Posts

Financing Biodiversity

Financing Biodiversity

Biodiversity, which refers to the variety of life within an ecosystem, is crucial for the flourishing of all life on earth. We frequently draw upon nature for inspiration or new substances based on the characteristics of plants and animals. Diversity in genetic material also strengthens the resilience of the population against emerging threats of disease or climate change. The removal of certain organisms could have an unintended effect on the populations of other species that people depend on.

However, biodiversity is in danger of being neglected while climate change receives more attention. For instance, carbon offset programmes to mitigate climate change often involves the reforestation of a single species of trees[i], which is unable to provide the ecological functions of a forest ecosystem with many different species of trees. Human activities, such as the expanding demand for agricultural land, also continue to threaten natural habitats.

The need to balance climate change mitigation, human activity and biodiversity preservation is known as the triple challenge[ii]. Improvements or deteriorations to any of these three aspects can reverberate across to the others. It is therefore necessary to pay attention to the issues plaguing each of the three aspects.

In a series of articles, the Paia team will discuss the implications of biodiversity protection and loss for the private sector. This article will present an overview of biodiversity financing, while the second will lay out a potential framework with which the value of biodiversity can be better accounted for. The third article will cover means in which biodiversity can be viewed as an asset to promote conservation. Together, our articles will demonstrate why businesses today must consider the value of biodiversity alongside other ESG concerns.

 

The complexity of putting a dollar value on nature

Markets for climate financing have developed rapidly over the past few decades. While there is still a long road to go, there are liquid markets in many regions for the trading of carbon credits. The global Carbon Trade Exchange, the Shanghai Environment & Energy Exchange in China and Singapore’s upcoming Climate Impact X exchange are but some examples. The same cannot be said for markets in biodiversity, where financing solutions that seek to mitigate the impact of human development are scant. However, to ensure that efforts to improve biodiversity are self-sustaining and not dependent on continuous activism, such solutions are vital.

In this article, we will lay out:

1) Why biodiversity financing is more complex than carbon financing

2) Current solutions in biodiversity financing

3) Potential pitfalls in designing these financial instruments

 

Why is biodiversity financing more complex than climate financing?

Although the issues of climate change and biodiversity are very much intertwined, the complexity of linking financial instruments to biodiversity benchmarks is greater than for its climate change counterparts.

Firstly, the impact on biodiversity from human activities is often non-linear and unpredictable. Unlike climate change which can be modelled based on the level of carbon emissions, the interconnectedness of ecosystems often leads to cascading effects when their equilibriums are disturbed. The loss of certain species can lead to unpredictable, yet devastating consequences. Financing structures often need a quantified metric with which they can base the expected rate of return upon. It is hence also difficult to price in the negative externalities generated by firms. An inability to set the value of biodiversity in quantified terms hence hinders the development of financing solutions.

Secondly, biodiversity impact is more difficult to trade from one area to another, and similar offset programmes cannot be applied to seek out arbitrage across large distances. As the removal of organisms from one ecosystem will have implications on other species that depend on them, damage is highly localized and cannot be compensated for by interventions in another area.  Thus, unlike carbon emissions, biodiversity impact cannot be as easily mitigated through the application of the Coase Theorem[iii]. The Coase Theorem refers to the concept that efficient outcomes can be achieved through bargaining to reflect the true value of property rights. Carbon permits find a pareto efficient outcome through the trade of allowances to emit, made possible since the generation of 1kg of CO2 in, for example, the United Kingdom can be offset by the removal of 1kg of CO2 in, for example, China. This brings down the overall opportunity cost of reducing emissions. The highly localized nature of biodiversity impact does not allow for a similar system.

 

Current Solutions

Efforts to protect biodiversity in a self-sustaining way have sprung up. These complement regulatory action that require constant enforcement, such as poaching and logging bans.

Some areas of conservation apply the Coase Theorem to mitigate the impact of human activity on conservation. For example, farmers can be compensated for livestock loss from wild predators, preventing the farmers from retaliating. Compensation can be drawn from the tourism revenue generated by these predators, forming a self-sustaining loop. However, such schemes are often supplanted by assistance from the government or NGOs, indicating that the value of tourism is insufficient to support the costs of conservation.

In another example, the preservation of fisheries is now often facilitated by Individual Transfer Quotas (ITQs)[iv], which cap the number of fish that can be captured and allow fishermen to trade these ITQs. Hunting permits work in the same way, auctioning off the right to hunt a limited number of animals.

Other solutions combine carbon and biodiversity. Also, Australia’s Carbon + Biodiversity Pilot[v] rewards farmers who improve both climate and biodiversity performance. Under the pilot programme, farmers who plant native trees will receive payments for biodiversity outcomes, which adds on to payments from carbon abatement projects

 

Potential Pitfalls

While commendable for slowing the decline in biodiversity, these measures are often reliant on enforcement against illicit behaviour.

The solution involves the design of financial instruments that reframe biodiversity as an asset to the owners of the land, instead of a nice-to-have. An asset is a financial instrument that is expected to bring economic benefit. To place a value on biodiversity and pave the way for quantified incentives in its conservation, methods to determine the present value of the cash flows from biodiversity have to be constructed. This metaphor can be extended to the way in which assets are depreciated through use over time as well as impaired from improper use; the benefits brought about by biodiversity declines as resources are extracted and careless treatment leads to an unnecessary decline in value.

The Dasgupta Review[vi], a report commissioned by the UK government on the economics of biodiversity, suggests that nature be regarded as a portfolio of assets that has thus far been “mismanaged”. He advocates that the full impact of human activity should be demonstrated by the agglomeration of not only human and produced capital, but also natural capital Dasgupta also cautions against solely using a pricing strategy to resolve the tragedy of the commons issue, since the difficulty in determining nature’s value creates barriers against developing an optimal price. The tendency to underestimate the value of nature could hence give rise to overconsumption deemed efficient. In addition, having a price tag attached to the exploitation of nature could then remove the psychological barriers of people to do so, much in the same way that parents tend to be later in picking up their kids if a small fine is imposed[vii]. Finally, a system that seeks to allocate resources requires a robust system of property rights which may deprive indigenous communities of resouces they have traditionally relied on. The initial allocation of property rights may also strike some as being unfair, especially to those who believe that nature is a part of the commons and unowned by humanity. Yet, property rights are necessary for such a system because only property owners have an incentive to defend against exploitation, negating the Tragedy of the Commons.

Nonetheless, while it is important to realise that any pricing strategy would potentially undervalue the true contribution of nature to humanity, it is vital to start somewhere. These schemes can be tweaked and improved incrementally so that they tend towards a reflection of the true value of nature.

Biodiversity financing is complex, and current solutions have their pitfalls – but it has never been more essential for businesses to keep in view. In the next article, we will cover how businesses can consider the impact of such schemes and the conservation of biodiversity in general on their operations.

 

References:

[i] Is planting trees as good for the Earth as everyone says? – https://news.mongabay.com/2021/05/is-planting-trees-as-good-for-the-earth-as-everyone-says/
[ii] The Triple Challenge – WWF – https://www.wwf.org.uk/triple-challenge
[iii] George Stigler, the First Apostle of the “Coase Theorem”- https://link.springer.com/chapter/10.1057/978-1-137-56815-1_15
[iv] Ensuring individual transferable quotas benefit fisheries and the environment – https://oceans.ubc.ca/2019/03/22/ensuring-itq-benefits/
[v] Carbon + Biodiversity Pilot – https://www.agriculture.gov.au/ag-farm-food/natural-resources/landcare/sustaining-future-australian-farming/carbon-biodiversity-pilot
[vi] Final Report – The Economics of Biodiversity: The Dasgupta Review – https://www.gov.uk/government/publications/final-report-the-economics-of-biodiversity-the-dasgupta-review
[vii] A Fine Is A Price – https://rady.ucsd.edu/faculty/directory/gneezy/pub/docs/fine.pdf

Photo by Mark Stoop on Unsplash

Carbon Offsets and Credits Explained

Carbon Offsets and Credits, Explained

The Carbon Credits Ecosystem infographic

Figure 1: The Carbon Credit Ecosystem, by the Paia Team

The urgency of our planet’s rising temperatures cannot be understated, and more and more companies and governments have announced net-zero goals.

But as companies and governments conceptualise their net-zero roadmaps, they will unavoidably continue to generate emissions in the short-term. To offset these emissions, companies have turned their attention to the promise of carbon offsets and carbon credits, weaving them into their wider decarbonisation strategies.

So what are carbon offsets? What are carbon credits? And how do they work?

This article is part of a new explanatory series by the Paia team, where we will break down everything you need to know about the most current topics. Stay tuned for more.

 

What are carbon offsets?

Every carbon offset represents 1 tonne of reduced CO2 or its greenhouse gas (GHG) equivalent, that compensates for emissions made elsewhere.

By purchasing carbon offsets, anyone can finance a certified climate action project, and bring about a real reduction in emissions elsewhere in the world. After all, GHGs are released into the global atmosphere, so no matter where the reduction happens, the same positive benefit is achieved.

Carbon offsets are an exciting way to channel capital to much-needed causes, while we look for the solutions and technology we need for hard-to-reduce emissions.

 

“Imagine how expensive it is for an already state-of-the-art factory to reduce its emissions by 30% versus a dirty coal plant in the Ukraine to reduce a similar amount of emissions by installing upgraded, new equipment. Carbon offsets enable capital to reduce emissions in the most efficient manner possible. Carbon offsets support technology transfer, international development, jobs and exports for developed countries and so forth.” From Carbonfund.org[i]

 

Are carbon credits and carbon offsets the same thing?

Yes, and no. Every carbon credit, like every carbon offset, also represents one tonne of emissions reduction, so both terms tend to be used interchangeably. Think of it this way – carbon credits are verified certificates for a unit of emissions reduction or carbon removal, enabling carbon offsets to be bought and sold in a carbon marketplace[ii].

Carbon credits are referred to as tradeable instruments, and are certified by independent certification bodies. Every carbon credit is traceable and finite; once used to offset any organisation’s emissions, they are retired forever, and cannot be sold again.

 

What types of carbon offsets are there?

There are generally two types of carbon offsets – those that reduce emissions from existing or future operations (carbon avoidance), and those that remove existing carbon in the atmosphere (carbon removal).

Carbon avoidance projects commonly include renewable energy projects that enable the replacement of carbon-intensive fuel burning processes, such as wind farms, biomass energy, hydro electric dams, or biogas digesters.

 

Sichuan Rural Poor-Household Biogas Development Programme

In the province of Sichuan, coal and firewood burners in low-income households are being replaced with biogas digesters that recover methane from animal manure, as well as smoke-free cookstoves. By avoiding both the methane released by livestock, and carbon emissions from burning coal and firewood, this programme has the potential to save up to half of Switzerland’s annual emissions within its 28-year lifetime[iii].

Sichuan rural poor household biogas development programme

Carbon removal projects include both nature-based solutions such as mangrove restoration, where new trees planted sequester carbon from the surrounding air, and technological solutions such as enhanced mineralisation and direct air capture.

 

How are carbon offsets and credits audited?

Carbon offset programs issue, transfer, and retire carbon credits, so they act as standard setters for carbon credit quality[iv]. On platforms such as Verra, Gold Standard, and the Clean Development Mechanism (CDM), project developers must undergo a strict registration process, involving rigorous auditing processes.

To verify that offsets projects indeed result in real emissions reduction, these offsets programs require the help of independent auditors. These auditors rely on science-based calculations to estimate carbon stocks and flows.

Before registration, project developers must engage auditors to validate their project methodology. Once the project has begun operating, auditors must be engaged to routinely monitor, report, and verify (MRF) the emissions reductions once again.

 

What makes a reliable carbon offset and credit?

What should you consider before you buy a carbon offset, or finance an offsets project?

Additionality

Additionality simply means that the emissions reduction or removal must be additional to, or on top of, what would have happened without the carbon offset project. If the reductions would have happened anyway, the offset cannot be considered additional.

But this is quite hard to determine in practice. For a forest conservation project to be considered additional, project developers must show that the forest would have been otherwise harvested and cut down. For a renewable energy project involving the installation of a windfarm, the project developer must show that the farm would not have been built anyway because of existing government incentives.

Therefore, it is better to ask, “How likely is the project to be additional?”

Permanence

It may sometimes be difficult to guarantee that carbon captured will be kept out of the atmosphere forever. For example, a bushfire may consume trees planted in a reforestration project, suddenly releasing the carbon stored back into the air. More permanent carbon capture technologies are still undergoing research and development.

Leakage

Offsets projects should not accidentally encourage the “leakage” of emissions elsewhere. For example, protecting one area of the forest may lead to deforestation in unprotected areas, if this risk is not accounted for in project design. Such an outcome would negate any benefits from the offsets project.

Leakage also extends beyond emissions – causing social harm would also take away from any successfully reduced emissions. Offsets projects should ideally bring about co-benefits, such as improving the livelihoods of local communities through providing new jobs. They should not inadvertently cause damage, such as violating the indigenous rights of people living around the project area.

 

Where can you buy and sell carbon credits?

Financial transactions for carbon credits, once issued, are handled on carbon exchanges, or through brokers and retailers. Through these third parties, project developers may sell issued credits to interested buyers such as companies looking to offset their unavoidable emissions.

Credit buyers may choose to engage directly with project developers, at any point from methodology development, to after credits have been issued. Getting involved at earlier project stages enables credit buyers to understand the offsets project more deeply, and skipping third parties such as brokers or retailers also gives buyers access to lower prices.

For buyers interested in a range of readily available offsets, and saving time on engaging directly with project developers, third parties may be more suitable. Carbon exchanges – such as Climate Impact X (CIX), a global carbon exchange headquartered in Singapore – allow for quick transactions and large volumes of carbon credits. Brokers offer similar benefits, while helping buyers access more project information, though at higher costs. Retailers suit buyers looking to buy credits at smaller volumes[v].

 

How should carbon offsets fit into your decarbonisation strategy?

Companies should reduce the emissions wherever possible, and only offset unavoidable emissions.

Carbon offsets hold exciting potential to accelerate decarbonisation globally, by channelling funds to vital projects that reduce carbon and bring about co-benefits that may otherwise have lacked the resources to operate. Carbon offsets provide economic incentives to NGOs, governments, and communities to lower their GHG emissions, that may not otherwise have been present.

But carbon offsets have not always lived up to their credibility, resulting in accusations of greenwashing by buyers, and slowing progress on climate action.

So carbon offsets must be used responsibly. Companies should first have strong reduction plans, undertaking a comprehensive review of their emissions both internally and beyond their value chain. Carbon offsets should only be reserved for emissions that have high barriers to reduction, or where technology is currently lacking, and should be factored only into a company’s short-term strategy. In the long-term, a robust decarbonisation strategy should eventually result in negligible emissions, through measures such as flying less or investing in energy-efficient technology and processes.

 

References

[i] Is There a Difference Between Carbon Offsets and Carbon Credits?, Carbonfund.org – https://carbonfund.org/difference-carbon-offsets-carbon-credits/

[ii] What is a Carbon Offset?, Carbon Offset Guide – https://www.offsetguide.org/understanding-carbon-offsets/what-is-a-carbon-offset/

[iii] Sichuan Rural Poor-Household Biogas PoA, Gold Standard – https://www.goldstandard.org/projects/sichuan-rural-poor-household-biogas-poa

[iv] Carbon Offset Programs, Carbon Offset Guide – https://www.offsetguide.org/understanding-carbon-offsets/carbon-offset-programs/

[v] How to Acquire Carbon Credits, Carbon Offset Guide – https://www.offsetguide.org/understanding-carbon-offsets/how-to-acquire-carbon-offset-credits/

Carbon markets and climate policy - Opportunity in a decarbonising world

Carbon markets and climate policy – Turning Risk into opportunity in a decarbonising world

By Valerie Phua

At the 8th Singapore Dialogue on Sustainable World Resources, a range of perspectives across the public, private, and academic sectors converged into a key message: agribusiness and forestry must pivot towards sustainability to turn current risks into future opportunities.

In this article, Paia breaks down our key insights from the panel discussion.

 

Carbon credits will unlock decarbonisation opportunities in Southeast Asia

The tidal shift to a low carbon world has been palpable. With major corporations pledging their commitment to net-zero targets, carbon credits are gaining attention from investors and businesses alike.

 

What are carbon credits?

Carbon credits are verifiable and measurable emissions reductions from certified climate action projects. These projects reduce, remove or avoid greenhouse gas (GHG) emissions, in addition to multiple other benefits, eg. community empowerment, ecosystem protection, forest restoration, and reduced reliance on fossil fuels.

Carbon credits can be bought by companies, and provide a viable way for companies to offset unavoidable emissions in their net-zero transition. However, Paia recommends that carbon offsetting should always be employed in tandem with a range of other emissions reduction strategies.

 

The growing interest in carbon credits holds great opportunity for Southeast Asia. Being a global hotspot for blue carbon opportunities, but also a hotspot for deforestation risk, Southeast Asia’s carbon stores may offer the highest rate of return globally[i]. And the opportunity is perhaps greatest in Indonesia.

With one-fifth of the world’s mangroves and the third-largest area of peatlands globally[ii], Indonesia’s mangroves hold 3.14 million tonnes of carbon dioxide, and its peatlands store approximately 57 billion tonnes[iii].

 

What is blue carbon?

Blue carbon refers to carbon stored in marine and coastal ecosystems over decades, and deforestation not only releases these substantial carbon stocks, but also reduces the amount of carbon dioxide that these ecosystems could have removed.

 

With such huge carbon stores, the Indonesian government recognises the potential risk of losing these precious carbon sinks, and other vital accompanying benefits – mangroves protect coastlines from erosion and storm damage, sustain livelihoods of local communities, and are rich with biodiversity.

In 2021, Indonesia extended its ambitious campaign to restore 600,000 hectares of mangrove forest up to 2024[iv]. And efforts have admirably considered not only environmental factors, but the social realities of impacted communities. During the panel, Dr Ayu Dew Utari, Secretary of the Peat and Mangrove Restoration Agency (BRGM) in Indonesia, shared that the local government has embraced the inclusion of local communities in restoration projects. Dr Ayu emphasised that all initiatives should eventually be permanent and self-reliant, and strong community partnership involves villagers seeing the benefit of mangrove restoration to their quality of life as well.

With restoration projects well underway, Indonesia will be an attractive hotspot for carbon offset initiatives. Carbon credits will offer a way for local governments and communities to finance their climate action efforts, providing an economic incentive beyond environmental and social imperatives.

 

Carbon marketplaces will connect nature-based solutions with vital funds

Only last month, Climate Impact X (CIX), a new global carbon exchange and marketplace headquartered in Singapore, was launched. CIX is a joint venture by Singapore Exchange (SGX), DBS Bank, Standard Chartered, and Temasek, aiming to provide organisations with “high-quality carbon credits to address hard-to-abate emissions”[v].

With recent research showing that natural climate solutions could deliver up to one-third of the emissions reduction required to reach a 1.5 degree Celsius pathway by 2030[vi], there is a crucial need to connect these projects to the financing they will need.

 

What are nature-based solutions (NBS)?

An NBS uses tools already provided by nature to address issues resulting from poor land or resource use, climate change, or societal challenges. Solutions often enhance existing natural or man-made infrastructure, to spur long-term economic, social, and environmental benefits[vii]. Mangrove restoration is one such example of NBS.

 

However, as Mikkel Larson, Chief Sustainability Officer of DBS Bank, explained in the panel, inconsistent carbon credit quality and the lack of transparency in carbon pricing has limited market growth[viii]. The CIX aims to instil integrity in carbon markets through mapping carbon credit benefits in dollar terms, and introducing measures that prevent companies from avoiding the hard decarbonisation issues in their industry.

As the current risks associated with carbon credits are too high at present profit margins, Mr Larsen also explained that the CIX aims to facilitate investments in the lower denominations, thus improving access to the carbon marketplace for smaller corporations or investors.

With a more robust, trusted, and accessible marketplace, emissions reduction projects will see vital funds being channelled towards their scaling.

This will be especially true for nature-based solutions (NBS). As Professor Koh Lian Pin, Director of Centre for Nature-Based Climate Solutions at NUS, explained in the panel, NBS are presently the only commercially viable and scalable carbon capture solutions available.

But the research is still evolving, as estimates of carbon stocks and flows in natural ecosystems continue to be improved, Prof Koh emphasised. Another area of research would be the mapping of the co-benefits of NBS at the regional level, which an NUS project is currently working on. Prof Koh’s work will be essential to the verifiability and pricing of carbon credits, once again facilitating the success and expansion of voluntary carbon markets.

As corporate commitments to net-zero accelerate by the day, greater carbon market integrity and transparency can only be a promising development for the scaling of nature-based solutions.

 

Carbon regulations will shift business risks and opportunities

As climate policymakers ramp up their efforts to motivate the reduction of carbon footprints, carbon taxes may increasingly become a reality for agribusinesses to face.

One such policy that will have rippling effects across international trade is the European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM). The CBAM will apply a carbon levy – mirroring the price of carbon in the EU’s cap-and-trade system – on embedded carbon in imports to the EU. In effect, this will extend the EU’s carbon market to the rest of the world.

 

What are carbon levies / carbon taxes?

A carbon tax sets a direct price on carbon by defining a tax rate on greenhouse gas emissions, or on the carbon content of fossil fuels. Carbon taxes capture some of the social costs of emissions that the public otherwise pays for, such as crop damage, health care costs, and property damage from flooding and sea level rise – and shifts the burden onto carbon emitters. In this way, carbon prices become a means of stimulating clean technology and market innovation.

 

In the panel, Mr. Pasquale De Micco, Policy Officer at the Directorate-General for Taxation and the Customs Union, a part of the European Commission, shared that the EU will be releasing its CBAM legislative package proposal in July. Crucially, Mr Micco emphasised that the CBAM aims to address the problem of carbon leakage – when businesses shift their operations to countries with laxer climate policies, leading to higher emissions, essentially kicking the can down the road.

Mr Micco also explained that the agriculture industry is unlikely to be included in this proposal, as the EU is focusing on the most carbon-intensive industries, that comprise 40% of emissions. Nevertheless, with the CBAM’s stated aims to raise global climate ambition and prevent carbon leakage[ix], it is expected that should the proposal be adopted, the CBAM will eventually be extended to all sectors.

The prospect of carbon levies will create business risks as profit margins stand to be impacted by rising carbon prices. But businesses will also have the opportunity to lay the groundwork that will enable them to thrive in a decarbonising world, through strong emissions reduction targets and immediate action.

 

Turning risk into opportunity

From the revitalisation of nature-based solutions in Southeast Asia, to shifting regulatory environments, the world is making a bigger bid for climate action than ever before.  As governments and corporations awaken to the imperative of climate action businesses must adapt to changing risks, while capitalising on new opportunities.  This has always been aligned to Paia’s approach, to help companies assess and manage the risks, and opportunities, that ESG, and climate change, pose to businesses.

 

References

Paia is a team of dedicated sustainability specialists, providing advisory on the business risks and opportunities that sustainability issues pose, and how best to apply those within existing company structures and strategies. To enquire about how we can help you, speak to us today at info@paiaconsulting.com.

[i] Market for carbon credits shows signs of recovery – The Straits Times https://www.straitstimes.com/asia/se-asia/market-for-carbon-credits-shows-signs-of-recovery

[ii] Indonesia pushes to restore peatlands and mangroves at the center of the climate crisis – ASEAN Today https://www.aseantoday.com/2021/01/indonesia-pushes-to-restore-peatlands-and-mangroves-at-the-center-of-the-climate-crisis/

[iii] Indonesia renews peat restoration bid to include mangroves, but hurdles abound – Mongabay https://news.mongabay.com/2021/01/indonesia-renews-peatland-mangrove-restoration-agency-brgm/

[iv] With stories and puppets, environmentalist battles to save Indonesia’s mangroves – CNA https://www.channelnewsasia.com/news/asia/indonesia-save-mangrove-environment-education-stories-puppets-14558740

[v]  DBS, SGX, Standard Chartered and Temasek to take climate action through global carbon exchange and marketplace – SGX https://www.sgx.com/media-centre/20210520-dbs-sgx-standard-chartered-and-temasek-take-climate-action-through-global?utm_medium=display&utm_source=sgx-web&utm_campaign=alwayson&utm_term=20052021&utm_content=NR

[vi] Nature and Net Zero – World Economic Forum http://www3.weforum.org/docs/WEF_Consultation_Nature_and_Net_Zero_2021.pdf

[vii] What are Nature-Based Solutions? – NUS Centre for Nature-based Climate Solutions https://www.nus.edu.sg/cncs/research/overview/#:~:text=%E2%80%9CNature%2Dbased%20solutions%20are%20actions,well%2Dbeing%20and%20biodiversity%20benefits.

[viii] A blueprint for scaling voluntary carbon markets to meet the climate challenge – McKinsey https://www.mckinsey.com/business-functions/sustainability/our-insights/a-blueprint-for-scaling-voluntary-carbon-markets-to-meet-the-climate-challenge

[ix] Carbon levy on EU imports needed to raise global climate ambition – European Parliament  https://www.europarl.europa.eu/news/en/press-room/20210201IPR96812/carbon-levy-on-eu-imports-needed-to-raise-global-climate-ambition

Image by enriquelopezgarre from Pixabay

President Biden signs an executive order on the Paris climate agreement

What Biden Re-joining the Paris Agreement Means for Climate Action

By Nicole Lim

As you may have heard by now, newly inaugurated President Biden returned the United States to the Paris Agreement. This will officially take effect in 30 days. The President also signed executive orders [1] overturning some of Trump’s other policies that had environmental implications, including putting a halt to the controversial Keystone XL pipeline.

Since Biden first announced [2] that re-joining the Paris Agreement would be one of his first moves in office, many have been anticipating this day. For climate action and for many other reasons, today was a day that marked the beginning of a new era.

But beyond the politics and symbolism of it all, we wanted to take a look at what this all means for climate action and sustainability.

Ambition, leadership and science

As world’s second largest emitter of greenhouse gas emissions (GHG), behind China, the U.S. re-joining the Paris Agreement must come with bold and decisive commitments and plans to significantly reduce GHG emissions. When the U.S. first joined the Paris Agreement under the Obama Administration, the U.S. had pledged to reduce emission levels between 26-28% by 2025 from 2005 levels. At present, it is not on track to reach those goals.

Much has changed since then, and Biden will now be expected to raise the bar by setting more ambitious targets that capture its “fair share” of emissions. Not only that, with China announcing its commitment to be net-zero by 2060 [3], the E.U. to be the same by 2050 [4], and many other net-zero commitments by strong Asian economies, the pressure is on for the U.S. to take on an increased leadership role.

Thankfully, science, as Mr. Biden indicated in his executive order, would guide U.S.’s climate action.

 

It is, therefore, the policy of my Administration to listen to the science.

Executive Order, 20 Jan 2021

Therefore, we can minimally expect that Washington will set targets in line with the Intergovernmental Panel on Climate Change’s (IPCC) guidance on reducing GHG emissions by 45% by 2030 (from 2010 levels) and reaching net-zero by 2050.

Organisations and corporations often adopt or align with national climate targets. With the U.S. being a crucial player in the global economy, their targets send signals and inform how the private sector globally might respond to climate change.

Climate finance and pricing carbon

A striking feature of Mr. Biden’s executive order was Sec. 5.  Accounting for the Benefits of Reducing Climate Pollution. It requires all agencies to capture the full costs of GHGs through incorporating the social cost of carbon” (SCC), “social cost of nitrous oxide” (SCN), and “social cost of methane” (SCM) into cost-benefit analyses in decision-making. To facilitate this, the President has established an Interagency Working Group on the Social Cost of Greenhouse Gases, led by economists and scientists.

The Working Group has been tasked to publish an interim SCC, SCN, and SCM within 30 days (by 21 February 2021), and establish a final SCC, SCN, and SCM no later than January 2022. These costs will be used by agencies in valuing GHGs from change in regulation and other relevant agency actions. The Working Group will also be providing recommendations to the President on where and how these costs can be applied in decision-making.

Mr. Biden also made clear that these costs are to “reflect the interests of future generations in avoiding threats posed by climate change”.

The President also has a $2 trillion plan to invest in the transition from fossil fuels to clean energy [5]. This plan will see the transformation of the U.S. automotive industry to produce increased zero-emission / electric vehicles, green infrastructure, carbon-neutral power, energy-efficient buildings, investment in green innovation, clean agriculture and job creation. Since Biden’s announcement, stock prices of ESG companies that stand to benefit in a decarbonised world have soared [6]. We can expect to see these sustainable, ESG-focused companies to be at the forefront in the coming years.

Ahead of stronger sustainability and ESG regulation, companies are already bracing themselves for increased expectations [7], and some trade groups and organisations have begun meeting with the Biden team to review ESG matters and potential risks.

Outside U.S. shores and as part of commitments under the Paris Agreement, the U.S. will also be expected to play a big role in helping developing nations finance a fair, just and equitable shift away from carbon-intensive industries and fossil fuels.

Moves to watch

So much today, but it is only the beginning. Moving ahead, there are many developments to look forward to.

With COP26 around the corner, it is likely that we will see the U.S. and its newly assembled team of climate experts [8] convene with other leaders to ramp up ambition and align action ahead of the COP. In light of many other nations committing to a green transition, will we see unity and global solidarity like we saw in Paris? Backed by green technologies and corporate ambition, will world leaders take bolder action?

Come 21 February, the Working Group will announce an interim SSC, SCN, and SCM. Based on the Obama administration’s formula, the price per ton would now stand at $52. However, Trump officials reduced it to between $1 and $7 per ton. Economists believe that the Biden administration’s price might start at $125 per ton to better reflect latest climate science and market realities. [9] We can expect the price that Washington sets to impact analysts’ valuation of companies, which will be carefully watched by investors.

By 1 February, the Biden administration has promised additional executive actions to address the climate crisis. Subsequently, the $2 trillion climate package is expected to be passed. With so much optimism surrounding this, it remains to be seen if they will live up to expectations and deliver the action needed in our race towards a decarbonised future.

 

These series of events have instilled hope, inspiration, and ambition. The global pandemic has awakened the need for change, we are optimistic that the world will embark on an acceleration of climate action like never before.

 

What does this all mean for your organisation? Paia helps companies build resilience against climate change and increased expectations to decarbonise. Over past two decades, Paia has been supporting leading corporations across the region to prepare for a decarbonised future through strategically integrating climate and ESG considerations into business. Do speak to us to find out more.

[1] https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/executive-order-protecting-public-health-and-environment-and-restoring-science-to-tackle-climate-crisis/

[2] https://www.aljazeera.com/news/2020/11/5/biden-vows-to-return-us-to-paris-climate-accord-if-elected

[3] https://www.theguardian.com/commentisfree/2020/oct/05/china-plan-net-zero-emissions-2060-clean-technology

[4]https://ec.europa.eu/clima/policies/strategies/2050_en#:~:text=The%20EU%20aims%20to%20be,action%20under%20the%20Paris%20Agreement.

[5] https://www.reuters.com/article/us-usa-election-biden/biden-climate-plan-would-spend-2-trillion-in-bid-to-boost-economy-idUSKCN24F202

[6] https://www.marketwatch.com/story/these-green-stocks-would-thrive-under-a-biden-administration-according-to-fund-managers-2020-07-29

[7] https://www-wsj-com.cdn.ampproject.org/c/s/www.wsj.com/amp/articles/companies-brace-themselves-for-new-esg-regulations-under-biden-11610719200

[8] https://www.independent.co.uk/environment/climate-change/biden-climate-change-hires-white-house-b1788976.html

[9] https://www.washingtonpost.com/climate-environment/2021/01/20/biden-climate-change-inauguration/

 

Shining a light on Scope 3 emissionsViking Cold Solutions

Carbon Assessment – Shining a light on Scope 3 emissions

These emissions have typically been hidden from view, but are increasingly coming into the spotlight.

By Junying Lou

Increasingly, companies are starting to expand their focus on greenhouse gas emissions from their core operations under Scope 1 and 2 to also include greenhouse gas emissions from their value chain (Scope 3 emissions) to better manage climate-related risks and opportunities.

 

But what exactly are scope 3 emissions?

In short, Scope 3 emissions are everything other than emissions from companies’ direct operations and purchased energy.  This includes all indirect emissions from both upstream and downstream and can be classified into 15 different categories, as shown in the graph below.

Overview of GHG Protocol scopes and emissions across the value chain

Figure 1: 15 Categories of Scope 3 emissions (WRI & WBCSD, 2011).

Source: GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard.

 

For most sectors, scope 3 emissions are far larger than scope 1 and 2 combined. The Carbon Disclosure Project’s (CDP) recent research shows that on average, companies’ supply chain emissions are 5.5 times greater than their scope 1 and 2 emissions (CDP, 2019).

 

Scope 3 calculation: a journey that has to start somewhere

Scope 3 measurement and management can be daunting for most companies because the data coverage is comprehensive while the data sources fall out of companies’ direct control. Collecting this data requires collaboration with companies’ value chain partners.  Paia typically advises companies to start by drafting a Scope 3 emission management plan to guide in screening the most material Scope 3 emissions, collecting relevant data and setting goals. Compared to Scope 1 and 2 emissions, the Scope 3 emissions quantification is more complex and uncertain and requires an iterative approach to refine data accuracy.

 

The next step: reducing scope 3 emissions

The end goal of knowing the full climate impact from across the value chain is to inform business decisions in what they purchase, produce and put into the market, and steer companies and their value chain to a sustainable direction.

Companies that have gained a robust understanding of their Scope 3 emissions can leverage different emission reduction approaches to minimise the climate impact in their value chain.

Best practices to reduce scope 3 emissions include implementing internal carbon pricing, extending product life span, procurement practices that prefer low carbon suppliers.  The table below shows carbon reduction approaches for each Scope 3 category, as recommended by the Science Based Targets initiative (SBTi).

Levers for reducing emissions by scope 3 category

Figure 2: Levers for reducing scope 3 emissions by category (Science Based Targets initiative et al., 2018)

 

So why should companies care about their Scope 3 emissions?

Risks:

As more governments announce their plans to reach carbon neutrality, the risks associated with rapidly evolving energy and carbon regulations are mounting. For example, if a company sources carbon-intensive materials and products, the future energy and emission costs absorbed by suppliers can significantly increase the costs of goods paid by the company. For other companies that sell energy-intensive products, they may well expect more stringent energy efficiency regulations as well as negative consumer sentiment towards their products.

Additionally, companies may also face reputational and even litigation risks if they fail to understand the climate impacts in their value chain.

Opportunities:

Where there is a risk, there is an opportunity. Through prudent Scope 3 emission management, companies stand to benefit from improved efficiency and substantial cost saving in their supply chain. CDP recently reported a total of US$19.3 billion annual supplier financial savings associated with actions to reduce carbon emissions (CDP, 2019).

Understanding scope 3 emissions also drives innovation along the value chain and helps companies build competitive advantages as the world decarbonises. Companies that can reap carbon reduction opportunities along the value chain and offer low-carbon solutions are more likely to enjoy an increased market share and enhanced customer loyalty in the resource-scarce future.

 

Closing thoughts

As countries and organisations look to build back better post-pandemic, many signs are pointing towards an increased focused on Scope 3 reporting. As many may be aware, 2020 saw a series of net-zero commitment announcements by countries and corporations. We can only expect that these commitments will trickle down along the value chain, impacting various companies.

Quantifying and managing Scope 3 emissions is challenging and we are here to help, contact us today to know more about Scope 3 emissions and how you can effectively measure and manage them.

 

References:

CDP. (2019). CDP Supply Chain Report 2018/19. https://6fefcbb86e61af1b2fc4-c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/004/072/original/CDP_Supply_Chain_Report_2019.pdf?1550490556

Science Based Targets initiative, Navigant & the Gold Standard. (November 2018). Value change in the value chain: best practices in scope 3 greenhouse gas management. https://sciencebasedtargets.org/resources/legacy/2018/12/SBT_Value_Chain_Report-1.pdf

World Resources Institute (WRI), & World Business Council for Sustainable Development (WBCSD). (September 2011). Corporate Value Chain (Scope 3) Accounting and Reporting Standard. https://ghgprotocol.org/sites/default/files/standards/Corporate-Value-Chain-Accounting-Reporing-Standard_041613_2.pdf

carbon management step by step guide

Carbon management: a step by step guide

Using Apple Inc. as a case study

By Junying Lou

Introduction

The world has witnessed a string of climate disasters in recent years. In the United States alone, there have already been 10 extreme weather events with losses more than $1 billion each in 2020 (NOAA, n.d). China is currently dealing with the worst flooding in more than 20 years that affected about 55 million people (He, 2020). Australia’s 2019-2020 bushfires have destroyed 2,000 homes and 11.2 million hectares, equivalent to nearly half the area of the United Kingdom (Green, 2020). The list could go on, there is no doubt that climate change has become more palpable for people around the world.

Climate scientists have confirmed that “human influence on the climate system is clear” and “warming of the climate system is unequivocal” (IPCC, 2014, p. 2). The urgency of climate actions has called for more effective carbon management from the public and private sectors.

Carbon management is about taking steps to measure and manage greenhouse gas (GHG) emissions within your organisation and extend the reduction of emissions across your supply chain (FDF, 2008, p.8).

What is in it for me as a business?

Saving the planet alone may not be a compelling enough reason for organisations to commit to carbon management. That is why it is important to highlight that carbon management does make a good business case in the following areas (Zhou, 2020, pp. 91-96):

  1. Cutting cost: carbon management will open up opportunities for organisations to identify cost-saving areas within and beyond its direct operations through improved energy and resource efficiency.
  2. Reducing regulatory risks: more and more countries are adopting ambitious climate targets which will translate to more stringent regulatory requirements for carbon emissions.
  3. Responding to stakeholders’ interest: increasingly stakeholders are showing interest in corporations’ effort to combat climate change.
  4. Improving competitiveness and promoting innovation: through the process to achieve ambitious carbon reduction targets, corporations will catalyse the transformation of operational practices and adoption of new technologies.

Getting started: setting up a management system

Setting up a management system for carbon management, which includes policies, processes, and frameworks will ensure the credibility of recorded data and results.

Just like any other strategic initiatives, it is imperative to obtain buy-in from the board and senior management. The leadership and oversight at the top level can help secure necessary financial and human resource for the effective implementation, evaluation, and continuous improvement of the organisation’s carbon management plan.

Cross-functional working teams from all levels of the organisation shall be formed with responsibilities clearly defined and allocated. Some common roles include collection, compilation, and reporting of emission data; management and monitoring of carbon reduction initiatives; and staff awareness and education. Other key internal processes, such as procedures to govern data quality, need to be put into place.

What are the key steps?

With support from a well-designed management system, an effective carbon management plan normally involves “measure- reduce- extend” (Cambridge Programme for Sustainability Leadership/Business in the Community, 2009, p. 4)

Step 1: Measurement

When it comes to management, we all heard about “what gets measured get managed”, and this is particularly true for carbon management. To develop an accurate baseline GHG inventory requires identification of emission sources and collection of activity data for conversion to emission data.

Before starting the actual measurement, organisations need to decide on a few things:

Standards to follow for the emission measuring purpose: the most commonly known standards to corporations are ISO 14064-1 and The GHG Protocol Corporate Accounting and Reporting Standard, but there are also other industry-specific standards available.

Organisational boundary: A corporation with a complex organisational structure, such as having multiple subsidiaries, joint ventures, associated companies, etc. needs to determine which parts of the businesses to be included. This largely depends on the approach it selects to consolidate GHG emissions: the equity share approach or the control approach (WBCSD/WRI, 2004, pp. 17-19).

  • Under the equity share approach, a corporation accounts for the share of GHG emissions from the operations according to its share of equity owned. This approach best reflects the risks and rewards a corporation is exposed to from a certain operation, but performance tracking of operations that it does not have control over can present challenges.
  • Under the control approach, a corporation accounts for 100% of the GHG emissions from the operations it has control over. The corporation needs to choose between either the operational control or financial control. While operational control is more compatible with government compliance programmes and more appropriate for performance tracking, this approach may not fully reflect the commercial reality of the reporting corporation.

Operational boundary:  The operational boundary (Scope 1, 2 and 3) is defined at the corporate level after the organisational boundary is decided, this step determines the scope of emissions to cover.

  • Scope 1 direct emissions are emissions from sources that owned or controlled by your corporation, including emissions from company-owned vehicles, boilers and furnaces, and emissions from chemical processes, etc.
  • Scope 2 indirect emissions are a special category of indirect emissions that are associated with the generation of electricity, heat, or steam that is purchased and used by the corporation.
  • Scope 3 indirect emissions are everything else, emissions that are a result of the activities of the corporation, including both upstream and downstream. Scope 3 is an optional reporting category, however, more companies are increasingly interested in measuring and managing their Scope 3 emissions. For example, Apple has been publishing its Scope 1, Scope 2, and Scope 3 carbon footprint in its environmental progress report.

Source: Apple’s Environmental Progress Report 2020

If it is your corporation’s first year in this journey, it means a lot of hard work that can be separated into the following oversimplified and broad categories:

  • identification of emission sources
  • collection of primary and secondary data including activity data and conversion factors
  • conversion to emission data
  • and compilation of all data to be reported at the corporate level

Step 2: Reduction

Once the baseline GHG inventory is set, it can be used to guide future actions. Organisations may also find it a golden opportunity to uncover emission hotspots during the measurement phase they wish to concentrate their reduction effort on.

The corporation may consider setting a carbon reduction target to demonstrate its commitment. The carbon reduction target can be absolute or intensity target. The latest development with target setting is the adoption of science-based target among leading companies. According to Science Based Targets initiative (SBTi), a science-based target is defined as targets “in line with what the latest climate science says is necessary to meet the goals of the Paris Agreement – to limit global warming to well-below 2°C above pre-industrial levels and pursue efforts to limit warming to 1.5°C.” (SBTi, n.d.)

It is also important to decide the boundary of your target. As a minimum, the target should be set for Scope 1 and Scope 2 emissions, but since for the majority of sectors, the largest portion of a company’s emissions is Scope 3 emissions (Labutong, 2018), many companies are looking beyond their core operations to set Scope 3 targets. Apple, for an instant, recently announced that it will be 100% carbon neutral for its supply chain and products by 2030. (Apple, 2020)

To achieve carbon reduction targets, a series of carbon reduction programmes shall be devised and implemented. It is worth noting that carbon reduction activities can range from free to very low costs, such as simple user behaviour change like switching off when not in use, to high costs, such as investment in energy efficiency equipment.

We use Apple as an example to explore the wide range of projects and programmes a corporation can consider for emission reduction purpose. The selective projects Apple implemented are discussed in the hierarchical order of carbon management, which is first to avoid or reduce emissions through conservation and efficiency, then to eliminate emissions by switching to renewable sources of energy, and lastly to sequester or offset any residual emissions. (Second Nature, n.d.)

RMIT Carbon Management Hierarchy

Source: RMIT University Carbon Management Plan

  • Avoid and Reduce

With an understanding of where the company’s biggest climate impact occurs, Apple prioritises low-carbon design of its products, at both manufacturing and product-use stages. The improved manufacturing processes that led to higher material efficiency, combined with the use of low-carbon materials like recycled materials, have reduced carbon emissions associated with Apple’s products, for example, it is reported that a 63% decrease in Apple’s aluminium carbon footprint is achieved compared to 2015.

Energy efficiency in Apple’s buildings is another focus area. It is reported that energy efficiency audits of buildings were conducted to identify system improvement opportunities, followed by energy efficiency measures. Apple estimates that its energy efficiency programme along with new building design can save about 7,500 metric tons of CO2e per year.

Apple’s At Home Advisor programme allows AppleCare customer service employees to work from their homes, and this single programme avoided nearly 22,000 metric tons of CO2e emissions in the fiscal year 2019. For other employees, Apple introduced a bus commute programme to reduce the use of single-occupancy vehicles and offer campus bicycles which resulted in an over 6,000 metric tons reduction in the fiscal year 2019.

  • Substitute

According to Apple’s report, it has generated or sourced 100% renewable electricity for its global facilities since 2018. The was achieved through Apple’s renewable energy programme, which took a blended approach that involves owning or investment in onsite and offsite renewable projects, entering into power purchase agreements, and purchasing market RECs. Since renewable energy has been the sole source of Apple’s electricity, its Scope 2 emissions were reduced to zero.

  • Offset

Apple reported that starting from April 2020, it has realised carbon neutrality for corporate emissions, which include not only Scope 1 and Scope 2 emissions, but also part of Scope 3 emissions, such as business travel and employee commute. In the same report, Apple reported a total of 50,540 metric tons of CO2e for Scope 1 emissions and another 520,160 metric tons for business travel and employee commute, so how could Apple claim carbon neutrality while still generating emissions from these sources?

apple greenhouse gas emissionsSource: Apple’s Environmental Progress Report 2020

The reality is that some emissions are difficult to avoid or reduce, so the last resort is to sequester or offset any remaining emissions through sequestration opportunities, Apple, for example, has been investing in projects that protect and restore forests, wetlands and grasslands that have removed enough carbon dioxide to offset the residual corporate emissions. For most organisations, it may be challenging to be directly involved in these types of projects, however, companies can still take advantage of high-quality and robust carbon credits to offset emissions.

Step 3: Extension

The last step and probably the most difficult one is to extend carbon management across its supply chain, but it is also a critical step if a corporation wishes to manage its Scope 3 emissions. To successfully cascade the strategy down to your suppliers, you need to work with your suppliers by prioritising suppliers to engage with and craft a communication plan to initiate and follow up with them, and ultimately it is about incorporating the carbon management criteria into the procurement process (Cambridge Programme for Sustainability Leadership/Business in the Community, 2009, pp. 41-44)

In Apple’s case, as 76% of its overall emissions come from product manufacturing which usually takes place in its suppliers’ facilities, Apple has been working with its suppliers through Supplier Energy Efficiency Program that aims to educate suppliers and help identify initiatives to reduce energy use and manage the implementation of the projects. Apple also supported suppliers’ reduction effort by providing funding for supplier projects, a special fund of $100 million was created for this purpose in 2019. Through Supplier Clean Energy Program, which aims to catalyse the adoption of 100% renewable electricity by its suppliers, Apple has been advocating its renewable energy policy and assisted the transition of its supplier through funding, training and other opportunities. So far, 71 manufacturing partners in 17 countries have committed to 100% renewable energy for Apple production.

References:

National Oceanic and Atmospheric Administration (NOAA). (n.d.). Billion-Dollar Weather and Climate Disasters: Overview. Retrieved August 13, 2020, from https://www.ncdc.noaa.gov/billions/

He, L. (2020, August 9). ‘Everything is gone.’ Flooding in China ruins farmers and risks rising food prices. CNN Business. https://edition.cnn.com/2020/08/08/economy/china-food-economy-flooding-intl-hnk/index.html

Green, M. (2020, January 14). Australia’s massive fires could become routine, climate scientists warn. Reuters. https://www.reuters.com/article/us-climate-change-australia-report/australias-massive-fires-could-become-routine-climate-scientists-warn-idUSKBN1ZD06W

Intergovernmental Panel on Climate Change (IPCC). (2014). Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. https://www.ipcc.ch/site/assets/uploads/2018/02/SYR_AR5_FINAL_full.pdf

Science Based Targets initiative (SBTi). (n.d.). What is a science based target? Retrieved August 14, 2020, from https://sciencebasedtargets.org/what-is-a-science-based-target/

Labutong, N. (2018, July 13). How can companies address their scope 3 greenhouse gas emissions? CDP. https://www.cdp.net/en/articles/companies/how-can-companies-address-their-scope-3-greenhouse-gas-emissions

Apple commits to be 100 percent carbon neutral for its supply chain and products by 2030. (2020, July 21). Apple Newsroom. https://www.apple.com/sg/newsroom/2020/07/apple-commits-to-be-100-percent-carbon-neutral-for-its-supply-chain-and-products-by-2030/

Carbon Management & Greenhouse Gas Mitigation. (n.d.). Second Nature. Retrieved August 14, 2020, from https://secondnature.org/signatory-handbook/carbon-management-greenhouse-gas-mitigation/

WBCSD/WRI. (2004). The GHG Protocol Corporate Accounting and Reporting Standard, revised edition. https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf

Zhou, S. W.W. (2020). Carbon Management for­ a Sustainable Environment. Springer.

Cambridge Programme for Sustainability Leadership/Business in the Community. (2009). Carbon management: A practical guide for suppliers. https://www.cisl.cam.ac.uk/resources/publication-pdfs/carbon-management-a-practical-guide-for-suppliers-1.pdf

Environmental Progress Report. (2020). Apple. https://www.apple.com/environment/pdf/Apple_Environmental_Progress_Report_2020.pdf

Food and Drink Federation (FDF). (2008). Carbon Management Best Practice in Food and Drink Manufacturing. https://www.fdf.org.uk/publicgeneral/carbon_management_guidance_2008.pdf

 

paris-agreement-cna-carbon-conundrum

Paris Agreement in Jeopardy? A Summary of CNA’s Carbon Conundrum

By Adrian Pang, Paia Consulting Pte Ltd

Channel News Asia’s documentary series earlier this month zoomed in on an impending disaster that is already set in motion – climate change or more accurately, anthropogenic climate change. The documentary explored the world’s profound reliance on carbon-intensive energy resources but highlighted some progress made in moving away from the self-destructing carbon addiction to provide a glimmer of hope of what could and should be done in the limited time to restore nature’s equilibrium. In the process, the documentary took mainly a Singapore-centric view complemented by international events and perspectives on the dire consequences of climate change and on finding solutions.

This piece provides a summary of the key messages conveyed by the documentary. The content follows the narrative of the documentary. First, it highlights the root cause of climate change: our addiction to fossil fuels that resulted in the dire situation and consequences regarding carbon emissions the world finds itself in. The next part of the summary presents provides a more optimistic outlook to the future with the developments of potential solutions in renewable energies as well as the simple yet complicated gesture to give agency back to nature to recover. First, the documentary reiterated the existence of potential solutions in the form of solar energy and green hydrogen. In Singapore, these potential solutions are undergoing consistent and significant development and testing. Thus, the most pressing issues is not about finding solutions but rather our willingness – government and corporations’ willingness to invest in these long-term solutions. Then, the documentary highlighted the abilities and importance of nature to regenerate itself and for us humans to coexist harmoniously with, if not live by laws of nature. The piece concludes on a note of caution that now is the time the world should drastically cut carbon emissions before climate change escalates to a point of no return very soon.

Carbon Junkies and the Consequences

Sequestered carbon from millennia of natural lifecycles of living beings that were formed into fossil fuels (coals, oil, natural gas, etc.) was always a natural process and fossil fuels were meant to be stored deep underground. However, this process was disrupted ever since the industrial revolution ushered in a new age of human progress that sees the stripping of Mother Nature’s resources as key to societal development. Human’s unquenchable thirst for fossil fuels for energy is the quintessence of this problem. As humans continue to pride ourselves on the technological advancements made in the past couple of centuries, we are ironically and rather stubborn sticking with carbon-packed resources to power our technological innovations and ingenuities. We have never moved on from fossil fuels as our primary energy sources. In fact, we fell deeper into the addiction problem to keep economies of oil-producing countries and financial markets well-oiled (pun-intended). Earth’s atmosphere was meant to be the protection but humans decided it is in their best interests to burn fossil fuels in the name of progress, thereby causing untold stress to this planet’s immune system that reduces harmful greenhouse gases like carbon dioxide. And burn we did for close to 300 years. In the process, we re-released inconceivable amount of carbon dioxide into Earth’s atmosphere.

In November 2016, the global community seemingly put aside their differences and set the world on an era defining path that was unimaginable just decades ago. 189 countries, even the reclusive hermit kingdom of North Korea, ratified or acceded to the Paris Agreement to begin intense carbon reduction to keep global temperatures in the 21st century to well below 2 degree Celsius above pre-industrial levels as well as to limit the temperature increase even further to 1.5 degree Celsius. The world committed to embark on several grand steps towards this common mission. First, carbon emissions and temperature rise should peak by 2020. Then, emissions should be halved by 2030 and the world needs to be completely decarbonised by 2050. Alas, the world now finds itself slowly creeping back to square one as the euphoria waned. The 1.5-degree Celsius targets based on current data are unreachable. Carbon emissions worldwide continue to rise. Countries’ support for this once hopeful – an understatement, milestone that showcased the best of humanity are being challenged at its core as individual economic interests supersede what needs to be done. The dwindling commitment is further exacerbated by the withdrawal of the United States, the biggest economy and biggest emitter in the world. Worst, the Trump administration ramped up fossil fuel production for their national economic interests. Ultimately, the world continues to find itself losing time faltering on significant efforts to protect and save itself from the dire consequences of climate change.

While climate change does indeed spare no-one, smaller nations, especially island nations are already bearing the full brunt of human’s inactions. The documentary went to Tuvalu, one of the smallest nations in the world located in the South Pacific between Hawaii and Australia. It showcased the plights of the country sinking fast beneath the sea to highlight the devastating effects of rising sea levels – the rate of which is faster in the past few decades than the last few thousands of years. When compared to more industrialised nations, all 57 small islands developing states (SIDS) including  (The Economist, 2019). [1] Yet, these countries are on the forefront of the consequences caused largely by their much larger and mightier industrialised counterparts. In the case of Tuvalu, their commendable efforts to slow their home from sinking through various adaptation mechanisms are increasingly futile. The country’s prime minister even gave grave warnings that climate change adaptation and resilience are no longer viable for his county and other SIDS. The documentary then revealed coastal and archipelago nations are the next in line to suffer the consequences of climate change. For example, 2,000 Indonesian islands and 20% of Bangladesh would be submerged under water by 2030. It will not be long before New York City and Amsterdam – great industrialised cities would sink beneath the waves by 2100 if sea level rises 1.5m, as per the current pace of climate change.

Singapore will not be spared either. Singapore is on course to lose of land to rising sea levels at the current trajectory according to the documentary. This problem is further compounded by the emergence of the fast emerging arctic sea route from melting ice caps, in which the new trade route is 33% shorter than the current one that has for so long made Singapore one of the trade centres of the world. This imminent new trade route would threaten the displacement of Singapore as a global commercial and trading hub, reducing the country’s competitiveness and even relevance in the global economy in the not too distant future. Singapore’s government has pledged SGD 100 billion to increase the country’s resilience to rising sea levels. Raising tidal gates, dykes and reservoirs, building the new Changi airport terminal more than 5m above sea levels and polders to reclaim land below sea levels are some of the measures taken. Even so, the pace that sea level is rising, and climate change worsening is gradually prompting the conversation in Singapore to shift ns much like the aforementioned sentiments by Tuvalu’s prime minister.

Stemming the Tide through Long-Term Solutions

The best solutions are none other than those that address the issue at its core, reducing carbon emissions within its own shores while hoping the rest of the world continue to play their parts. While existing steps to reduce carbon emissions would incur significant costs in the near future, the potential long-term impacts and values far outweigh the initial costs. short, the climate driven sphere has the highest job and business opportunities while the current linear economic business models destroy value and will slowly but surely be phased out. However, the pace of it happening is still a key factor in preserving the sanctity of Mother Nature and the climate. In view of these potentials while being mindful of the limited time before climate change is worsened beyond reparation, Singapore is taking bold but necessary steps to address the climate risks dawning upon our home. The main solutions covered by the documentary focus predominantly on technological innovations and Mother Nature herself.

i. Transition to Renewable Energies: Solar Power and Green Hydrogen in Focus

The most direct and logical steps to reduce carbon emissions is to generate electricity and energy through low carbon renewables. In short, reduce or even eliminate fossil fuels from the energy equation. This is the most obvious way forward because technologies are already in place and have proven capacities to replace fossil fuels as the biggest energy generator. . This technology will only get better with more investments and refinements in the future. Several innovations in Singapore can attest to the immense potential of the PV systems and the even higher ceiling of what this technology can achieve.

a. Building Integrated Photovoltaic (BIPV) Systems

Source: (SERIS, n.d.)

In a building design and architectural sphere, the Solar Energy Research Institute of Singapore (SERIS) and the School of Design and Environment at the National University of Singapore (NUS) have jointly designed, built, and are managing, refining and improving on the concept of BIPV where solar panels are fitted to the façade of a building to achieve the higher generation of solar generated electricity to become an energy self-sufficient and zero carbon emitting infrastructure. So unlike solar panels that are placed on rooftops, the solar panels are integral to the infrastructure, for example as and facades. Moreover, additional electricity generated can be fed back to the major electricity grid or be stored in battery for future use. SERIS stated that there are some 160,000 buildings that have the capacity to install sizeable BIPV systems far larger than the current testbed. In short, there is huge potential and benefits if Singapore decides to venture down this path.

b. Floating PV Systems

Elsewhere, the government’s Economic Development Board (EDB) and the Public Utilities Board (PUB) have also collaborated on taking PV systems to the next level. The collaboration aims to evaluate the performance of different solar systems and their impacts on the environment. As a result, the joint venture has produced largest floating solar panels testbed with 10PV systems across 1 hectare on water currently in the world according to the documentary. In fact, this trial has generated better results than expected as it was found that the cooling nature of water enables the PV to be more efficient. The floating PV systems generated 5% to 15% higher electricity than typical rooftop systems as well as possessing capacities to power 200-odd 4-rooms HDB flats per year, all the while having minimal environmental impacts. With such positive outcomes from the testbed, both EDB and PUB have targeted to introduce floating solar projects in the Bedok reservoir and Lower Seletar reservoir by mid-2020. Furthermore, the joint venture wants to introduce even larger scale floating PV systems 50 times the size and capacity of the existing testbed that can generate 6,000 MWh of electricity by 2021. This target is set with the goal of ramping up 2-Gigawatt Peak solar capacity that can power 350,000 households or 4% of total electricity demand in Singapore daily by 2030.

c. Commercial Leadership & Intergovernmental Cooperation

Sunseap Group, one of the largest renewables and solar energy companies in Singapore has also aggressively attempt to push and drive Singapore and Southeast Asia to adopt renewable solar energy to generate electricity. The documentary highlighted Sunseap’s success story in the Ninh Thuan province in Vietnam on the positive environmental as well as social and economic impacts of solar PV systems. Sunseap Group has installed 449,880 PV modules in the province that can generate 20 million kWh of electricity to power 100,000 households every month. This is a significant development for one of the least developed regions in the country. The establishment of the PV farm has created positive social impacts such as providing better infrastructure and paved new roads for the local communities to connect with the urban and peri-urban areas. Economically, this project has created new jobs for the community. 2,000 employees were hired for the construction of the farms and 35 permanent positions were created after construction completion. This is one of many indications of Sunseap’s ability to be a leading figure in the development of the renewable energy sector in Southeast Asia or ASEAN region. As per Frank Phuan, CEO of Sunseap Group, he used the examples of the infrastructures in place in Malaysia and Singapore to upscale PV systems between the Johor Straits to accentuate on the fact that it is political will – whether ASEAN countries are willing to cooperate in this sphere to create a shared “ASEAN power grid” that balances countries with in the region with rich renewable energy resources against parts of the region that have high energy demands, that would determines the growth of renewables in this region. He added that the technicalities are no longer a barrier to prevent ASEAN countries from taking a huge leap towards transitioning to renewable energy.

d. Green Hydrogen

Amongst the more popular renewable energy sources like wind and solar, one source, one element has been under the radar and perhaps in the shadow of the former two counterparts – hydrogen. As the most abundant element in the whole of the universe, hydrogen also possesses the potential to become a clean and efficient alternative to fossil fuels. The only complication from venturing headfirst into using hydrogen as fuel source is its highly combustible nature. Moreover, the storage of hydrogen in conventional high-pressure tanks is not the most logistically and environmentally efficient manner to attain hydrogen if we consider the transportation of these heavy tanks. Fortunately, the Tohoku University in Japan is developing a new technology in the form of metal hydrides. Metal hydrides are metals which have been bonded to hydrogen to form a new compound. This compound, at the current stage of research and development are pointing towards the elimination of the conventional method of storing hydrogen in high-pressure tanks as it exists in metallic powder forms. But more research is required as the process of retrieving energy from the powdered metal hydrides requires high energy itself to heat and activate the compound.

Back in Singapore, a more basic form of metal hydrides system is undergoing testing. The testbed is also showing positive results. Instead of storing metal hydrides in powdered form, hydrogen is stored in a metal hydride tank using the same concept of binding hydrogen with metals. When electricity is needed, hydrogen is released from the tank and passed through fuel cells. Prior to storage, hydrogen is attained by breaking down water in a separate compartment in the testbed. Overall, the energy required for the entire generation process, from breaking down water to releasing hydrogen from the metal hydride tank only used electricity generated by solar panels. As a result, the Singapore Power Training Institute is the first zero emission building that is powered fully off the grid by green hydrogen in ASEAN region.

ii. Restoring Nature

It is undeniable that the ongoing coronavirus pandemic is grim and disruptive on all fronts. However, environmental lessons while secondary to public health, can be taken from this challenging time. The pandemic shows Mother Nature’s ability to regenerate herself over the short period of time when human activities almost came to a virtual standstill. Air pollution levels decreased quite significantly, rivers became clean and clear again and the air fresher. This is an indication that humans do not actually need to take draconian measures to make changes possible. Rather we can take modest but nonetheless significant steps to eventually phase out things that are environmental detrimental like excessive carbon while allowing the Earth to heal. Nature has a strong will and has shown time and again its ability to restore itself – think Chernobyl and the nature that reclaimed the abandoned city in just a few decades. Therefore, the message from the documentary is to give agency back to nature to do what it does best, to recover and regenerate itself. In particular, restoring plants and their habitats should be a priority in major efforts to help nature to recover because plants are nature’s front liners against rising carbon dioxide level. The documentary focuses on mangrove trees as exceptional carbon scrubbers. This plant species can sequester 3 to 5 times as much carbon as land-based jungles. Thus, experts are studying closely on ways to preserve, conserve and cultivate new habitats in historically alien environments in other parts of the world. Even so, the bottom line remains – preserve and plant more trees.

In so doing, nature’s recovery and flourishment will only further benefit human’s health. It is scientifically proven that the human biology is wired to sync harmoniously with nature. The practice of shinrin-yoku or forest bath in Japan shows how human’s immersion in nature can have healing effects on the mind and body. Therefore, it is a ‘kill two birds with one stone” scenario whereby a thriving nature benefit both humans and Earth. Shifting the focus back to Singapore, it is unsurprising that this belief in nature’s healing abilities has led to the restoration of freshwater wetland in Singapore’s Botanical garden. As a result, it not only restores habitats but also act as a potential water reservoir that redirects flood water from urban areas to the area to make this city state more flood resilient. In summary, we should strive to let nature reclaim its equilibrium and us humans should coexist peacefully with, if not live harmoniously in nature.

No Time for Caution and Complacency

Climate scientist assistant professor Angel Hsu of the Yale-NUS College summarised best the reason climate change is described as the “super-wicked problem”. One, time is running out and relatively little has been achieved. Next, many people currently entrusted to solve climate change are ironically people who are causing it due to their other interests and their questionable practices in the process, best demonstrated by how these people fly extensively to attend meetings to combat climate change. Third, there is no central authority in the fight against climate change. As a result, every country prioritises their own interests before the common necessity to fix the climate and environment. Finally, and most damning of all, the persisting paradigm that climate change is a problem for the future. In reality, there is no time for caution and complacency. Carbon dioxide must begin declining this year or the world risks an irreversible disaster. Systemic changes are needed where business leaders and governments pool together resources and expertise to deal with this common enemy. We are one species after all.

While Singapore has taken good strides to address climate change issues at home, we need to be conscious that there are still other areas that could be done better. For example, the country could accelerate the transformation of public transportation system. Electrifying public buses and increasing bicycle lanes should be fairly easy to be implemented in an enclosed and well organised country like Singapore. Shenzhen, which is roughly the same economic size as Singapore has electrified all their public buses in 5 years, Singapore can surely do better than setting this target to be achieved by 2040 (He, 2018). Therefore, we are only at the prelude of the fight against climate change and the climax will arrive quicker than ever. If we do not take significant actions, the crescendo [2] of the disaster will likely drown out any hopeful progress. And climate disaster will happen more as a caesura [3] to the end of human existence than a diminuendo [4] like most lifecycles.

[1] Singapore’s percentage of world GDP was 0.42% in 2017; total contribution to global emissions was 0.11% in 2017; Singapore’s population is equivalent to 0.08% of the total world population ( (theGlobalEconomy.com, n.d.; Tan, 2019; worldometer, n.d.)

[2] In classical music tradition – gradually getting louder.

[3] In classical music tradition – a grand pause or dramatic break.

[4] In classical music tradition – gradually getting softer.

References
Carbon Conundrum. 2020. [Film] Singapore: Channel News Asia,.

He, H., 2018. Shenzhen surpasses US$338 billion GDP mark in 2017, beats Hong Kong and Singapore’s growth. [Online] 
Available at: https://www.scmp.com/news/china/economy/article/2128310/shenzhen-88-cent-hi-tech-growth-roll-hit-y2tr-2017
[Accessed 29 April 2020].

SERIS, S. E. R. I. o. S., n.d. [Online] 
Available at: https://bipv.sg/
[Accessed 29 April 2020].

The Economist, 2019. Island states have had an outsized influenced on climate policy. [Online] 
Available at: https://www.economist.com/international/2019/09/19/island-states-have-had-an-outsized-influence-on-climate-policy
[Accessed 29 April 2020].

theGlobalEconomy.com, n.d. Singapore: Percent of world GDP. [Online] 
Available at: https://www.theglobaleconomy.com/Singapore/gdp_share/
[Accessed 11 May 2020].

worldometer, n.d. Singapore Population. [Online] 
Available at: https://www.worldometers.info/world-population/singapore-population/
[Accessed 11 May 2020].