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The chairman of the Energy Transitions Commission has highlighted the role both companies and governments can play when it comes to reducing emissions, emphasizing the importance of the upcoming COP26 summit on climate change.
In a wide-ranging interview with CNBC’s “Squawk Box Europe” at the end of last week, Adair Turner was asked if meaningful action was actually taking place when it comes to corporate announcements related to ESG — a term which stands for environmental, social and governance — or if these lacked substance.
“A lot of meaningful action is taking place,” Turner said. “The problem is that it’s five to ten years later than it should have occurred – but it’s still good news.”
He went on to note that companies and countries across the world were “now making clear commitments and taking clear actions” to cut their emissions.
“Almost everybody has now agreed that we’ve got to get the global economy to about zero emissions by 2050,” Turner, who chaired the U.K.’s Financial Services Authority between 2008 and 2013, said.
“The other bit of good news is that the technologies to do that — the technologies of renewables, of batteries, of electrolyzing hydrogen — have ended up being far cheaper and easier to apply than we dared hope 10 years ago,” he said.
According to the foreword of a recent report from the International Renewable Energy Agency, the cost of electricity from utility scale solar photovoltaics dropped by 85% in the period 2010 to 2020. For onshore wind, costs fell by 56%, while offshore wind saw a decline of 48%.
The report from IRENA also states that, in the U.S., the price of utility scale battery storage decreased by 71% between 2015 and 2018.
The production of hydrogen using renewables and electrolysis — sometimes called ‘green’ hydrogen — remains expensive, but efforts are also being made to lower costs.
In June, the U.S. Department of Energy launched its Energy Earthshots Initiative and said the first of these would focus on cutting the cost of “clean” hydrogen to $1 per kilogram (2.2 lbs) in a decade. According to the DOE, hydrogen from renewables is priced at around $5 a kilogram today.
Looking at the bigger picture, Turner acknowledged that while the technologies were there and a lot of companies were taking action, even stronger commitments would be needed at COP26, which will be held in the Scottish city of Glasgow from October 31 to November 12.
“In particular, we now need to focus not just on how do we get to zero emissions by 2050, but how do we get really serious emission reductions in methane as well as CO2 — I want to stress that point — in the 2020s,” he said. “We’ve really got to get the action in place now.”
A lot is riding on COP26, which was due to take place last year but postponed because of the coronavirus pandemic. The U.K.’s official website for the summit says it will “bring parties together to accelerate action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change.”
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Described by the United Nations as a legally binding international treaty on climate change, the Paris Agreement, adopted in late 2015, aims to “limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.”
Much of the discussions at Glasgow will be centered around nationally determined contributions, or NDCs. In simple terms, NDCs refer to individual countries’ targets for cutting emissions and adapting to the effects of climate change.
In his interview with CNBC Turner noted how the NDCs presented at COP26 would, when added up, be “nothing like the scale of emission reductions that we need.”
“We are going to have to think about additional action on top of that,” he said. “And that will require further tightening of NDCs in future years but also, maybe, some cross-cutting initiatives at COP26 on methane, on deforestation, on accelerating the drive towards electric vehicles, which can be agreed across all countries.”
When it came to getting results, Turner stressed the important role national governments could play.
“You need not only corporates to be committed and to make voluntary commitments because they want to do the right thing,” he said, but strict government “regulations and taxes and other instruments as well.”
He explained how establishing a framework to create the conditions in which businesses could then deliver was key.
One example of how governments are attempting to generate change is in the automotive industry. The U.K., for instance, wants to stop the sale of new diesel and petrol cars and vans by 2030 and require, from 2035, all new cars and vans to have zero tailpipe emissions.
“The automotive industry is pivoting towards EVs at an amazing pace,” Turner said. “But we need to make that even faster by just telling them you can’t sell an internal combustion engine car beyond 2035. So yes, you need strong action from government — sometimes the best action is regulation, sometimes it’s a carbon price, sometimes it’s a subsidy or support.”
When it comes to climate change and action, topics related to increased government regulation and carbon pricing have generated a significant amount of debate in recent times.
In a separate interview with CNBC’s Steve Sedgwick over the weekend, former U.S. Energy Secretary Ernest Moniz touched upon these subjects.
Moniz said he thought the energy transition to net zero was “a $100 trillion-plus affair.” He was, he said, encouraged at how financial institutions were “demanding things like disclosure from … companies … in order to be able to shape their own investment portfolios.”
“But we know that most areas of the clean energy transition right now do not have, let’s say, the returns that an investor would like without government coming in and reshaping policy and regulation,” Moniz said. “So that I think is a key step now that needs further attention.”
He was then asked if a carbon tax would level the playing field and make renewables more attractive when compared with hydrocarbons.
“First of all, I like to say clean energy and not renewable because we need the entire space, including carbon capture and hydrogen and nuclear.”
“But yes, a carbon pricing mechanism, I think, would be the most straightforward way of doing two things. One, to shape the playing field – assuming the price, frankly, is high enough. But secondly, what carbon pricing would do is create a pool of resources that I would strongly urge be used in a progressive way.”