Whilst the effects & challenges of climate change are felt differently across regions, business innovations & policy lessons provide valuable inspiration and frameworks globally.
The 26th United Nations Climate Change Conference (COP26) in Glasgow in November looms large on the UK’s political agenda. After what many perceived to be a frustrating summit in Madrid at the end of 2019, politicians are under real pressure to achieve a meaningful outcome that moves forward the global debate on climate change. For Prime Minister Boris Johnson and his new cabinet, this comes with the added weight of setting a coherent and convincing domestic policy plan to get the UK on track for Net Zero by 2050. Industry and the public are eager to understand where government sees the overarching structures and regulatory framework to drive change. Never has there been a greater need for clarity and concrete actions to provide confidence that ambitions can be met. Brexit sapped energy away from the domestic policy and legislative agenda. Now that the direction at least of that debate has been settled, building a green economy, framed around investment towards Net Zero, will increasingly take centre stage as a core focus. Many of the areas primed for further boosts to green industries and investment, such as Redcar and Blyth, were strategic Conservative gains from Labour in the recent election. These constituencies may very well feel the benefits of the £6bn pledged to improve the energy efficiency of social housing. The regional focus of Net Zero has never been more prominent, and businesses with manufacturing footprints need to be ready to push for and seize the funding opportunities which will inevitably spin from this. Alongside this, some big-ticket strategic and legislative work must be dusted off and made ambitious enough for a Net Zero economy. The outputs of the Treasury’s review of funding the transition to a Net Zero economy, due in Autumn 2020, will be fascinating but they feel distant, given the scale of the challenge. The jigsaw puzzle of maximising opportunities for growth whilst creating equitable balance of contributions among households, businesses and the taxpayer will be hugely complex. Ministers have promised that the Budget will support the drive towards Net Zero, and the Energy White Paper – on hold since summer 2019 – is promised to appear early this year. Expected to set out a new structure for nuclear project financing, it can be a bolder, more strategic framework addressing issues such as financing for transport infrastructure for carbon capture and storage and addressing questions on infrastructure for hydrogen or electrification to replace gas heating. Seemingly more comfortable with traditional green Conservatism, much of the focus of Boris Johnson’s Government has been on the wider environmental agenda. The Environment Bill, which fell when the General Election was called, would introduce powers to tackle air pollution, biodiversity net-gain, waste management and deposit return schemes, banning plastic exports to developing countries, and increasing sustainable water management. Yet there are ripples of concern from the environmental community that short-term trade deals made post-Brexit could undermine current environmental regulation, even with a promise of two-year reviews of significant developments in international legislation.
To maintain credibility on the far more challenging Net Zero target, the Government will need to ensure that there is no rowing back on wider environmental standards built up over 40 years within the EU. Businesses committed to driving sustainability are in a strong position to do that – holding decision makers to account on behalf of a customer base who are increasingly bought into the environmental agenda. At the core of Boris Johnson’s leadership there is a dilemma: squaring the potential risks of post-Brexit economic pragmatism softening environmental standards, while promoting and leading an ambitious programme of Net Zero and international decarbonisation. Options such as forcing City financial institutions to divest from coal internationally may have symbolic appeal in the immediate term but cannot exist as governmental greenwash. For companies committing to climate action, there are plentiful opportunities to drive the policy agenda around Net Zero. Sharing ideas and innovations with government – from new technology, to finding new means of raising capital for green projects or carbon pricing mechanisms, to driving customer behaviour-change - will help unlock existing regulatory barriers and prevent new frameworks hindering future solutions.
COP26 provides a focal point for UK businesses to showcase their new deeper ambitions through targets and meaningful plans for action on climate change. Economy-wide Net Zero will only be achieved in the UK with buy-in from businesses across every sector and that will be a tougher and longer journey, likely laden with regulation and likely new financial incentives. Success will depend on UK businesses and government finding that path to 2050 together.
The European Union hopes to become the world’s first climate-neutral continent by 2050 – at least if it is up to the European Commission, the non-elected administrative body. The Commission presented its European Green Deal in December 2019, an ambitious and comprehensive package that should enable EU citizens and businesses to transition to carbon-neutrality by 2050. EU member states have not been able to reach full consensus on this target yet: while almost all member states have endorsed the objective after months of discussions, sensitivities remain. Poland for example – still heavily reliant on coal and other fossil fuels - is holding off any commitment demanding increased financial support from the group. As co-legislators and crucial in the implementation of EU policy, member states, with different regional challenges and opportunities, need to be on board to make the transformation work. Member states are at different stages of progress, due to economic, social, political, historical, but also geographical reasons. The Republic of Ireland, for instance, had to devote so much political and administrative energy to “resolving the massive unemployment crisis, bringing public finances back into balance and restoring economic sovereignty1” that climate change has not been a core priority over the last decade. Economic growth often goes in parallel with growth in emissions, and decoupling is a major challenge of any Net Zero strategy. Nonetheless, despite different starting positions, many capitals are drawing up and implementing their own ambitious energy & climate strategies, some even going beyond what is required by the EU. Over the last decades, the EU has been driving environmental policy developments, among others through the set-up of the European Emission Trading Scheme, but also through stringent regulation of chemicals (REACH), policies and binding targets on renewable energy and alternative fuels, biodiversity, sustainable fishing and many more. During the last legislative term, the EU adopted an ambitious Circular Economy Action Plan, which led to revised legislation on waste, as well as a stringent directive on single-use plastics, further pushing the global debate on plastics. Where environmental policy area was once addressed in silo of other domains such as agriculture, mobility or industry, its increasing cross-sector impact has been acknowledged and embedded in the Green Deal. The Green Deal is built around core policy pillars: clean energy, sustainable industry, a cleaner construction sector, sustainable mobility, protecting biodiversity, sustainable food systems and eliminating pollution. There are synergies across these, such as energy & resource efficiency; circularity; the interface between chemicals, products and waste legislation; digitisation; and social impact. A core concern is managing the complexity and the need for coherence whilst avoiding the development of policies that lead to “regrettable substitutions”, contributing to one environmental objective while harming another. Bringing together the right people with the right set of expertise from the European institutions and Member States will be crucial – and so will be the role of industry and organisations. It is up to businesses which have an unmatched level of technical expertise and knowledge of innovation to proactively contribute, engage with European policymakers, and shape the debates and the future policy framework. The coming months and years will see a plethora of legislative initiatives, offering an enormous opportunity for businesses to drive the transition on an ambitious, yet feasible path. Despite the many challenges, EU leaders recognised that the transition to climate neutrality can also bring significant opportunities, with potential for economic growth, business and technological development. However, while that may be true, in the shorter term, there is no doubt that a transition will be costly. An aspect that is less clear currently - but is fundamental - is how the transition will be financed. In early 2020, the Commission will present a Sustainable Europe Investment Plan to help meet additional funding needs, which will include the launch of a Just Transition Mechanism, that will combine public and private money of up to €100bn, leveraged by the European Investment Bank. In addition, the ongoing work on sustainable finance, through the taxonomy, eco-label and others, aims to shift investment flows towards a green economy. Following the 2019 European elections, the European Parliament has never been greener. With growth of 38% for the Greens, green parties particularly in Western and Northern European Member States managed to mobilise a ‘green wave’, and due to public pressure, most political parties this time explicitly addressed climate and environmental policies in their manifestos, albeit with various levels of ambitions. Upon appointment of the new European Commission, sustainability was a key issue for MEPs, and the strong signal sent has certainly had an impact on the urgency and ambition of the European Green Deal. Declaring a climate emergency in November 2019, the European Parliament urged the Commission to ensure all proposals are aligned with the 1.5°C target and is fully supportive of the carbon neutrality target. With the backing of the Parliament, the Commission will have a powerful ally to push through its green plans, starting with the European climate law in Q1 2020, aimed at enshrining the 2050 Net Zero targets into law. If all member states gather behind the targets, the first big hurdle will be taken on the path towards becoming the first carbon-neutral continent.
Stepping out into the humid summer heat of Dubai or Abu Dhabi provides an instant demonstration of the Middle East’s sustainability challenge.
Due to climatic conditions, the obstacles the region faces to delivering Net Zero are on a vastly different scale from much of the rest of the world. The Middle East is already experiencing the impact of climate change. Rising sea levels and increasing temperatures may drive substantial changes to the geography of the region in coming years. The World Bank recognised it as the most water-scarce in the world.
A 20172 report from Emirates Wildlife Society and World Wildlife Fund exploring “UAE Climate Change: Risks and Resilience” suggested climate change risked spikes in temperatures and humidity resulting in an 11% increase in energy consumption for cooling by 2050. It estimated associated costs of as much as $834m per year to the building sector, based on the modelled increase of 10-35% energy demand.
Global polling conducted by YouGov in Sep 20193 revealed that 85% of respondents in the UAE recognised climate change and felt human activity was wholly (52%) or partly (33%) responsible. Indeed, the polling revealed that people in Middle Eastern – and Eastern – countries are much more likely to believe that climate change will have a serious impact than many in the West.
And this recognition is of course linked to the perception of impact. Respondents in the UAE ranked 6th amongst the 28 countries polled in terms of anticipation that climate change would impact their lives, with 56% expressing a view that climate change would have ‘a great deal’ of impact, compared to a mere 17% in Great Britain4. Interestingly, those polled in the Middle Eastern countries were also more likely to think climate change would cause serious damage to the global economy than those in European countries and the USA. However, the survey revealed that the core challenge in the region lies in a disconnect between the perception of impact and the feeling that there is more that both the country and individuals ‘can reasonably do’ to prevent further damaging impacts.
Nevertheless, the combination of a wealth of natural resources and year-round sunshine create both a need and opportunity to encourage the use of renewable energy, most notably solar power. The UAE has led the region in recognising the role of innovation in securing a sustainable future for the planet.
Over the past 15 years, significant focus has been devoted to the advance of renewable energy solutions. Abu Dhabi’s investments both within the UAE and abroad have been spearheaded by local renewable energy and clean technology firm Masdar, launched in 2006 and owned by Mubadala Investment Company. It has invested in the commercialisation and deployment of renewable technologies with the aim of establishing the city as a global centre of excellence in the clean technology sector. This has included investment in the 100MW Shams 1 solar project – Abu Dhabi’s first solar utility. The launch of Noor Abu Dhabi plant in Sweihan - a joint venture between the Abu Dhabi Power Corporation and a consortium of Japan’s Marubeni Corp and China’s Jinko Solar Holding - which went live in summer 2019 and has capacity to produce over 1GW of power from 3.2 million solar panels. In Dubai, the Mohammed bin Rashid Al Maktoum Solar Park represents one of the world’s largest renewable projects based on an independent power producer model. Once completed, its planned capacity of just under 2GW could power as many as 1.3 million homes and reduce emissions by 6.5 million tonnes annually. The targeted speed of increase in clean power in Dubai is ambitious. While 7% of Dubai’s total power output is forecast to come from clean energy by 2020, the Clean Energy Strategy seeks to increase this to 25% by 2030, with 75% sought by 2050 (equivalent to 42GW). The YouGov survey revealed that respondents in the UAE felt that the greatest power to combat climate change primarily lay with international bodies like the UN and national governments of wealthy countries (82% respectively). However, much like respondents in Great Britain, around 80% also felt that business and industry have the power to instigate change.
Businesses are rising to this challenge. Masdar will work in partnership with EDF to develop the Dumat Al Jandal onshore wind project in Saudi Arabia, which will be the largest wind farm in the Middle East. In partnership with environmental management company Bee’ah, Masdar is also developing a cutting-edge waste-to-energy plant in Sharjah which will process more than 37.5 tonnes of municipal solid waste into power per hour.
Positively, those surveyed by YouGov in the UAE had a far more optimistic view of the role of individuals in combatting climate change than in many other countries. Indeed, 70% in the UAE felt individuals could change things versus a mere 43% in Britain. Public pressure has already sparked a shift in the region. Many businesses have responded to consumer calls by committing to reduce carbon emissions, eliminate single-use plastic or increase clean energy use in the coming years.
Those commitments may feel distant now but 2025 will arrive quickly. With regular communication, consumers will better understand why products are changing or, in some instances, why prices may increase.
Communicating why change is required, what the impact on consumers will be and ultimately how consumers will benefit is critical for companies introducing innovative products to the Middle East markets. For brands operating in the region, that means bringing consumers and the wider public on a narrative journey that is open and honest about the challenges of making products or services more sustainable, as well as the many opportunities.
