by John Connor, Chief Executive Officer of the Carbon Market Institute.
“Society’s combustion of fossil fuels and industrial processes like steelmaking and agriculture have released greenhouse gases at rates much faster than at any other time in the geological past.
As we have seen from activism and debates from schools to parliaments all around the world, we see this period as an escalation towards a crisis.
However the global response does not yet match the severity of the threat. In part because of the outright complexity of the problem. So we must tailor our response to address this complexity and start with an acknowledgement that solutions will take on a range of forms.”
Strong words from BHP CEO Andrew McKenzie in a remarkable speech on Tuesday outlining next climate steps for BHP.
In the speech Mr McKenzie noted the IPCC report on 1.5oC warming and their findings that the projected physical impacts and risks of global warming are much worse at 2ºC than 1.5ºC. BHP is building on its long-term target for net zero emissions from its operations by 2050, with medium term targets and an updated climate portfolio analysis, aligned with the Paris Agreement goals, to be determined next year.
In a significant development, BHP also committed to working on its value chain, its scope 3 emissions. This is a subject coming up more and more in my discussions with CMI members and other industry participants. It’s an exciting development where business can work together to get economies of scale in acceleration of decarbonisation efforts. It’s also an important recognition of business responsibility.
BHP’s candid observation that the global response does not yet match the severity of the threat backs the assessment of UNEP and others that national policy responses, not just that of Australia’s, remain insufficient and have the world on track to a catastrophic warming of three degrees or more.
While many are calling for stronger internationally coordinated national responses, corporations, investors and subnational governments are examining actions aligned to the Paris goals and prudently seeking to maximise opportunities and manage risks.
Investors continue to step up their focus on managing climate risks and I encourage you to keep your eye on UN PRI’s Inevitable Policy Response Project which is designed to be a central business planning case for investors, corporates and regulators. Representing US$83 trillion under management, PRI presented on this project during London Climate Week earlier this month. In this vein, while our own prudential regulators and Reserve Bank have been making important moves, I strongly recommend the recent analysis by Adam Tooze in Foreign Policy on “Why Central Banks need to step up action on global warming.”
Like BHP, the Victorian Government is now also considering its medium-term emission reduction targets after the report of an Independent Panel led by Greg Combet. CMI attended a special workshop on this and made its submission earlier this week available here.
While stating our preference for sufficient nationally coordinated targets, CMI supported for now the recommended stronger state targets. We commended the use of carbon budgets analysis previously conducted by the Commonwealth Climate Change Authority which, as noted below, has just announced a review of its advice to Government on meeting the Paris Agreement commitments. CMI also backed the recommended expansion of Victorian carbon farming as an important economic, social and environmental opportunity. CMI encouraged Victoria to support market development to enable it to have stronger participation in the Commonwealth’s Emission Reduction Fund (ERF).
Last but not least, the ERF’s 9th auction has officially opened and the results, due out next week, will be interesting. Market observers have noted that registration of projects has been significantly down on that normally the case prior to previous auctions.
As highlighted in last month’s update, the Department of the Environment and Energy is considering what could be done to unlock new projects and boost participation in the ERF scheme. In particular, the Department intends to focus on providing more opportunities for participation through existing methods, exploring opportunities for new methods and upgrading the science and data supporting land sector abatement calculations. The Department is engaging with CMI and its members as this work progresses.
As can be seen there are plenty of interesting moves afoot and CMI will continue to work constructively with all stakeholders. We’ve been working hard with state governments to develop carbon market opportunities, and we will work with the Morrison Government as it implements its Climate Solutions Package and both reviews its Safeguard Mechanism and develops a long-term Strategy for Australia by end of next year.