sustainable investment
Sustainability watch: global carbon pricing, biofuels adoption, and American Climate Corps
Our selection of sustainability news from September includes news of “the beginning of the end” for fossil fuel dominance, a proposal to set up global carbon pricing, and legally binding targets to expand renewable energy faster.
The International Energy Agency projected that the world is at “the beginning of the end” of the fossil fuel era, and that demand for oil, natural gas and coal will all peak before 2030. The European Commission president asked G20 leaders to join a proposal to set up global carbon pricing. Meanwhile, the European Parliament agreed to significantly raise the EU’s renewable energy targets, requiring 42.5% of EU energy to be renewable by 2030.
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G20 leaders failed to set a timeline for the end of fossil fuel use without the emissions captured. The 20 countries account for about 80% of global greenhouse gas emissions failed to include any reference to the phase out of oil and gas, despite the burning of fossil fuels being the biggest contributor to human-induced global warming. Representatives committed only to a “phasedown” of coal in line with national circumstances and avoided reference to phasing out all polluting fuels. The action is deemed “indispensable” by the United Nations in the most recent assessment of the efforts of almost 200 countries to reduce their greenhouse gas emissions. Attention will now turn to whether countries can agree a phase out of all fossil fuels at COP28.
The International Energy Agency (IEA) forecast that demand for oil, natural gas and coal will all peak before 2030. Consumption is expected to decline this decade because of the rapid growth of renewable energy and the spread of electric vehicles. Governments across the world have increased investments in renewables in response to climate change and the energy crisis stoked by Russia’s full-scale invasion of Ukraine, but many have faced a backlash over the expense during a cost of living crisis.
US President Biden unveiled a new program on that will put young people to work staving off the climate crisis, meeting a longstanding demand of many environmental activists. Modelled on the New Deal-era Civilian Conservation Corps, the new American Climate Corps will recruit more than 20,000 people in its first year to conserve and restore lands and waters, build out clean energy and strengthen community resilience.
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Thematic link: The transition to a low-carbon and climate-resilient economy will require innovation, commitment and significant investment. Click here to find out more. |
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The European Commission president asked G20 leaders to join a proposal to set up global carbon pricing. Many countries are using a price on carbon to help meet their climate goals in the form of a tax or under an emissions trading (ETS), or cap-and-trade, system. According to a World Bank report, there are currently 73 carbon pricing instruments in operation, covering around 23% of global greenhouse gas emissions.
Carbon credit streaming company Carbon Streaming announced an agreement with Microsoft, providing the tech giant with up to 10,000 tonnes of carbon dioxide removal credits per year from the Waverly Biochar project. Biochar, or biological charcoal, is produced by heating biomass, such as forest residue, wood or crop waste, in the absence of oxygen, creating a stable form of carbon, which when buried in soil enables centuries-long carbon sequestration, in addition to leading to improved soil fertility. The Waverly Biochar project, under development by Restoration Bioproducts LLC, involves the construction of a biochar production facility, and is expected to remove over 262,000 tCO2e of emissions over its 25-year project life.
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Thematic link: Carbon pricing is a key enabler of the transition to a CLIC® economy. We believe an active carbon strategy can help investors capture attractive return opportunities while hedging transition risks in their portfolios. Click here for more information. |
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The United Arab Emirates (UAE) has committed USD 4.5 bn to significantly scale up renewable energy development in Africa to 15 GW by 2030. The initiative is the first of its kind between the UAE and Africa and seeks to unlock Africa’s capacity for sustainable prosperity. The projects will focus on solar, wind, and hydro power. They will also support the development of transmission and distribution infrastructure, as well as the training of African engineers and technicians.
The European Parliament gave its final approval to legally binding targets to expand renewable energy faster this decade, a central part of Europe’s plans to curb climate change and shift away from fossil fuels. The law significantly raises the EU’s renewable energy targets, requiring 42.5% of EU energy to be renewable by 2030. The share of renewables in the EU’s energy mix currently stand at 22.1%, according to EU statistics, which means roughly doubling that share by 2030 – mainly with additional wind and solar capacity. The revised directive also adds renewable energy targets for buildings and seeks faster permitting processes for wind and solar projects with the introduction of dedicated acceleration areas for renewables.
Colgate-Palmolive announced that it has signed a 20-year virtual power purchase agreement (VPPA) with the developers of a planned solar energy farm outside of Waco, Texas. The solar farm is expected to produce the equivalent of 100% of the company’s U.S. based operational electrical requirements. The planned 209-megawatt Markum Solar Farm is expected to generate enough clean energy for the ERCOT grid to power approximately 32,200 homes. Scout intends to begin construction of the solar farm by fall of 2023 with completion by the end of 2024. Through the VPPA, Colgate will garner clean energy credits that will propel the company closer to its carbon emissions goals of reaching net zero by 2040.
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Thematic link: Click here to find out more about the sectors that are well-placed for the renewables transition, as well as the growing investment opportunities arising from climate adaptation. |
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The US announced a financing package of more than USD 15 bn aimed at supporting the transition to electric vehicles, including USD 10 bn in loans and USD 2 bn in grants to help automotive manufacturers convert factories to produce electric vehicles (EVs). Key criteria for applicants to the new program include the retention of jobs, wages and benefits at the manufacturing facilities, and projects supporting the administration’s initiatives to direct investments to disadvantaged communities. Applicants that currently pay top quartile wages in their industry and non-wage compensation benefits will be prioritised.
India launched a global alliance for promoting biofuels adoption at the Group of 20 leaders meeting in New Delhi, aimed at reducing emissions in the transportation and industrial sectors. The Global Biofuel Alliance, which include top producers Brazil and the US, has been one of India’s key priorities for the G20 presidency. This is the second major global initiative on green energy pioneered by the country after the launch of International Solar Alliance in 2015 and is expected to boost Prime Minister Modi’s credentials as global climate leader.
The EU has announced an anti-subsidy probe into China’s electric car industry in an attempt to shield European manufacturers before they are priced out by Chinese rivals. While imports of Chinese electric vehicles represent only a small share of the bloc’s market, they are growing fast and could hit 15 % within two years — in a repeat of what the EU experienced with solar panels more than a decade ago. The EU is banning the sale of new combustion engine cars from 2035 to cut carbon emissions and fears their electric replacements will be made in China, not Europe.
United Airlines announced that it has signed an offtake agreement with decarbonisation-focused industrial biotech company Cemvita for up to 1 billion gallons of sustainable aviation fuel (SAF) made from CO2. Under the new agreement, Cemvita will provide United with up to 50 million gallons of the CO2-based SAF annually over 20 years. Sustainable aviation fuel is seen as one of the key tools to help decarbonize the aviation industry, which currently accounts for 2-3% of global greenhouse gas (GHG) emissions. SAF is generally produced from sustainable resources, like waste oils and agricultural residues, providing substantial emissions reductions relative to current fossil-based jet fuels.
UK prime minister Rishi Sunak announced a delay a ban on the sale of new petrol and diesel cars by five years to 2035, prompting a backlash from the UK automotive industry, which warned it would undermine investment certainty. The sudden shift in green policy will complicate plans to boost EV sales in the country this decade. Leading car brands such as Ford, Vauxhall and Volvo Cars have pledged to go fully electric this decade and had made manufacturing decisions with the 2030 ban in mind. Sunak’s policy pivot came as the industry was preparing for new rules, which were due to come into force in January and require the UK’s car industry to sell a certain proportion of electric vehicles from next year.
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Thematic link: To find out more about the challenges and opportunities presented by the transport revolution, click here. |
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Indonesia and Brazil led over a dozen countries in seeking a voice in the European Union’s implementation of the bloc’s anti-deforestation law. In a joint letter, 17 countries asked for the bloc to involve commodity-producing nations when drafting the implementing rules. The countries also urged the EU to avoid worsening trade disruptions and administrative burden including from requirements for traceability.
The European Commission said that financial institutions are not backing the EU's new deforestation law, which has faced a backlash from producing countries concerned it will create unfair trade barriers. The landmark law requires importers of commodities like coffee, cocoa, beef, soy, rubber and palm oil to produce a due diligence statement proving their goods are not contributing to the destruction of forests, or risk hefty fines. Deforestation is responsible for about 10% of global greenhouse gas emissions that drive climate change, and the law, which comes into effect at end-2024, aims to tackle the European Union's contribution.
The US announced the largest investment in 30 years in recycling. The Environmental Protection Agency (EPA) said it would put more than USD 100 million toward recycling, saying the effort is funded by the Bipartisan Infrastructure Law. A total of USD 73 million will go to 25 communities to improve waste management systems, including the purchase of new fleets of recycling trucks and bins, facility upgrades and construction of facilities for recycling and composting. Of that, about 76 % is slated to go to projects that benefit disadvantaged communities. Another USD 32 million will go to states and territories to help with planning and data collection.
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Thematic link: We believe that companies supporting the circular economy and leveraging the regenerative power of nature will be the future winners. To find out more about the circular economy as an investment opportunity, click here. |
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Sources
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