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#CARBONCLASH / 23 Nov 2018

Europe’s first ever Carbon Clash hosted by Pöyry

Did you know that the current global output level of CO2 emissions is 51GT per annum?

In its recent special report titled ‘Global Warming of 1.50C’, the IPCC called for accelerated progress to reduce climate change. Urgent action is required to find solutions needed to address the magnitude of the problem.

On 14th November, Pöyry staged Europe’s first ever Carbon Clash event in Helsinki, Finland. In celebration of the company’s 60th anniversary, the international consulting and engineering company connected 300+ industry leaders and world-class experts to debate low carbon solutions.

The Carbon Clash attracted climate change gurus such as Louis Blumberg, renowned climate policy consultant for San Francisco, California, where they have successfully reduced emissions and boosted the economy. Innovation was a cross-cutting event theme and many exciting ideas were sparked.

Two lively ‘Clashes’

At the heart of the event, were two lively clashes between the CEOs of energy and packaging companies. In this first of a series of Insights posts we sum up the conclusions, including the results of the audience live polls, of the first Clash ‘Electricity vs. Biofuels’ which took place between Pekka Lundmark, Forum President and CEO of Fortum, and Mika Anttonen, Chairman of the Board of St1.

Clash 1: Energy vs. Biofuels – what happened next?

‘Overall, there was more consensus than disagreement’, commented Richard Sarsfield-Hall, the expert moderator of the Clash. Richard is a Director in Pöyry’s Energy Management Consulting unit and the lead author of the Pöyry Point of View ‘Fully Decarbonising Europe’s Energy System by 2050’.

‘Political decision makers’ mostly responsible for reducing CO2

The Clash kicked off with a question to the audience:  ‘Who do you think is mostly responsible for reducing carbon emissions?’ The six options included Political decision makers, Companies, International organisations (e.g. UN, EU), Private individuals, Authorities and Civic organisations. The answer ‘All of the above’ was intentionally missing from the list in order to generate a sense of priority.

Interestingly, the audience, comprised mainly of Nordic business leaders from industry, voted most for ‘Political decision makers’ (39%) as the stakeholder mostly responsible for reducing carbon emissions, although this was closely followed by companies (30%) in second place.  Private individuals (24%) came third. International organisations (e.g. UK, EU), authorities and civic organisations attracted a combined total of 7% of the votes.

In the thought provoking dialogue which followed between Pekka and Mika, Richard probed the participants on why the role of Political decision makers is so important to reducing CO2. ‘Let’s first look at the situation today,’ commented Richard, ‘We have the 2020 target in place to reduce CO2 by 20%, however, there is no one overall scheme to achieve this target globally. Instead each country has been left to create and implement its own scheme for reducing CO2 emissions. Each scheme is different and as such, the playing field is uneven. ’

Big problem of international competitiveness

With such a wide range of country-level schemes and initiatives, the problem of international competitiveness arises, which occupied much of the Clash discussion between Mika and Pekka. Europe is responsible for just 8% of the global CO2 output (51 GT) with its CO2 being evenly split across power generation, heating, transportation and other (agriculture, aviation, shipping, land use, etc.).

‘If you are an energy company producing a mass market product and you have additional costs, which are not the same globally, then this is going to impact the commercial decisions you make,’ was a common view of Pekka and Mika, raising the question ‘will process industries make these investments without an overarching global scheme which rebalances the playing field and makes competition fair?’

Extremely low confidence in achieving the 2050 decarbonisation target

The second question that the audience were asked is ‘What level of decarbonisation will Europe achieve across the energy system by 2050? ‘The target of >95% is what needs to happen,’ commented Richard, ‘however, the majority in the audience were highly sceptical that as to whether this could be achieved.’

Over 80% of the audience of leaders in the room from the energy, forest industry, infrastructure sectors felt that the level of decarbonisation achieved would be less than 80%. And 58% of leaders believed that it would not achieve 70% decarbonisation. ‘This shows a significant expectation gap exists between policymakers and the voice of business. What’s more, we are talking about leaders in Nordics companies who generally adopt a more sustainability-oriented outlook.’

140 million Electric Vehicles on Europe’s roads by 2040

The discussion turned towards the hot topic of Electric Vehicles (EVs). When asked whether EVs will take off, the audience agreed with Mika and Pekka’s view that there would be a significant deployment of EVs. In response to the question ‘How many Electric Vehicles across Europe do you anticipate by 2040?’ 37% of the audience believed that 140 million would be on the road and a further 33% said they believed that 90 million EVs would be out there. A quarter of the audience guessed at 50 million and only 4% said that the level was in the region of 22 million.

Richard elaborated, ‘What’s apparent is that when something is explained as was the case in this Clash and marketed well, then it becomes a more realistic option. There was a strong consensus today by business leaders of industry that Electric Vehicles are going to be big in Europe’.

Whilst some promote biofuels as an alternative to EVs, both Pekka and Mika agreed that the small potential availability of sustainable biofuels in the future means this should be focused on the sectors where it could have the greatest economic benefit, such as aviation and shipping.

Will displaced oil go somewhere else?

One area where there was some disagreement was the view Mika highlighted that the amount of oil that EVs would displace would be relatively modest and that it was likely, and especially if no other policy actions are taken, that the displaced oil would be used in the petro-chemical industry, leading to an outcome where you have move CO2 emissions from one sector to another and not actually decarbonised the energy system.

Conclusion: create a market driven shift towards a New Economy focused on CO2

To address this, Martin à Porta, President & CEO, Pöyry PLC, earlier introduced the concept of the ‘Carbon Cake’. Martin asserted that carbon is typically seen as a huge business challenge, however, by putting a price on CO2 you create a mechanism to drive change and a market shift towards a New Economy based on CO2. Thus the problem of carbon now becomes an opportunity. The concept of the cake represents the business opportunity that’s created and with the right mechanism you get to eat the cake again and again.

However, without a CO2 priced market mechanism then the concerns identified in the Clash will not be addressed in a co-ordinated and mutually supportive way, leading to sub-optimal solutions and perhaps justifying the pessimistic expectations of the audience on future levels of decarbonisation. Furthermore, the need that was recognised for global political support to unleash the innovation of industry and helping consumers in making the transformation required.