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COP27: 4 Takeaways on How the Private Sector Can Lead on Climate Change
Seven years ago, almost all nations worldwide adopted the Paris Climate Agreement, a legally binding treaty that calls for countries to submit nationally determined contributions (NDCs) that outline mitigation goals. Among those NDCs was an EU commitment to reduce greenhouse-gas emissions by at least 40% for 2030, compared to 1990 levels, organized under a broader 2030 framework.
As those deadlines draw near, what began as a call for partnerships has become an all-hands-on-deck summons between the world’s public and the private sectors. The recent 27th Conference of Parties to the U.N.’s Framework Convention on Climate Change (COP27) had a resounding message during the two-week conference: Governments need companies to join and help lead this massive effort.
John Podesta, a senior Biden advisor and conference attendee, told the Washington Post that private-sector capital is “where the real money is,” with billions of dollars in play “when the need is trillions. We’ve got to unlock that [private-sector] capacity for people to make investments in building a clean-energy future or else we’ll miss both the development goals and the climate goals.”
The private sector needs to be at the front lines in the battle against climate change. This is our moment, especially for companies in the energy sector. We are the power generation, and we have a once-in-a-lifetime opportunity to join hands with governments worldwide to confront the crisis head-on. Here are four COP27 takeaways on how companies can take the lead.
1. Companies Can Help Finance and Enable the Transition to Clean Energy
Midway through COP27’s first week, the U.S. announced a new public-private partnership to unlock finance that could accelerate the energy transition. A report from Boston Consulting Group and the Rockefeller Foundation released on the sidelines of the conference says we’ve collectively deployed just 16% of the $3.8 trillion in annual investment needed over the next three years to meet global climate goals.
The new U.S. public-private effort, called the Energy Transition Accelerator, aims to unlock the $4.2 trillion per year by 2030 that the IEA says will be needed to drive private investment in comprehensive renewable power. Jurisdictions can issue verified greenhouse gas (GHG) emissions reductions as marketable carbon credits, similar to those already used in the forestry sector. This can steer finance to certain projects to produce “deep, rapid emissions reductions,” the State Department says.
Public-private efforts like this are critical to multiplying the impact of new investments and technologies. As Mitsubishi Power’s Blueprint for Decarbonization explains, they can also fast-track essential collaborations to accelerate change. The bottom line, says Mitsubishi Power Americas’ CEO Bill Newsom, is “ingenuity and technical prowess only get us so far in achieving net zero. Investment is the accelerant that allows us to commercialize and scale the impactful solutions the world needs.”
What do these partnerships look like? Consider the Republic of Kenya, which has long believed that large-scale electrification projects are essential to promoting economic growth. Some two-thirds of Kenya’s power supply comes from low-carbon sources like hydroelectric or geothermal. In Kenya’s Great Rift Valley, the country has been developing geothermal power for half a century. Mitsubishi Power delivered steam turbines and other power-generating equipment for three of the region’s Olkaria geothermal power plants, including Olkaria V, one of Kenya’s largest geothermal plants, in 2019. Because of that work in design, procurement, commissioning and operations, Olkaia V’s 86.2-megawatt capacity helped Kenya surpass Iceland as the world’s eighth-largest producer of geothermal power.
2. Companies Can Drive Adaptation Around Climate Change
The COP27 Sharm-El-Sheikh Adaption Agenda warned that climate hazards will impact 80% of energy systems and 75% of roads worldwide by 2030. Much infrastructure will be needed, and large companies and wealthy nations will both need to support this. Finance was a big emphasis at climate talks early on during COP27, with the U.N. publishing a list of projects worth $120 billion that companies and investors could back to help the developing world cut emissions and adapt to climate change.
Adapting to climate change can mean a lot of things. The U.S. EPA lays out 164 specific adaptation strategies, among them several that call for more-resilient electricity supply. That comes as climate change places escalating burdens on electric grids, with power outages from extreme weather in the U.S. having doubled over the past two decades. Even as we work to mitigate the root causes of climate change, we must also adapt to what’s already here – and adaptation will require companies to bring solutions to the table.
Mitsubishi Power, for example, is “developing technologies that strengthen our energy systems and ensure reliable power is delivered to the most vulnerable and at-risk areas,” says Bill Newsom. “It’s important to help all communities adapt to the effects of climate change.”
The power sector must help ensure that the energy transition is equitable and includes the estimated 770 million people – nearly 10% of the world’s population – who currently lack electricity. That’s one factor behind the imperative for the energy industry to help the world adapt to climate change by generating ever-more power, with nearly double the current demand projected to be needed in 30 years’ time.
For that to happen, we need industry leaders to become entrepreneurial collaborators. Entrepreneurship is contagious, and we want it to spread, such that all corners of the industry innovate at scale to achieve these goals.
3. Companies Can Advocate for Removing Trade Barriers to Green Technology
Early on at COP27, World Trade Organization leadership reportedly rebooted efforts to revive negotiations around a global environmental trade deal. A WTO report released alongside the conference called trade a “force multiplier” for adaptation efforts to climate change and a way to “reduce the cost of mitigation and speed up the low-carbon transition and the creation of green jobs.”
Scrapping tariffs and other barriers on items such as solar panels and smart-heating units can accelerate adoption. The WTO reportedly suggested opening trade to 50-60 products and gradually expanding. Companies producing such goods should be at the forefront of this advocacy, as it can help foster robust international competition that can scale up capacity, lower pricing and open innovation for key decarbonization technologies.
That’s already happened for infrastructure like wind turbines, solar panels and lithium-ion battery storage. Wind turbines have progressed to five- and tenfold their former production capacity. And the cost of utility-scale photovoltaic systems is now less than one-fifth the cost it was in 2010, helping global solar capacity to increase more than 20-fold between 2010 and 2021. The cost of lithium-ion batteries has fallen nearly 90% per kilowatt-hour between 2010 and 2021, driving global electric-vehicle adoption from negligible levels in 2010 to some 16.5 million cars on the road in 2021. Similarly, green-hydrogen production and storage will require tremendous scaling of electrolysis – the process of extracting hydrogen by running electricity through water – to exponentially higher levels than currently available.
“With renewable energy now cheaper than fossil alternatives in some places, the adoption of renewables has accelerated,” the WTO report continues. The organization estimates that eliminating tariffs and reducing non-tariff barriers on a subset of energy-related environmental assets could boost exports 5% by 2030 and bump energy efficiency and renewable uptake to cut global emissions 0.6%.
Robust policies that open international trade can help accelerate how fast we scale green technologies. Green hydrogen, for example, is already at an inflection point on the cost curve, says Michael Ducker, Senior Vice President and Head of Hydrogen Infrastructure at Mitsubishi Power Americas. Ducker believes several key drivers – increasing capacity, improving manufacturing efficiencies and embracing technological advances – will reduce production costs and accelerate adoption on the other side. Amid all of that, open trade will be key.
4. Companies Must Regain Public Trust
At COP27, a high-level expert group convened by the U.N. submitted a report on net zero commitments that recommends gaining “clear, accessible, comparable data” between the various actors to enable individuals and investors to reward them accordingly, as well as for hurdles to be pinpointed and overcome.
Companies should get out ahead of this. The private sector must take allegations of greenwashing seriously. As the report recommends, they need to communicate information in standardized, open formats. Such information should include net zero targets and progress against those goals, including annual GHG emissions, plotted against baselines that are comparable between different companies. Companies have an opportunity to lead by forming consortiums around these metrics and collectively reporting into benchmark indices.
Mitsubishi Power supports two indices that provide transparency into power-sector emissions. The first one is the Power Sector Carbon Index, a metric developed by Carnegie Mellon University’s Scott Institute for Energy Innovation that tracks CO2 emissions and power generation by source. The second is the Power Generation NOx Tracker, an indicator of nitrogen oxide emissions per MWh of power generation developed by the University of Central Florida. Metrics like these enable companies to report standardized, open-format data for public interest and prompt accountability against greenwashing.
The Clock Is Ticking
A year from now, COP28 will take place in Dubai. As we strive to meet long-term net zero deadlines, we also need short-term deadlines to spur more immediate action. We have one year to make progress – to show the world that the private sector can step up and be part of the solution to climate change. Some decisions will be hard, sacrificing today’s profitability for tomorrow’s investment. But this is too important to protect short-term interests. From investing in the renewable energy of tomorrow – wind, solar, green hydrogen and more – to financing decarbonization in the Global South, the private sector faces not just the opportunity to lead. It faces the imperative to do it, too.
