Compatible framework for climate change
Climate change is one of the defining issues of our generation. The cause of these changes, global warming, is significantly impacting the entire planet. The world is undeniably warming, which is causing a series of unexpected disasters. Scientists are working tirelessly to forecast the circumstances given the number of assumptions. The reality, however, may differ and will not always be precise. We may be too late to respond if the planet reaches damage in irreversible conditions. Assume that neither the government nor the people of each country take drastic action. In that case, the IPCC predicts that we will reach 1.5°C above pre-industrial levels within the next few decades. The IPCC is a United Nations Intergovernmental panel on climate change that provides assessments of human-caused climate change. The image given below shows the temperature level within the year 2040.
Scientists attribute rising temperatures to the human induced ‘greenhouse effect.’ Carbon dioxide accounts for most of it. As Display 2 shows, current concentrations of CO2 in the atmosphere are already significantly higher than for the past hundreds of thousands of years. The speed and level of the increase suggest most of it is by human activity.
Decarbonisation- What, how and why is it important?
Decarbonisation is simply reducing the carbon dioxide (CO2) emission into the atmosphere by effectively switching towards the usage of low carbon energy sources, thereby creating an economic system that substantially reduces and compensates carbon dioxide emissions. The concept increases the dominance of low-carbon power generation by correspondingly minimising fossil fuels, creating a high demand for renewable energy sources like biomass, wind power, and solar power.
In the business context, decarbonisation refers to all measures adopted by an entity. It can be either private or public, to bring down its carbon footprints. This involves greenhouse gas emissions, carbon dioxide, and methane, to reduce its impact on the climate as a whole. Khaitan BioEnergy, as a company, has shown key initiatives towards decarbonisation by developing bio-fuels for the global economy. Therefore what matters for investors, is the resulting changes in government policy and consumer behaviour. Similarly the impact on companies and their valuations (the ‘transition risk’) too.
Why is it important?
Decarbonization is essential for a variety of reasons, and these can be summarized in critical points:
Addressing Climate Change:
Decarbonization is crucial in mitigating the effects of climate change by lowering GHG emissions, primarily carbon dioxide (CO2), which are the leading cause of global warming.
Limiting Global Warming:
It aims to limit global temperature rise, as outlined in international agreements like the Paris Agreement, to prevent catastrophic consequences, such as more intense heatwaves, sea-level rise, and extreme weather events.
Decarbonization helps protect ecosystems by reducing pollution, habitat destruction, and the disruption of natural processes caused by the extraction, transportation, and burning of fossil fuels.
Improving Air Quality:
Transitioning away from fossil fuels improves air quality, reducing the health risks associated with air pollution and respiratory diseases.
Energy Security: By diversifying various energy sources and reducing dependence on fossil fuel imports, decarbonization enhances energy security and reduces vulnerability to supply disruptions.
Economic Opportunities: It fosters economic growth and job creation in renewable energy sectors and promotes innovation and competitiveness in clean technologies.
Environmental Sustainability: Decarbonization promotes sustainable practices and reduces the harmful environmental impacts of fossil fuel extraction, transportation, and consumption.
It can address environmental justice concerns by ensuring that the benefits of decarbonization. Also they are accessible to and benefit all communities, especially marginalized and vulnerable populations.
Investing in decarbonization drives technological innovation in clean energy, energy efficiency, and sustainable practices, leading to advancements across various sectors.
Long-Term Resource Conservation:
Decarbonization reduces reliance on finite fossil fuel resources, promoting long-term sustainability and reducing the risk of resource depletion.
A decarbonized economy is more resilient to the impacts of climate change. Thus helping communities better withstand and recover from extreme events.
Global Cooperation: Decarbonization fosters international collaboration to combat climate change, strengthening diplomatic ties and global efforts to achieve climate goals.
Health Benefits: Cleaner energy sources and reduced pollution from decarbonization lead to better public health outcomes and lower healthcare costs.
Thus decarbonization is essential for addressing the climate crisis, protecting the environment, improving public health, enhancing economic opportunities, and ensuring long-term sustainability and resilience in the face of a changing climate.
Why governments, businesses and society are in urgent need of decarbonisation?
In Paris Agreement of 2015, governments and business leaders across different countries have committed to work towards achieving a low carbon economy. Thus making the concept a global imperative priority of governments and companies as it has significant role in limiting global warming. 197 countries worldwide have shown their consensus to gradually reduce the use of fossil fuels and CO2 emissions. This is to achieve carbon neutrality by 2050 and bring down global warming below 2°C by 2100. And to keep global warming within the acceptable level, the only way left is through deep decarbonisation.
Companies operating in specific industries like transport, energy, etc have declared their vision to become carbon neutral by 2050. So to realize this ambitious mission, key progress must be in sectors that share similar nature. This can be like longer asset lifespan, the complexity of electrification and high energy density. And as per the statistics, such sectors account for 32 per cent of the total carbon emissions.
To meet the global temperature standards by the Paris Agreement and the UK government, “there should be reduction in carbon emission from transportation and power generation”.
WHY DOES IT MATTER IF THE WORLD ‘ONLY’ BECOMES 1.5°C WARMER?
Warming will not be evenly spread. The climate will become more unstable and weather patterns disrupted,. Similarly with heatwaves in some places and hurricanes and floods in others. The list of resulting direct physical climate change risks is long. It includes damage to assets, rising sea levels, water stress, crop failures and lower yields, lower fish catches, high mortality and low labour productivity in hotter countries, etc.
But longer-term concern is that at some point in the warming process, various natural feedback mechanisms will kick in, and warming will self-perpetuate and become unstoppable. These include the albedo effect release of methane by melting permafrost . Also the Amazon rainforest dieback is happening. These outcomes are impossible to model exactly, which is why there are a wide range of climate scenarios.
Nonetheless, irreversible damage and our actions in coming decades will dictate our planet’s course for centuries to come.
TARGETING ‘NET ZERO’ BY 2050 IS NOW A GLOBAL IMPERATIVE
The consensus now is that we have to fully decarbonise—reach ‘net zero’—by around 2050. Display 3 models the drastic decline in CO2 emissions. It require an immediate effect in order to reach net zero by both 2055 and 2040.
To achieve zero net emission, there should be a radical switch toward cleaner energy sources. and shifting from fossil fuels to other clean green sources of energy. Complete decarbonisation is the only solution for achieving climate stability, as per the reports by the World Economic Forum.
The global middle-class population is expected to reach 3 billion over the next two decades. Thus compelling the industries to produce more commodities at relatively low prices. But constraints on vital resources will hurdle the industries to meeting the growing demand.
Industries being nearly half of the global GDP and employment should note that they contribute to 28% of the world’s greenhouse gas emissions. With due concerns over environmental degradation by political parties and international agencies, the decarbonisation of industries has become more prominent. And industrial decarbonisation is not an easy process. It concerns the four major sectors that contribute 45% of carbon emissions into the atmosphere. These sectors include; cement, ammonia, steel and ethylene. And this requires rebuilding the production process from scratch or redesigning the existing sites. Decarbonising these four significant industries requires a careful mix of technologies and strategies. Statistics in recent reports estimate the total cost of industrial decarbonisation to be around $21 trillion.
Following are the most effective ways to decarbonise the four most environmentally significant industrial sectors;
How Khaitan Bio Energy MAKES a difference
Khaitan BioEnergy, as a company, has shown key initiatives towards decarbonisation by developing bio-fuels for the global economy. The company encompasses the idea of focusing on producing high-efficiency products for the green and circular economy. The company developed and owns multiple patents for technologies that significantly reduce greenhouse gases. By holding an ethanol production patent, the company converted presently wasted albeit economically viable cellulose to sugars to 2G bioethanol . This technology is by undergoing various levels of development and testing. Thus making it highly efficient and unique by fully utilising components of lignocellulosic materials. Rice and paddy straw are the main agricultural waste. With this technology, the long-pending problem of open field burning will significantly solved. E ventually leading to a significant reduction in the environmental hazards arising from such activity.
Khaitan Bio energy uses rice straw to produce Bio-ethanol. The estimated carbon credits from 2G ethanol produced from Rice Straw:
From the life cycle of ethanol production, the reduction in greenhouse gases is estimated at 1 MT of CO2 is reduced for every MT of ethanol. 1 MT of ethanol equals 1268 litres or 1.268 Kiloliters. On 100 Kiloliters/day of production, the weight of ethanol produced is 78.9 MTs. Carbon credits per Kiloliter of ethanol accruable are 0.789 Credits/Kl
The company is commits to the principles of environmental sustainability and green (ESG) & tapping natural resources responsibly. Using the latest technologies contributes to safeguarding the energy supply. With fuels cutting CO2 emissions by up to 88% compared to fossil fuels, Khaitan BioEnergy shows the way forward in climate protection and achieving carbon neutrality in the coming decades.
Regulatory framework governing Decarbonisation
- The Paris Agreement of 2015 appears to be a vigilant move towards achieving carbon neutrality. The agreement gets approval from 195 countries across the world. The countries have jointly shown their consensus towards minimizing the increase in global temperature by 2°C and trying hard to reduce it to 1.5°C in the coming decades.
- Europe has been very positive and supportive of achieving a low carbon economy through various policies and regulations in recent years. One such initiative was by The European Green Deal 0f 2019. The initiative targets reaching carbon neutrality by 2050 and also aims to improve competitiveness by reducing the gap between economic growth and the use of resources.
- The above initiative was rectified in the European Climate Law of June 2021. Targeting to achieve carbon neutrality by 2050 and modified the emissions reduction objective for 2030. And this upward improvement shows reforming the existing energy and climate regulations through a comprehensive legislative package.
- Recently, the European Union has approved the Next Generation EU funds of 750 million euros targeting the speedy recovery following the Covid-19 crisis. As per the Recovery and Resilience Plans by the Member States, a part of this fund is used for to achieve the climate objectives.
How to achieve decarbonization
The following are the main steps in the process of decarbonization;
- Have a clear understanding of the current potential and baseline. As a first step towards achieving decarbonization, getting a straight forward deal of the current decarbonization journey. It helps to set the target and enable us to make quick decisions about where to start. And to begin with, industries can go for creating baseline emissions by sources.
Further, to create a well decarbonization process, industries and governments can use software to scrutinise the data. Thereby helping the stakeholders and use the data in the right way. Keeping stakeholders is essential to ensure that the decarbonization.
- Build and announce the targets: After identifying the goals, the next step is to promote this goal in public, helping businesses to realise those goals faster.
- Decarbonization Strategies and Programs: Different industries need to adopt different decarbonization strategies based on their varying nature. Because of advancements in technology, most enterprises require individual efforts to achieve a carbon-neutral economy, such as infrastructural upgrades, digital solutions, and data management.
- Monitor and adjust: Towards achieving decarbonization, industriesmight face challenges such as additional human capital, reallocation of finances and more.
Therefore to keep updated with the latest trends, industries must constantly monitor. Also analyse the changes happening in the internal and external business environment from time to time.
The possible impact of the net-zero transition
Various research analysts suggest that as per the Network for Greening the Financial System (NGFS) Net Zero 2050 Scenario, there will be a considerable shift in demand for various goods and services due to changes in policies, technologies, and consumer and investor preferences. By 2050, the oil and gas production will experience a sudden decline in its production volume up to 55- 70%. Further, coal production for energy use may extinct by 2050.
Decarbonisation also significantly impacts the demand for products and services that use fossil fuels. The need for internal-combustion engines may decline considerably because of rising awareness about battery-electric and fuel cell electric cars. And demand for EV’s is expected to reach 100% by 2050.
Regarding other sectors, productions will concentrate more on lower-emission alternatives than products with emission-intensive operations. In the agriculture and food sector, the necessary changes for achieving net-zero transitions can be a shift from protein demand from emission-intensive beef and lamb to a lower emission food option like poultry.
The other sectors like power are expecting exponential demand on account of targets for aligning with net-zero emissions. The power sector is expecting a twofold increase in its market by 2050. Also, the production of biofuels and hydrogen will increase tenfold in the coming years. Other industries that indulge in managing carbon with carbon capture and storage expect to project a high growth rate in the coming years.
Under the NGFS Net Zero 2050 scenario, a capital allocation of nearly $275 trillion is on physical assets as cumulative spending. Achieving a net-zero transition would require eliminating some existing physical assets and replacing them with new ones – investments in installing physical assets with low carbon emissions in a period running from 2021 to 2025. The scenario also ensures the decarbonisation of existing assets. And on average, the annual spending for attaining net-zero emissions amounts to $3 trillion to $4 trillion, which will be equivalent to about 7.5% of GDP from 2021 to 2050. About $1 trillion of the present spending on high emission assets will have to be reallocated to low emission assets. Specific sectors like buildings, power and transportation would account for 75% of the total spending on physical assets.
This capital expenditure for achieving net-zero transitions will result in operating savings in the long run through reduced fuel consumption, improved energy and material efficiency and lower maintenance costs.
The net-zero transition will also impact consumer spending as they may experience increased prices and include the need to replace goods that burn fossil fuels like transportation, vehicles and home heating systems that depend on fossil fuels and a potential change from beef and lamb consumption. Consumers will experience severe hikes concerning mobility and building transitions, and the cost of production in fuels will be transferred to consumers in various duties and taxes.
NGFS Scenario also foresees a demand for 162 million new job opportunities and a decrease in demand for direct and indirect jobs relating to the operations and maintenance sector by 2050. As per the scenario, the need for direct operations and maintenance jobs relating to the fossil fuel extraction and production sector and the fossil fuel-based power sector would be lesser. Whereas the agricultural and food sector jobs will prosper as demand for animal protein is affected under the net-zero mission. On average, 34 million positions associate with livestock and feed-relate jobs will be close by 2050. Similarly, low emission sectors will experience more job gains by 2050.
The rise in cumulative spending on physical assets will create substantial growth opportunities for companies and countries. Companies that minimise the emissions of their processes and products can get numerous benefits. Decarbonising their products and methods can also help them run their businesses cost-effectively. For example, improving the energy efficiency of heating systems in a steel plant can lower both its emission and operating costs. Car makers will prefer to manufacture EVs over Internal Combustion Engines. Industries will shift towards solar, and wind energy to generate renewable electricity and energy companies will start generating biofuels and hydrogen.
Sectors that are exposed to net-zero transition
- Fossil fuels: Combining fossil fuels contributes to 83% of global CO2 emissions. And the sector is highly expose to achieving carbon neutrality through energy efficiency, electrification and managing methane emissions. The industry will also face a steady decline in the demand for fossil fuels and growing demand for other energy sources like electricity, biofuels and hydrogen.
- New energy sectors-Hydrogen and biofuels: Growing awareness about decarbonisation will soon create more demand for low emission energy technologies. Investments in expanding the capacity and infrastructure of other low carbon fuels would require additional capital spending amounting to $230 billion per year between 2021 and 2050. Net Zero 2050 scenario estimates that hydrogen and biofuels sectors will create two million direct job opportunities by 2050.
- Power: To decarbonise the economy, the power sectors of different countries would require a phase of fossil fuels based operations and add low emission capacity power to meet the growing demand for economic development and electrification of other sectors. The sector must require capital spending amounting to $1 trillion, $820 billion, and $120 billion for power generation, power grids, and energy storage. As the industry prospers, the allied sectors like equipment providers, electricity storage hardware and related services will also develop. The industry expects to generate six million direct job opportunities.
- Mobility: The transportation segment accounts for 75% of the total mobility emissions. And decarbonisation would require the sector to adopt electric vehicles or vehicles powered by hydrogen fuel cells rather than internal combustion engine vehicles. The Net Zero 2050 scenario estimates annual spending of $35 trillion on the same for building charging and fueling infrastructure by 2050. Nearly nine million job opportunities expect to generate in the EV manufacturing sector by 2050.
- Industry: Two leading sectors are given more attention. That is steel and cement, as they contribute 14% of the global carbon emission and 47% of total industrial carbon emission. These two sectors decarbonise by installing CCS equipment or shifting to fuels like hydrogen resulting in zero or low emissions.
- Agriculture and food: Agriculture sectors are driven towards carbon neutrality by ensuring that they follow GHG-efficient farming practices. They encourage to increase the production of energy crops to produce biofuels. Annual spending amounting to $60 billion would be required to enable more emission-efficient farming by 2050.
Khaitan BioEnergy, as a company, has shown key initiatives towards decarbonisation by developing bio-fuels for the global economy. The company encompasses the idea of focusing on producing high-efficiency products for the green and circular economy. The company develops and owns multiple patents for technologies that significantly reduce greenhouse gases resulting from transportation fuels to decarbonise the mobility sector. By holding an ethanol production patent, the company converted economically viable cellulose to sugars to 2nd generation bioethanol technology. This technology is developed by undergoing various levels of development and testing, making it highly efficient and unique by fully utilising all the components of lignocellulosic materials in the production of high-value products. Rice straw is a massively produced agricultural waste. With the emergence of this technology, the long-pending problem of open field burning will be significantly solved, leading to a significant reduction in the environmental hazards arising from such activity.
The pre-commercial pilot plant established by the company highly focuses on establishing an end to end process for self-sustained integrated biorefinery, which facilitates zero discharge. And this patented technology by the company is recognised as a significant breakthrough for biotech innovation by the Biotechnology Industry Research Assistance Council, BIRAC.
The company is committed to the principles of environmental sustainability and green (ESG) & tapping natural resources responsibly. Using the latest technologies contributes to safeguarding the energy supply. With fuels cutting CO2 emissions by up to 88% compared to fossil fuels, Khaitan BioEnergy shows the way forward in climate protection and achieving carbon neutrality in the coming decades.