Ahead of the COP28 UN Climate Summit, a new report, the Corporate Climate Stocktake (CCST), examines the needs of business leaders to accelerate the clean tech transition.
The CCST, developed by the We Mean Business Coalition with support from the UN Climate Champions team and Bain & Company, assesses progress against international or national climate targets and identifies barriers faced by businesses that are rapidly decarbonising.
Based on surveys of 250 business leaders and detailed interviews with sector-leading companies and industry experts, as well as an analysis of forward-looking indicators and corporate commitments, the CCST includes input from over 300 of the world’s largest emitters. The stocktake focuses on a data-based analysis of eight key transition sectors: power, road transport, concrete and cement, steel, shipping, agriculture, aviation, and hydrogen.
The results suggest that the growth of clean technologies is accelerating across the board, citing a growth in renewable generation, passenger EV sales, and even in harder-to-abate sectors, such as aviation, which is ramping up the production of sustainable aviation fuel (SAF) as aircraft manufacturers plan to make engines 100%-SAF ready as soon as 2030.
The report attributes much of this progress to falling costs, as businesses invest in bringing new technologies into their industries. For example, capital costs for solar decreased by 85% in a decade, while lithium-ion batteries have enabled the electrification of transport, decreasing by 25% from 2013 to 2022.
Despite this progress, business leaders remain concerned about the pace of advancement. For example, under current conditions, over 30% of those surveyed conclude that their company will still be reliant on fossil fuels into the 2050s, even those having set net zero targets well ahead of this date.
The report details several challenges which must be addressed to achieve zero-carbon emissions across sectors. These include the lack of infrastructure for fuel production in the shipping industry, the high cost of zero-carbon steel production technology, and the shortage of zero-carbon workers in the power industry.
The energy sector
The energy sector specifically constitutes a major challenge. It is one of the largest emitters of greenhouse gases globally, and while the report acknowledges deployment of clean energy is “growing rapidly” and that the transition is “well underway”, there are still significant hurdles to overcome.
Four economies will play a critical role in setting the pace of global power decarbonisation, according to the report. China, the United States, the European Union, and India, together, account for over 60% of global electricity generation.
One of the key challenges in the United States is the interconnection queue, which can delay the deployment of renewable energy projects. The International Energy Agency (IEA) has recently highlighted this issue in its Electricity Grids and Secure Energy Transitions report.
Another challenge is the continued reliance on coal in some parts of the world. China, India, and Southeast Asia are expected to remain heavily reliant on fossil fuels in the coming years due to increasing demand that outpaces the capacity for renewable deployment.
The report suggests that a step change in international coordination is needed to address the challenges of renewable energy deployment. This coordination should focus on policy and market design, rather than targets, to ease knowledge sharing, support the development of more integrated power markets, and lower the cost of capital.
“More political will is needed to make the hard reforms required – whether that’s managing the financial and social implications of retiring legacy coal assets, including many young plants; addressing vested interests; or changing incentives around transition finance,” the report says.
Over 70% of surveyed companies identified government regulation as the most important driver for accelerating the clean energy transition, ranking it significantly higher than consumer pressure (37%) and investor pressure (25%).
“By placing the responsibility on businesses to balance climate action with commercial interests, we are setting them up for failure,” said Katherine Dixon, Partner at Bain & Company.
While most businesses welcome supportive regulation, some expressed concern over the pace and scope of regulatory intervention, particularly the burden imposed by EU regulations such as the Corporate Sustainability Reporting Directive (CSRD). One business leader described the risk that sustainability was “being turned from a leadership opportunity into a compliance issue,” which could stifle innovation.
In order to achieve our climate goals, the report suggests some solutions.
- Sector-specific focus: The report emphasises the need to accelerate demand for clean solutions in each sector by implementing targeted, robust strategies.
- Business-government partnership: Another key finding is the importance of collaboration between the public and private sectors to increase investments in sustainability. This requires a clear understanding of technology development so that businesses can direct capital effectively.
- Enhanced international cooperation: The report argues that smaller, pragmatic groups of governments and businesses are better suited to drive change than large, overarching alliances. Effective international coordination is essential for accelerating innovation and technology adoption globally, including establishing common standards. Governments play a crucial role in coordinating efforts both multilaterally and within specific sectors.
You can read the full report here.
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