Deep Dive: Science Based Target Setting for Carbon Intensive Sectors

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1 Deep Dive: Science Based Target Setting for Carbon Intensive Sectors Science Based Targets initiative webinar March 29, 2016 Key Questions What are Science Based Targets and how are they developed? How do Science Based Targets vary among carbon intensive sectors? What are the next steps for the SBT initiative? 2 1

2 Webinar agenda 10:00 10:10 Science based targets overview 10:10 10:40 Sector discussions: Iron and steel Electricity Cement Pulp and paper 10:40 10:45 Summary and next steps 10:45 11:00 Questions and discussion 3 Webinar presenters Nate Aden, (WRI) Pedro Faria (CDP) Nicole Labutong (CDP) Paola Delgado Luna (WWF) 4 2

3 Science based targets overview 5 What is a science based target? A science based target represents a company s share of the global carbon budget. The global carbon budget is the amount of carbon the world can collectively emit while hoping to stay on a 2 degree C path. This budget is allocated to a company differently based on the various available methods. 6 3

4 What do science based targets mean for companies? Science based targets shift the discussion. How much does my company expect to reduce emissions? How much MUST my company reduce emissions? Science based targets enable companies to understand what they need to do to align their targets with science. Companies can demonstrate to stakeholders that they are doing their part to help the world avoid the worst effects of climate change. 7 Science Based Targets initiative overview Goal Increase corporate ambition on climate action with the level of decarbonization required by science to limit global warming to less than 2 C compared to pre industrial temperatures. Objectives 250 companies with science based targets by 2018 Demonstrate to policy makers the scale of ambition achievable among leading companies to positively influence international climate stabilization 8 4

5 IPCC AR5 is based on an ensemble approach 9 From exceedance to avoidance: updating the 2 degree budget New recommended threshold avoidance budget: 590 1,240 Gt CO 2 (from 2015 onwards) Source: Rogelj et al

6 3 characteristics differentiate SBT methods Emissions scenario & carbon budget Carbon budget determined by a Peak & Decline trajectory or Carbon budget determined by a CAGR or linear trajectory disaggregated carbon budget Level of disaggregation Global carbon budget or Geographic budget and / or Sector budget Allocation mechanism Convergence or Compression or Contraction Intensity Absolute Economic indicator and / or Physical indicator 11 The SBT initiative has identified 7 methods Allocation Mechanisms Absolute contraction C FACT CSI CSO (contextbased) GEVA SDA 3% Solution Emissions Scenarios Geographic* Global Level of Disaggregation All economy Sector Convergence Compression Contraction Physical $ Intensity Absolute SDA (homogenous) CSO, GEVA SDA (heterogeneous) All economy CSI C FACT Sector 3% Absolute Contraction *Method differentiates by either Annex I / non Annex I, regional, or country scenarios 12 6

7 Global absolute contraction approach Cumulative CO 2 emissions: 842 billion tonnes CAGR: 3.1 % Linear and peak anddecline pathways generally have higher cumulative emissions At 40 Gt/yr, the 1,000 Gt budget will be exceeded in 2040 Historical data source: CDIAC ( 13 Greenhouse gas emissions per unit of value added ( GEVA ) approach 14 7

8 The Sectoral Decarbonization Approach is based on global pathways 15 Industry is the largest sector source of GHGs Source: IPCC, AR

9 Science Based Targets for Iron & Steel Companies 17 IEA forecasts that steel sector emissions need to drop 2% per year through 2050 to limit warming to 2 C this century Source: IEA (2015) Energy Technology Perspectives. 18 9

10 SDA pathway for iron & steel companies 19 Absolute contraction approach 20 10

11 Steel company example of method variation Company characteristics: 2014 base year 8 million tonnes crude steel production $7 billion value added 11 million tonnes CO 2 e Physical intensity (t CO 2 e/t crude steel) Economic intensity (kg CO 2 e/$) 2011* * Company base year 21 Science Based Targets for Electricity Companies 22 11

12 Global electricity scenarios scenario envelope 23 Regional scenarios in ETP 2015 (2D compatible) 24 12

13 Application principle of convergence of intensity =1 py = 0 25 Comparison to other methods Activity projection SDA emissions pathway Linear reduction (80%) 26 13

14 Science Based Targets for Cement Companies 27 Summary of current cement sector GHGs and cumulative budget Cement is made from clinker and a mix of other minerals. It is an energy intensive sector because it involves the heating of ingredients to 1,450 C. The calcination reaction that takes place in cement production also produces CO2 as an inherent process emission separate from energy use. In 2012, it accounted for 8.5% of total industrial energy use and 34% of industrial direct CO2 emissions. CARBON BUDGET Scope 1: 89,785 Mt CO2 Scope 1+2: 94,462 Mt CO

15 SDA pathway: Cement 29 SDA pathway: Cement Mitigation options: Fuel related emissions can be brought down through fuel switching, using biofuels instead of fossil fuels Emissions can be brought down even further by implementing best available technologies including energy efficiency measures (limited potential) CCS can achieve further reductions (CO2 emissions from the calcination reaction) Assumptions: Demand increase assumption holds if no new building technologies or fabrications are found with equivalent properties as a building material Sufficient access to biofuels for the cement sector Emissions peak in 2020 because of the growing activity, and then decline toward 2050 due to the effect of mitigation measures 30 15

16 Example: Company X 60,000, TONNE OF CO2E 50,000, ,000, ,000, ,000, ,000, Summary table 2010 Scope 1 tco2e 43,000, Scope 2 tco2e 3,212, Total scopes 46,212, Activity t cement 60,000, Annual growth 0.78% GEVA SDA ETP 2DS Abs. Cont. 2.0 C Abs. Cont. RCP 2.6 GEVA RCP Science Based Targets for Pulp and Paper Companies 32 16

17 Pulp and Paper Overview Manufacture of all grades of paper including pulp, paper, and paperboard intended for further industrial processing. GHG emissions mainly from fuel and energy use during forestry, pulping, and manufacturing. Continued increased demand, mostly from non OECD countries. Source: IEA ETP 2015 IEA ETP CARBON BUDGET Scope 1: 8 GtCO2 33 Science Based Targets for Pulp & Paper Companies Source: IEA ETP

18 Pulp and Paper Mitigation Options Decreased carbon intensity can be achieved through: Energy efficiency in heat use Efficiency in paper mills Waste to energy technologies Carbon capture and sequestration 35 Example: Paper Company A TCO2E 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000, YEAR SDA ETP 2DS Abs. Cont. 2.0 C Abs. Cont. RCP 2.6 GEVA RCP2.6 Summary Table Scope 1 tco2e 6,000,000 Scope 2 tco2e 5,000,000 Total tco2e 11,000,000 Activity (t paper) 15,000,000 Annual activity growth 0.32% GEVA (tco2e/euro)

19 Summary & next steps 37 Additional sector specific pathways are being defined 38 19

20 Options for company engagement Freely available tools and guidance at Commit to set a science based target and submit targets for review process and announcement Submit targets for unofficial target review process Engage with CDP, WRI or WWF to receive technical assistance For more information contact us at info@sciencebasedtargets.org