You have described Asia as being at the heart of the global economy and at the epicentre of carbon emissions. Which industries need to transform the most within APAC?
Fossil based power production, transport (including land, aviation and shipping) and the built environment are the usual suspects, but as you start to zoom in, sectors such as mining, manufacturing, agribusinesses are also heavy emitters. Decarbonisation for these sectors globally remains challenging, but within APAC, insufficient renewable energy installed capacity, complex policy landscapes and different levels of economic development make the case for rapid change harder.
There are also newer sectors, such as technology. – Data centres (DC) are growing at a rapid pace and APAC is expected to become the fastest growing location over the next five years. With this shift, energy requirements are expected to rise, and the carbon footprint will increase accordingly. In 2019, Singapore placed a moratorium on building new DCs, but decided to lift it earlier in 2022 with new guidelines on building best-in-class DCs in terms of resource efficiency, which can contribute to the country’s economic and strategic objectives. This has propelled DC players in the region to transform and be innovative.
The region has historically faced challenges battling negative perceptions. How is ENGIE Impact supporting clients to help shift these perceptions?
These perceptions need to be understood within the context of the country, i.e., the region’s economic development trajectory. Given lower economic development levels of some countries, the ability to access affordable energy sources is an important point. High costs of some renewable sources in some geographies, and fragmented markets, make it hard to have an overarching renewable strategy for the region. Companies need to justify investments to their key stakeholders, many of whom are rooted in traditional values of return.
“What is the best way to move forward within these constraints”, is the question we focus on with our clients. We try to understand the hurdles companies face, in order to help them navigate effectively. One of the core priorities is to help them create a roadmap to get started on their decarbonisation journey. This is challenging because there is a lack of clarity on this.
Achieving Net Zero implies a transformation journey far beyond the incremental change companies are accustomed to.
While each organisation’s Net Zero transformation journey will be unique, we’ve found that successful decarbonisation is fundamentally anchored around three dimensions: the decarbonisation levers organisations deploy, the scales at which they engage and transform operations, and the enablers that serve to unlock opportunities and accelerate change.
ENGIE Impact uses fact-based, scientific, engineering, and technological approaches following in-depth analysis.
Do you feel that governments in the region are investing enough to support companies and organisations in this transition? Where is investment coming from?
Governments have multiple objectives and priorities that need to be balanced –managing societal well-being, economic growth, energy security and climate targets. With the Ukraine crisis, gas-related shocks have rippled across the world, and alternative forms of energy are being looked at, not just with a carbon and climate lens, but also from a ‘security of supply’ lens.
When all these targets can be met with clean technologies, then it’s an easy transition. For example, in India, renewable energy adoption has been very rapid in the last decade, as it is helping fill the gap between short energy supply and rapidly growing demand, providing economic growth opportunities and enabling a transition to cleaner sources. China is becoming both the manufacturing hub and user of transition technologies like batteries and solar panels – providing both economic growth and carbon transition.
When these targets cannot all be met easily – for example when cheap fossil fuels are available in abundance – then it’s a harder transition. But the good news is that new cheaper and cleaner technologies, as well as market mechanisms that help to monetise carbon, are providing solutions to aid that transition.
How do you feel that the landscape is shifting now that we do have this ‘digitization with purpose’, and this need to optimise processes to be able to hit all of our targets?
Digital plays a very important role in realising energy efficiency goals for our built environment. IoT solutions can monitor buildings and provide information on availability and usage of energy, to match that properly and avoid inefficiencies.
The field is also rapidly evolving with carbon intelligence platforms. While companies are keen to move to Net Zero, they often lack the enablers to help them. One of the biggest pain points is availability of data and a single source of truth for decarbonisation. According to our Net Zero Corporate Readiness Survey, more than half of the APAC respondents don’t have visibility on their scope 3 emissions. More than 80% also don’t have a single source of truth for decarbonisation data across the whole organisation. The proliferation of carbon-intelligence platforms is a step in the right direction. ENGIE Impact announced our own carbon intelligence platform last year, through which companies can capture all this information in one place and track their Net Zero initiatives.
Digital is certainly paving the way for transformation.
When it comes to carbon credits, how do you feel the landscape is going to play out with so many companies buying their way out of net zero?
Carbon offsetting is a polarising, frequently misunderstood concept. Offsetting can be a valid strategic tool for companies that are serious and committed to the Race to Zero, but they are not the panacea to the problem of emissions.
Only about a third of emissions can be reached through carbon offsets.
We will not achieve Net Zero by using carbon credits alone and we need to do everything possible, including carbon credits, to find the solution.
There is a hierarchy of mitigation – companies must first focus on the levers that really tackle their largest emission sources. It is only when you have gone through the process and finally arrived at only the remaining hard to abate emissions, where there is no solution available, or the technology is not yet commercialised, that you use carbon credits to offset. Realising the full potential of offsetting – and speeding transition to Net Zero – requires a disciplined, strategic approach, and should definitely not be used as an excuse to keep emitting.
We have a limited window of opportunity to get to Net Zero, lets focus on all solutions to get there.
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