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Weekly News | 9th to 16th April 2022

Codo Advisory keeps an eye for you on the latest events and trends in climate finance and corporate sustainability, in the world and in Japan. Here’s what caught our attention last week.

World | Is carbon capture another distraction or a promising solution? 

  • There is current consensus on the fact that carbon neutrality is unreachable without the introduction of Carbon Capture and Storage (CCS), as highlighted in the latest IPCC report. However, there is debate on the appropriate role for CCS in the decarbonization process. Relying too much on CCS could disincentivize other more immediate and efficient actions to cut emissions at the source.
  • Climate experts agree that to decarbonize, priority must be given to ending fossil fuels consumption. CCS, an expensive technology, should be used in limited and targeted ways. Cheaper technologies, such as renewable energy, are already available and can be deployed more rapidly to decarbonize sectors such as power generation.
  • In some countries, storage capacity may also be an issue. In a recent report focusing on “Japan’s advanced coal technologies”, British NGO TransitionZero warns that “Japan’s limited geological storage potential means CCS is not a sustainable solution to keep coal in the energy mix. Japan’s storage capacity could run out in just one decade.”

Europe | Changes in VAT rules to prop up environment-friendly products  

  • The European Commission is working on updating rules that governs the thirty-year-old VAT rates. This modernization aims also at aligning VAT rules with EU’s climate policy and efforts towards a sustainable economic recovery after the COVID-19 crisis. 
  • So called “Environmental VAT” or “eco-detax,” these new rules would exonerate green products from VAT (= 20% price decrease), making them more economically appealing than their polluting alternatives, which are usually cheaper for now. 
  • A group of consultants, supporters of the reform since long ago, describes it as a “weapon for massive transformation of our economic model” in their column for French newspaper Le Monde. Indeed, the mentioned above changes in the VAT rules will help to internalize in final consumer prices the environmental impact (externality) of production processes, and thus, help the conciliation of consumption behaviors and ecological matters. 

US | Regulator confirms its intention to require climate disclosure for US listed firms

  • Gary Gensler, the Chair of U.S Securities and Exchange Commission reminded in its remarks to Bloomberg and Ceres that requiring companies’ disclosure of climate information is part of SEC’s role. 
  • The chairperson referred to the agency’s “long tradition of disclosures” which must now be tuned with the global tendency towards climate-related disclosure requirements and needs. In this context, the SEC’s authority would add a long-waited layer of standardization. 
  • He noted that the agency remains open to suggestions and feedback on the changes to be made to its proposal published last month. Industry lobbyists would potentially have numerous legal levels to challenge the proposal that appears to some as outside of the SEC’s remit. 

France | Shareholders submit new climate motion against TotalEnergies 

  • French oil and gas giant TotalEnergies prepares for confronting with its climate-sensitive investors during its next shareholders’ meeting on the 25th of May.  12 of them (0.8% of company’s capital) presented a resolution requiring the company to align its investment policy with Paris Agreements’ goals and to give access to “comprehensive and quality information” on its climate strategy. 
  • BP, Shell, Exxon Mobil have already been dealing with similar resolutions. These cases reflect the mounting pressure on fossil fuels giants to raise their ambitions for climate change mitigation and adaptation. 
  • Globally, investors and assets managers, such as MN Services NV (Netherlands) and LFDE (France) which leads the push on TotalEnergies, are getting more exigent on companies’ pledges and actions to stop global warming. As most of them are currently not doing enough, these resolutions are about to become more frequent and are already receiving increasing shareholder backing.
  • More coverage on this story: Bloomberg, Reuters, Challenges 

Europe/Japan | Europe’s energy crisis “shows Japan the direction to pursue” 

  • The last two years’ increase in global energy consumption led to a boom in fossil fuels’ prices, both because of the COVID-19 crisis and the recent geopolitical context nervosity. 
  • According to the Renewable Energy Institute, if winter 2021-2022 revealed the pitfalls of European power systems in Europe, it also highlighted the economic potential of renewables, as Germany manage to meet 100% of its electricity demand through wind and solar power temporarily in March.
  • This suggests that once technological solutions would have stabilized the renewable energy supply capacities, the harmonization of energy security and carbon neutrality is only a matter of time. 
  • Europe suffered the most from this energy crisis because of its dependence on fossil fuels imports from Russia. As an importer country, Japan is as well critically vulnerable to surges in prices. Thus, Japan must quickly derive lessons from its European counterparts and its own experiences. 

Japan | Growing pressure from NGOs and activist investors on banks and listed companies 

  • After leading campaigns against MUFG and Mizuho Financial Group, environmental NGOs and activist investors submitted for the first time a shareholder proposal on Sumitomo Mitsui Financial Group.  
  • TEPCO and Mitsubishi Corporation will face similar actions by the same groups at their annual meetings in 2022. 
  • Investors attacks against firms for weak climate action plans have been growing in Europe and America, and are now coming to Japan.
  • Despite banks and companies’ pledges for net zero by 2050, many lack a clear and solid strategy for how to reach these targets, and current actions – such as a continued support to fossil fuel-intensive projects – are not aligned with these long-term goals.
  • More coverage on this story: Nikkei, Reuters 

About our weekly news

The above article is a summary of news hand-picked and commented by our team of experts. We monitor a selection of leading international and Japanese sources, including generalist and specialized press, communication from public authorities, publications from recognized non-profit organizations.

About us

Codo Advisory is a Japan-based consulting agency offering independent advisory services to help Japanese companies define and refine their low-carbon transition strategy, to reduce their risks and reinforce their global competitiveness. Feel free to read more about our services and team, or contact us if you’d like to discuss how we can work together.

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