Posted by: Pekka Lundmark
The Intergovernmental Panel on Climate Change (IPCC) put out an alarming message in October: the future of our planet will be decided within the next twenty years. The scientific community’s report also contains hope: climate change can be solved, but we must act here and now.
There must be an immediate and steep reduction in greenhouse gas emissions in order to limit global warming to 1.5 degrees. According to the IPCC, carbon dioxide emissions and carbon sinks must be equal in magnitude by 2050.
On a journey towards the decades of electricity
Globally, greenhouse gas emissions from energy production and use account for about 2/3 of all emissions caused by humans. In Europe, and especially in the Nordic countries, there has been an active effort to reduce emissions from electricity production.
However, electricity’s share of final energy consumption is only about 20%, and that’s why decarbonising electricity production alone doesn’t go very far. But the solution may be in the electrification of society.
Emissions-free electricity can help to reduce emissions in other sectors: in heating, transportation and industry. This development is supported also by new technology solutions that boost energy efficiency. Even though the overall use of energy in Europe is estimated to decrease in the future, the use of electricity will increase significantly with this development. Our European sector association, Eurelectric, has recently noted that increasing electricity’s share of energy consumption in the EU to 60% could decrease emissions in the EU by 95%.
In the push towards the 1.5-degree world, we must also advance a transition towards more sustainable production and recycling of materials. Resource-use efficiency must be improved by, e.g., utilising biomass primarily in the production of high-value materials and products. However, burning forest industry by-products unsuitable for this purpose, like logging residues, will be justified still for a long time when it is a replacement for coal.
The IPCC also highlights nuclear power in curbing climate change. In all 1.5-degree scenarios, the amount of electricity produced with nuclear power must increase manifold, globally, by 2050.
EU climate strategy must lead the way
This week the EU Commission will publish its long-term climate strategy. I think this is a great opportunity to show climate leadership and to set a target of a carbon-neutral Europe by 2050. It is also important to plan a cost-efficient emissions reduction path towards that target and to set rational intermediate goals for 2030 and 2040. Clear and ambitious targets are vitally important for companies planning investments, and they also impel other countries.
For Europe’s competitiveness, it’s important that reducing emissions is cost efficient. The best solution is to harness the markets to support a sustainable energy system because it will take more than public funding to solve climate change. Private capital finds the best ways to reduce emissions when there is a financial incentive to do so, i.e. a high enough price on emissions.
So it is imperative that the EU trusts its emissions trading system (ETS) and develops it further, e.g. in conjunction with the checkpoints in the 2020s. This means tightening the emissions ceiling in line with the set targets. If member states decide to implement overlapping national steering mechanisms such as various bans on fossil fuels or taxes on emissions, it is very important that their impact is neutralised by reducing the number of emission rights in the market. Otherwise well-meaning measures in one country may facilitate increasing emissions in another. The best solution would be to direct additional steering mechanisms to sectors outside the ETS such as transportation.
At the same time, the EU must be active with other continents to expand emissions pricing in order to lower the risk of carbon leakage and to level the competitive playing field.
The scientific community’s messages must be integrated in company strategies
Climate change is estimated to be the biggest global change for companies since the mainstreaming of information technology. In fact, climate change has already become a part of business for many companies by creating new growth and opening new opportunities. And for an increasing number of them, it has become a matter of survival.
At Fortum, climate change was identified early on as a megatrend driving our business strategy. In conjunction with our latest strategy update, we did a scenario analysis in which we assessed the energy system’s development at various global temperatures. Our company’s vision “For a cleaner world” conveys the message that we want to lead the change towards a low-emissions energy system and the optimal use of resources. Our customers, shareholders, financers, and other stakeholders encourage and demand us to develop new and increasingly better solutions.
We at Fortum are aiming for a climate-neutral energy system, and we believe that the 1.5-degree world is still technically possible. But in such a way that we can simultaneously ensure energy’s security of supply in all conditions and keep the costs reasonable. We hope that the political decisions made in different countries, in the EU, and globally support this goal and that we together achieve a low-emissions energy system through means – and at costs – that are realistic.