The 2008 UK Climate Change Act, sets some of the world’s most aggressive national targets by introducing the first ever long-term, legally binding, national framework to tackle dangerous climate change.
The Act sets a UK target of 80% reduction in greenhouse gas (GHG) emissions from 1990 levels, by the year 2050.
A new report, produced by the Carbon Disclosure Project (CDP), evaluates how UK FTSE 100 companies’ emission reduction targets measure up against the national target and uses the CDP 2009 dataset to analyse how ambitious company carbon reduction targets actually are.
Key Findings of the report include:
* The average annual greenhouse gas emissions reduction rate for FTSE 100 company targets is 2.5%. A 2.4% annual reduction rate is required to meet the UK 2020 target, set out by the UK Climate Change Act.
* However, the Energy, Utilities and Materials sectors, covering just 24 companies in the FTSE 100, are currently responsible for 87% of all FTSE 100 reported emissions. Their average reduction rate per annum is just 1.2% per annum. This falls far short of national targets and if we continue on this trajectory, we will not deliver in line with government requirements for 2020, until 2030.
* The high intensity Materials sector accounts for 26.6% of total FTSE 100 reported emissions. CDP found that the absolute and intensity targets set by this sector, when normalised for GDP growth, will achieve an actual annual 1.5% increase in emissions.
* The Energy sector accounts for 28.6% of total FTSE 100 reported emissions, and has an average annual reduction rate of 2%. These targets are insufficient to achieve the required 2.4% annual reduction rate.
* Some Utilities companies (accounting for 31.6% of reported emissions) are thinking ahead and setting strong targets, but the average annual reduction across the sector is only 1.8% per annum, falling short of the required 2.4%.
* 77% of FTSE 100 companies report having an emissions reduction target.
* 49% of targets are absolute, compared to 31% based on intensity. 19% of target setting companies have both absolute and intensity targets.
Paul Dickinson, CEO of CDP said: “It is crucial that those sectors responsible for nearly 90% of FTSE 100 reported emissions set aggressive reduction targets. Although we see some individual companies setting strong targets, the sector average reduction targets for Materials, Energy and Utilities sectors are lagging behind what is required to meet UK government targets.”
The report also calls for a strong global framework to create the right incentives to set sufficiently strong carbon reduction targets.
It added: “The UK Climate Change Act sets a legally binding national target of an 80% reduction in greenhouse gas emissions by 2050. Although on average FTSE 100 companies are setting good targets, CDP analysis shows that some carbon intensive companies are not committed to sufficient cuts and there is a Carbon Chasm between required national cuts and those commitments from the most carbon intensive sectors.
“If we continue on the trajectory of emissions reductions set across carbon intensive sectors, we will not achieve the reduction required to hit the UK interim target which will also impact the UK’s ability to reach its long-term target.
“The average reduction rate reported by FTSE 100 companies varies significantly by sector. Telecommunications and Health Care lead the way in setting strong targets, followed by Consumer Staples and Consumer Discretionary. Average reduction rates for these sectors are currently ahead of the recent recommendations presented by the Committee on Climate Change.
“However, the vast majority of emissions reported within the FTSE 100 come from the most energy intensive sectors, so, the reductions these sectors commit to will be key in delivering on UK targets. CDP data shows that although the Energy, Utilities and Materials sectors cover just 24 companies in the FTSE 100, they are currently responsible for 87% of all FTSE 100 reported emissions.”
The majority of these carbon intensive companies report having some form of target. However, do they go far enough to deliver on the UK national targets?
CDP finds that on average, these energy intensive sectors do not have adequate targets:
* The high intensity Materials sector accounts for 27% of total FTSE 100 reported emissions. CDP found that the absolute and intensity targets set by this sector, when normalised for GDP growth, will achieve an actual annual 1.5% increase in emissions.
* The average annual reduction rate calculated for the Energy sector is 2%. These targets are insufficient to achieve the required 2.4% annual reduction rate.
* The Utilities sector has a major role to play in the UK’s plan to mitigate climate change. Reducing emissions from this sector and the supply of low-carbon electricity to other sectors is crucial if the UK is to reach its 2050 target. Some Utilities companies are clearly thinking ahead and setting strong targets, but the average annual reduction across the sector is only 1.8% per annum, falling short of the required 2.4%. We will need to see a significant increase in reduction rates in this sector in order to achieve the required cuts.
* Considering both absolute and adjusted intensity targets, the average reduction rate of the FTSE 100 carbon intensive Energy, Utilities and Materials sectors is 1.2% per annum.
The report added: “Across the FTSE 100, the average reduction rate is on track to meet UK 2020 targets. However the carbon intensive sectors, responsible for 87% of reported emissions are lagging behind in their targets. If we continue on the trajectory set by the carbon intensive FTSE 100 companies, of just 1.2% annual reduction in emissions, we will not achieve the required reduction until 2030, 10 years too late.”
And it concluded: “By setting strong transparent targets, a significant number of FTSE 100 companies, such as BT, Cadbury and National Grid are taking an important step towards reducing their emissions and setting a trend which others should follow. However CDP analysis finds that although some carbon intensive companies have strong targets, if we were all to follow the trajectory set by FTSE 100 carbon intensive sectors we will not deliver on UK government targets.
“These carbon intensive sectors are responsible for nearly 90% of total FTSE 100 reported emissions. If we continue on the trajectory set by the Energy, Utilities and Materials sectors we will not achieve the UK interim target until 2030, 10 years too late.
“A failure to reduce emissions sufficiently by 2020, would require the UK to accelerate its rate of mitigation thereafter if it is to reach its 2050 target of an 80% reduction in greenhouse gases, against 1990 levels. Such acceleration would be costly and the delay will compromise the UK’s ability to reach this long-term target. For many FTSE 100 companies operating internationally, this highlights the importance of building an international framework alongside strong national regulation, which sends the right signals to industry and enable businesses to set the required reduction targets.
“The successful mitigation of climate change requires the collaboration of government and business, as well as individuals. The UK government has demonstrated global leadership by setting ambitious national targets for reducing carbon emissions and we need to see strong targets across the whole of business if we are to enable the UK to achieve its national goal.”
John Vivier, Las Vegas, NV around 6 months, 2 weeks ago