Since the first Conference of the Parties (COP1) in 1995, the world’s annual emissions from fossil fuels and industry have increased by a staggering 56 per cent.1 In Australia, emissions from electricity and agriculture may be falling, but those from industry and transport continue to climb.2
As world leaders emerge from negotiations at COP26 about what actions they’ll take to reach net zero emissions by 2050 or sooner, the science shows that the globe must slash its emissions by 75 per cent to achieve this goal.3
Climate change is one of the defining issues of our time and this global goal carries with it plenty of challenges. But there are also reasons for optimism, says Anna Skarbek, CEO of ClimateWorks Australia, who was a keynote speaker at a recent CommBank sustainability conference, ‘Financing Australia’s Transition’.
As leader of the not-for-profit organisation tasked with helping organisations develop pathways and strategies for achieving net-zero emissions, Skarbek is seeking to build momentum – especially among the private sector.
“Eighty-three per cent of Australia’s exports, in terms of trading partner destinations, have committed to net-zero emissions,” she said. “What’s more, two-thirds of global funds under management are run by investment companies that have made a net-zero commitment for their portfolios by 2050 or sooner.”
A multi-faceted approach to net zero
A net zero target requires a multi-faceted approach, beginning with phasing out investment in fossil fuel supply projects and unabated coal by 2030. At the same time, Skarbek said, we must rapidly embrace new technology and scale up to increase renewable energy supply in the electricity grid.
“We need roughly between two- and five-times more renewable energy generation for us to meet global decarbonised economy goals,” she explained.
Decarbonising the grid will also help all sectors lower their emissions – from organisations cutting their carbon footprint, to the uptake of renewable energy sources so they can power electric vehicle (EV) fleets.
Using renewable energy, Australia can also create green hydrogen which will help to decarbonise sectors that traditionally struggle to lower their emissions, like transport, mining and industry. For example, hydrogen can replace diesel in heavy machinery or shipping, or be used in place of coal to produce ‘green’ steel.
Green hydrogen can even decarbonise Australia’s exports to trading partners such as Japan and Korea, when used in place of coal and gas. This is a lucrative export opportunity – and one that will help Australia meet its net zero targets faster.
The other way to decarbonise, said Skarbek, is by using nature itself. Solutions such as tree planting, revegetation of land, soil sequestration and carbon forestry can be used to draw down and capture carbon already in the atmosphere.
How advances in technology can help the transition
Robust, proven, low-carbon technology solutions are already available – from solar, wind and hydro energy, to electric and fuel-cell vehicles, battery storage, green material substitution and even plant-based meat substitutes. However, not all of these solutions are commercially viable at scale.
Those that have scaled up consistently move faster than expected. For instance, in just five years, solar panel uptake has achieved what was forecast to take 20 years, and battery costs have fallen 90 per cent over the past decade.
Best of all, as new solutions are adopted, they become cheaper and release new iterations that are often more effective.
The science of finance
Science guides not only climate research, but climate finance, too. Investors are increasingly aligning their goals with net zero and assess companies’ progress against their own sustainability targets.
Crucially, Skarbek said, companies should only use offsets where emissions reduction technology isn’t available. “We need all the offsets we can invest in, in terms of nature-based solutions for drawing down the carbon, not for offsetting carbon we could otherwise avoid.”
She noted that where a viable technology exists, it should be used to determine the decarbonisation pathway for economic activity – even if it is relatively expensive.
The best-practice path to net zero
Best-practice businesses focused on net zero are already building partnerships within their sectors to solve common challenges and continuously improve. A coalition of international non-profit organisations is helping sector-specific alliances design roadmaps for decarbonisation and publish their commitments. This is helping investors align their investment commitments with net zero too.
Leading businesses are also setting up governance and internal practices to support a reduction of emissions. And they’re embedding their net zero transition plans into their corporate structures, allocating capital and resources to these activities.
But adopting internal sustainable practices, while critical, is just one part of each company’s journey to a low-carbon future. Skarbek urged companies to focus on what’s known as Scope 3, or whole-of-supply chain emissions, by working closely with their suppliers to reduce their total emissions.
The time for action on net zero is now
Reaching net zero requires committed action and scale, as well as the setting of strong, medium-term goals. The first global aim is to halve emissions by 2030 before achieving net zero by 2050 or sooner.
“2030 is nine harvests away in food supply chains, two or three project finance contracts away in infrastructure investment project finance, or three strategic plans away,” Skarbek said.
But as COVID-19 has shown us, nations and economies can move quickly. And the transition to a net-zero economy will provide myriad opportunities for new jobs, industries and economic stimulus as the uptake of existing technologies increases and we develop new ones.
“From an investment perspective, this is millions of transactions, equipment upgrades, new business models, and mainstreaming products for consumers so they become the default procurement choice,” Skarbek explained. “That's our task in the next decade, [if we want to] avoid the worst of global warming.”