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Editor's Pick: Jump start: accelerating net zero commitments

Neil Mearns Neil Mearns Senior Writer
4th February 2020

This article was originally published on 14 January 2020 in Energy:2030 Issue 25.

With the World Economic Forum (WEF) Annual Meeting having just taken place on 21-24 January, there has been increased focus on global sustainability. In this Perspective, we take stock of the countries and companies that are accelerating net zero commitments a decade or more ahead of the widely held 2050 target.

Overtaking
Prior to the annual meeting in Davos, the WEF published The Net-Zero Challenge: Global Climate Action at a Crossroads (Part 1) on 11 December 2019. The two-part series assesses the state of global climate action through the lens of corporations, governments and civil society.

It covers countries with net zero ambitions to date, either written into law or as a policy position (see Figure 1).

Pole position
Nordic countries, as the WEF reference in their report, have “been among the few to take truly decisive steps”.

Norway, in its Climate Strategy for 2030, published in June 2017, stated its conditional commitment to reduce its emissions by at least 40% by 2030 compared with the 1990 level. The strategy presented a “transformational approach” within a European cooperation framework.

The Finnish government first announced its country’s plan to be carbon neutral by 2035 in June 2019. Five coalition parties agreed on the target, which was championed by incoming Prime Minister Antti Rinne.

The country will tighten its emissions reduction obligation for 2030 to at least 55% below the 1990 emissions level. It will also carry out an assessment of its carbon neutrality target in 2025.

As part of the sustainable development tax reform, the Finnish government will carry out a complete overhaul of energy taxation by the August 2020 government budget session. Emissions guidance in energy production will be increased by abolishing its industrial energy tax rebate system. It will also reduce category II electricity tax (for industrial companies) towards the minimum rate. Heat pumps and data centres generating heat for district heating networks will be transferred to this tax category.

The government will also provide property tax relief for offshore wind farms and remove the double taxation on electricity storage for pumped storage facilities and smaller batteries.

The government will also:

Implement an energy aid scheme, shifting the focus to grants supporting investments in new energy technologies and demonstrations.
Support new methods for producing district heating and heat storage without burning fuel.
Remove barriers to wind project construction.
On 6 December 2019, the Danish Parliament agreed on a legally binding national Climate Act. This set a legally binding target to reduce greenhouse gas emissions by 70% by 2030 compared to the 1990 level.

The Act will overhaul Denmark’s climate policy; every year, the Danish government will present Climate Action Programmes with concrete political initiatives to decarbonise every sector, from transport to energy. The Act establishes an ambition mechanism with a five-year cycle, designed to ensure both early action and to revise the reduction targets. The milestone targets will be implemented in Danish law, with the forthcoming Climate Action Plan in 2020 to set a target for 2025.

Handling
Other western European countries are starting to make interim targets long before their respective net zero targets.

One development that appeared to go under the radar was that the Dutch Supreme Court on 20 December 2019 ruled that the Dutch State must reduce Dutch greenhouse gas emissions by 25% by the end of 2020, compared to 1990 levels. This is a remarkably ambitious short-term target considering emissions were down 15% on 1990 levels by the end of 2018. But the Supreme Court justifies this reduction target “on account of the risk of dangerous climate change that could also have a serious impact on the rights to life and well-being of residents of the Netherlands.”

Over a slightly longer timeframe, Germany’s lower house of parliament in November 2019 approved a package to help the country achieve its target of cutting greenhouse gas emissions to 55% of their 1990 level by 2030. Germany will raise the price for CO2 emissions from transport and heating buildings to €25 (£21.08) per tonne from 2021. This was after a proposed €10 (£8.43) price tag was criticised for being too low. Under the new agreement, the carbon price would rise to €30 (£25.3) in 2022 and rise incrementally to a price corridor of €55-65 (£46.38-54.81) by 2026.

Also using taxation to drive emissions lower Sweden has set the highest carbon tax in the world, at €114 (£96.40) per tonne.

Traction
Just as Nordic countries are the ones with shorter-term net zero targets, the Nordic oil and gas majors are accelerating their ambitions to decarbonise. An initial marker of this greening intent was the name-change of DONG to Ørsted in November 2017 and Statoil to Equinor in May 2018.

Equinor, on 6 January, announced its aim to reduce all greenhouse gas emissions from its offshore and onshore operations in Norway by 40% by 2030, 70% by 2040 and to near zero by 2050. By 2030, this implies annual cuts of more than 5mn tonnes, corresponding to around 10% of Norway’s total CO2 emissions. The 2030 ambition will require investments of around NOK50bn (£4.2bn) for Equinor and its partners. Vattenfall previously stressed in a 11 November 2019 press release that that partnerships will drive its transformation to net zero.

By 2025, Ørsted aims to achieve a 98% carbon reduction in energy generation and operations compared to 2006. The company also aims to have a 100% electric car fleet by this year. By 2030, the company will look to build more than 30GW of green energy projects across technologies. By 2032, Ørsted wants to reduce emissions in the supply chain and from energy trading by 50% compared with 2018. It will aim to become completely carbon neutral by 2040. These targets were explained in its Sustainability report 2019 on 30 January.

Corporate Knights named Ørsted as the world’s most sustainable company on 21 January. It topped more than 7,300 global companies with billion-dollar revenues to rank number one in the 2020 index of the Global 100 most sustainable corporations. It is the first time an energy company has finished top of the index. Vattenfall announced on the same day that it was awarded an “A” by non-profit Carbon Disclosure Project (CDP) based on data submitted through its 2019 climate change questionnaire. Only the top 2% of 8,000 companies assessed achieved this score.

Vattenfall claims that it has a £10bn+ UK pipeline in wind power, interconnection, power distribution and district heating to drive its net zero ambition. Meanwhile, Equinor is advancing opportunities in offshore wind, carbon capture and storage and emissions-free hydrogen based on natural gas.

Scrutineering
The Nordic countries, in tandem with the likes of Equinor and Ørsted, are raising their ambitions in the hope that others will follow suit. The likes of Norway and Finland have vastly different fuel mixes and national consumption profiles compared to the UK, but many of the initiatives being employed to reach net zero are certainly transferrable.

It is important that the transition is a just one, as the EU has recognised in its Green Investment Plan (see page 21). This will be a difficult balancing act for larger western European economies, with traditionally fossil-fuel heavy energy mixes.

 

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Energy:2030 is a monthly publication covering relevant and interesting developments including:

  • market mechanisms and regulatory incentives
  • technological developments and their anticipated impact
  • changing policy as it evolves both in the UK and worldwide