Home' Trinidad and Tobago Guardian : June 11th 2015 Contents JUNE 2015 • WEEK TWO www.guardian.co.tt BUSINESS GUARDIAN
THE ECONOMIST | BG22
Six big European oil and
gas firms called on June
1 for a globally coordi-
nated price on carbon-
dioxide emissions, to
restrain the impact on
the climate of burning
fossil fuels. It was a
bombshell, in its way.
Five years ago no one would have expected
the move: as producers of much of the world s
dirty fuels, industry members were disinclined
to join forces and advocate accelerating the
switch to cleaner ones.
"It is a sort of revolution," said Patrick
Pouyanné, chief of one of the six companies,
And it is not just the energy firms. As world
leaders prepare to meet in Paris in December
to produce an agreement on reducing green-
house-gas emissions, attitudes toward climate
change have changed profoundly among busi-
nesses of all kinds.
In 2009, when a global conference in
Copenhagen failed to come up with a new
agreement to replace the Kyoto protocol, many
businesses were not much worried about
either the failure or global warming itself.
They saw Europe s host of related regula-
tions---along with a carbon-trading system
of limited impact---as little more than a burden
on firms competitiveness. Three things have
First, the price of renewable sources of
energy, especially solar, has dropped dramat-
ically, and their share in power generation is
Second, consumers care more about climate
change than before.
And third, investors---especially long-term
ones such as pension funds---have woken up
to the risks of owning firms with assets and
business models likely to decrease in value as
the world "decarbonises." Some are beginning
to divest from the dirtiest fuels, such as coal,
to invest in cleaner ones and to press for
greener policies all round.
"The cost of not doing things is starting
to be higher than the cost of doing them,"
said Paul Polman, chief executive of Unilever,
an Anglo-Dutch consumer-products maker.
"Our motives are not exactly altruistic,"
said another European boss. "Our clients and
stakeholders demand such initiatives."
All sorts of firms are changing their inputs
and processes and designing products that
spare the environment, while helping suppliers
do the same. L Oréal, a French cosmetics-
maker, says its CO2 emissions fell by 50 per
cent between 2005 and 2014, even as its out-
put rose by 22 per cent. Its target for 2020
is a 60 percent reduction.
To avoid contributing to deforestation,
Unilever already buys all its palm oil, of which
it is one of the world s biggest users, through
an audited sustainability scheme, and by 2020
it plans to buy it from certified and traceable
IKEA, a Swedish retailer, will have invested
or committed to invest 1.5 billion euros (US$1.7
billion) in wind and solar power by the end
of 2015, and the firm and its charitable foun-
dation have just pledged an additional 1 billion
euros to developing renewable energy and to
helping people in places affected by climate
In Italy, 54 per cent of medium-sized man-
ufacturers interviewed by Mediobanca, an
investment bank, and local chambers of com-
merce, said they were investing in green tech-
nologies in 2015, compared with 37 per cent
A big German energy utility, E.ON, is sep-
arating its renewables business from its old
power-generation business to focus on the
former. Enel, Italy s largest utility, has pledged
to halt all new investments in coal, decom-
mission fossil-fuel-powered plants in Italy
and work toward carbon neutrality by 2050.
Renault and BMW have been enthusiastic in
promoting electric cars.
Kering, a French luxury-goods group, has
pioneered an environmental profit-and-loss
account to measure the impact of its business
across its entire supply chain. Sodexo, a French
catering company, says that more than half
of the 34 per cent of emissions the firm has
pledged to cut by 2020 will come from its
Many businesses now use a shadow carbon
price internally when allocating capital, to
judge whether an investment will still make
sense if and when carbon is dearer.
Firms say that besides savings from greater
energy efficiency they gain less quantifiable
benefits from an enhanced reputation, a moti-
vated workforce and the like. But big, dis-
ruptive investments in new energy sources
or industrial techniques may take years to
justify their costs, if they ever do. Is greenery
Yes, broadly, argues Paul Simpson, the boss
of CDP, a research outfit that collects envi-
ronmental data on more than 5,000 firms
worldwide. Those with published targets for
cutting their CO2 emissions are more prof-
itable, delivering a return on invested capital
of 9.9 per cent, compared with 9.2 per cent
for those with no targets, according to research
published by CDP in May.
The Low-Carbon 100 Europe index com-
piled by Euronext, a stock exchange, which
includes the European firms with the lowest
CO2 emissions in their respective industries,
has risen by 60 per cent since the end of
2010. This compares with a 45 per cent rise
in the broader STOXX Europe 600 index,
from which its components were selected.
However, it could just as well be that green
firms are more profitable not because they
are green, but because they happen to be
better run, and that their shares perform
better because investors see greenness simply
as a proxy for good management. The six
European energy firms calling for an effective
carbon price acknowledge that if the Paris
conference succeeds in agreeing on one, it
will add to their costs.
But at least, they said, it would provide a
"clear road map" for their future investment.
The six are heavy on gas; it now accounts for
around half of Total s output, for example,
up from 35 per cent 10 years ago. So they are
hoping that carbon-pricing would lead to a
switch from coal to gas, which they say pro-
duces half as much CO2 as coal, for each unit
of electricity generated from burning it.
The overall impact of all this on profits
would not be known for years, said Pouyanné.
But, like others in Europe s boardrooms, he
has concluded there is no choice in the mat-
@2015 The Economist Newspaper Ltd.
Distributed by the New York Times Syn-
US President Barack Obama speaks during a media conference at the conclusion of the G-7 summit at Schloss Elmau hotel near Garmisch-Partenkirchen, southern Germany, on Monday, June 8,
2015. The two-day summit addressed such issues as climate change, poverty and the fight against terrorism. (AP)
the walk on
Links Archive June 10th 2015 June 12th 2015 Navigation Previous Page Next Page