|CARBON AND ENERGY POLICY
The World Economic Forum’s Global Risks Report 2017
rated “failure of climate-change mitigation and adaptation” as one of the top ten global risks. Climate change as a policy driver, with inevitable impacts on business, is here to stay. The Paris Agreement of 2015 provided additional urgency to the global transition to a low-carbon economy, requiring virtually all governments to set out plans to reduce their carbon emissions.
Due to the fact that 60% of global greenhouse emissions result from energy production, carbon policy and energy policy are inextricably linked. As the understanding of the impacts of climate change and energy on business has grown, a number of trends have been observed. One significant trend is the reduction in energy intensity per unit of GDP – initially sparked by rising energy costs in the 1970s, but given new importance in a low-carbon economy. A second trend is the strides that have been made in the affordability of renewable energy. For example, in South Africa, the recent Department of Energy bids received from Independent Power Producers (IPPs) under the Renewable Energy and Coal IPP Programmes, revealed that the levelised (all-in) costs of new solar PV and wind per kWh generated are now 60% of that of new coal. So, no longer is the choice for electricity a balance between emissions and costs, as renewables win on both counts.
In addition to the above, factors such as urbanisation and climate-related risks to socio-economic development and business models contribute to a carbon and energy policy environment that can be described as a VUCA world (volatile, uncertain, complex and ambiguous).
To thrive in this environment companies must not only consider carbon and energy policy, but also the impact of other forces on their business ecosystem. They need to move beyond the certainty of forecasts into scenarios that capture as many of the potential outcomes as possible. Depending on the company’s strategy it may even choose to become proactive in shaping scenarios rather than aiming to mitigate against climate-change and energy impacts.
MAC’s approach to advising clients combines an in-depth understanding of the carbon and energy environment with a thorough assessment of business needs.
- Understanding the carbon and energy environment
Maintaining an in-depth understanding of current developments in the carbon and energy space is of critical importance for developing and maintaining strategy. MAC’s interactions with policy makers and industry players in forums such as the NBI and CDP enables us to keep clients up to date with the latest developments in this field.
- Understanding company strategy and requirements
An appropriate response to risks and opportunities resulting from developments in carbon and energy policy depends on company-specific needs.
A key tool in ensuring that carbon and energy strategies are fully aligned to business needs is a scenario-based approach which is summarised in the diagram below:
MAC has worked with clients spanning the mining, financial and logistics industries, on a variety of sustainability projects. These include:
- Development of long-term carbon and energy strategies.
- Development of carbon and energy policies.
- Development and implementation of strategies for renewable energy generation.
- Assessment of the impact of carbon and energy on the organisation’s business activities.
- Carbon reporting (CDP) and assurance.