1 Introduction Introduction It’s time to peak RECYCLED 100 million tons 1 REPORT 2015 Up to 2011, The Climate Savers members companies had reduced GHG emissions by over 100 million tons. 1999 WWF Climate Savers is a global programme initiated in 1999, and it was launched in China in2009. 30 13 So far 30 leading international companies have become Climate Savers. To stop the degradation of the planet's natural environment and to build a future in which humans live in harmony with nature. www.wwfchina.org Why China’s corporate sector needs to set ambitious greenhouse gas reduction targets ®58.pic.com 欢迎关注WWF官方微信 © 1986 Panda Symbol WWF – World Wide Fund For Nature (Formerly World Wildlife Fund) ® “WWF” a WWF Registered 2 isIt’s time to peakTrademark. WWF, Avenue du Mont-Blanc, 1196 Gland, Switzerland – Tel. +41 22 364 9111 Fax +41 22 364 0332. For contact details and further information, please visit our international website at panda.org © National Geographic Stock / Mark Thiessen / WWF Why we are here It’s time to peak WWW.WWFCHINA.ORG WWF Climate Savers has teams in 13 countries. It’s time to peak 3 About WWF Climate Savers Programme WWF Climate savers is a global programme that positions companies as leaders of the low-carbon economy. Member companies take on two commitments: to become the best in class in reducing greenhouse gas emissions; and to influence market or policy developments by promoting their vision, solutions and achievements. The programme also acts as a sounding board by providing valuable guidance to companies seeking to shrink their carbon footprint while growing their business and enhancing brand equity. About Ecofys Ecofys is a leading consultancy in renewable energy, energy & carbon efficiency, energy systems & markets and energy & climate policy. For us, knowledge and innovation are the key factors in turning the ideas of today into viable realities of tomorrow. We support public and corporate organisations alike to adapt to changes and identify new opportunities quickly. Together with our clients we make sure that relevant steps are taken and business projects are realised in a practical and sustainable manner. If we act now the 2050 global energy system can be sustainable, secure, affordable and fully based on renewable sources. Dedicated to our mission we all work passionately to make it happen: sustainable energy for everyone. Authors : Ecofys team Project Coordinator Chen Xin ( Climate savers program manager, WWF China) Special Thanks To Ms Li Lin (WWF China) Ms Lu Lunyan(WWF China) Mr Deng Liangchun (WWF China) Ms Zhang Chang Mr Alberto Carrillo Pineda (WWF Intl) Mr Milan Kooijman (WWF Intl) Mr Aaron Sobel (WWF US) Mr Stefan Henningsson (WWF Intl) ® Yan yong/WWF-China About WWF Climate Savers Programme WWF Climate savers is a global programme that positions companies as leaders of the low-carbon economy. Member companies take on two commitments: to become the best in class in reducing greenhouse gas emissions; and to influence market or policy developments by promoting their vision, solutions and achievements. The programme also acts as a sounding board by providing valuable guidance to companies seeking to shrink their carbon footprint while growing their business and enhancing brand equity. About Ecofys Ecofys is a leading consultancy in renewable energy, energy & carbon efficiency, energy systems & markets and energy & climate policy. For us, knowledge and innovation are the key factors in turning the ideas of today into viable realities of tomorrow. We support public and corporate organisations alike to adapt to changes and identify new opportunities quickly. Together with our clients we make sure that relevant steps are taken and business projects are realised in a practical and sustainable manner. If we act now the 2050 global energy system can be sustainable, secure, affordable and fully based on renewable sources. Dedicated to our mission we all work passionately to make it happen: sustainable energy for everyone. Authors : Ecofys team Project Coordinator Chen Xin ( Climate savers program manager, WWF China) Special Thanks To Ms Li Lin (WWF China) Ms Lu Lunyan(WWF China) Mr Deng Liangchun (WWF China) Ms Zhang Chang Mr Alberto Carrillo Pineda (WWF Intl) Mr Milan Kooijman (WWF Intl) Mr Aaron Sobel (WWF US) Mr Stefan Henningsson (WWF Intl) ® Yan yong/WWF-China hiker silhouette ® fotolia.com -Oleg_Zabielin sectors. The 2°C compatible scope 1 emissions There is increasing evidence that companies taking up intensity decline for the industry and services sector the challenge are in fact better off compared to those ranges between 0.8% and 2.7%. For scope 1 and 2 emissions combined, China’s corporate sector needs to Executive summary reduce its emissions intensity on average between 1.7% and 4.6% each year between now and 2050, depending on the sector. Combined with projections for the growth of the various sub-sectors in China over time, continuing a business as usual practice. A recent WWF these reductions in emissions intensity will result in a and CDP study in the US shows that large net savings peak in corporate emissions in China before 2030 and could be achieved if US’ corporate sector would devote a steeply declining emissions pathway afterwards, in 3% to 4% of its capital expenditures to emission line with 2°C pathways for China. reduction investments and that those investments typically result in a higher return compared to the The fifth assessment report by the Intergovernmental corporate sector resulting from climate change. At Panel on Climate Change (IPCC) confirms what we the same time, the corporate sector is also pivotal The specific actions and technologies required to average corporate capital investments. Cost curve already know. Without additional efforts, global in combatting climate change, both as a significant achieve a deep decarbonisation pathway for China’s analyses for China show a similar picture. Roughly contributor to the emissions (corporate CO2 emissions corporate sector vary from sector to sector and even 2/3 rd of the improvements required to bring China for example make up for approximately 50% of the from company to company. In this study, they are on a deep decarbonisation pathway come, according country’s GHG emissions) and as provider of the categorised in four distinguished options. First of all, to McKinsey’s China’s green revolution report, from innovative climate friendly solutions required to make it is only possible to drive down emissions if higher investments that have a positive economic return or the low carbon transition happen. It is necessary to only slight to moderate economic costs over time. greenhouse gas (GHG) emissions will continue to explore approaches for setting Chinese corporate At the same time, the window of opportunity is increase by 3.7 – 4.8 °C, a level well beyond the emissions reduction targets and options for low carbon closing rapidly. China is still in the middle of rapidly 2 °C temperature rise limit widely agreed among pathways in order to achieve China’s ambition to peak expanding its capital stock in commercial buildings, scientists and governments across the world as a its emissions sooner rather than later and to achieve power plants and industrial facilities. Given the limit above which implications of climate change the emissions reductions required in the rest of the management is highly committed to it and sets clear lifetime of such capital stock additions, it is essential to become increasingly impactful and dangerous. Drastic century. targets. Only then can changes in organisations be embark on the decarbonisation pathway better sooner enforced which is required to work as organisation than later. reductions in GHG emissions, up to 40-70% globally in 2050 as compared to 2010, are needed to bring Building on similar initiatives globally and using a towards a lower carbon future. The second and third the world on track to a 2°C scenario. China’s role in number of 2°C scenario studies for China, science- option are to reduce energy use via ambitious energy Low carbon development will help decoupling the fighting climate change can hardly be overestimated. efficiency measures and to source the remaining economic performance of enterprises from resource China is the largest emitter of GHG emissions in the energy use as much as possible from renewable power world accounting for roughly a quarter of the global and fuel sources. Although non-utility corporates in emissions. A low carbon GHG emissions pathway for China cannot directly influence the decarbonisation of China is thus vital in order to keep the world on track China’s electricity supply, they do have the opportunity based targets are developed for the scope 1 emissions to use on-site renewable generation as much as consumption. Improved market competitiveness (those directly emitted by companies) and scope 2 possible and to play a role in improving the efficiency can be an internal drive for companies to carry out Industry and business will be seriously affected by emissions (those related to the purchase of electricity of electricity use and the purchase of renewable fuels emission reduction measures. The external incentive rising temperature levels. More extreme weather or heat) of seven corporate sectors of China’s economy. and electricity. Further options for corporates to for low carbon development is China’s ambitious events, issues with water supply, disruptions of supply The emissions intensity (i.e. emissions per unit of reduce their GHG footprint are an increased use of emissions peak target and decarbonisation pathway. chains can all be significant risk factors for China’s output) of power generation needs to reduce by about secondary raw materials, improved waste management It’s time for China’s corporate sector to commit 8% each year to come close to a fully decarbonised as well a reduction in GHG emissions related to e.g. to ambitious, yet realistic 2°C compatible targets. power supply system for China mid-century, which corporate business travel. Via their products, the Companies embracing such targets can make the translates into a similar target for the scope 2 corporate sector can play an important role in driving difference and they can profit from doing so. Let’s take emissions intensity of the electricity consuming down consumer emissions. up the challenge, now! or close to a 2 °C scenario. hiker silhouette ® fotolia.com -Oleg_Zabielin sectors. The 2°C compatible scope 1 emissions There is increasing evidence that companies taking up intensity decline for the industry and services sector the challenge are in fact better off compared to those ranges between 0.8% and 2.7%. For scope 1 and 2 emissions combined, China’s corporate sector needs to Executive summary reduce its emissions intensity on average between 1.7% and 4.6% each year between now and 2050, depending on the sector. Combined with projections for the growth of the various sub-sectors in China over time, continuing a business as usual practice. A recent WWF these reductions in emissions intensity will result in a and CDP study in the US shows that large net savings peak in corporate emissions in China before 2030 and could be achieved if US’ corporate sector would devote a steeply declining emissions pathway afterwards, in 3% to 4% of its capital expenditures to emission line with 2°C pathways for China. reduction investments and that those investments typically result in a higher return compared to the The fifth assessment report by the Intergovernmental corporate sector resulting from climate change. At Panel on Climate Change (IPCC) confirms what we the same time, the corporate sector is also pivotal The specific actions and technologies required to average corporate capital investments. Cost curve already know. Without additional efforts, global in combatting climate change, both as a significant achieve a deep decarbonisation pathway for China’s analyses for China show a similar picture. Roughly contributor to the emissions (corporate CO2 emissions corporate sector vary from sector to sector and even 2/3 rd of the improvements required to bring China for example make up for approximately 50% of the from company to company. In this study, they are on a deep decarbonisation pathway come, according country’s GHG emissions) and as provider of the categorised in four distinguished options. First of all, to McKinsey’s China’s green revolution report, from innovative climate friendly solutions required to make it is only possible to drive down emissions if higher investments that have a positive economic return or the low carbon transition happen. It is necessary to only slight to moderate economic costs over time. greenhouse gas (GHG) emissions will continue to explore approaches for setting Chinese corporate At the same time, the window of opportunity is increase by 3.7 – 4.8 °C, a level well beyond the emissions reduction targets and options for low carbon closing rapidly. China is still in the middle of rapidly 2 °C temperature rise limit widely agreed among pathways in order to achieve China’s ambition to peak expanding its capital stock in commercial buildings, scientists and governments across the world as a its emissions sooner rather than later and to achieve power plants and industrial facilities. Given the limit above which implications of climate change the emissions reductions required in the rest of the management is highly committed to it and sets clear lifetime of such capital stock additions, it is essential to become increasingly impactful and dangerous. Drastic century. targets. Only then can changes in organisations be embark on the decarbonisation pathway better sooner enforced which is required to work as organisation than later. reductions in GHG emissions, up to 40-70% globally in 2050 as compared to 2010, are needed to bring Building on similar initiatives globally and using a towards a lower carbon future. The second and third the world on track to a 2°C scenario. China’s role in number of 2°C scenario studies for China, science- option are to reduce energy use via ambitious energy Low carbon development will help decoupling the fighting climate change can hardly be overestimated. efficiency measures and to source the remaining economic performance of enterprises from resource China is the largest emitter of GHG emissions in the energy use as much as possible from renewable power world accounting for roughly a quarter of the global and fuel sources. Although non-utility corporates in emissions. A low carbon GHG emissions pathway for China cannot directly influence the decarbonisation of China is thus vital in order to keep the world on track China’s electricity supply, they do have the opportunity based targets are developed for the scope 1 emissions to use on-site renewable generation as much as consumption. Improved market competitiveness (those directly emitted by companies) and scope 2 possible and to play a role in improving the efficiency can be an internal drive for companies to carry out Industry and business will be seriously affected by emissions (those related to the purchase of electricity of electricity use and the purchase of renewable fuels emission reduction measures. The external incentive rising temperature levels. More extreme weather or heat) of seven corporate sectors of China’s economy. and electricity. Further options for corporates to for low carbon development is China’s ambitious events, issues with water supply, disruptions of supply The emissions intensity (i.e. emissions per unit of reduce their GHG footprint are an increased use of emissions peak target and decarbonisation pathway. chains can all be significant risk factors for China’s output) of power generation needs to reduce by about secondary raw materials, improved waste management It’s time for China’s corporate sector to commit 8% each year to come close to a fully decarbonised as well a reduction in GHG emissions related to e.g. to ambitious, yet realistic 2°C compatible targets. power supply system for China mid-century, which corporate business travel. Via their products, the Companies embracing such targets can make the translates into a similar target for the scope 2 corporate sector can play an important role in driving difference and they can profit from doing so. Let’s take emissions intensity of the electricity consuming down consumer emissions. up the challenge, now! or close to a 2 °C scenario. FOREWORD FOREWORD WWF Preface: Ecofys Foreword: As the world’s largest emitter of greenhouse gas (GHG) emissions, China plays a critical role in curbing greenhouse gas emissions and keeping global temperatures below 2ºC. What China does or does not do inevitably defines our chances of avoiding dangerous anthropogenic interference with the climate system. China’s role in the international effort to combat climate change can hardly be overstated. As the world’s largest emitter and as manufacturing base of millions of products used globally, it is essential for China to play its role in mitigating emissions and in providing the solutions needed. There is certainly progress in the international climate negotiations, but it essential for businesses to embrace the climate change challenge as well, independently from the often slow developments in international climate policies. To date, China has already made considerable progress through a rapid scale up of renewable energy and the implementation of ambitious programs aimed at improving energy efficiency across a number of industrial sectors. However, with the rapid growth that the country has experienced in recent decades, efforts need to be redoubled in order to stabilize emissions and transit towards a low-carbon development track. Last year, China along with the United States of America – responsible for over 45% of the world’s carbon emissions – made a historic joint announcement pledging to curb greenhouse gas emissions within the next decades. Through this statement, China has committed to peak its GHG emissions by 2030 and to supply at least 20% of its primary energy demand from fossil-free sources. The corporate sector in China, responsible for over 50% of the country’s GHG emissions, plays a critical role in achieving this target along with the current 2020 goal. In order to achieve this, corporates in China need to assume a leading role in the reduction of GHG emissions and the scale-up of renewable energy. According to the analysis presented in this report, companies in China should aim to reduce its carbon intensity in a range of 0.8 to 2.7% every year. Rapid decarbonisation needs to take place particularly in the energy sector, in which the carbon intensity needs to decrease by 8% every year. While the challenge is considerable, the rewards for leading companies are also sizeable. Evidence from companies that have taken substantial decarbonisation efforts shows that reducing GHG emissions is not only good for the planet, but also good for the bottom line. According to data compiled by We Mean Business , energy-efficiency investments in industrial processes yield average returns of 23%. Proprietary analysis by WWF shows that ambitious climate action by the corporate sector in different countries (e.g. Mexico, USA) contribute to increasing the competitiveness of the industry in those regions and to the overall growth of the economy. This reports provides guidance for China’s companies to set targets in line with the global ambition to limit global warming to 2°C. There is wide agreement on this ambition level, but a key question is: what does this ambition mean for individual companies? The method presented in this report answers this question, based on the best of science that we have available today. The method takes into account that companies differ from in each other in many ways, and there is no one-sizefits-all. The sectoral approach takes into account these differences. The work is based on a thorough analysis of scenarios for China, within the global context. The targets suggested in this report are ambitious, but technically feasible and in many cases, very much profitable, even more if the economic damage from inaction is taken into account. The report calls on China’s corporate community to embrace ambitious greenhouse gas reduction targets, and make them part of their business operations. Only then can the increasingly impactful business risks related to climate change be avoided and can the opportunities be seized. Ecofys works already for 30 years at the forefront of energy and climate solutions, for clients both in the private and in the public sector. Based on our work, we can confirm: active participation of the private sector in combating climate change is absolutely essential and increasingly provides a positive business case. Doing nothing is no option anymore, it’s time for China’s corporate sector to act and make China’s emissions peak happen. With such compelling evidence, and the imperative to curb greenhouse gas emissions to protect those more vulnerable to climate change, we trust that this report will inspire companies in China to seize the opportunities behind a lowcarbon transition and to take ambitious action in line with the goal of peaking GHG emissions in the coming years. Samantha Smith Leader Global Climate & Energy Initiative, WWF International 1 http://www.wemeanbusinesscoalition.org/sites/default/files/The%20Climate%20Has%20Changed_0.pdf Kornelis Blok Director of Science, Ecofys FOREWORD FOREWORD WWF Preface: Ecofys Foreword: As the world’s largest emitter of greenhouse gas (GHG) emissions, China plays a critical role in curbing greenhouse gas emissions and keeping global temperatures below 2ºC. What China does or does not do inevitably defines our chances of avoiding dangerous anthropogenic interference with the climate system. China’s role in the international effort to combat climate change can hardly be overstated. As the world’s largest emitter and as manufacturing base of millions of products used globally, it is essential for China to play its role in mitigating emissions and in providing the solutions needed. There is certainly progress in the international climate negotiations, but it essential for businesses to embrace the climate change challenge as well, independently from the often slow developments in international climate policies. To date, China has already made considerable progress through a rapid scale up of renewable energy and the implementation of ambitious programs aimed at improving energy efficiency across a number of industrial sectors. However, with the rapid growth that the country has experienced in recent decades, efforts need to be redoubled in order to stabilize emissions and transit towards a low-carbon development track. Last year, China along with the United States of America – responsible for over 45% of the world’s carbon emissions – made a historic joint announcement pledging to curb greenhouse gas emissions within the next decades. Through this statement, China has committed to peak its GHG emissions by 2030 and to supply at least 20% of its primary energy demand from fossil-free sources. The corporate sector in China, responsible for over 50% of the country’s GHG emissions, plays a critical role in achieving this target along with the current 2020 goal. In order to achieve this, corporates in China need to assume a leading role in the reduction of GHG emissions and the scale-up of renewable energy. According to the analysis presented in this report, companies in China should aim to reduce its carbon intensity in a range of 0.8 to 2.7% every year. Rapid decarbonisation needs to take place particularly in the energy sector, in which the carbon intensity needs to decrease by 8% every year. While the challenge is considerable, the rewards for leading companies are also sizeable. Evidence from companies that have taken substantial decarbonisation efforts shows that reducing GHG emissions is not only good for the planet, but also good for the bottom line. According to data compiled by We Mean Business , energy-efficiency investments in industrial processes yield average returns of 23%. Proprietary analysis by WWF shows that ambitious climate action by the corporate sector in different countries (e.g. Mexico, USA) contribute to increasing the competitiveness of the industry in those regions and to the overall growth of the economy. This reports provides guidance for China’s companies to set targets in line with the global ambition to limit global warming to 2°C. There is wide agreement on this ambition level, but a key question is: what does this ambition mean for individual companies? The method presented in this report answers this question, based on the best of science that we have available today. The method takes into account that companies differ from in each other in many ways, and there is no one-sizefits-all. The sectoral approach takes into account these differences. The work is based on a thorough analysis of scenarios for China, within the global context. The targets suggested in this report are ambitious, but technically feasible and in many cases, very much profitable, even more if the economic damage from inaction is taken into account. The report calls on China’s corporate community to embrace ambitious greenhouse gas reduction targets, and make them part of their business operations. Only then can the increasingly impactful business risks related to climate change be avoided and can the opportunities be seized. Ecofys works already for 30 years at the forefront of energy and climate solutions, for clients both in the private and in the public sector. Based on our work, we can confirm: active participation of the private sector in combating climate change is absolutely essential and increasingly provides a positive business case. Doing nothing is no option anymore, it’s time for China’s corporate sector to act and make China’s emissions peak happen. With such compelling evidence, and the imperative to curb greenhouse gas emissions to protect those more vulnerable to climate change, we trust that this report will inspire companies in China to seize the opportunities behind a lowcarbon transition and to take ambitious action in line with the goal of peaking GHG emissions in the coming years. Samantha Smith Leader Global Climate & Energy Initiative, WWF International 1 http://www.wemeanbusinesscoalition.org/sites/default/files/The%20Climate%20Has%20Changed_0.pdf Kornelis Blok Director of Science, Ecofys 1 Introduction Introduction 1 Table of contents 01 1.Introduction 05 2.China’s emissions and emission projections 07 2.1 China’s current emissions 09 2.2 The 2 °C challenge for China 12 2.3 The role of the corporate sector 13 15 3.1 Methodology 16 3.2 Emissions intensity targets for China’s corporate sectors 21 3.3 Taking on the challenge 21 4.Feasible and often profitable 21 4.1 Routes towards low carbon emissions 25 4.2 Cost-effectiveness 26 4.3 Case studies of companies leading the way 29 10 It’s time to peak 3.Meeting the challenge – sector targets 5.It is time to act now It’s time to peak 11 1 Introduction Introduction 1 Table of contents 01 1.Introduction 05 2.China’s emissions and emission projections 07 2.1 China’s current emissions 09 2.2 The 2 °C challenge for China 12 2.3 The role of the corporate sector 13 15 3.1 Methodology 16 3.2 Emissions intensity targets for China’s corporate sectors 21 3.3 Taking on the challenge 21 4.Feasible and often profitable 21 4.1 Routes towards low carbon emissions 25 4.2 Cost-effectiveness 26 4.3 Case studies of companies leading the way 29 10 It’s time to peak 3.Meeting the challenge – sector targets 5.It is time to act now It’s time to peak 11 1 Introduction 1 Introduction Introduction 1 1. Introduction The fifth and latest assessment report by the Intergovernmental Panel on Climate Change (IPCC) further confirms what we already know. “Human influence on the climate system is clear. This is evident from the increasing greenhouse gas (GHG) concentrations in the atmosphere, positive radiative forcing, observed warming, and understanding of the climate system” 2. Without additional efforts global GHG emissions will continue to increase and will result, according to IPCC, in an increase of global temperatures of 3.7 to 4.8°C towards the end of the century3 as compared to pre-industrial times. This is well beyond the 2°C limit that is widely agreed among scientists and governments across the world as a limit above which the implications of climate change become increasingly impactful and dangerous. Drastic reductions in GHG emissions, up to 4070% globally in 2050 as compared to 2010, are needed to bring the world on track to a 2°C scenario4. The industry and business sector will be seriously affected by rising temperature levels. Issues with water supply, disruption in the supply chains, rising energy, commodity and insurance costs are all the likely result. At the same time, the corporate sector is pivotal in combatting climate change. The corporate sector was responsible for well over half of the global GHG emissions in 20105. At the same time, the innovative climate friendly solutions developed by entrepreneurs and the corporate sector are vital for the transition towards a less GHG emitting global economic system. It is time for the global business community to act. If the above is true at the global level, then even more for China. China’s rapid economic growth and urbanisation brought China among the world’s largest economies. The challenges China faces in terms of natural resource constraints and emissions and pollution levels are enormous. The latest annual update of the Global 2 IPCC, 2013: Summary for Policymakers. In: Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. 3 IPCC, 2014: Summary for Policymakers, 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 [Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlomer, C. von Stechow, T. Zwickel and J.C. Minx (eds.)]. Cambridge University Press,Cambridge, United Kingdom and New York, NY, USA. 4 Idem 5 Idem, page 8. Industry and the electricity and heat production and other energy industries account for 25%, 21% and 10% respectively with the corporate sector also contributing significantly to the emissions from buildings (6%), transport (14%), and agriculture, forestry and land-use emissions (24%). 1 It’sFlooding time\2010\2048 to peak ®1\265\274\321\324 Solymosi Tam\250\242s - thinkstock It’s time to peak 2 1 Introduction 1 Introduction Introduction 1 1. Introduction The fifth and latest assessment report by the Intergovernmental Panel on Climate Change (IPCC) further confirms what we already know. “Human influence on the climate system is clear. This is evident from the increasing greenhouse gas (GHG) concentrations in the atmosphere, positive radiative forcing, observed warming, and understanding of the climate system” 2. Without additional efforts global GHG emissions will continue to increase and will result, according to IPCC, in an increase of global temperatures of 3.7 to 4.8°C towards the end of the century3 as compared to pre-industrial times. This is well beyond the 2°C limit that is widely agreed among scientists and governments across the world as a limit above which the implications of climate change become increasingly impactful and dangerous. Drastic reductions in GHG emissions, up to 4070% globally in 2050 as compared to 2010, are needed to bring the world on track to a 2°C scenario4. The industry and business sector will be seriously affected by rising temperature levels. Issues with water supply, disruption in the supply chains, rising energy, commodity and insurance costs are all the likely result. At the same time, the corporate sector is pivotal in combatting climate change. The corporate sector was responsible for well over half of the global GHG emissions in 20105. At the same time, the innovative climate friendly solutions developed by entrepreneurs and the corporate sector are vital for the transition towards a less GHG emitting global economic system. It is time for the global business community to act. If the above is true at the global level, then even more for China. China’s rapid economic growth and urbanisation brought China among the world’s largest economies. The challenges China faces in terms of natural resource constraints and emissions and pollution levels are enormous. The latest annual update of the Global 2 IPCC, 2013: Summary for Policymakers. In: Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. 3 IPCC, 2014: Summary for Policymakers, 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 [Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlomer, C. von Stechow, T. Zwickel and J.C. Minx (eds.)]. Cambridge University Press,Cambridge, United Kingdom and New York, NY, USA. 4 Idem 5 Idem, page 8. Industry and the electricity and heat production and other energy industries account for 25%, 21% and 10% respectively with the corporate sector also contributing significantly to the emissions from buildings (6%), transport (14%), and agriculture, forestry and land-use emissions (24%). 1 It’sFlooding time\2010\2048 to peak ®1\265\274\321\324 Solymosi Tam\250\242s - thinkstock It’s time to peak 2 1 Introduction Introduction 1 Carbon Budget shows that China’s CO2 emissions per person overtook emissions in absolute target, base year, and target year and emission reduction with details. the EU for the first time in 2013. China is now the largest CO2 emission emitter, with Three companies disclosed detailed carbon intensity targets, and only one company 6 emissions higher than those of the US and the EU-28 combined . China’s vital role disclosed the influence of the carbon intensity target on the absolute target. There in fighting climate change can thus hardly be overestimated. And also in China, the is thus room for a much deeper and committed engagement from China’s corporate corporate sector has to play a big role in this, both as significant contributor to the sector to act in order to keep global temperatures rise below 2°C10. GHG emissions challenge and as a source for innovative solutions to deal with the global challenge. In terms of methodology, this study builds on publicly available existing literature and data on China’s emissions, target setting methods and emissions scenarios. It is against this background that WWF China, building on similar initiatives 7 An important input into the target setting part of this report is the ongoing “Mind internationally , commissioned this report to support the Chinese corporate sector in the Science, Mind the Gap” initiative by the World Wide Fund for Nature (WWF), addressing climate change. The study aims to: the World Resources Institute (WRI), the Carbon Disclosure Project (CDP) and the United Nations Global Compact (UNGC). In Chapter 2, we zoom in on China’s 1. Provide meaningful CO2 emissions reduction targets for the Chinese corporate current emissions and emissions scenarios towards 2050 that are in line with a 2°C sector that are science-based, technologically possible and in line with the fair scenario. In Chapter 3, we derive intensity based CO2 emissions reduction targets for 8 share of Chinese domestic cuts in a global 2°C scenario . 2. Give insight in typical technologies and approaches that are required to meet such targets. in total seven corporate sectors, i.e. emissions reduction targets per unit of output. Combined with growth expectations for each of those sectors, this also yields insight into the absolute emissions trajectories towards 2050 for these sectors in line with the 3. Provide evidence from literature and case studies showing that reducing 2°C scenarios. In Chapter 4, we describe the type of technologies and approaches GHG emissions in many cases yields positive financial returns and is overall required to achieve the decarbonisation pathways per sector. We assess briefly to beneficial for business, also in terms of additional export opportunities. which extent taking action yields positive economic returns and present a number of case studies of Chinese companies already actively working on the reduction of GHG Many Chinese companies are already well aware of climate change risks and are emissions from their operations. taking steps to strengthen their climate resilience and investments in a low carbon future. WWF via its Climate Savers9 programs for example already actively works with Chinese companies such as Yingli solar and Vanke to set GHG reduction targets. At the same time, as becomes clear from the recent CDP China 100 Climate Change Report 2014, the number of Chinese companies committing to absolute or intensity based GHG reduction targets remains limited. Only 16% of companies investigated set targets for emissions reduction, of which only two disclosed the scope of their 6 According to the Global Carbon Budget 2014 annual update (http://www.globalcarbonproject.org/carbonbudget/14/hl-full.htm), global CO2 emissions were dominated by emissions from China (28%), the USA (14%) and the EU (28 Member States; 10%). The per capita CO2 emissions in 2013 were 6.8 t CO2 per capita in the EU-28, 7.2 t CO2 per capita in China and 16.4 t CO2 per capita in the USA. 10 CDP, 2014, China 100 Climate Change Report 7 Worth mentioning are e.g. the recently launched “We mean Business Coalition” (www.wemeanbusinesscoalation.org) and the Mind the Science, Mind the Gap initiative introduced later on in this study. 8 This study focuses on CO2 emissions from fuel combustion and industrial process only, representing the majority of the corporate sector GHG emissions as will become evident from Chapter 2. 9 The WWF Climate Savers program consist of partnerships between WWF and international corporations, aimed at delivering real, measurable and additional reductions in CO2 emissions. At the time of writing this report, Yingli solar and Vanke have become Chinese WWF Climate Savers. 3 It’s time to peak It’s time to peak 4 1 Introduction Introduction 1 Carbon Budget shows that China’s CO2 emissions per person overtook emissions in absolute target, base year, and target year and emission reduction with details. the EU for the first time in 2013. China is now the largest CO2 emission emitter, with Three companies disclosed detailed carbon intensity targets, and only one company 6 emissions higher than those of the US and the EU-28 combined . China’s vital role disclosed the influence of the carbon intensity target on the absolute target. There in fighting climate change can thus hardly be overestimated. And also in China, the is thus room for a much deeper and committed engagement from China’s corporate corporate sector has to play a big role in this, both as significant contributor to the sector to act in order to keep global temperatures rise below 2°C10. GHG emissions challenge and as a source for innovative solutions to deal with the global challenge. In terms of methodology, this study builds on publicly available existing literature and data on China’s emissions, target setting methods and emissions scenarios. It is against this background that WWF China, building on similar initiatives 7 An important input into the target setting part of this report is the ongoing “Mind internationally , commissioned this report to support the Chinese corporate sector in the Science, Mind the Gap” initiative by the World Wide Fund for Nature (WWF), addressing climate change. The study aims to: the World Resources Institute (WRI), the Carbon Disclosure Project (CDP) and the United Nations Global Compact (UNGC). In Chapter 2, we zoom in on China’s 1. Provide meaningful CO2 emissions reduction targets for the Chinese corporate current emissions and emissions scenarios towards 2050 that are in line with a 2°C sector that are science-based, technologically possible and in line with the fair scenario. In Chapter 3, we derive intensity based CO2 emissions reduction targets for 8 share of Chinese domestic cuts in a global 2°C scenario . 2. Give insight in typical technologies and approaches that are required to meet such targets. in total seven corporate sectors, i.e. emissions reduction targets per unit of output. Combined with growth expectations for each of those sectors, this also yields insight into the absolute emissions trajectories towards 2050 for these sectors in line with the 3. Provide evidence from literature and case studies showing that reducing 2°C scenarios. In Chapter 4, we describe the type of technologies and approaches GHG emissions in many cases yields positive financial returns and is overall required to achieve the decarbonisation pathways per sector. We assess briefly to beneficial for business, also in terms of additional export opportunities. which extent taking action yields positive economic returns and present a number of case studies of Chinese companies already actively working on the reduction of GHG Many Chinese companies are already well aware of climate change risks and are emissions from their operations. taking steps to strengthen their climate resilience and investments in a low carbon future. WWF via its Climate Savers9 programs for example already actively works with Chinese companies such as Yingli solar and Vanke to set GHG reduction targets. At the same time, as becomes clear from the recent CDP China 100 Climate Change Report 2014, the number of Chinese companies committing to absolute or intensity based GHG reduction targets remains limited. Only 16% of companies investigated set targets for emissions reduction, of which only two disclosed the scope of their 6 According to the Global Carbon Budget 2014 annual update (http://www.globalcarbonproject.org/carbonbudget/14/hl-full.htm), global CO2 emissions were dominated by emissions from China (28%), the USA (14%) and the EU (28 Member States; 10%). The per capita CO2 emissions in 2013 were 6.8 t CO2 per capita in the EU-28, 7.2 t CO2 per capita in China and 16.4 t CO2 per capita in the USA. 10 CDP, 2014, China 100 Climate Change Report 7 Worth mentioning are e.g. the recently launched “We mean Business Coalition” (www.wemeanbusinesscoalation.org) and the Mind the Science, Mind the Gap initiative introduced later on in this study. 8 This study focuses on CO2 emissions from fuel combustion and industrial process only, representing the majority of the corporate sector GHG emissions as will become evident from Chapter 2. 9 The WWF Climate Savers program consist of partnerships between WWF and international corporations, aimed at delivering real, measurable and additional reductions in CO2 emissions. At the time of writing this report, Yingli solar and Vanke have become Chinese WWF Climate Savers. 3 It’s time to peak It’s time to peak 4 2 China’s emissions and emission projections 2 5 It’s time to peak China’s emissions and emission projections 2 China’s emissions and emission projections It’s time to peak 6- fotolia.com ®big_tau 2 China’s emissions and emission projections 2 5 It’s time to peak China’s emissions and emission projections 2 China’s emissions and emission projections It’s time to peak 6- fotolia.com ®big_tau 2 China’s emissions and emission projections China’s emissions and emission projections 2. China’s emissions and emission projections 2 The graph clearly shows the large share of CO2 emissions from fuel combustion and industrial processes in the overall GHG emissions for China and the dominant role of the corporate sector. CO2 emissions represent about 3/4th of China’s total GHG emissions and the corporate sector represents about 3/4th of those emissions, so approximately half of China’s total GHG emissions. In this study, we focus on the CO2 emissions from the manufacturing industry and the commercial public services, which 2.1 China’s current emissions is a fair approximation of the total corporate emissions in China13. A more detailed China surpassed the US as the largest emitter of GHG emissions and is now the overview of the emissions in those sectors is provided in Figure 2. country with most GHG emissions. China accounts roughly for one quarter of the global GHG emissions11. An overview of the emissions by source category for the total GHG emissions and, in a bit more detail, for the CO2 emissions from fuel combustion GHG emissions (Gt CO2-eq) and industrial processes is given in Figure 1. Figure 2 CO2 emissions from fuel combustion and industrial processes by corporate subsector in China, 2010 and 2011 (Gt CO2) Figure 1 7 It’s time to peak GHG emissions in China, 2010 (Gt CO2-eq.) 14 12 11 Climate Change 2014, Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlomer, C. von Stechow, T. Zwickel and J.C. Minx (eds.)]. Cambridge University Press,Cambridge, United Kingdom and New York, NY, USA. 13 We use the definitions used in the IEA statistics, i.e. the sum of the manufacturing industry and construction sector and the commercial and public services sector. Corporate emissions outside these sectors include those in agriculture and transport, but due to limited data availability for the corporate share in those emissions, we do not focus on those. Emissions in the commercial and public services sector include also a share of noncorporate emissions, i.e. those related to public services. 12 IEA, 2013, CO2 emissions from fuel combustion statistics, 2013 edition. Excluding emissions from Land Use, Land Use Change and Forestry, which according to the 2012 2nd National Communication on Climate Change of the People’s Republic of China amounted to -454 Mt CO2-eq. in 2005 (no more recent data available). Categorisation in the graph on the left hand side in line with country reporting format used by the Intergovernmental Panel on Climate Change (IPCC). Emissions from electricity and heat producers in the right hand side graph distributed to end-use sectors based on the relative shares of electricity consumption in the final consumption. 14 Based on IEA, 2013, CO2 emissions from fuel combustion statistics, 2013 edition and own calculations. Emissions from electricity production in right hand-side graph distributed to end-use sectors based on the relative shares of electricity consumption in the final consumption. Industrial process emissions are allocated to the non-metallic minerals sector where, according to the 2005 Second National Communication on Climate Change of the People’s Republic of China, over 90% of the industrial process CO2 emissions occur. For 2011, industrial process emissions are estimated based on the growth of fuel combustion emissions between 2010 and 2011. It’s time to peak 8 2 China’s emissions and emission projections China’s emissions and emission projections 2. China’s emissions and emission projections 2 The graph clearly shows the large share of CO2 emissions from fuel combustion and industrial processes in the overall GHG emissions for China and the dominant role of the corporate sector. CO2 emissions represent about 3/4th of China’s total GHG emissions and the corporate sector represents about 3/4th of those emissions, so approximately half of China’s total GHG emissions. In this study, we focus on the CO2 emissions from the manufacturing industry and the commercial public services, which 2.1 China’s current emissions is a fair approximation of the total corporate emissions in China13. A more detailed China surpassed the US as the largest emitter of GHG emissions and is now the overview of the emissions in those sectors is provided in Figure 2. country with most GHG emissions. China accounts roughly for one quarter of the global GHG emissions11. An overview of the emissions by source category for the total GHG emissions and, in a bit more detail, for the CO2 emissions from fuel combustion GHG emissions (Gt CO2-eq) and industrial processes is given in Figure 1. Figure 2 CO2 emissions from fuel combustion and industrial processes by corporate subsector in China, 2010 and 2011 (Gt CO2) Figure 1 7 It’s time to peak GHG emissions in China, 2010 (Gt CO2-eq.) 14 12 11 Climate Change 2014, Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlomer, C. von Stechow, T. Zwickel and J.C. Minx (eds.)]. Cambridge University Press,Cambridge, United Kingdom and New York, NY, USA. 13 We use the definitions used in the IEA statistics, i.e. the sum of the manufacturing industry and construction sector and the commercial and public services sector. Corporate emissions outside these sectors include those in agriculture and transport, but due to limited data availability for the corporate share in those emissions, we do not focus on those. Emissions in the commercial and public services sector include also a share of noncorporate emissions, i.e. those related to public services. 12 IEA, 2013, CO2 emissions from fuel combustion statistics, 2013 edition. Excluding emissions from Land Use, Land Use Change and Forestry, which according to the 2012 2nd National Communication on Climate Change of the People’s Republic of China amounted to -454 Mt CO2-eq. in 2005 (no more recent data available). Categorisation in the graph on the left hand side in line with country reporting format used by the Intergovernmental Panel on Climate Change (IPCC). Emissions from electricity and heat producers in the right hand side graph distributed to end-use sectors based on the relative shares of electricity consumption in the final consumption. 14 Based on IEA, 2013, CO2 emissions from fuel combustion statistics, 2013 edition and own calculations. Emissions from electricity production in right hand-side graph distributed to end-use sectors based on the relative shares of electricity consumption in the final consumption. Industrial process emissions are allocated to the non-metallic minerals sector where, according to the 2005 Second National Communication on Climate Change of the People’s Republic of China, over 90% of the industrial process CO2 emissions occur. For 2011, industrial process emissions are estimated based on the growth of fuel combustion emissions between 2010 and 2011. It’s time to peak 8 2 China’s emissions and emission projections China’s emissions and emission projections 2 The corporate sector’s CO2 emissions are very much dominated by a few very energy Tracker of China’s CO2 emissions trajectory towards 2020 based on the current and thus emissions intensive industries. Non-metallic minerals (of which cement pledge to reduce the GHG emissions intensity of its economy (expressed per unit is by far the largest contributor), iron and steel, non-ferrous metals, chemicals and of GDP) by 40 – 45% in 2020 as compared to 2005. The line shown relates to the rd petrochemicals, and paper pulp and printing in total contribute to roughly 2/3 of the enhanced policies scenario in the 2012 2nd National communication on Climate corporate sector’s CO2 emissions with the remaining 1/3rd originating from the less Change with corrections for industrial CO2 emissions. Note that absolute emissions emissions intensive other manufacturing industry and from the commercial services. resulting from the pledged emissions intensity target in 2020 is a best estimate. To reflect the significant uncertainty in this pledged line given that it is to a large extent 2.2 The 2°C challenge for China Projecting GHG emissions over time is never easy due to the multiple factors that play a role: The green area represents high and low CO2 2020 estimates under the current policies in China, as assessed by Climate Action Tracker21. The lower limit of the line • The speed of economic growth over time • The structural composition of the economic activity (i.e. agriculture, industry, services) and changes in this economic structure • dependant on the actual GDP development, an uncertainty bar is added. Technological changes that bring down or increase the emissions intensity of the economic activity. There are many studies attempting to project China’s GHG emissions over time such is based on current policy assessment in the 2012 World Energy Outlook22. The World Energy Outlook assessment shows that with all policies implemented before 2012, China is already close to reaching the emissions pledge towards 2020. Given the various policies implemented since then and future plans for enhanced policy action, such as the emissions trading pilots that should converge to a national scheme, further policies to stimulate renewable energy and ongoing efforts to limit the use of coal, it is likely that China will meet its 2020 emissions intensity pledge. as those by China National Development Reform Commission Energy Research Institute (ERI)15, the Energy Technology Perspective studies by the International Energy Agency (IEA)16, a recent study by The Institute for Sustainable Development and International Relations (IDDRI)17, the Climate Action Tracker18 and modelling efforts that are e.g. compiled in the scenario database resulting from the “Low climate Impact and the Implications of required Tight emissions control Strategies (LIMITS)” project19. Out of a selection of those sources, Figure 3 was compiled. The red line gives China’s CO2 emissions projections from IEA’s Energy Technology Perspective (ETP) 2°C scenario (2DS). The 2°C mitigation scenario (2°C scenario – 2DS) is consistent with the latest generation of IPCC 2°C scenarios, called the Representative Concentration Pathway (RCP) 2.6 scenarios 20. The ETP uses a technology-rich model and has a breakdown in several industrial sectors. It is an important input also in the next chapter that zooms in GHG reduction targets for the corporate sector. The grey line gives an assessment done in the Climate Action 15 Energy Research Institute, 2009, China’s Low Carbon Development Pathways by 2050 Figure 3 450 ppm (2°C) scenarios for CO2 emissions from fuel combustion and industrial processes in China, 2020 – 2050 (Gt CO2)23 21 Climate Action Tracker, www.climateactiontracker.org, data for the China assessment for 2013 was used in this graph, adapted to reflect only CO2 emissions. IDDRI, 2014,Pathways to Deep Decarbonisation, China section, page 74 22 IEA, World Energy Outlook, 2012 Climate Action Tracker, China country update 23 See text for explanation on sources used 16 IEA, 2014,Energy Technology Perspective 17 18 19 The LIMITS project aims at advancing the understanding of the implementation of climate policies consistent with 2°C Celsius. LIMITS results, resulting from in total seven global integrated assessment models, were relied upon extensively in preparing the IPCC 5th Assessment Report. Figure 3 gives CO2 emissions from fuel combustion and industrial processes from all China 450 ppm 2°C scenarios in the database. The scenarios are based on global integrated assessment models with varying level of detail included for China, which partly explains the wide range of scenarios, also already in 2020. 20 These pathways are identified by their approximate total radiative forcing in 2100 relative to 1750, see the IPCC AR 5 Report (footnote 2) for more details on the scenario definitions. 9 It’s time to peak It’s time to peak 10 2 China’s emissions and emission projections China’s emissions and emission projections 2 The corporate sector’s CO2 emissions are very much dominated by a few very energy Tracker of China’s CO2 emissions trajectory towards 2020 based on the current and thus emissions intensive industries. Non-metallic minerals (of which cement pledge to reduce the GHG emissions intensity of its economy (expressed per unit is by far the largest contributor), iron and steel, non-ferrous metals, chemicals and of GDP) by 40 – 45% in 2020 as compared to 2005. The line shown relates to the rd petrochemicals, and paper pulp and printing in total contribute to roughly 2/3 of the enhanced policies scenario in the 2012 2nd National communication on Climate corporate sector’s CO2 emissions with the remaining 1/3rd originating from the less Change with corrections for industrial CO2 emissions. Note that absolute emissions emissions intensive other manufacturing industry and from the commercial services. resulting from the pledged emissions intensity target in 2020 is a best estimate. To reflect the significant uncertainty in this pledged line given that it is to a large extent 2.2 The 2°C challenge for China Projecting GHG emissions over time is never easy due to the multiple factors that play a role: The green area represents high and low CO2 2020 estimates under the current policies in China, as assessed by Climate Action Tracker21. The lower limit of the line • The speed of economic growth over time • The structural composition of the economic activity (i.e. agriculture, industry, services) and changes in this economic structure • dependant on the actual GDP development, an uncertainty bar is added. Technological changes that bring down or increase the emissions intensity of the economic activity. There are many studies attempting to project China’s GHG emissions over time such is based on current policy assessment in the 2012 World Energy Outlook22. The World Energy Outlook assessment shows that with all policies implemented before 2012, China is already close to reaching the emissions pledge towards 2020. Given the various policies implemented since then and future plans for enhanced policy action, such as the emissions trading pilots that should converge to a national scheme, further policies to stimulate renewable energy and ongoing efforts to limit the use of coal, it is likely that China will meet its 2020 emissions intensity pledge. as those by China National Development Reform Commission Energy Research Institute (ERI)15, the Energy Technology Perspective studies by the International Energy Agency (IEA)16, a recent study by The Institute for Sustainable Development and International Relations (IDDRI)17, the Climate Action Tracker18 and modelling efforts that are e.g. compiled in the scenario database resulting from the “Low climate Impact and the Implications of required Tight emissions control Strategies (LIMITS)” project19. Out of a selection of those sources, Figure 3 was compiled. The red line gives China’s CO2 emissions projections from IEA’s Energy Technology Perspective (ETP) 2°C scenario (2DS). The 2°C mitigation scenario (2°C scenario – 2DS) is consistent with the latest generation of IPCC 2°C scenarios, called the Representative Concentration Pathway (RCP) 2.6 scenarios 20. The ETP uses a technology-rich model and has a breakdown in several industrial sectors. It is an important input also in the next chapter that zooms in GHG reduction targets for the corporate sector. The grey line gives an assessment done in the Climate Action 15 Energy Research Institute, 2009, China’s Low Carbon Development Pathways by 2050 Figure 3 450 ppm (2°C) scenarios for CO2 emissions from fuel combustion and industrial processes in China, 2020 – 2050 (Gt CO2)23 21 Climate Action Tracker, www.climateactiontracker.org, data for the China assessment for 2013 was used in this graph, adapted to reflect only CO2 emissions. IDDRI, 2014,Pathways to Deep Decarbonisation, China section, page 74 22 IEA, World Energy Outlook, 2012 Climate Action Tracker, China country update 23 See text for explanation on sources used 16 IEA, 2014,Energy Technology Perspective 17 18 19 The LIMITS project aims at advancing the understanding of the implementation of climate policies consistent with 2°C Celsius. LIMITS results, resulting from in total seven global integrated assessment models, were relied upon extensively in preparing the IPCC 5th Assessment Report. Figure 3 gives CO2 emissions from fuel combustion and industrial processes from all China 450 ppm 2°C scenarios in the database. The scenarios are based on global integrated assessment models with varying level of detail included for China, which partly explains the wide range of scenarios, also already in 2020. 20 These pathways are identified by their approximate total radiative forcing in 2100 relative to 1750, see the IPCC AR 5 Report (footnote 2) for more details on the scenario definitions. 9 It’s time to peak It’s time to peak 10 2 China’s emissions and emission projections China’s emissions and emission projections The blue dots for 2010 and 2050 represent a deep decarbonisation pathway for 2 indicating that an emissions peak well before 2030 would be needed for China. fuel combustion CO 2 emissions by experts from Tsinghua University and China National Centre for Climate Change Strategy developed for a report by the Institute From the graph, we can draw the following conclusions: for Sustainable Development and International Relations (IDDRI). The projections are • The current 40-45% GHG intensity target and the policies implemented to achieve part of IDDRI’s Pathways to Deep Decarbonisation report. The 2050 projection is very this target have helped China to start decoupling its economic growth from its similar to IEA ETP one. The IDDRI report includes most data for the years 2010 and GHG emissions. As a result, gradually the CO 2 emissions of China develop 2050 only, without giving explicitly a trajectory of emissions over time. towards stabilisation making the discussion on when China’s emissions will peak a very relevant one. As a result of the significant uncertainties with respect to economic growth projections • Currently implemented and planned policies will likely be sufficient to comply with and the structure of the Chinese economy, Chinese academic experts and institutes the current pledge, although there is some uncertainty related to the actual GDP are divided on the question about when China CO2 needs to peak in order to reach growth. What is also clear, however, is that China has to step up its ambitions the longer 2°C scenario term objectives. Researchers from the Massachusetts significantly quickly in order to come close to what science sees as necessary for Institute of Technology (MIT) and China’s Tsinghua University find that by continuing China towards 2050. The recent statements by President Xi on China’s intentions current efforts to reduce the carbon intensity, emissions will level off between 2030 to peak the emissions as soon as possible can be very much welcomed in that and 2040. In an accelerated effort scenario, emissions will level off between 2025 and respect. 24 2035 . Jiang Kejun, a leading researcher from Energy research Institute National • For China to develop in line with a 2°C scenario, such an emissions peak is Development and Reform Commission, finds that if China aggressively pursues these needed sooner rather than later with most models indicating a peak well before policies and others such as promoting carbon capture and storage, China’s emissions 2030 would be needed. 25 could peak even before 2025 . The China Academy of Social Sciences quote in a recent study that slowing rates of urbanisation would likely mean that industrial emissions would peak around 2025-2030 and start to fall by 204026. These forecasts laid the theoretical foundation of China’s recent post-2020 CO2 reduction target announced by President Xi on 12th November, 2014: China intends to achieve the peaking of CO2 emissions around 2030 and to make best efforts to peak earlier27. The need for such a peak is confirmed by the international scenario work on 2°C emission scenarios globally and for China. The orange box gives the range of all CO2 emissions scenarios for China that are included in the LIMITS28 scenarios database and that are consistent with a 450 ppm or 2°C scenario. This gives a good indication of what the Chinese and international scientific community sees as a necessary CO2 trajectory that is in line with a 2°C scenario. It shows, depending on assumptions on the share of emission reductions done by China in relation to other economies in the world and other modelling assumptions in the underlying models in the database, that CO2 emissions in China by 2050 should have been reduced by 30 – 90% as 2.3 The role of the corporate sector What do the above scenarios mean for Chinese corporate community? It is clear that involvement of China’s companies is essential to further bring China on a decarbonisation pathway. Corporate GHG emissions need to go down and the climate friendly innovative products developed by the corporate sector are essential to bring down emission in all sectors of the economy. For this to happen, it is vital that the total corporate sector in China voluntarily embraces and embodies ambitious targets to bring down the GHG emissions from their operations, following the example of leading international and Chinese companies that did so before. Government action alone will not be sufficient. Without a committed corporate sector embracing the low carbon challenge and acting to make it happen, China’s low carbon ambitions are set to fail. The pathways as shown in this chapter should inform science-based target setting for China’s corporate sector, in line with 2°C. Let’s zoom in now, on how such targets could look like. compared to 2010 levels for China to develop in line with a global 2°C scenario. It also shows that China’s emissions should peak sooner rather than later with most models 24 MIT-Tsinghua China Energy and Climate Program, 2014, An Energy Outlook for China 25 Kejun Jiang, Xing Zhuang, Ren Miao, Chenmin He, 2013, China’s role in attaining the global 2 °C target 26 27 28 11 It’s time to peak China Academy of Social Sciences, 2014, Study of Climate change China peak announcement published by China Ministry of Foreign Affairs, 2014 See Footnote 19 for details on the LIMITS database It’s time to peak 12 2 China’s emissions and emission projections China’s emissions and emission projections The blue dots for 2010 and 2050 represent a deep decarbonisation pathway for 2 indicating that an emissions peak well before 2030 would be needed for China. fuel combustion CO 2 emissions by experts from Tsinghua University and China National Centre for Climate Change Strategy developed for a report by the Institute From the graph, we can draw the following conclusions: for Sustainable Development and International Relations (IDDRI). The projections are • The current 40-45% GHG intensity target and the policies implemented to achieve part of IDDRI’s Pathways to Deep Decarbonisation report. The 2050 projection is very this target have helped China to start decoupling its economic growth from its similar to IEA ETP one. The IDDRI report includes most data for the years 2010 and GHG emissions. As a result, gradually the CO 2 emissions of China develop 2050 only, without giving explicitly a trajectory of emissions over time. towards stabilisation making the discussion on when China’s emissions will peak a very relevant one. As a result of the significant uncertainties with respect to economic growth projections • Currently implemented and planned policies will likely be sufficient to comply with and the structure of the Chinese economy, Chinese academic experts and institutes the current pledge, although there is some uncertainty related to the actual GDP are divided on the question about when China CO2 needs to peak in order to reach growth. What is also clear, however, is that China has to step up its ambitions the longer 2°C scenario term objectives. Researchers from the Massachusetts significantly quickly in order to come close to what science sees as necessary for Institute of Technology (MIT) and China’s Tsinghua University find that by continuing China towards 2050. The recent statements by President Xi on China’s intentions current efforts to reduce the carbon intensity, emissions will level off between 2030 to peak the emissions as soon as possible can be very much welcomed in that and 2040. In an accelerated effort scenario, emissions will level off between 2025 and respect. 24 2035 . Jiang Kejun, a leading researcher from Energy research Institute National • For China to develop in line with a 2°C scenario, such an emissions peak is Development and Reform Commission, finds that if China aggressively pursues these needed sooner rather than later with most models indicating a peak well before policies and others such as promoting carbon capture and storage, China’s emissions 2030 would be needed. 25 could peak even before 2025 . The China Academy of Social Sciences quote in a recent study that slowing rates of urbanisation would likely mean that industrial emissions would peak around 2025-2030 and start to fall by 204026. These forecasts laid the theoretical foundation of China’s recent post-2020 CO2 reduction target announced by President Xi on 12th November, 2014: China intends to achieve the peaking of CO2 emissions around 2030 and to make best efforts to peak earlier27. The need for such a peak is confirmed by the international scenario work on 2°C emission scenarios globally and for China. The orange box gives the range of all CO2 emissions scenarios for China that are included in the LIMITS28 scenarios database and that are consistent with a 450 ppm or 2°C scenario. This gives a good indication of what the Chinese and international scientific community sees as a necessary CO2 trajectory that is in line with a 2°C scenario. It shows, depending on assumptions on the share of emission reductions done by China in relation to other economies in the world and other modelling assumptions in the underlying models in the database, that CO2 emissions in China by 2050 should have been reduced by 30 – 90% as 2.3 The role of the corporate sector What do the above scenarios mean for Chinese corporate community? It is clear that involvement of China’s companies is essential to further bring China on a decarbonisation pathway. Corporate GHG emissions need to go down and the climate friendly innovative products developed by the corporate sector are essential to bring down emission in all sectors of the economy. For this to happen, it is vital that the total corporate sector in China voluntarily embraces and embodies ambitious targets to bring down the GHG emissions from their operations, following the example of leading international and Chinese companies that did so before. Government action alone will not be sufficient. Without a committed corporate sector embracing the low carbon challenge and acting to make it happen, China’s low carbon ambitions are set to fail. The pathways as shown in this chapter should inform science-based target setting for China’s corporate sector, in line with 2°C. Let’s zoom in now, on how such targets could look like. compared to 2010 levels for China to develop in line with a global 2°C scenario. It also shows that China’s emissions should peak sooner rather than later with most models 24 MIT-Tsinghua China Energy and Climate Program, 2014, An Energy Outlook for China 25 Kejun Jiang, Xing Zhuang, Ren Miao, Chenmin He, 2013, China’s role in attaining the global 2 °C target 26 27 28 11 It’s time to peak China Academy of Social Sciences, 2014, Study of Climate change China peak announcement published by China Ministry of Foreign Affairs, 2014 See Footnote 19 for details on the LIMITS database It’s time to peak 12 3 China’s emissions and emission projections Meeting the challenge – sector targets 13®freeimages.com-beermug It’s time to peak office building 3 3 China’s emissions and emission projections It’s time to peak 14 3 China’s emissions and emission projections Meeting the challenge – sector targets 13®freeimages.com-beermug It’s time to peak office building 3 3 China’s emissions and emission projections It’s time to peak 14 3 China’s emissions and emission projections 3. China’s emissions and emission projections China’s emissions and emission projections 3 corporate budgets. A sector emissions intensity pathway, i.e. a pathway of the development of emissions relative to the output of sectors, is created by dividing the emissions pathway by the activity growth. The sector emissions intensity pathways form the basis to define the targets for companies based on their current carbon intensity (so, emissions per unit of output) and the required pathway. For homogenous 3.1 Methodology sectors (power production, cement, iron and steel, pulp and paper, aluminium) physical indicators (kWh of electricity, tonne of production) are used as an output In developing guidance on target setting for the Chinese corporate sector, this study parameter to which the emissions intensity relates. For the public and commercial builds on the already introduced Mind the Science, Mind the Gap Initiative. In a joint service companies, the number of square metres of buildings is used as an indicator effort, WWF/WRI/CDP/UNGC launched this initiative to engage companies in setting for the output. To derive company targets out of the sector targets, it's in the global ambitious GHG reduction targets in line with climate science. A part of this initiative SDA assumed that the carbon intensities of companies in a homogeneous sector is to develop guidance for companies to set science-based targets to reduce GHG converge to the same level in 2050. In this study for China, we focus on the average emissions in line with a 2°C decarbonisation pathway. In doing so, companies can sector targets only. align their strategies with climate science to play a key role in decarbonising the economy. Raising the ambition on corporate target setting levels will drive bolder For the heterogeneous sectors (other industry and chemicals/ petrochemicals), added business solutions and promote innovative approaches to corporate GHG target value is used as an indicator and the added value is assumed to grow proportional to setting. In addition, it will demonstrate to policymakers the scale of ambition in GDP growth29. To set targets at the company level, the SDA methodology assumes industry to reduce their emissions and act as a positive influence on international the carbon intensities of companies in heterogeneous sectors to decline at the same climate policy. rate as the sector to stay below 2°C global temperature rise. Based on feedback from a technical advisory group, two stakeholder workshops in In the next paragraph, China specific estimates for a 2°C scenario compatible London and Washington DC and a webinar for Asian stakeholders, the methodology development of the emissions intensity of seven sectors are developed. Together with has recently been finalised and is published for broader public consultation (see www. expectations on the absolute development of those sectors, this yields an emissions sciencebasedtargets.org). The methodology, called the Sectoral Decarbonisation trajectory for China’s corporate sector over time. Approach (SDA), builds on existing approaches that allocate a carbon budget to companies based on their contribution to the economy. The methodology looks at sector specific decarbonisation pathways that are compatible with the 2°C threshold rather than applying a generic decarbonisation pathway for all companies regardless of the nature of their operations. The global SDA methodology takes the following approach. It is mainly based on the IEA Energy Technology Perspectives (ETP) 2014 2DS scenario. The ETP uses a technology rich model including an assessment of the emission reduction opportunities as well as the feasibility of those options per sector. The 2DS scenario corresponds to an emission pathway to limit global warming to 2°C with a probability of at least 50 percent and is consistent with the IPCC’s RCP 2.6 pathway. 3.2 Emissions intensity targets for China’s corporate sectors In Table 1, we provide average annual intensity based scope 1 and scope 2 targets for the 2011 -2050 timeframe. The resulting intensity pathway for the scope 1 emissions intensity is shown in Figure 4. The averages have been derived based on analysis of the 2011 and 2050 emissions intensity in the studied 2°C scenarios and then assuming an equal year on year annual emissions intensity decline over time, given the focus of this study on year-on-year emissions intensity targets that are robust for a longer period. In reality, the emissions intensity decline over time can vary from year to year depending on e.g. the availability and uptake of certain technologies under different fuel prices developments etc30. Basically, The SDA methodology uses sectoral activity level projections and emissions projections from the IEA ETP 2 DS to break down the global CO2 budget for staying within the 2°C threshold to sector carbon budgets, which can then be used to define 29 In the SDA approach, a separate scenario for the chemicals / petrochemicals sector is developed, but due to a lack of consistent data for this sector, this sector is in this study included in the Other Industry sector. 30 See WWF/WRI/CDP/UNGC: the sectoral decarbonisation approach (SDA), draft for public consultation, 2014 for global examples and IDDRI: IDDRI Pathways to Deep Decarbonisation, 2014, for example pathways for China. 15 It’s time to peak It’s time to peak 16 3 China’s emissions and emission projections 3. China’s emissions and emission projections China’s emissions and emission projections 3 corporate budgets. A sector emissions intensity pathway, i.e. a pathway of the development of emissions relative to the output of sectors, is created by dividing the emissions pathway by the activity growth. The sector emissions intensity pathways form the basis to define the targets for companies based on their current carbon intensity (so, emissions per unit of output) and the required pathway. For homogenous 3.1 Methodology sectors (power production, cement, iron and steel, pulp and paper, aluminium) physical indicators (kWh of electricity, tonne of production) are used as an output In developing guidance on target setting for the Chinese corporate sector, this study parameter to which the emissions intensity relates. For the public and commercial builds on the already introduced Mind the Science, Mind the Gap Initiative. In a joint service companies, the number of square metres of buildings is used as an indicator effort, WWF/WRI/CDP/UNGC launched this initiative to engage companies in setting for the output. To derive company targets out of the sector targets, it's in the global ambitious GHG reduction targets in line with climate science. A part of this initiative SDA assumed that the carbon intensities of companies in a homogeneous sector is to develop guidance for companies to set science-based targets to reduce GHG converge to the same level in 2050. In this study for China, we focus on the average emissions in line with a 2°C decarbonisation pathway. In doing so, companies can sector targets only. align their strategies with climate science to play a key role in decarbonising the economy. Raising the ambition on corporate target setting levels will drive bolder For the heterogeneous sectors (other industry and chemicals/ petrochemicals), added business solutions and promote innovative approaches to corporate GHG target value is used as an indicator and the added value is assumed to grow proportional to setting. In addition, it will demonstrate to policymakers the scale of ambition in GDP growth29. To set targets at the company level, the SDA methodology assumes industry to reduce their emissions and act as a positive influence on international the carbon intensities of companies in heterogeneous sectors to decline at the same climate policy. rate as the sector to stay below 2°C global temperature rise. Based on feedback from a technical advisory group, two stakeholder workshops in In the next paragraph, China specific estimates for a 2°C scenario compatible London and Washington DC and a webinar for Asian stakeholders, the methodology development of the emissions intensity of seven sectors are developed. Together with has recently been finalised and is published for broader public consultation (see www. expectations on the absolute development of those sectors, this yields an emissions sciencebasedtargets.org). The methodology, called the Sectoral Decarbonisation trajectory for China’s corporate sector over time. Approach (SDA), builds on existing approaches that allocate a carbon budget to companies based on their contribution to the economy. The methodology looks at sector specific decarbonisation pathways that are compatible with the 2°C threshold rather than applying a generic decarbonisation pathway for all companies regardless of the nature of their operations. The global SDA methodology takes the following approach. It is mainly based on the IEA Energy Technology Perspectives (ETP) 2014 2DS scenario. The ETP uses a technology rich model including an assessment of the emission reduction opportunities as well as the feasibility of those options per sector. The 2DS scenario corresponds to an emission pathway to limit global warming to 2°C with a probability of at least 50 percent and is consistent with the IPCC’s RCP 2.6 pathway. 3.2 Emissions intensity targets for China’s corporate sectors In Table 1, we provide average annual intensity based scope 1 and scope 2 targets for the 2011 -2050 timeframe. The resulting intensity pathway for the scope 1 emissions intensity is shown in Figure 4. The averages have been derived based on analysis of the 2011 and 2050 emissions intensity in the studied 2°C scenarios and then assuming an equal year on year annual emissions intensity decline over time, given the focus of this study on year-on-year emissions intensity targets that are robust for a longer period. In reality, the emissions intensity decline over time can vary from year to year depending on e.g. the availability and uptake of certain technologies under different fuel prices developments etc30. Basically, The SDA methodology uses sectoral activity level projections and emissions projections from the IEA ETP 2 DS to break down the global CO2 budget for staying within the 2°C threshold to sector carbon budgets, which can then be used to define 29 In the SDA approach, a separate scenario for the chemicals / petrochemicals sector is developed, but due to a lack of consistent data for this sector, this sector is in this study included in the Other Industry sector. 30 See WWF/WRI/CDP/UNGC: the sectoral decarbonisation approach (SDA), draft for public consultation, 2014 for global examples and IDDRI: IDDRI Pathways to Deep Decarbonisation, 2014, for example pathways for China. 15 It’s time to peak It’s time to peak 16 3 China’s emissions and emission projections China’s emissions and emission projections Scope 1 average annual Scope 2 average annual emissions intensity emissions intensity decline required 2011 decline required 2011-2050 2050 3 Total average annual emissions intensity decline required 2010 2011-2050 The scope 1 emissions intensity decline for the basic material industries varies generation) as well as the occurrence in some sectors of difficult to abate non- between 0.8% and 2.3% per year. This lower emissions intensity decline can, in Sector Indicator Power production kWh 8.1% - - Cement t cement 1.3% 7.9% 1.7% fuel related process emissions. In some cases, the limited availability of recycled Iron and steel t steel 1.6% 7.8% 2.2% material can limit the uptake of less emission intensive production routes. The scope Aluminium t aluminium 0.8% 8.9% 4.6% 1 emissions intensity of commercial buildings needs to be reduced by 1.4% per year Pulp and paper t paper 2.3% 9.7% 4.0% Services m2 floor area 1.4% 6.3% 3.4% Other industry Added Value 2.7% 8.2% 4.4% Table 1 Average 2 °C compatible annual emissions intensity decline between 2011 and 2050 general terms be explained by the more limited abatement possibilities for direct fuel related CO2 emissions (as compared to the multiple options available for power based on the scenarios studied and the emissions intensity decline for the other industry needs to be reduced by 2.7% per year. Although not identical, the patterns are quite similar to the emissions intensity pathways derived in the global SDA, highlighting the need for a low carbon technology convergence globally in order to 31 stay within or close to a 2°C limit. Depending on the development of the electricity intensity of the various sectors over time, the scope 2 emissions intensity needs to reduce at a rate slightly above or slightly below the rate required for the power production sector. Sectors that become more electricity intensive over time have a scope 2 emissions intensity decline slightly below the emissions intensity decline for the power sector. This is the case for example in the iron and steel industry sector where gradually the share of electricity intensive secondary steel making becomes more important34 as well as for the service buildings sector that gradually becomes more electricity intensive. Sectors that have a reduced electricity consumption per unit of output over time, should reduce their Figure 4 Scope 1 emissions intensity pathways for the seven sectors (index, 2011 = 1) scope 2 emissions at a rate above the emissions intensity decline of the power sector like the aluminium sector where the electricity intensity of primary aluminium making Most 2°C compatible scenarios assume a close to fully decarbonised electricity further declines over time and the importance of less electricity intensive secondary production by 2050 in China, which translates into a required annual emissions aluminium production becomes more important over time. intensity decline of about 8% per year, with the exact number depending on the exact emissions intensity level assumed for 2050 and the exact allocation of emissions Depending, on the relative share of electricity emissions in the total, this implies that related to heat production in power stations to end-users . WWF’s China’s future the typical combined scope 1 and 2 emissions intensity reduction requirement ranges Generation report also shows that China has the potentially to largely decarbonise its between 1.7% for the fuel and process emissions intensive cement industry to 4.6% 32 power sector by 2050 . for the electricity intensive aluminium industry with the other sectors in between. 31 Data derived from an own analysis of restricted web accessible data from IEA, Energy Technology Perspectives, 2014 as well detailed China data used in the IEA Energy Technology Perspectives 2014 received via personal communication with the ETP team, complemented with data from other low carbon energy scenarios for China such as IDDRI: IDDRI Pathways to Deep Decarbonisation, 2014, LBNL, China’s Energy and Carbon Emissions Outlook to 2050 and ERI, China’s Low Carbon Development Pathways by 2050, 2009. For a definition of the sectors, we refer to WWF/ WRI/CDP/UNGC: the sectoral decarbonisation approach (SDA), 2014. Other industry includes the chemical industry, which is in the SDA approach separately included. The authors take responsibility for the results given in this table. The results are by no means endorsed by or under the responsibility of any of the organisations mentioned in this footnote. 34 33 In LBNL: China’s energy and carbon emissions outlook to 2050, the share of secondary steel making by electric arc furnaces is for example assumed to increase to over 30% in 2050 compared to a current share below 10%. 35 In LBNL: China’s energy and carbon emissions outlook to 2050, for example, cement production is expected not to increase anymore from current levels, and steel production is expected to peak around 2025. In ERI’s China’s low carbon emissions pathways, 2009, both cement and steel production are expected to peak between 2020 and 2030. 32 In IDDRI Pathways to Deep Decarbonisation, 2014, an intensity decline from 743 to 32 kg CO2 / kWh is for example given between 2010 and 2050, corresponding to an average annual intensity decline of 7.6% over this period. 33 17 It’s time to peak WWF, 2014, China’s Future Generation It’s time to peak 18 3 China’s emissions and emission projections China’s emissions and emission projections Scope 1 average annual Scope 2 average annual emissions intensity emissions intensity decline required 2011 decline required 2011-2050 2050 3 Total average annual emissions intensity decline required 2010 2011-2050 The scope 1 emissions intensity decline for the basic material industries varies generation) as well as the occurrence in some sectors of difficult to abate non- between 0.8% and 2.3% per year. This lower emissions intensity decline can, in Sector Indicator Power production kWh 8.1% - - Cement t cement 1.3% 7.9% 1.7% fuel related process emissions. In some cases, the limited availability of recycled Iron and steel t steel 1.6% 7.8% 2.2% material can limit the uptake of less emission intensive production routes. The scope Aluminium t aluminium 0.8% 8.9% 4.6% 1 emissions intensity of commercial buildings needs to be reduced by 1.4% per year Pulp and paper t paper 2.3% 9.7% 4.0% Services m2 floor area 1.4% 6.3% 3.4% Other industry Added Value 2.7% 8.2% 4.4% Table 1 Average 2 °C compatible annual emissions intensity decline between 2011 and 2050 general terms be explained by the more limited abatement possibilities for direct fuel related CO2 emissions (as compared to the multiple options available for power based on the scenarios studied and the emissions intensity decline for the other industry needs to be reduced by 2.7% per year. Although not identical, the patterns are quite similar to the emissions intensity pathways derived in the global SDA, highlighting the need for a low carbon technology convergence globally in order to 31 stay within or close to a 2°C limit. Depending on the development of the electricity intensity of the various sectors over time, the scope 2 emissions intensity needs to reduce at a rate slightly above or slightly below the rate required for the power production sector. Sectors that become more electricity intensive over time have a scope 2 emissions intensity decline slightly below the emissions intensity decline for the power sector. This is the case for example in the iron and steel industry sector where gradually the share of electricity intensive secondary steel making becomes more important34 as well as for the service buildings sector that gradually becomes more electricity intensive. Sectors that have a reduced electricity consumption per unit of output over time, should reduce their Figure 4 Scope 1 emissions intensity pathways for the seven sectors (index, 2011 = 1) scope 2 emissions at a rate above the emissions intensity decline of the power sector like the aluminium sector where the electricity intensity of primary aluminium making Most 2°C compatible scenarios assume a close to fully decarbonised electricity further declines over time and the importance of less electricity intensive secondary production by 2050 in China, which translates into a required annual emissions aluminium production becomes more important over time. intensity decline of about 8% per year, with the exact number depending on the exact emissions intensity level assumed for 2050 and the exact allocation of emissions Depending, on the relative share of electricity emissions in the total, this implies that related to heat production in power stations to end-users . WWF’s China’s future the typical combined scope 1 and 2 emissions intensity reduction requirement ranges Generation report also shows that China has the potentially to largely decarbonise its between 1.7% for the fuel and process emissions intensive cement industry to 4.6% 32 power sector by 2050 . for the electricity intensive aluminium industry with the other sectors in between. 31 Data derived from an own analysis of restricted web accessible data from IEA, Energy Technology Perspectives, 2014 as well detailed China data used in the IEA Energy Technology Perspectives 2014 received via personal communication with the ETP team, complemented with data from other low carbon energy scenarios for China such as IDDRI: IDDRI Pathways to Deep Decarbonisation, 2014, LBNL, China’s Energy and Carbon Emissions Outlook to 2050 and ERI, China’s Low Carbon Development Pathways by 2050, 2009. For a definition of the sectors, we refer to WWF/ WRI/CDP/UNGC: the sectoral decarbonisation approach (SDA), 2014. Other industry includes the chemical industry, which is in the SDA approach separately included. The authors take responsibility for the results given in this table. The results are by no means endorsed by or under the responsibility of any of the organisations mentioned in this footnote. 34 33 In LBNL: China’s energy and carbon emissions outlook to 2050, the share of secondary steel making by electric arc furnaces is for example assumed to increase to over 30% in 2050 compared to a current share below 10%. 35 In LBNL: China’s energy and carbon emissions outlook to 2050, for example, cement production is expected not to increase anymore from current levels, and steel production is expected to peak around 2025. In ERI’s China’s low carbon emissions pathways, 2009, both cement and steel production are expected to peak between 2020 and 2030. 32 In IDDRI Pathways to Deep Decarbonisation, 2014, an intensity decline from 743 to 32 kg CO2 / kWh is for example given between 2010 and 2050, corresponding to an average annual intensity decline of 7.6% over this period. 33 17 It’s time to peak WWF, 2014, China’s Future Generation It’s time to peak 18 3 China’s emissions and emission projections China’s emissions and emission projections 3 The emissions intensity pathways are driven by the uptake of energy efficient technologies, fuel shift and the shift to less GHG intensive process routes within the sectors such as the shift to production from secondary materials. The absolute emissions trajectory associated with these emissions intensity pathways depends on the growth of the respective sectors of the economy over time. Simply speaking, if the growth of the sector exceeds the emissions intensity improvements, there will still be a growth in the total emissions and if the growth is below the emissions intensity improvement, there will be a decline in emissions for the sector. Most scenarios for China project that, in a 2°C compatible scenario, the demand for and production of the key materials used in construction (cement / iron and steel) will gradually start to saturate over time, peaking somewhere between 2020 and 2040, with some scenarios even projecting an absolute decline towards the middle of this century in the production of those materials and a peak already before 202035. On November 4, 2014, China’s National Development and Reform Commission released the National Plan for Climate Change, 2014-2020. The 2014-2020 Plan states that by 2020, total GHG emissions from steel and cement sectors should stabilise at 2015 levels which confirms the trends of gradually stabilising emissions from these sectors36. The saturation results from gradually saturating urbanisation rates, and the resulting Figure 5 Example of a 2°C scope 1 and 2 CO2 emissions pathways for (parts of) China’s corporate sector 2011 – lower need for (new) infrastructure and construction. Demand for the other basis 2050: the IEA ETP 2 DS scenario for the industry and services sector ( fuel combustion and process emissions)38 materials projected in this study (i.e. aluminium and pulp / paper included in this study) is projected to continue to increase, albeit at lower rates in the future 37. A gradual shift towards higher added value, less emissions intensive industries and the service sector will result in a continued growth of those sectors resulting gradually in a lower relative importance (as share of the economy) of the energy intensive industries. A combination of the above factors on the development of the economy, in combination with the technology based emissions intensity trajectories given above, results in corporate emissions in China that grow at a slower and slower pace before starting to decline somewhere in the 2020 – 2040 timeframe, a trajectory that is also required for China’s total CO2 emissions in Figure 3. As examples, we show in Figure 5 and Figure 6, the corporate emissions pathways from the ETP 2 DS scenario from the IEA and the industry pathway from the deep carbonisation pathway developed by IDDRI. Figure 6 Example of a 2°C scope 1 and 2 CO2 emissions pathways for (parts of) China’s corporate sector 2010 – 2050: the IDDRI Deep Decarbonisation pathway for China (fuel combustion only) 39 36 37 China National Plan for Climate Change, 2014-2020, 2014, China National Development and Reform Commission An exception is ERI’s China’s low carbon emissions pathways, 2009 that projects aluminum production to also decline towards 2050 with paper production saturating beyond 2030. 19 It’s time to peak 38 Data derived from an own analysis of restricted web accessible data from IEA, Energy Technology Perspectives, 2014 as well detailed China data used in the IEA Energy Technology Perspectives 2014 received via personal communication with the ETP team. 39 See footnote 17 for the source used It’s time to peak 20 3 China’s emissions and emission projections China’s emissions and emission projections 3 The emissions intensity pathways are driven by the uptake of energy efficient technologies, fuel shift and the shift to less GHG intensive process routes within the sectors such as the shift to production from secondary materials. The absolute emissions trajectory associated with these emissions intensity pathways depends on the growth of the respective sectors of the economy over time. Simply speaking, if the growth of the sector exceeds the emissions intensity improvements, there will still be a growth in the total emissions and if the growth is below the emissions intensity improvement, there will be a decline in emissions for the sector. Most scenarios for China project that, in a 2°C compatible scenario, the demand for and production of the key materials used in construction (cement / iron and steel) will gradually start to saturate over time, peaking somewhere between 2020 and 2040, with some scenarios even projecting an absolute decline towards the middle of this century in the production of those materials and a peak already before 202035. On November 4, 2014, China’s National Development and Reform Commission released the National Plan for Climate Change, 2014-2020. The 2014-2020 Plan states that by 2020, total GHG emissions from steel and cement sectors should stabilise at 2015 levels which confirms the trends of gradually stabilising emissions from these sectors36. The saturation results from gradually saturating urbanisation rates, and the resulting Figure 5 Example of a 2°C scope 1 and 2 CO2 emissions pathways for (parts of) China’s corporate sector 2011 – lower need for (new) infrastructure and construction. Demand for the other basis 2050: the IEA ETP 2 DS scenario for the industry and services sector ( fuel combustion and process emissions)38 materials projected in this study (i.e. aluminium and pulp / paper included in this study) is projected to continue to increase, albeit at lower rates in the future 37. A gradual shift towards higher added value, less emissions intensive industries and the service sector will result in a continued growth of those sectors resulting gradually in a lower relative importance (as share of the economy) of the energy intensive industries. A combination of the above factors on the development of the economy, in combination with the technology based emissions intensity trajectories given above, results in corporate emissions in China that grow at a slower and slower pace before starting to decline somewhere in the 2020 – 2040 timeframe, a trajectory that is also required for China’s total CO2 emissions in Figure 3. As examples, we show in Figure 5 and Figure 6, the corporate emissions pathways from the ETP 2 DS scenario from the IEA and the industry pathway from the deep carbonisation pathway developed by IDDRI. Figure 6 Example of a 2°C scope 1 and 2 CO2 emissions pathways for (parts of) China’s corporate sector 2010 – 2050: the IDDRI Deep Decarbonisation pathway for China (fuel combustion only) 39 36 37 China National Plan for Climate Change, 2014-2020, 2014, China National Development and Reform Commission An exception is ERI’s China’s low carbon emissions pathways, 2009 that projects aluminum production to also decline towards 2050 with paper production saturating beyond 2030. 19 It’s time to peak 38 Data derived from an own analysis of restricted web accessible data from IEA, Energy Technology Perspectives, 2014 as well detailed China data used in the IEA Energy Technology Perspectives 2014 received via personal communication with the ETP team. 39 See footnote 17 for the source used It’s time to peak 20 4 Feasible and often profitable 3.3 Taking on the challenge The above analysis shows that the corporate community (excluding utilities) in China should take on annual emissions intensity reduction targets for their combined scope 1 and 2 emissions of typically 1.7 – 4.6% per year to bring China on a deep Feasible and often profitable 4 In Chapter 3, we have drawn possible low carbon pathways in China and developed the emission trajectories by sector from now until 2050. Building on other studies40, four major approaches, outlined in Figure 7 can be distinguished as viable and often profitable options in achieving deep carbon emissions reductions. decarbonisation pathway. China’s power sector in its turn should start reducing the emissions intensity of electricity production with as much as 8% per year to reach a very low carbon power mix towards the middle of this century. The generic highlevel sector indicators derived in this chapter provide a good marker for the typical emissions intensity targets that companies active in the sectors identified would need to take on to bring China on a 2°C pathway. They can be used as a starting point for China’s corporate sector to derive company specific and absolute greenhouse gas reduction targets that take into account more specific information such as the expected growth of the company, the type of production processes used, the status of the technology used in comparison with the sector etc. Adding such company specific information is important in order to derive realistic and achievable company targets. Ambitious GHG reduction targets are certainly challenging to achieve, but the technologies are there to make it happen and taking on such targets often makes a lot Management and behaviour change Target setting Employee engagement programs Robust energy management systems Energy efficiency through technological change Use of best available proces technologies Motor,steam and HVAC systems Passive commercial buildings Increase use of low carbon energy Maximize on-site renewable use Demand side management Bio-tased fuels Other low carbon resource options Increased use secondary materials Dematerialization Optimal waste management of good business sense as we show in the next chapter. 4. Feasible and often profitable 4.1 Routes towards low carbon emissions The specific technologies required to achieve the deep decarbonisation for the corporate sector that is needed to bring China on a 2°C compatible pathway vary from sector to sector and even from company to company. Figure 7 Options for low carbon pathways 1. Management and behaviour change. This part of the potential is instrumental to the other three and can be achieved without doing any All business activities will be influenced if China follows a low carbon pathway. The significant investments. Securing buy-in and support from senior management Chinese corporate sector will need to respond quickly and proactively to mitigate can help putting low carbon business development on the agenda and enforce business risks and to grasp the business opportunities that arise from the challenge. certain changes across the business organisation. Global business leaders’ It is time to move ahead of the curve by setting ambitious targets as outlined in the show an increasing awareness in recent years. More and more companies previous chapter and to develop the related strategies to reach such targets. There have started to monitor their energy use and emissions and set targets to will be investments required, but also benefits associated if done in the right way. The reduce them. China’s corporate sector should follow this trend. According corporate sector needs to discover the abatement opportunities that are technical and economically viable, mobilise capital and collaborate with policy makers and other 40 The WWF / CDP, the 3% solution report for the US for example distinguishes energy efficiency improvements through technology improvements, energy efficiency through management and behaviour changes and increased use of low-carbon energy as the major levers towards low carbon pathways. stakeholders in a joint effort. 21 It’s time to peak It’s time to peak 22 4 Feasible and often profitable 3.3 Taking on the challenge The above analysis shows that the corporate community (excluding utilities) in China should take on annual emissions intensity reduction targets for their combined scope 1 and 2 emissions of typically 1.7 – 4.6% per year to bring China on a deep Feasible and often profitable 4 In Chapter 3, we have drawn possible low carbon pathways in China and developed the emission trajectories by sector from now until 2050. Building on other studies40, four major approaches, outlined in Figure 7 can be distinguished as viable and often profitable options in achieving deep carbon emissions reductions. decarbonisation pathway. China’s power sector in its turn should start reducing the emissions intensity of electricity production with as much as 8% per year to reach a very low carbon power mix towards the middle of this century. The generic highlevel sector indicators derived in this chapter provide a good marker for the typical emissions intensity targets that companies active in the sectors identified would need to take on to bring China on a 2°C pathway. They can be used as a starting point for China’s corporate sector to derive company specific and absolute greenhouse gas reduction targets that take into account more specific information such as the expected growth of the company, the type of production processes used, the status of the technology used in comparison with the sector etc. Adding such company specific information is important in order to derive realistic and achievable company targets. Ambitious GHG reduction targets are certainly challenging to achieve, but the technologies are there to make it happen and taking on such targets often makes a lot Management and behaviour change Target setting Employee engagement programs Robust energy management systems Energy efficiency through technological change Use of best available proces technologies Motor,steam and HVAC systems Passive commercial buildings Increase use of low carbon energy Maximize on-site renewable use Demand side management Bio-tased fuels Other low carbon resource options Increased use secondary materials Dematerialization Optimal waste management of good business sense as we show in the next chapter. 4. Feasible and often profitable 4.1 Routes towards low carbon emissions The specific technologies required to achieve the deep decarbonisation for the corporate sector that is needed to bring China on a 2°C compatible pathway vary from sector to sector and even from company to company. Figure 7 Options for low carbon pathways 1. Management and behaviour change. This part of the potential is instrumental to the other three and can be achieved without doing any All business activities will be influenced if China follows a low carbon pathway. The significant investments. Securing buy-in and support from senior management Chinese corporate sector will need to respond quickly and proactively to mitigate can help putting low carbon business development on the agenda and enforce business risks and to grasp the business opportunities that arise from the challenge. certain changes across the business organisation. Global business leaders’ It is time to move ahead of the curve by setting ambitious targets as outlined in the show an increasing awareness in recent years. More and more companies previous chapter and to develop the related strategies to reach such targets. There have started to monitor their energy use and emissions and set targets to will be investments required, but also benefits associated if done in the right way. The reduce them. China’s corporate sector should follow this trend. According corporate sector needs to discover the abatement opportunities that are technical and economically viable, mobilise capital and collaborate with policy makers and other 40 The WWF / CDP, the 3% solution report for the US for example distinguishes energy efficiency improvements through technology improvements, energy efficiency through management and behaviour changes and increased use of low-carbon energy as the major levers towards low carbon pathways. stakeholders in a joint effort. 21 It’s time to peak It’s time to peak 22 4 Feasible and often profitable Feasible and often profitable 4 to a recent CDP report, 71% of the 45 companies responding to the annual 3. Renewable energy options. To increase the overall use of low carbon survey to the 100 largest Chinese companies have an individual or sub- energy in China, the power sector is key. Low carbon scenarios for China all set of the Board or other committee appointed in charge of climate change foresee and target a power mix for China towards the middle of the century matters and the corresponding risks and opportunities. However, only 16% that is almost fully decarbonised. McKinsey’s 2030 abatement scenario of the companies set targets for emissions reductions and only two of them projects already in 2030 a coal share of only 34% in China’s power generation 41 disclosed absolute targets with details . A similar pattern arises from the We with the remainder coming from lower carbon sources such as gas (8%), Mean Business initiative report where solid conclusions on China are difficult hydro (19%), wind (12%), nuclear (16%) and solar (18%)42. 2050 low carbon to draw due to the lack of companies disclosing targets. These percentages scenarios such as those by LBLN, WWF, the IEA and ERI, all project a mix should go up to much higher levels in order for China’s corporate sector to of various renewable resource in China’s power generation in 2050. Although fulfil the potentials as outlined below. Only in companies where energy and the level of influence of the non-utility corporate sector on the development GHG emission performance targets are part of the corporate culture, there of the large scale power production is limited, there is still a role the non- will be a chance of energy efficient operational practices (switching off lights, utility corporate sector can play. Deploying on-site renewable energy, such as paying attention to energy leaks, energy monitoring) being fully embraced solar panels on the roofs of offices and warehouses and urban wind turbines by the organisation, which is of the most cost-effective ways to tap the low cannot only reduce carbon emissions, but also combat inflated energy prices hanging fruit in terms of energy efficiency improvements that is present in or increasing uncertainty about energy supply. In fact it is a development that most companies. already takes place. Renewable power has been increasingly deployed in Asia 2. Energy efficiency through technological change. Energy efficiency and emerging economies. Asia as a whole deployed more than half of global has for some time been called the world’s hidden fuel, but is recently is more solar (photovoltaic) PV additions in 2013, with China being the leader43. Via often referred to as the world’s first fuel. Retrofitting existing technology and purchase agreements of renewable energy, corporates can also reduce their consistently applying the best available new technology can lead to significant scope 2 emissions, thereby putting an upward pressure on the deployment of energy savings. All 2°C scenarios for China foresee a pivotal role for energy renewable energy in China. Last but not least, corporates can play a role in efficiency for both the industrial and services sectors in China. In industry, improving the efficiency of their electricity use and in electricity demand side cross-cutting technologies and measures such as efficient motor systems, management, helping to stabilise a grid with an increasing share of fluctuating electronic control systems, as well as reduced air and steam leaks can help to renewable energy. optimise performance of industrial processes and improve plant efficiency cost- 4. Other low carbon options. Other options for the corporate sector in effectively with both energy savings and emissions benefits. Deployment of China to reduce emissions is an increased use of secondary materials (such best available process specific technology such as best practice cement and a recycled steel and aluminium), and better re-use of waste streams. Outside steel technology can further derive down emissions. In building, optimisation of the scope 1 and 2 emissions, corporates can reduce their scope 3 emissions heating, ventilation and air conditioning (HVAC) systems, use of efficient Light by reducing transport, and business travel. Via their products, industry also Emitting Diode (LED) lights and the construction of passive or zero energy plays an important role in driving down consumer emissions. Examples buildings can drive down emissions while the use of the most energy efficient include low emissions cars, energy monitoring equipment for households etc. appliance and electric equipment can help to reduce the effect of the increasing Integrative product design can help to ensure a better recyclability of materials appliance use in the service sector. Businesses can lead the way in setting and prolonged durability to reduce material demand thereby driving down ambitious energy efficiency standards that can serve as benchmarks for the emissions. industry. In the longer term, innovative new processes will be needed to align Apart from making changes inside their own operations, companies can actively to a 2°C pathway, including for example low carbon steel making technologies, engage external stakeholders within their customers and suppliers and beyond policy large scale production of bio-based chemicals etc. It is essential that industry makers, business association and NGO to create wider impact. and governments work together to achieve this. 41 CDP, 2014 China 100 Climate Change Report 42 McKinsey, China’s green revolution, prioritising technologies to achieve energy and environmental sustainability, unknown year 43 23 It’s time to peak IEA, 2014, Energy Technology Perspectives It’s time to peak 24 4 Feasible and often profitable Feasible and often profitable 4 to a recent CDP report, 71% of the 45 companies responding to the annual 3. Renewable energy options. To increase the overall use of low carbon survey to the 100 largest Chinese companies have an individual or sub- energy in China, the power sector is key. Low carbon scenarios for China all set of the Board or other committee appointed in charge of climate change foresee and target a power mix for China towards the middle of the century matters and the corresponding risks and opportunities. However, only 16% that is almost fully decarbonised. McKinsey’s 2030 abatement scenario of the companies set targets for emissions reductions and only two of them projects already in 2030 a coal share of only 34% in China’s power generation 41 disclosed absolute targets with details . A similar pattern arises from the We with the remainder coming from lower carbon sources such as gas (8%), Mean Business initiative report where solid conclusions on China are difficult hydro (19%), wind (12%), nuclear (16%) and solar (18%)42. 2050 low carbon to draw due to the lack of companies disclosing targets. These percentages scenarios such as those by LBLN, WWF, the IEA and ERI, all project a mix should go up to much higher levels in order for China’s corporate sector to of various renewable resource in China’s power generation in 2050. Although fulfil the potentials as outlined below. Only in companies where energy and the level of influence of the non-utility corporate sector on the development GHG emission performance targets are part of the corporate culture, there of the large scale power production is limited, there is still a role the non- will be a chance of energy efficient operational practices (switching off lights, utility corporate sector can play. Deploying on-site renewable energy, such as paying attention to energy leaks, energy monitoring) being fully embraced solar panels on the roofs of offices and warehouses and urban wind turbines by the organisation, which is of the most cost-effective ways to tap the low cannot only reduce carbon emissions, but also combat inflated energy prices hanging fruit in terms of energy efficiency improvements that is present in or increasing uncertainty about energy supply. In fact it is a development that most companies. already takes place. Renewable power has been increasingly deployed in Asia 2. Energy efficiency through technological change. Energy efficiency and emerging economies. Asia as a whole deployed more than half of global has for some time been called the world’s hidden fuel, but is recently is more solar (photovoltaic) PV additions in 2013, with China being the leader43. Via often referred to as the world’s first fuel. Retrofitting existing technology and purchase agreements of renewable energy, corporates can also reduce their consistently applying the best available new technology can lead to significant scope 2 emissions, thereby putting an upward pressure on the deployment of energy savings. All 2°C scenarios for China foresee a pivotal role for energy renewable energy in China. Last but not least, corporates can play a role in efficiency for both the industrial and services sectors in China. In industry, improving the efficiency of their electricity use and in electricity demand side cross-cutting technologies and measures such as efficient motor systems, management, helping to stabilise a grid with an increasing share of fluctuating electronic control systems, as well as reduced air and steam leaks can help to renewable energy. optimise performance of industrial processes and improve plant efficiency cost- 4. Other low carbon options. Other options for the corporate sector in effectively with both energy savings and emissions benefits. Deployment of China to reduce emissions is an increased use of secondary materials (such best available process specific technology such as best practice cement and a recycled steel and aluminium), and better re-use of waste streams. Outside steel technology can further derive down emissions. In building, optimisation of the scope 1 and 2 emissions, corporates can reduce their scope 3 emissions heating, ventilation and air conditioning (HVAC) systems, use of efficient Light by reducing transport, and business travel. Via their products, industry also Emitting Diode (LED) lights and the construction of passive or zero energy plays an important role in driving down consumer emissions. Examples buildings can drive down emissions while the use of the most energy efficient include low emissions cars, energy monitoring equipment for households etc. appliance and electric equipment can help to reduce the effect of the increasing Integrative product design can help to ensure a better recyclability of materials appliance use in the service sector. Businesses can lead the way in setting and prolonged durability to reduce material demand thereby driving down ambitious energy efficiency standards that can serve as benchmarks for the emissions. industry. In the longer term, innovative new processes will be needed to align Apart from making changes inside their own operations, companies can actively to a 2°C pathway, including for example low carbon steel making technologies, engage external stakeholders within their customers and suppliers and beyond policy large scale production of bio-based chemicals etc. It is essential that industry makers, business association and NGO to create wider impact. and governments work together to achieve this. 41 CDP, 2014 China 100 Climate Change Report 42 McKinsey, China’s green revolution, prioritising technologies to achieve energy and environmental sustainability, unknown year 43 23 It’s time to peak IEA, 2014, Energy Technology Perspectives It’s time to peak 24 4 Feasible and often profitable Feasible and often profitable 4.2 Cost-effectiveness pursuing. Investment on renewable energy and energy efficiency technology upgrade therefore sometimes still need support if their market shares are to be Low carbon actions are available but in many cases require upfront investment. increased. Additional enabling policies are needed to address issues associated. This is a challenge that stops companies potentially from implementing low To tackle opportunity cost, cheap financing specifically tailored to energy saving carbon measures. However, there is increasing evidence that companies taking measures could help increase the attractiveness of abatement measures. up the challenge are in fact better off compared to those not taking action. Many Furthermore, as market growth stabilised, their profit focus evolves to embrace the renewable technologies have substantially advanced in performance and cost. benefits of eliminating system loses. In the long term, carbon pricing can support A growing number of renewable energy technologies have achieved a level of the adoption of low GHG energy technologies. technical and economic maturity to enable deployment at significant scale. For example, improvements in photovoltaic (PV) technologies and manufacturing 4.3 Case studies of companies leading the way processes, along with changed market conditions (i.e., manufacturing capacity exceeding demand) and reduced non-hardware costs, have substantially reduced 44 PV costs and prices . Low carbon investment can produce high returns. Depending on the sector and the scale of the investment, the internal return rate (IRR) on low carbon projects 45 can be as high as 20% . In China, such rates (between 10% and 20%) are for example confirmed for small scale projects (under 30KW) of solar panels installed on roofs based on internal Ecofys analysis. Investment data shows that 79% of the US companies in the S&P 500 that report to CDP earn more from investments 46 aimed at reducing carbon emissions than on their overall capital expenditure . The same analysis shows that deep decarbonisation can be achieved if the US corporate sector would devote about 3% to 4% of its capital expenditures to emission reduction measures. The McKinsey cost curves for China estimate that achieving a low carbon development scenario for China will overall require a substantial incremental carbon investment of up to 150-200 billion Euro per year. “Yingli is committed to transforming cuttingedge technologies into high-performance products and to providing affordable renewable energy for people. While pursuing this target, we have been constantly reducing energy consumption and GHG emissions in production and operation in order to provide GREENER and CLEANER solar electricity for everyone.” - Mr. Liansheng Miao, Chairman and CEO The following case studies give good examples of emissions reduction targets by some key Chinese companies. Yingli to provide affordable green electricity Yingli’s efforts on energy savings and emissions reductions are strongly supported by the company’s leadership with the vision to promote the healthy development of the solar manufacturing industry. Yingli is the first company in China to have a Chief Climate Change Officer. They have established a Committee on Integrated Utilisation of Resources to manage projects on energy efficiency and clean productions. As the first of WWF Climate Savers in China, Yingli sets a good example of making climate strategy and ambitious targets to reduce GHG emissions from 2010 to 2015. For each megawatt of PV module produced, Yingli is committed to: • • over the lifetime, with another third being available at only low to moderate net costs over their lifetime. For the corporate sectors, the McKinsey analysis show expanding its capital build up in commercial buildings, power plants and industrial facilities. Given the lifetime of such capital stock additions, it is essential to embark on the decarbonisation pathway sooner rather than later. Companies still face internal hurdles and have to compete with other projects to raise capital. The general assumption by the management of the corporate sector is that by investing in energy efficiency or low carbon energy, the companies will either face a higher opportunity cost of investment or low return which is not worth 44 Climate Change 2014, Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlomer, C. von Stechow, T. Zwickel and J.C. Minx (eds.)]. Cambridge University Press,Cambridge, United Kingdom and New York, NY, USA. 45 The climate has changed, report by the We mean Business Coalition (www.wemeanbusinesscoalation.org), 2014 46 WWF and CPD, 2013, the 3% Solution, driving profits through carbon reductions 7% cut of emissions from purchased goods and services (Scope 3 emissions); even more positive shares of cost-effective savings. At the same time though, the window of opportunity is closing rapidly. China is still in the middle of rapidly 13% cut of direct emissions and indirect emissions from consuming power and heat (Scope 1 and 2); Approximately one third of those come with an overall positive economic return 25 It’s time to peak 4 • “Lenovo is dedicated to reducing our global carbon footprint. We have developed a comprehensive strategy to address all aspects of our business, set aggressive objectives and targets, and we are measuring our performance against each objective and target to insure that we stay on track“ Mr. Yuanqing Yang, CEO 10% cut of emissions intensity from upstream transportation (Scope 3 emissions); Yingli is also the first company in China to pledge a renewable electricity target. By 2015, at least 4% of the electricity consumption will come from renewable sources, particularly from solar. In 2013, Yingli already managed to go beyond all of the targets that are mentioned above. Lenovo aims for zero emissions Lenovo is committed to “minimise its climate impact” and acknowledges the need to reduce GHG emissions from its business activities worldwide. Governed by the Climate Change Policy47, Lenovo has been reporting its GHG emissions from 2008 and successfully reducing its total emissions by setting clear and measureable targets, including getting rid of all scope 1 GHG emissions by 2011, cut scope 2 emissions step by step, and reduce the emissions from supply chain and products It’s time to peak 26 4 Feasible and often profitable Feasible and often profitable 4.2 Cost-effectiveness pursuing. Investment on renewable energy and energy efficiency technology upgrade therefore sometimes still need support if their market shares are to be Low carbon actions are available but in many cases require upfront investment. increased. Additional enabling policies are needed to address issues associated. This is a challenge that stops companies potentially from implementing low To tackle opportunity cost, cheap financing specifically tailored to energy saving carbon measures. However, there is increasing evidence that companies taking measures could help increase the attractiveness of abatement measures. up the challenge are in fact better off compared to those not taking action. Many Furthermore, as market growth stabilised, their profit focus evolves to embrace the renewable technologies have substantially advanced in performance and cost. benefits of eliminating system loses. In the long term, carbon pricing can support A growing number of renewable energy technologies have achieved a level of the adoption of low GHG energy technologies. technical and economic maturity to enable deployment at significant scale. For example, improvements in photovoltaic (PV) technologies and manufacturing 4.3 Case studies of companies leading the way processes, along with changed market conditions (i.e., manufacturing capacity exceeding demand) and reduced non-hardware costs, have substantially reduced 44 PV costs and prices . Low carbon investment can produce high returns. Depending on the sector and the scale of the investment, the internal return rate (IRR) on low carbon projects 45 can be as high as 20% . In China, such rates (between 10% and 20%) are for example confirmed for small scale projects (under 30KW) of solar panels installed on roofs based on internal Ecofys analysis. Investment data shows that 79% of the US companies in the S&P 500 that report to CDP earn more from investments 46 aimed at reducing carbon emissions than on their overall capital expenditure . The same analysis shows that deep decarbonisation can be achieved if the US corporate sector would devote about 3% to 4% of its capital expenditures to emission reduction measures. The McKinsey cost curves for China estimate that achieving a low carbon development scenario for China will overall require a substantial incremental carbon investment of up to 150-200 billion Euro per year. “Yingli is committed to transforming cuttingedge technologies into high-performance products and to providing affordable renewable energy for people. While pursuing this target, we have been constantly reducing energy consumption and GHG emissions in production and operation in order to provide GREENER and CLEANER solar electricity for everyone.” - Mr. Liansheng Miao, Chairman and CEO The following case studies give good examples of emissions reduction targets by some key Chinese companies. Yingli to provide affordable green electricity Yingli’s efforts on energy savings and emissions reductions are strongly supported by the company’s leadership with the vision to promote the healthy development of the solar manufacturing industry. Yingli is the first company in China to have a Chief Climate Change Officer. They have established a Committee on Integrated Utilisation of Resources to manage projects on energy efficiency and clean productions. As the first of WWF Climate Savers in China, Yingli sets a good example of making climate strategy and ambitious targets to reduce GHG emissions from 2010 to 2015. For each megawatt of PV module produced, Yingli is committed to: • • over the lifetime, with another third being available at only low to moderate net costs over their lifetime. For the corporate sectors, the McKinsey analysis show expanding its capital build up in commercial buildings, power plants and industrial facilities. Given the lifetime of such capital stock additions, it is essential to embark on the decarbonisation pathway sooner rather than later. Companies still face internal hurdles and have to compete with other projects to raise capital. The general assumption by the management of the corporate sector is that by investing in energy efficiency or low carbon energy, the companies will either face a higher opportunity cost of investment or low return which is not worth 44 Climate Change 2014, Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlomer, C. von Stechow, T. Zwickel and J.C. Minx (eds.)]. Cambridge University Press,Cambridge, United Kingdom and New York, NY, USA. 45 The climate has changed, report by the We mean Business Coalition (www.wemeanbusinesscoalation.org), 2014 46 WWF and CPD, 2013, the 3% Solution, driving profits through carbon reductions 7% cut of emissions from purchased goods and services (Scope 3 emissions); even more positive shares of cost-effective savings. At the same time though, the window of opportunity is closing rapidly. China is still in the middle of rapidly 13% cut of direct emissions and indirect emissions from consuming power and heat (Scope 1 and 2); Approximately one third of those come with an overall positive economic return 25 It’s time to peak 4 • “Lenovo is dedicated to reducing our global carbon footprint. We have developed a comprehensive strategy to address all aspects of our business, set aggressive objectives and targets, and we are measuring our performance against each objective and target to insure that we stay on track“ Mr. Yuanqing Yang, CEO 10% cut of emissions intensity from upstream transportation (Scope 3 emissions); Yingli is also the first company in China to pledge a renewable electricity target. By 2015, at least 4% of the electricity consumption will come from renewable sources, particularly from solar. In 2013, Yingli already managed to go beyond all of the targets that are mentioned above. Lenovo aims for zero emissions Lenovo is committed to “minimise its climate impact” and acknowledges the need to reduce GHG emissions from its business activities worldwide. Governed by the Climate Change Policy47, Lenovo has been reporting its GHG emissions from 2008 and successfully reducing its total emissions by setting clear and measureable targets, including getting rid of all scope 1 GHG emissions by 2011, cut scope 2 emissions step by step, and reduce the emissions from supply chain and products It’s time to peak 26 4 Feasible and often profitable Feasible and often profitable as well as the emissions from process significantly. By 31st March 2011, Lenovo has realised zero emissions from scope 1 carbon sources, and reduced its scope 2 4 WWF Climate Solvers49 develop smart products and services to realise a transition towards a 100% renewable energy future globally emissions by 10% compared to 2009 level. Lenovo has consecutive targets in the following years, which will potentially lead to a total of 20% GHG emission reduction Since 2011, in total fourteen Chinese innovative low carbon solutions have been from 2009 to 2020. Lenovo has implemented over 70 operational energy efficiency awarded in the WWF Climate Solvers project. Examples include . projects, such as installation of low energy lighting, energy efficiency improvement to HVAC system and data centres, and application of solar PV and solar hot water • system in some office buildings. Lenovo is taking actions to green its own business storage option for the renewable energy market so that it can grow even and its suppliers, and build the blueprint for low carbon production. faster, • Vanke to build green houses “As the largest residential developer in the world, we feel it’s our responsibility to lead GHG emissions reduction in the industry. We believe only when leading companies take more responsibilities for emissions reduction can the industry improve its carbon footprint as a whole,” - Mr. Mao Daqing, Vice President A zinc-bromine battery developed by ZBEST that provides a viable energy A smart meter developed by San Franco Electronic Co., Ltd. that enables big reductions in power consumption for its users Vanke has put the energy saving and emissions reduction as one of the core issues • for the company. It started to build the company’s GHG inventory and will report A photovoltaic ceramic tile developed by Zhejiang Heda Solar Technology Company that allows integration of solar energy in building materials every year from 2013. As a first step, Vanke measured its carbon emissions sources • A new furnace developed by Miluo Xinxiang Carbon Products Co., Ltd. that in Scope 1,2 and 3. The results show that Vanke emitted 18.7 Mt CO2 equivalent allows for a significantly more energy efficient production process for the in 2012. 99.92% of it comes from Scope 3 emissions. Vanke sets specific GHG production of graphite materials emissions reduction targets of 2018 with focus on improving the environmental quality of its real estate products and removing the carbon footprint of building materials th These are examples of new, innovative products developed by the Chinese procured, using 2012 as the base year. On November 13 2014, Vanke became entrepreneurial community that can help their costumers worldwide to significantly WWF’s second Climate Savers company in China. Vanke commits for the period 2013 reduce their energy consumption and to make a switch towards a 100% renewable to 2018 to: energy future. In order for more Chinese innovations like these to become global success stories China need to strengthen domestic demand for innovative solutions • • • 48 Develop at least 49 million square metres industrial housing products to cut by increased climate ambitions, Chinese corporate players and venture capitalists 1.46 Mt CO2 equivalent emissions from upstream sectors, including 1.08 Mt should become more active in mergers and acquisitions in this space compared to CO2 equivalent carbon sequestration; leading countries. This way China can more fully take economic advantage of being Maintain the growth rate of 3-star green new buildings by at least 15% to save a ‘Strong commercialiser’ of solutions, for example already having the world’s most about 2.56 Mt CO2 equivalent emissions; mature initial public offering (IPO) market for expansion capital to the cleantech Promote renewable energy in residential buildings, ensure at least 560,000 sector50. square metres of new buildings with PV solar water heating systems to save another 1.28 Mt CO2 equivalent emissions; • Increase the usage of renewable electricity for self-used office buildings to 27%, and to install solar PV power generation systems on the self-used office buildings. 47 48 Lenovo’s climate change policy, effective from August 6th 2010, http://www.lenovo.com/social_responsibility/us/en/climate_policy.html Model residential building with integrated energy and resource use 49 The WWF Climate Solver Project is an award designed to identify and promote innovative low carbon solutions developed by small to medium sized enterprises (SMEs), with the vision to realise the low carbon transition around the world. Built upon a multi-stakeholder platform, the project aims to support winning SMEs/innovations through increased financial access, market penetration and media exposure. Climate Solver was initiated by WWF Sweden in 2008 and was introduced to China in 2011. So far, fourteen Chinese innovative low carbon solutions were awarded covering renewable energy utilisation, energy efficiency improvement and conservation, etc. 50 27 It’s time to peak WWF/Cleantech Group: Global Cleantech Innovation Index 2014 – Nurturing Tomorrow’s Transformative Entrepreneurs It’s time to peak 28 4 Feasible and often profitable Feasible and often profitable as well as the emissions from process significantly. By 31st March 2011, Lenovo has realised zero emissions from scope 1 carbon sources, and reduced its scope 2 4 WWF Climate Solvers49 develop smart products and services to realise a transition towards a 100% renewable energy future globally emissions by 10% compared to 2009 level. Lenovo has consecutive targets in the following years, which will potentially lead to a total of 20% GHG emission reduction Since 2011, in total fourteen Chinese innovative low carbon solutions have been from 2009 to 2020. Lenovo has implemented over 70 operational energy efficiency awarded in the WWF Climate Solvers project. Examples include . projects, such as installation of low energy lighting, energy efficiency improvement to HVAC system and data centres, and application of solar PV and solar hot water • system in some office buildings. Lenovo is taking actions to green its own business storage option for the renewable energy market so that it can grow even and its suppliers, and build the blueprint for low carbon production. faster, • Vanke to build green houses “As the largest residential developer in the world, we feel it’s our responsibility to lead GHG emissions reduction in the industry. We believe only when leading companies take more responsibilities for emissions reduction can the industry improve its carbon footprint as a whole,” - Mr. Mao Daqing, Vice President A zinc-bromine battery developed by ZBEST that provides a viable energy A smart meter developed by San Franco Electronic Co., Ltd. that enables big reductions in power consumption for its users Vanke has put the energy saving and emissions reduction as one of the core issues • for the company. It started to build the company’s GHG inventory and will report A photovoltaic ceramic tile developed by Zhejiang Heda Solar Technology Company that allows integration of solar energy in building materials every year from 2013. As a first step, Vanke measured its carbon emissions sources • A new furnace developed by Miluo Xinxiang Carbon Products Co., Ltd. that in Scope 1,2 and 3. The results show that Vanke emitted 18.7 Mt CO2 equivalent allows for a significantly more energy efficient production process for the in 2012. 99.92% of it comes from Scope 3 emissions. Vanke sets specific GHG production of graphite materials emissions reduction targets of 2018 with focus on improving the environmental quality of its real estate products and removing the carbon footprint of building materials th These are examples of new, innovative products developed by the Chinese procured, using 2012 as the base year. On November 13 2014, Vanke became entrepreneurial community that can help their costumers worldwide to significantly WWF’s second Climate Savers company in China. Vanke commits for the period 2013 reduce their energy consumption and to make a switch towards a 100% renewable to 2018 to: energy future. In order for more Chinese innovations like these to become global success stories China need to strengthen domestic demand for innovative solutions • • • 48 Develop at least 49 million square metres industrial housing products to cut by increased climate ambitions, Chinese corporate players and venture capitalists 1.46 Mt CO2 equivalent emissions from upstream sectors, including 1.08 Mt should become more active in mergers and acquisitions in this space compared to CO2 equivalent carbon sequestration; leading countries. This way China can more fully take economic advantage of being Maintain the growth rate of 3-star green new buildings by at least 15% to save a ‘Strong commercialiser’ of solutions, for example already having the world’s most about 2.56 Mt CO2 equivalent emissions; mature initial public offering (IPO) market for expansion capital to the cleantech Promote renewable energy in residential buildings, ensure at least 560,000 sector50. square metres of new buildings with PV solar water heating systems to save another 1.28 Mt CO2 equivalent emissions; • Increase the usage of renewable electricity for self-used office buildings to 27%, and to install solar PV power generation systems on the self-used office buildings. 47 48 Lenovo’s climate change policy, effective from August 6th 2010, http://www.lenovo.com/social_responsibility/us/en/climate_policy.html Model residential building with integrated energy and resource use 49 The WWF Climate Solver Project is an award designed to identify and promote innovative low carbon solutions developed by small to medium sized enterprises (SMEs), with the vision to realise the low carbon transition around the world. Built upon a multi-stakeholder platform, the project aims to support winning SMEs/innovations through increased financial access, market penetration and media exposure. Climate Solver was initiated by WWF Sweden in 2008 and was introduced to China in 2011. So far, fourteen Chinese innovative low carbon solutions were awarded covering renewable energy utilisation, energy efficiency improvement and conservation, etc. 50 27 It’s time to peak WWF/Cleantech Group: Global Cleantech Innovation Index 2014 – Nurturing Tomorrow’s Transformative Entrepreneurs It’s time to peak 28 WWF 4 Climate Savers 5 It is time to act now Feasible and often profitable 5. It is time to act now http://www.wwfchina.org/climatesaver/ Industry and business will be seriously affected by rising temperature levels. More extreme weather effects, issues with water supply, disruptions of supply chains can all be significant risk factors for China’s corporate sector resulting from climate change. About Climate Savers programme both as significant contributor to the emissions and as provider of the innovative 1999 climate friendly solutions required to make the low carbon transition happen. It is time WWF United States took the initiative. Johnson-Johnson, IBM and Polarorid were the first member companies. over 100 million tons annual emissions for the Chinese corporate sector to act and to contribute to China’s ambition to have a peak in its emissions rather sooner than later in order to achieve the reductions Up to 2011 required in the rest of the century. WWF Climate Savers decrease by 1.7% to 4.6%, depending on the sector, to stay on track for a low carbon future.Only then will China’s emission peak in the coming decade and only then A global programme that positions companies as leaders of the low-carbon economy. emissions will decline towards the middle of this century, in line with what global scientists think is required for China to stay within a 2°C world. The specific actions and technologies required to achieve a deep decarbonisation pathway for China’s corporate sector will be different for all, but there are opportunities all around, and the evidence is building up that those taking action are better off compared to those enterprises from resource consumption. Improved market competitiveness can be an internal drive for companies to carry out emission reduction measures. The external incentive for low carbon development is China’s ambitious emissions peak target and decarbonisation pathway. It’s time for China’s corporate sector to commit to ambitious, yet realistic 2°C compatible targets. Companies embracing such targets can make the difference and they can profit from doing so. It is time to act now and follow the likes of companies like Yingli, Vanke and Lenovo. Member companies take on two commitments to show their leadership in climate change To become the best in class in reducing greenhouse gas emissions. To influence market or policy developments by promoting their vision and achievements. Take the responsibility and set ambitious targets to meet China’s decarbonisation challenge! The programme also acts as a sounding board 29 It’s time to peak The Climate Savers members companies had reduced GHG emissions by over 100 million tons, which is equivalent to the annual emissions of Austria. Austria Up to 2014 WWF Climate Savers programme had developed in 13 countries, including Netherlands, France, The USA, Sweden, Switzerland, Italy, Mexico, Austria, China, Japan, Denmark, Belgium and Canada. Sweden Netherlands Denmark France Belgium Switzerland Austria Italy 中国 China Japan 日本 美国 The USA 加拿大 Canada 墨西哥 Mexico 2013 lagging behind. Low carbon development will help decoupling the economic performance of 1998 WWF Netherlands first proposed the concept of Climate Savers programme, stimulating top companies to reduce carbon emissions. At the same time, the corporate sector is also pivotal in combatting climate change, This report shows that the emission intensity of the Chinese corporate sector should Milestones by providing valuable guidance to companies seeking to shrink their carbon footprint while growing their business and enhancing brand equity. Yingli Green Energy, the world’s leading PV module manufacturer, became the first Chinese company to join Climate Savers. 2014 Vanke Co Ltd, the world’s largest real estate developer, joined Climate Savers programme. Up to now 30 leading international companies have joined Climate Savers programme. Current Climate Savers member companies are: WWF 4 Climate Savers 5 It is time to act now Feasible and often profitable 5. It is time to act now http://www.wwfchina.org/climatesaver/ Industry and business will be seriously affected by rising temperature levels. More extreme weather effects, issues with water supply, disruptions of supply chains can all be significant risk factors for China’s corporate sector resulting from climate change. About Climate Savers programme both as significant contributor to the emissions and as provider of the innovative 1999 climate friendly solutions required to make the low carbon transition happen. It is time WWF United States took the initiative. Johnson-Johnson, IBM and Polarorid were the first member companies. over 100 million tons annual emissions for the Chinese corporate sector to act and to contribute to China’s ambition to have a peak in its emissions rather sooner than later in order to achieve the reductions Up to 2011 required in the rest of the century. WWF Climate Savers decrease by 1.7% to 4.6%, depending on the sector, to stay on track for a low carbon future.Only then will China’s emission peak in the coming decade and only then A global programme that positions companies as leaders of the low-carbon economy. emissions will decline towards the middle of this century, in line with what global scientists think is required for China to stay within a 2°C world. The specific actions and technologies required to achieve a deep decarbonisation pathway for China’s corporate sector will be different for all, but there are opportunities all around, and the evidence is building up that those taking action are better off compared to those enterprises from resource consumption. Improved market competitiveness can be an internal drive for companies to carry out emission reduction measures. The external incentive for low carbon development is China’s ambitious emissions peak target and decarbonisation pathway. It’s time for China’s corporate sector to commit to ambitious, yet realistic 2°C compatible targets. Companies embracing such targets can make the difference and they can profit from doing so. It is time to act now and follow the likes of companies like Yingli, Vanke and Lenovo. Member companies take on two commitments to show their leadership in climate change To become the best in class in reducing greenhouse gas emissions. To influence market or policy developments by promoting their vision and achievements. Take the responsibility and set ambitious targets to meet China’s decarbonisation challenge! The programme also acts as a sounding board 29 It’s time to peak The Climate Savers members companies had reduced GHG emissions by over 100 million tons, which is equivalent to the annual emissions of Austria. Austria Up to 2014 WWF Climate Savers programme had developed in 13 countries, including Netherlands, France, The USA, Sweden, Switzerland, Italy, Mexico, Austria, China, Japan, Denmark, Belgium and Canada. Sweden Netherlands Denmark France Belgium Switzerland Austria Italy 中国 China Japan 日本 美国 The USA 加拿大 Canada 墨西哥 Mexico 2013 lagging behind. Low carbon development will help decoupling the economic performance of 1998 WWF Netherlands first proposed the concept of Climate Savers programme, stimulating top companies to reduce carbon emissions. At the same time, the corporate sector is also pivotal in combatting climate change, This report shows that the emission intensity of the Chinese corporate sector should Milestones by providing valuable guidance to companies seeking to shrink their carbon footprint while growing their business and enhancing brand equity. Yingli Green Energy, the world’s leading PV module manufacturer, became the first Chinese company to join Climate Savers. 2014 Vanke Co Ltd, the world’s largest real estate developer, joined Climate Savers programme. Up to now 30 leading international companies have joined Climate Savers programme. Current Climate Savers member companies are: 1 Introduction Introduction It’s time to peak RECYCLED 100 million tons 1 REPORT 2015 Up to 2011, The Climate Savers members companies had reduced GHG emissions by over 100 million tons. 1999 WWF Climate Savers is a global programme initiated in 1999, and it was launched in China in2009. 30 13 So far 30 leading international companies have become Climate Savers. To stop the degradation of the planet's natural environment and to build a future in which humans live in harmony with nature. www.wwfchina.org Why China’s corporate sector needs to set ambitious greenhouse gas reduction targets ®58.pic.com 欢迎关注WWF官方微信 © 1986 Panda Symbol WWF – World Wide Fund For Nature (Formerly World Wildlife Fund) ® “WWF” a WWF Registered 2 isIt’s time to peakTrademark. WWF, Avenue du Mont-Blanc, 1196 Gland, Switzerland – Tel. +41 22 364 9111 Fax +41 22 364 0332. For contact details and further information, please visit our international website at panda.org © National Geographic Stock / Mark Thiessen / WWF Why we are here It’s time to peak WWW.WWFCHINA.ORG WWF Climate Savers has teams in 13 countries. It’s time to peak 3