Blog: EDF Europe

Wanted: An ambitious target to drive investment in clean shipping

If you’ve ever been to a port, you’ve likely been awed by the giant vessels lining the docks. These ships, some capable of carrying hundreds of thousands of tonnes of cargo across oceans, are not only impressive but inherently efficient and capable of significant improvements, if designed to with the newest advancements in naval engineering and technology. However, as the number of ships taking to the seas increases to meet the global demand for cargo, so does the shipping sector’s carbon emissions, which currently represents 2.6% of global emissions, equivalent to the emissions of Germany.[1] Yet the industry remains the only sector without a quantifiable climate emission reduction target and mitigation policy.

That may change this month, when the shipping sector’s global standard setting body, the International Maritime Organization (IMO), will meet to decide an Initial Greenhouse Gas Emission Reduction Strategy. The IMO has been discussing shipping’s approach to reducing emissions for 20 years, but with increasing international pressure, thanks in part to the signing of the UN Paris Agreement, the IMO has now set a deadline to approve an initial strategy.

As delegates gather on the banks of the Thames and the behind the scenes talks heat up, the expected outcome from the negotiations will be a quantified emission reduction target for a date this century. The policies that will be needed to ensure this target becomes a reality will then be officially discussed. The Environmental Defense Fund (EDF) urges the IMO to take the opportunity to agree an ambitious target in line with the Paris Agreement’s vision to maintain global temperatures ‘well below 2°C pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels’. This will enable the sector to regain the moral green high ground and significantly reduce the risks posed by climate change, helping, for example, the survival of small island developing states that are at risk from multiple climate change impacts.

An ambitious, but proportionate emissions target

A proportionate and achievable emissions reduction target for the shipping sector, in line with the Paris Agreement would be a 70-100% reduction in greenhouse gases by 2050 from 2008 levels.[2] The technology pathways to deliver this goal are known and the technologies are increasingly becoming commercially available. It is unlikely that one silver bullet technology will be used and this will encourage diversity in the shipping supply chain. For example, battery and solar panel technology from the electric car and renewable energy sectors are already being applied to both short-distance ferries in Norway[3] and cargo ships in China.[4] Alternative fuels are also coming to market including gas, methanol and ammonia[5], which could allow countries such as Brazil to harness their extensive experience in this sector and so benefit.[6] Experience shows that the pairing of ambitious targets with well-designed policies can propel the surprisingly rapid development and deployment of low- and even zero-carbon solutions. For instance, in 2017 the UK propelled to 7th place on the low-carbon electricity league table up from 20th place in 2012[7] thanks to a combination of clear targets, carbon pricing and deployment support policies that gave companies and investors confidence to invest in new technologies. [8]  And as investment has increased costs have tumbled.

We believe that the goal of a 70-100% decarbonisation by 2050 from 2008 is achievable at a reasonable cost. [9]  As seen in other sectors business as usual emissions growth predictions are rarely realised (e.g. energy sector) and should be treated with caution since the pace of change in technology is such that future projections quickly become out of date.

The shipping sector could apply this understanding of policy outcomes to identify how these tried and tested policies may be best adapted to the shipping sector’s own requirements.  For example, an ambitious target, paired with a price on carbon or fuel, could spur innovative zero and low-carbon technologies toward commercialisation. This could be enhanced by using the revenues associated with the policy within the sector through a fund that would support the deployment of low carbon technologies and ships onto the seas.

The shipping sector has shown it is capable of adapting to address environmental challenges and there is none bigger than climate change. With the positive news on stronger enforcements for reducing the sulphur content of shipping fuel, emanating from the IMO earlier this year, the shipping industry has the perfect opportunity this April to continue rebuilding its reputation as the greenest mode of transport. We look forward to an ambitious strategy with defined greenhouse gas emissions targets being agreed.

 

[1] OECD (2018). Decarbonising Maritime Transport: The Case of Sweden. [online] Available at: https://www.itf-oecd.org/sites/default/files/docs/decarbonising-maritime-transport-sweden.pdf [Accessed 14 Mar. 2018].

[2] CO2 Targets, Trajectories and Trends for International Shipping, Smith, T.W.P., Traut, M., Bows-Larkin, A., Anderson, K., McGlade, C. and Wrobel, P. Shipping in Changing Climates Report.

[3] Lambert, F. (2018). A new fleet of all-electric ferries with massive battery packs is going into production. [online] Electrek. Available at: https://electrek.co/2018/03/05/all-electric-ferries-battery-packs/ [Accessed 22 Mar. 2018]

[4] Business Insider. (2017). China just launched the world’s first electric cargo ship. [online] Available at: http://uk.businessinsider.com/china-just-launched-the-worlds-first-electric-cargo-ship-2017-12?r=US&IR=T [Accessed 3 Apr. 2018].

[5] OECD (2018). Decarbonising Maritime Transport: The Case of Sweden. [online] Available at: https://www.itf-oecd.org/sites/default/files/docs/decarbonising-maritime-transport-sweden.pdf [Accessed 14 Mar. 2018]

[6] Climate Home News, Brazil should support ambition in the climate deal of the year. [online] Climate Home News. Available at: http://www.climatechangenews.com/2018/03/07/brazil-support-ambition-climate-deal-year/ [Accessed 3 Apr. 2018].

[7] Ambrose, J. (2017). Carbon tax thrusts Britain towards the top of low carbon energy league table. [online] The Telegraph. Available at: https://www.telegraph.co.uk/business/2017/11/15/carbon-tax-thrusts-britain-towards-top-low-carbon-energy-league/ [Accessed 22 Mar. 2018].

[8] Ambrose, J. (2017). Carbon tax thrusts Britain towards the top of low carbon energy league table. [online] The Telegraph. Available at: https://www.telegraph.co.uk/business/2017/11/15/carbon-tax-thrusts-britain-towards-top-low-carbon-energy-league/ [Accessed 22 Mar. 2018].

[9] CO2 Targets, Trajectories and Trends for International Shipping, Smith, T.W.P., Traut, M., Bows-Larkin, A., Anderson, K., McGlade, C. and Wrobel, P. Shipping in Changing Climates Report.

 

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Shell becomes latest oil and gas company to test smart methane sensors

Methane Detector Challenge
Canada
2017

This week, the oil and gas giant Shell took a positive step toward addressing methane emissions. The company announced a new technology trial at a wellsite in Alberta, Canada, where it is piloting a specially designed laser to continuously monitor emissions of methane, a powerful pollutant known to leak from oil and gas equipment.

The move by Shell is a glimpse into the future and demonstrates growing market interest in smart, sensor-based methane detection technology. Shell’s project joins a similar field test already underway in Texas, operated by the Norwegian producer Statoil, and a California utility pilot run by Pacific Gas and Electric Company.

Each of these deployments is promising, but the ultimate test will be broad-scale adoption of innovations that generate actual methane reductions.

For industry, there is an incentive to move ahead. An estimated $30 billion of natural gas (which is largely methane) is wasted every year due to leaks and flaring from oil and gas operations worldwide. In addition, roughly 25 percent of global warming is driven by methane. Oil and gas methane emissions also contain chemicals that adversely affect public health.

For these reasons, methane is a problem that has caught the attention of regulators, investors and consumers alike. Advancing new technologies to enable the oil and gas industry to tackle this challenge more efficiently is key, even as companies use established tools to manage emissions now.

 

Collaborations Spark Methane Innovation

When you bring the right people to the table, innovative solutions will follow. Behind the Shell, Statoil and PG&E demonstration projects is a collaborative initiative, the Methane Detectors Challenge, begun by the Environmental Defense Fund four years ago. The project united eight oil and gas companies, R&D experts, and technology innovators in an effort to accelerate the development of next-generation methane detectors.

The formation of this project was motivated by a key insight: new technology to manage emissions needs to be created and deployed faster than ever. The Methane Detectors Challenge offers a unique resource to innovators – access to real facilities and collaboration with potential customers – which is essential to help entrepreneurs understand the market, demonstrate demand, and ultimately achieve economies of scale.

Both the Statoil and Shell pilots are using a solar-powered laser, created by Colorado-based Quanta3. The technology uses the Internet to provide real-time data analytics to wellsite managers via mobile devices or web portals.

 

Continuous Visibility, Faster Response

The oil and gas industry has a lot to gain from smart methane sensors that can prevent the loss of valuable product and reduce pollution.

Imagine a future where continuous leak detection systems allow operators to digitally monitor methane emissions occurring across thousands of sites. It’s a game-changer on the horizon. The burgeoning field of continuous methane monitoring offers a range of possibilities – including technologies capable of identifying emission spikes in real-time, allowing operators to cut mitigation time from months to days. Over time, smart sensors on wells may even help predict and prevent leaks and malfunctions before they occur.

Smart Methane Sensors Triggering New Market

 

The methane-sensing laser deployed by Shell and Statoil is one of many technologies in the emerging methane mitigation industry. In North America alone, more than 130 companies provide low-cost methane management technologies and services to oil and gas customers – a number likely to expand as innovators innovate, pollution requirements tighten, and producers increasingly appreciate the urgency of dealing with methane to maintain their social license to operate.

Smart automation technologies are already being used across the oil and gas industry to improve operating and field efficiencies. Continuous methane detection technology is the next logical step, which has the potential to provide significant economic, environmental and societal benefits.

The Shell pilot is a milestone to celebrate and we recognize the company for its early leadership. Now, we need governments and industry to show the determination needed to meet the methane challenge head-on. Sustained leadership is a prerequisite. But the keys to solving this problem are smart policies that incentivize ongoing innovation, and clear methane reduction goals—supported by technologies like continuous monitoring.

Image source: Shell/Ian Jackson

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Global Investor Touts Methane Opportunity with Oil & Gas Industry

Institutional investors worldwide are increasingly encouraging oil and gas companies to improve and disclose their management strategies to minimise methane risk.

Methane – an invisible, odorless gas and main ingredient in natural gas – is routinely emitted by the global oil and gas industry, posing a reputational and economic threat to portfolios.

Natural gas is widely marketed as a low-carbon fuel because it burns roughly 50 percent cleaner than coal. But this ignores a major problem: methane. Natural gas is almost pure methane, a powerful pollutant that speeds up Earth’s warming when it escapes into the atmosphere.

Last month marked a significant milestone in investor action on the methane issue. The Principles for Responsible Investment (PRI) launched a new initiative representing 30 investors and $3 trillion in assets that will engage with the oil and gas industry across five different continents to improve its methane management and disclosure practices. The PRI initiative complements existing methane engagement efforts focused on the US led by the Interfaith Center on Corporate Responsibility and CERES.

EDF Senior Manager Sean Wright recently sat down with Sylvia van Waveren, a Senior Engagement Specialist with Robeco Institutional Asset Management (Robeco), a Dutch-based investment firm managing over $160 billion, to discuss the matter and understand why some investors are keen to affect the status quo on methane.

Sylvia van Waveren, Senior Engagement Specialist, Robeco Institutional Asset Management

Wright: Why is methane a focus of your engagements? What do you see as the risks of unmanaged methane emissions? 

van Waveren: Methane is one of the most important drivers of engagement with the oil and gas industry. We invest in oil and gas companies worldwide. A year ago, we started engaging them, specifically on climate change – and within that the methane issue is included.

In the past, methane was viewed as a U.S. shale gas issue, but more recently it has become important in Europe as we learned that methane is a powerful greenhouse gas. So in that sense, we learned a lot from the U.S. discussions and we still do.

I would like to stress that we see the methane issue more as a business opportunity than a risk. What we often say to companies is that methane is a potential revenue source. It would be a waste if companies do not use it.

Wright: The scope of PRI’s initiative is global, with investors from 3 different continents as far away as Australia and New Zealand, and a plan to engage with companies from the Latin America, Europe, North America and Asia-Pac. What does this level of global collaboration convey about methane emissions?

van Waveren: I am happy and it is good to see that others have taken up the seriousness of this issue, as well. Methane is no longer a U.S. only problem. The issue is being raised and discussed in all kinds of geographies.

I’m a firm believer in collective engagements. They can be a powerful force when the issue is not contained within borders. That is the case with greenhouse gases. So yes, I’m happy to see the PRI initiative taking off and I am an active believer in getting this solved and bringing attention to this subject.

Wright: In your conversations thus far with companies about methane, what resonates best when making the business case for improving methane management and disclosure?

van Waveren: When we talk about motivation at the company level, I have to be honest, it’s still early days. The European companies are talking in general terms and just now conceptualising methane policies. If we’re lucky, they have calculated how much methane is part of their greenhouse gas emissions. And if we’re more fortunate, they are producing regional and segregated figures from carbon, but it’s really very meager how motivated the companies are and what triggers them most.

I really feel we should emphasise more with companies to get them motivated and to really look at the seriousness of methane. One issue that is particularly bothersome is that many companies do not know how to calculate, estimate and set targets to reduce methane. It is still a mystery to many of them. That’s why we come in with engagements. We need to keep them sharp on this issue and ask them for their actions, calculations and plans.

Wright: Who are other important allies that have a role in solving this problem, and why?

van Waveren: We always would like to have an ally in the government. For example, carbon pricing or carbon fixations are all topics that we look for from the government. But in practice, that doesn’t work. Governments sometimes need more time. So we do not always wait for the government. When companies say they will wait for government, we say, “You should take a proactive approach.”

We rely very much on our knowledge that we get from within the sector. We review data analyses and make intermediate reports of scoring. We find best practice solutions and we hold companies accountable. There are also times when we name names. So in that sense, that is how engagement works. The data providers and other organisations with good knowledge and good content on methane – and EDF is certainly one of them – are very instrumental to get the knowledge that we need.

Wright: Can you give me an example of a widespread financial risk facing an industry in the past that was proactively improved by investors leading the charge – similar to this initiative?

van Waveren: More than 20 years ago, we had a greenhouse gas issue – acid rain. Investors helped solve that problem. Because of this, I’m hopeful that investors can also play a positive role in reducing methane.

I would also say the issue of Arctic drilling. Not so long ago, this was top of mind when we talked to our portfolio companies. A lot of companies have now withdrawn from Arctic drilling, especially from offshore Arctic drilling. I think investors were quite successful in sending a clear signal to the industry in a collective way that we didn’t see Arctic drilling as a good process. Maybe profitable – if at all – to the companies, but certainly not for the environment

Wright: Thank you, Sylvia. We really appreciate your time and your thoughtful answers showing how investors can be part of the solution on methane.

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Bryony Worthington for Prospect magazine: Reasons for hope in the fight against climate change

Baroness Bryony Worthington, Executive Director, Environmental Defense Fund Europe

Nasa recently announced the discovery of a solar system with seven earth-sized rocky planets, three of which could potentially sustain life. Interesting news, but at 235 trillion miles away, no one is going there soon. In the meantime, we need to look after our only home. We must protect ourselves from climate change. Our fate turns on a race between physics and politics.

The physics of climate change is off and running—we’re not sure how fast, and we don’t truly know the end point. But we do know that in the last century, dramatic increases in fossil fuel burning and changing land use began fundamentally changing the composition of the atmosphere. Warming has already raised sea levels, caused ocean acidification and coral reef bleaching. It contributes to depleted biodiversity, droughts, mass migration and extreme weather events including recently extreme high temperatures in the Arctic, heatwaves in Australia, drought in Bolivia, famine in north east Africa, flooding in the United States.

As for the politics, even before Donald Trump, our response had been too slow. The most instructive single metric is the parts per million (ppm) of greenhouse gases in the atmosphere, which not merely continues to increase, but to accelerate. Over the last 50 years the average increase was 1.7 ppm; in the last five 2.5 ppm. We need to up our game.

In 2015, it seemed possible to hope after the world came together to tackle climate change in Paris, helped by a newly positive US approach. Then last year, the prospect of a Trump presidency galvanised countries to ratify in record time. The Paris Agreement included a clear statement: in the second half of this century, all man-made emissions of greenhouse gases must be reduced to zero or be captured and stored.

It falls to our generation to make this happen. The difficulty is we must do so through national politics, which find it hard to deal with threats that straddle borders and have an inbuilt time lag so that consequences only unfold in the distant future. The charge that other countries are free-riding is always a powerful excuse for inaction. And that has even more sting now that Trump has begun rolling back domestic environmental protections, and suggesting he may even withdraw the US from the Paris Agreement.

But is Paris, and the multilateral spirit it embodies, really doomed? The UK’s Climate Change Act demonstrates the multilateral merit in setting a unilateral example. A recent report by the Grantham Institute lists over 800 climate change-related laws now in place in 99 countries. Most recently, Sweden published legislation setting a net zero target by 2045, citing the UK’s climate act as its model. Thankfully there are also signs that much of the rest of the world—most importantly China and India—will stick to their efforts to begin to decarbonise and the EU Commissioner during his visit to China this week emphasised the importance of continued EU-China collaboration and leadership.

Keep reading

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