Between now and 2020, as part of the Paris Agreement, countries will put forward the next generation of the Nationally Determined Contributions (NDCs). Individually, they represent each country’s pathway toward a more sustainable future. When added together, they represent the world’s collective effort to fight climate change. The new pledges must be much more ambitious than the first generation in order keep global temperature rise to below 1.5 degrees Celsius – previous NDCs as of December 2018 would limit warming to only about 3.0 degrees Celsius.
However, the current NDCs lack ambition because they look at isolated challenges or attempts to optimize individual installations, rather than a comprehensive decarbonization pathway. Therefore, they risk overlooking a large share of the economically feasible mitigation potential. This requires looking beyond reducing a negative output, greenhouse gasses, into the use and reuse of resources which feed our economic systems. Rather than starting at the greenhouse gas (GHG) emission sources as the starting point for a low carbon development strategy, we need to develop an understanding of the underlying economic system and how it meets our present and future needs.
The recent webinar on circular economy and the Paris Agreement discussed the current shortcomings of accounting for global GHG emissions. A new approach is needed to drastically increase ambition which looks at a country’s economic system as a whole, including its socio-economic development strategies to meet the future needs of their societies. Circular economy provides a useful framework for such an approach.
This requires mapping out all flows of materials and energy in a country to identify circular economy options which make material but also socio-economic sense. Furthermore, with international trade expanding, more often reducing GHG emissions in one country, requires action on the root causes in another country. Already now, the average carbon footprint of all products imported by a country, amounts up to 20% or even 30% of a nation’s carbon footprint.
A recent report on the GHG emissions in Europe showed that emissions on the EUs territory have gone down with 20%. However, looking at the life cycle emissions of the value chains which supply products to European industry and consumers, the EU’s carbon footprint has actually increased with 11%. The reason is that the EU has outsourced part of its carbon footprint. And this is where we’re talking about scope 3 emissions, which are the upstream emissions in value chains and relate to consumption-based rather than territorial emissions.
Scope 1 and 2 emissions, on the other hand, refer to emissions from on-site combustion and electricity use. These international scope 3 emissions were essentially left unincentivized by the mechanisms for international cooperation under Kyoto. This is something which we need to solve in Article 6 of the Paris Agreement by looking at value chains through cooperative approaches and consumption-based accounting.
More ambitious NDCs shall look at carbon-intensive materials and optimize resource, asset and product use and consider value chains rather than narrow scope 1 and 2 emissions. This could eventually lead to low carbon value chain strategies and go beyond national low emission development strategies.
As has been demonstrated, the zero-carbon paradigm shift will need to be financed by private capital. Some estimate that private sector contribution will amount to around 85 or 90% of the total cost of shifting towards a low carbon society. The opportunities are significant and present at least a US$13.5 trillion market through 2030 for the energy sector alone, specifically for energy efficiency and low carbon technologies. Businesses that act boldly and swiftly will reap the rewards of these market opportunities.
Circular economy approaches provide a larger and more attractive entry point for the private sector as they provide broader themes to engage and invest in. Based on a recent UNDP survey, businesses show greater interest in engaging with the SDGs than NDC sectors in general. The survey showed that 12 of the 17 SDGs received at least 25% business interest, while only 3 of the 8 NDC priority sectors in the surveyed country received similar interest.
NDCs that look at a country’s economic system as a whole and its broad socio-economic development strategies will thus provide a more favourable framework for private sector to thrive the zero-carbon transformation.