Weekly News | 27th September to 3rd October 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 | Moody’s $1.9 trillion warning over biodiversity collapse 

• Moody’s Investor Service warns sectors such as coal mining or oil and gas exploration, that have ‘high’ or ‘very high’ inherent exposure to natural capital, with its financial assessment of $1.9 trillion of potential loss biodiversity breakdown would cause. 
• However, unlike universal measures to evaluate greenhouse gas emissions, there are still no steady equivalent for gauging nature-related risks as many of the relevant factors for understanding them are specific to different biomes. 
• The World Economic Forum has estimated that roughly half of global GDP, about $44 trillion worth of economic value, depends on the biodiversity in some way. 
• Read more about this story: Bloomberg  

World | Carbon offsets used for marketing rather than sustainability 

• BloombergNEF found this summer that many of the major buyers of carbon offsets were purchasing them to improve their reputation that than to achieve sustainability targets. Another institute, Trove Research, came to the same conclusion, finding that only 10% of the buyers had purchased a meaningful amount of offsets. 
• In addition to this issue of scale, carbon offsets are under growing scrutiny. Activists and researchers say they do not always deliver the environmental benefits they promise, in part because of a lack of traceability along the chain from the issuer to the buyer. 
• Read more about this story: Financial Times 

Comment from Codo: A study showed that 66% of firms use or intend to use carbon offsets to reach their decarbonization goals. However, the total capacity available on earth is limited. For instance, it has been estimated that there is only 500 million hectares of land available to plant new forests – the tree-planting carbon offset plan of Shell alone uses 10% of this amount. Carbon offsets should be the last resort solution for corporate decarbonization, once all other efforts have been made to actually cut emissions at the source. 

World | Carbon bombs and Gulf Stream collapse: the most urgent climate stories of our time 

• Due to an alarming spurt in climate breakdown, dozens of countries have been hit by flood, fire or drought, the ripple effects of such extreme weather events causing energy shortages and food insecurity across the globe.  
• If not stopped or severely reduced, the multibillion-dollar investments placed by the world’s biggest fossil fuel firms are forecasted to trigger carbon bombs: projects capable of pumping at least 1bn tons of CO2 emissions over their lifetime. 
• Moreover, the level of CO2 capable of triggering tipping points such as the Gulf Stream shutdown not being known to this date, the time calls for action to be taken to prevent crossing the point of no return. 
• Read more about this story: The Guardian 1 & 2 

Denmark | Denmark to pay to help vulnerable countries adapt to climate change

• After last week’s UN secretary-general’s attempt to call on global economies to direct investment to assist countries having suffered ‘loss and damage’ from climate change, Denmark pledged to back said countries with $13M. Amongst them, $5.4M will go to help Sahelian communities recover and adapt to climate change. 
• Denmark’s investment is the biggest yet, following the Scottish government and Belgium’s Wallonia region contributions to loss and damage funds.   
• Although Denmark’s pledge will be significant, it is still nowhere close to the toll wrought by climate change every year. For instance, recovery from the floods in Pakistan is estimated to cost more than $10billion.  
• Read more about this story: The Washington Post, Balkan Green Energy News 

Comment from Codo: This move from Denmark came a few days before youth movement “Fridays for Future” organized protests in 450 places around the globe to ask rich countries to pay for damage caused by global warming. The matter of climate change adaptation finance in poor countries will be a central topic at COP27, to be held next month in Egypt. 

EU | The EU schemes to upgrade its Paris Agreement climate target  

• EU plans to update its ‘nationally determined contribution’ (NDC) – each country’s contribution to addressing the 2015 Paris Agreement goals – in preparation for the COP27 summit in November. The new NDC is however unlikely to be adopted before the end of the year. 
• As the world’s third-biggest emitter, the EU will look forward to cutting its net emissions by more than 55% by 2030 – its current NDC. To be able to enhance its decarbonization goal, Europe will need to further expand renewable energy – contributing also to ending dependence on Russian fuels, and phase-out fossil fuel cars by 2035. 
• Read more about this story: Reuters, ECEEE 

Comment from Codo: One of COP26’s achievements last year was the agreement between countries that the next update of their NDCs should intervene at COP27, in 2022. This is 3 years earlier than the schedule defined by the Paris Agreement, which requires an update every 5 years: after the first pledges in 2015 and revisions in 2020, the next update was expected by 2025. According to UN estimates, the sum of NDCs and pledges announced at COP26 was still putting earth on a global warming pathway likely to reach 2.8°C by the end of the century. 

Japan | Japan’s ammonia plan for “clean coal” unlikely to be economically viable 

• A growing number of Japanese industries in the power and steel sectors are referring to ammonia co-firing as a way to reduce the CO2 emissions of their coal-fueled plans. This technology consists in introducing a share of ammonia in the energy mix in substitution of some coal. 
• However, a recent report published by research firm BloombergNEF shows that this strategy is unlikely to become an economy viable solution for Japan to decarbonize the electricity sector. 
• One of the main findings of the study is that to implement this solution at commercial scale, Japan would need to import massive quantities of green or blue ammonia (i.e. produced from renewable sources, or natural gas with carbon-capture). Japan would therefore still be spending trillion of yen on energy imports. 
• Read more about this story: BloombergNEF 

Comment from Codo: This new study from BloombergNEF confirms the findings of a previous report from NGO TransitionZero that was questioning Japan’s bet on ammonia and carbon storage to decarbonize the power sector. As all sectors have to decarbonize, and as some sectors such as agriculture have fewer options at their disposal, technologies like green ammonia – which global output will be limited – should not be used when other solutions exist. The first initiative power companies in Japan can take to reduce their emissions is further encouraging energy savings – something that goes against their historical business and therefore requires new way of thinking.