The deadlines vary from 2030 to 2060, but the world is experiencing a rare consensus from the main global leaders that the decarbonization of the economy is urgent. After COP-26, held in November in Scotland, the number of signatories to the Paris Agreement rose from 175 countries in 2015 to 195, including China, the United States and Brazil, which announced a target of a 50% reduction in emissions by 2030. Together, the group represents more than 90% of global greenhouse gas (GHG) emissions. It is this contingent that has committed itself to acting to keep the planet’s temperature rise as close as possible to 1.5°C until the end of the century. That means working to achieve the decarbonization of the economy by 2050 — China wants another ten years to go.
The business community is aligned. The United Nations (UN) Race to Zero campaign registered the adhesion of more than 5,200 companies and 441 major investors, many of them setting 2030 or 2040 as a deadline. The key question for 2022 is: how will building a carbon-free economy be viable in terms of technology, resources and standards? “This situation will not resolve itself”, stated Viviane Martins, CEO of Falconi Consultores. “It is necessary to readjust the economic and social reality.”
Here the problems begin. Companies are announcing decarbonization targets today, betting that in the future the knots that make it impossible to fulfill the commitments made will be undone. One of them comes up against technologies. Some even exist, but are not scalable and others just haven’t been invented yet. Gerdau is at this crossroads. Earlier this month, the company announced that it will reduce its scope 1 and 2 emissions (which refer to the volumes emitted by the company’s operations itself, while scope 3 includes the value chain), to 0.83t of CO2e per ton. of steel by 2031, less than 50% of the global average for the steel industry. CEO Gustavo Werneck went public with the decision, but had to make the caveat: “We have taken an important step towards our ambition to be carbon neutral by 2050, even though we know that neutrality in the steel industry is still not viable today” . The list of obstacles cited by the steel company includes technologies that do not yet exist on an industrial scale and public policies that enable the global steel industry to neutralize its carbon emissions.
Another Achilles heel is the amount of resources needed for the transition towards a green economy. Only the International Energy Agency estimates that it will be necessary to increase investments in the sector from the current R$ 2.5 trillion/year to US$ 5 trillion/year by 2030 and remain at that level until at least 2050. This is more than all the assets linked to sustainable investments, estimated today at US$ 4 trillion by the fund manager BlackRock. By the way, the manager has just sent a letter to its network explaining how to invest in the transition to zero emissions. According to the document, many of these technologies exist but are not yet economically competitive — such as green hydrogen, carbon capture, green cement or sustainable aviation fuel. “Capital is necessary to commercialize these new technologies and invent others”, brought the document signed by six executives of the institution.
Meanwhile, the US$ 100 billion international fund pledged by developed countries to help developing countries in the energy transition is slipping and was left to be discussed at COP-27 to be held in November in Egypt. And let’s agree that a US$ 100 billion fund for an equation that will require investments of US$ 5 trillion will hardly change the scenario.
LACK OF RULER As if the great structural challenges were not enough to jeopardize the feasibility of complying with the Paris Agreement, a more trivial issue worries the community: there is still a lack of clear rules to measure emissions and the integrity of the plans towards Net Zero in a single ruler. In a cordial debate this week, Science Based Target (SBTi), one of the most renowned organizations guiding companies on the decarbonization journey, questioned the Corporate Climate Responsibility Monitor released by the New Climate Institute and Carbon Market Watch, which pointed out that Of the world’s 25 largest corporations, only three clearly commit to decarbonizing 90% of their emissions in scopes 1, 2 and 3.
According to the SBTi, the document reflects “important differences in the methodology used in the report and in the criteria used by the SBTi to validate the emission reduction targets.” Without clear and unique rules, companies such as Vale and JBS have plans prepared in accordance with the Science Based Target standards, but which were classified as having a low level of transparency and integrity in the Monitor. Both defend themselves in official communiqués, but suffer from the divergence of methodology that is a disservice to the companies themselves, the market and the consumer.
Faced with so many obstacles in the way, the way out comes in the words of the director of Agribusiness at Itaú BBA, Pedro Fernandes. “As complex as it is, we will make decarbonization happen.” The financial institution is working to decarbonize the operation by 2030. How? “It’s not that everything is done, but we have the capacity to build and we’re not measuring our efforts for that”, stated Fernandes. For the sake of survival, he is not alone on this journey.
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