European utilities are better-placed to meet their Paris Agreement goals than their counterparts in the USA, according to a new report.
The study also concluded that SSE is on track to meet its Paris climate change agreement targets but will have to work harder to achieve those designed to keep global temperatures from rising above 2C.
The research, carried out by the London School of Economics’ Grantham Research Institute, examined the carbon intensity of 20 leading utilities, three of which are European: Enel, Iberdrola and SSE. The study was carried out on behalf of the Transition Pathway Initiative (TPI), which is composed of investment funds.
It found that the three European companies are “significantly” less carbon-intensive than the 14 US utilities in the sample. Carbon intensity was measured by working out the level of emissions per megawatt hour of electricity generated.
SSE was one of the five utilities that has plans to be less carbon-intensive than the ambitions for 2020 set out in the Paris Agreement, which the US pulled out of last week.
But only Enel and Iberdrola had set emissions targets which will ensure they are less carbon intensive by 2030 than the benchmark needed to stop average temperatures rising more than 2C above pre-industrial levels.
SSE’s target is to cut its carbon intensity to 0.3 metric tonnes of CO2 (tCO2e) /MWh by 2020, which is nearly half its 0.57 tCO2e /MWh figure in 2013.
However, the TPI said that the company, which has no targets beyond 2020, will need to cut its emissions intensity further by at least another 0.019 tCO2e / MWh between 2020 and 2030 in order to keep in line with the 2 degrees benchmark.
Source: Grantham Research Institute
The report estimated that, by 2020, the average emissions intensity of the three European utilities will be 0.283 tCO2e /MWh, compared with 0.575 tCO2e /MWh for the five North American utilities that have set targets.
The gap reflects the more robust national and regional climate change policies and legislation within the European Union, says the report.
Commenting on the study, Professor Simon Dietz, co-director of the LSE’s Grantham Research Institute said: “Utility companies will need to significantly re-orient their strategies and their capital expenditure plans if the sector is to remain below the global 2C benchmark.”
Adam Matthews, co-chair of the TPI, said: “It is encouraging that European utilities seem better placed to manage the transition. However, the message to policy makers remains clear that businesses need strong enabling regulatory environments to manage the transition. The gap between what governments agreed in Paris in 2015 and the 2C pathway remains significant. More needs to be done by governments to close that gap if we are to avoid dangerous climate change.”
The TPI also announced today that Legal and General Investment Management (LGIM), Inflection Point Capital Management (IPCM) and its sister company La Française Inflection Point (LFIP) have all joined the initiative, increasing the volume of assets under management by its members to £3.8 billion.