with a likely chance of limiting warming
to 2°C, and phase out emissions in the long term, the IPCC
model assumes that the building sector reduces its final
energy demand relative to the baseline by approximately
17 percent in 2030 and by 27 percent in 2050. The sector
increases the share of low-carbon energy in its final energy
supply to over 35 percent in 2030 and close to 55 percent
in 2050.99
Höhne et al. note that, to achieve a phase out
of net greenhouse gas emissions by mid-century, all new
buildings have net zero or net negative emissions as soon
as possible;100
all electric appliances and lighting are at
20. 20 |
least as efficient as those that are currently best in class;
and efficient stoves are used to reduce the use of tradi-
tional biomass to zero.101
However, as a result of technologies, know-how, and poli-
cies in the sector, it is feasible for the sector’s final energy
use to stabilize or even decline by mid-century.102
Regula-
tory instruments such as building and appliance energy-
performance standards, as well as public procurement
policies, have proven cost-effective.103
Reductions in the sector can be highly dependent on
adequate short- and long-term policy signals, and their
absence can also lock in carbon-intensive trajectories in
the sector. Buildings and related infrastructure have long
lifespans. The IPCC notes, for example, that the large
majority of buildings that will exist in 2050 in developed
countries already exist. However, high performance retro-
fits in such buildings have great mitigation potential. Sig-
nificant investments will be made in the future to improve
access to and fulfill building energy demand, including the
provision of modern energy services and adequate hous-
ing. The new construction that is occurring all over the
world, and especially in developing countries, should be
viewed as an opportunity to advance best-practice tech-
nologies rather than a risk that we will continue to lock in
a high emissions trajectory.104
Also, lifestyle and behav-
ioral changes can reduce energy demand significantly—in
developed countries by up to 20 percent in the short-term
and by up to 50 percent by mid-century compared with
present levels—but this is not easy. Policy and regulatory
signals can help foster such behavioral changes, and help
encourage leapfrogging of inefficient practices in develop-
ing countries.105
The embrace of such signals can pay off. Past experi-
ence with efficiency gains, through building codes and
targets, voluntary construction standards, and appliance
standards, has demonstrated that performance and cost
improvements can follow. A quarter to a third of energy-
efficiency improvements have been achieved in a cost-
effective way.106
Additional benefits can follow, including
energy security, health and environmental improvements
thanks to reduced air pollution, alleviation of fuel poverty,
and reduced energy expenditures, among others.107
Agriculture, forestry, and other land use (AFOLU)
There are two baskets of interventions for reducing
emissions in the agriculture, forestry, and other land use
(AFOLU) sector. First are supply-side measures, includ-
ing sustainable forest management, reduced deforesta-
tion, afforestation, land and livestock management, and
increasing carbon stocks. Demand-side measures, on the
other hand, target demand for products, such as reducing
waste in the food supply chain, and dietary changes.108
The sector’s net annual baseline CO2
emissions are pro-
jected to decline over time, with net emissions potentially
less than half of 2010 levels by mid-century; the sector
could possibly be a net sink by 2100.109
There is significant
potential for the sector, with a mitigation of 7.18–10.6
GtCO2
e/yr in 2030 achievable from supply-side measures
alone.110
Among the most cost-effective policies, which
could account for a significant portion of the sector’s
abatement potential, are measures to reduce emissions
from deforestation and forest degradation (REDD+).111
Höhne et al. estimate that, if deforestation were brought to
zero, it would reduce GHG emissions by 3 GtCO2
annu-
ally. Avoiding tropical forest land-use change and forest
degradation could lead to an additional reduction of 2.3
GtCO2
.112
Restoring only 12 percent of degraded land
could lead to 1–3 GtCO2
e of reductions per year, as well
as enhance smallholders’ incomes by US$35–40 billion
annually and feed 200 million people per year within 15
years.113
Once again, both short- and long-term signals are critical
for the full realization of the sector’s mitigation potential.
The barriers to mitigation are largely institutional,
including lack of tenure and poor governance. They are
also related to access to financing, availability of land and
water, and poverty.114
These barriers take time to address,
as well as steady commitments from the public and private
sectors. Without signals that guide policymaking and
private sector investments, these barriers may not be fully
overcome.
21. WORKING PAPER | October 2015 | 21
Driving Transformative Change
Table A.1 | Timing of Availability of Improved Low-Carbon
Technologies for Deployment at Scale (Assumed in DDPP)
SECTOR TECHNOLOGY
STARTING DATE OF
DEPLOYMENT AT SCALE
Power
CCS (coal and gas)
Advanced geothermal
Advanced energy storage
IV gen nuclear
2025–2030
2025–2030
2030–2035
2035–2040
Transport
Global availability of long range EVs across all vehicle types
Second generation biofuels
Hydrogen fuel cells
2020–2025
2020–2025
2030–2035
Industry
CCS in industry (close to pure CO2
streams)
Electric boilers and process heaters
2020–2025
2020–2025
Source: Sustainable Development Solutions Network (SDSN) and Institute for Sustainable Development and International Relations (IDDRI). 2014. “Pathways to Deep Decarbonization.”
Available at: http://www.iddri.org/Publications/Rapports-and-briefing-papers/DDPP_interim_2014_report.pdf
Research and Development
While there are many opportunities for immediate deploy-
ment of sectoral measures, at the same time it will be
necessary to increase research and development into new
technologies for deployment at scale later. For example,
the Deep Decarbonization Pathway Project (DDPP)
assumes that the world invests in development and early
deployment of technologies that are not yet economically
viable.115
Table A.1 illustrates assumptions in the DDPP
model regarding the timing of availability of improved
low-carbon technologies for deployment at scale.116
Long-
term goals assist in guiding the focus of research and
development. For example, in Germany, it is clear that
breakthroughs are needed in renewable technologies in
order to meet the long-term goal of 80 percent emissions
reductions by 2050. Without the guidance provided by
long-term goals, it is very likely that research budgets will
focus on technologies that are incremental in their effect,
rather than transformational.
However, the deployment of such technologies will not
happen on its own; it requires both market demand
and public policy to correct market failures and support
research and development.117
22. 22 |
ENDNOTES
1. Ernst Young. 2010. “The Business Response to Climate Change:
Choosing the Right Path.” Available at: https://www2.eycom.ch/
publications/items/other/2010_cc_right_path/201004_EY_Business_
Response_CC_right_path.pdf
2. Ernst Young. 2010.
3. Bianco, N. et al. 2014.”Seeing is Believing: Creating a New Climate
Economy in the United States.” The New Climate Economy-The Global
Commission on the Economy and Climate. (Online Journal). Available
at: http://www.wri.org/sites/default/files/seeingisbelieving_working_
paper.pdf
4. New Climate Economy. 2014. “Better Growth, Better Climate: The
New Climate Economy Report.” The Global Report, Chapter 3. The
New Climate Economy-The Global Commission on the Economy and
Climate. Available at: http://2014.newclimateeconomy.report/wp-
content/uploads/2014/08/NCE-Global-Report_web.pdf
5. New Climate Economy. 2014.
6. New Climate Economy. 2014.
7. National Center for Environmental Information. 2015. “Billion-Dollar
Weather and Climate Disasters: Table of Events.” National Oceanic and
Atmospheric Administration. Available at: http://www.ncdc.noaa.gov/
billions/events
8. Wong, P.P. et al. 2014. “Coastal systems and low-lying areas. In:
Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A:
Global and Sectoral Aspects. Contribution of Working Group II to the
Fifth Assessment Report of the Intergovernmental Panel on Climate
Change.” Cambridge and New York: Cambridge University Press:
361–409. Available at: http://www.ipcc.ch/pdf/assessment-report/ar5/
wg2/WGIIAR5-Chap5_FINAL.pdf
9. Porter, J.R. et al. 2014. “Food Security and Food Production Systems.
In: Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part
A: Global and Sectoral Aspects. Contribution of Working Group II to
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