In Mark Carney’s recent book Values there’s a startling section on the need for us to act now on carbon emissions. He says that if we had acted at the turn of the millennium, we could have stayed within our 1.5C warming limit target by halving emissions every thirty years.
But we didn’t. So now we have to halve emissions every ten years.
If we wait another four years, we’ll have to halve emissions every year.
If we wait another eight years, we’ve run out of time. We’ll already have hit 1.5C.
It’s a startling outlook. But the true scale of the crisis still escapes many of us at an individual, social and governmental level. For many there’s an internalised view that if it absolutely must be done, the government will ensure it is done. For individuals that manifests itself as waiting for the law to tell them what they have to do to reduce their carbon footprint. For businesses it’s similar – many know they’ll have to act eventually, but are waiting for the right combination of incentives and penalties to force their hand.
But governments respond to public and commercial pressure. They often get their priorities and cues from what the public and businesses are asking of them. So if we’re all waiting for someone else to take the lead, where does that leave us in four years, or eight years? A metaphor about creeks and paddles comes to mind.
How did we get ourselves into this mess?
It’s helpful to think of emissions in terms of a carbon budget. There is a fixed budget of carbon we can release into the atmosphere before we exceed our target of 1.5C of global warming. If we fritter that budget away in a short period of time, we don’t get it back. We then lose runway – we curtail the carbon budget available to us over a longer period of time. The sooner we act to reduce emissions, the longer our carbon budget will last.
The challenge, for every person, government and business, is that the atmosphere is a common asset with no single entity responsible for its condition. Individuals can, therefore, act independently according to their own self interest without regard for the common good. This phenomenon is commonly known as the tragedy of the commons. The term was first used in 1833 to describe the theoretical effects of unregulated grazing on common land and we’ve seen it play out in practice over and over again. Farming, hunting, fishing, lumber – just about any use of natural resources has run into the tragedy of the commons.
How can we get ourselves out of it?
We have a major tool in our arsenal that we aren’t using properly – price. We absolutely must begin pricing carbon properly immediately. This would in effect be an agreed tariff which incentivises protection of the climate by financially punishing its destruction.
Carbon pricing isn’t new, but because it is currently far too low it has receded from public view. It is, however, one of the biggest levers we can pull because it will force individuals and businesses to change their behaviour. If it’s too expensive to release carbon by burning fossil fuels relative to alternatives, we won’t do it.
Another solution is to regulate access to our common resource – in this case, the carbon budget. The Paris agreement was a significant step in the right direction and, hopefully, Glasgow COP26 will continue the work of implementing nationally determined contributions which will kick-start the full scale transition of the private sector.
We’ve seen, during the coronavirus pandemic, that in a crisis we are capable of sacrificing personal freedom and wealth for the common good. We must do the same again for the carbon budget – it must become both financially and socially unviable for businesses to blow through any more of the carbon budget than is absolutely necessary.
The pandemic is sometimes considered like a practice run for a response to climate crisis impact. We have to take two main lessons from it:
-Widespread social consent for drastic action, in the face of an unthinkable alternative, is achievable.
-Humanity’s poor understanding of long range risk means that governments and regulators are likely to wait too long to act – the risks of the pandemic were warned about well before it happened.
Therefore leaders will have to stop being wilfully blind, recognise the heuristics that lead to an undervaluing of the risks, and act to mitigate them.
Governments, businesses and individuals must act, sooner or later (for all of our sakes, we hope it’s sooner). Any delay makes the problem far more acute. By acting now, we will be able to stretch our carbon budget further and therefore buy time for improvements using existing technology like heat pumps, change in organisations, and change in behaviours.
What does this mean for businesses?
Businesses have to decarbonise. And they cannot, and should not, wait for governments to pull the levers described above. As time passes we will quickly approach the narrow end of the carbon budget and experience the early impacts of climate change. Businesses will find that supply chains will become stretched and fragile, giving rise to the risk that the decarbonisation project can’t be completed in time or that costs will multiply.
If these decarbonisation plans can’t be completed then the business will be exposed to rising tax, rising carbon prices, regulatory sanction and social sanction as the public’s view of high-emission businesses sours. The risks associated with the brand and reputational damage of tardy decarbonisation cannot be overstated – especially as failure to meet net zero plans will have to be publicly disclosed through TCFD or similar schemes.
Any investment in technology or plant that does not align with the need to decarbonise will lead to the risk of being left with stranded assets. Early movers will benefit from learning, better availability and reputational enhancements creating a competitive advantage that will build stronger, more resilient and more profitable businesses.
A clear example of this is the technology used to heat buildings. Natural gas boilers will have to be replaced, and any hope that hydrogen heating will negate this is (pardon the pun) a pipe dream. Installing a heat pump is one of the best things a business can do to decarbonise, and it’s fairly straightforward if engineered correctly. A heat pump will deliver a 60 to 80% carbon reduction and when used for cooling too it’ll do even better. If plugged into a digital platform to optimise performance and provide grid flexibility services it will be able to deliver even more carbon reductions and cost savings.
If your business is interested in taking this step, talk to us today or read more about our heat pumps here.