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As COP26 nears, experts talk tech, carbon pricing and regulation

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Adriana Van De Wal | EyeEm | Getty Images

The chairman of the Energy Transitions Commission has highlighted the role both companies and governments can play when it comes to reducing emissions, emphasizing the importance of the upcoming COP26 summit on climate change.

In a wide-ranging interview with CNBC’s “Squawk Box Europe” at the end of last week, Adair Turner was asked if meaningful action was actually taking place when it comes to corporate announcements related to ESG — a term which stands for environmental, social and governance — or if these lacked substance.

“A lot of meaningful action is taking place,” Turner said. “The problem is that it’s five to ten years later than it should have occurred – but it’s still good news.”

He went on to note that companies and countries across the world were “now making clear commitments and taking clear actions” to cut their emissions.

“Almost everybody has now agreed that we’ve got to get the global economy to about zero emissions by 2050,” Turner, who chaired the U.K.’s Financial Services Authority between 2008 and 2013, said.

“The other bit of good news is that the technologies to do that — the technologies of renewables, of batteries, of electrolyzing hydrogen — have ended up being far cheaper and easier to apply than we dared hope 10 years ago,” he said.

According to the foreword of a recent report from the International Renewable Energy Agency, the cost of electricity from utility scale solar photovoltaics dropped by 85% in the period 2010 to 2020. For onshore wind, costs fell by 56%, while offshore wind saw a decline of 48%.

The report from IRENA also states that, in the U.S., the price of utility scale battery storage decreased by 71% between 2015 and 2018.
 
The production of hydrogen using renewables and electrolysis — sometimes called ‘green’ hydrogen — remains expensive, but efforts are also being made to lower costs.

In June, the U.S. Department of Energy launched its Energy Earthshots Initiative and said the first of these would focus on cutting the cost of “clean” hydrogen to $1 per kilogram (2.2 lbs) in a decade. According to the DOE, hydrogen from renewables is priced at around $5 a kilogram today.

COP26

Looking at the bigger picture, Turner acknowledged that while the technologies were there and a lot of companies were taking action, even stronger commitments would be needed at COP26, which will be held in the Scottish city of Glasgow from October 31 to November 12.

“In particular, we now need to focus not just on how do we get to zero emissions by 2050, but how do we get really serious emission reductions in methane as well as CO2 — I want to stress that point — in the 2020s,” he said. “We’ve really got to get the action in place now.”

A lot is riding on COP26, which was due to take place last year but postponed because of the coronavirus pandemic. The U.K.’s official website for the summit says it will “bring parties together to accelerate action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change.”

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Described by the United Nations as a legally binding international treaty on climate change, the Paris Agreement, adopted in late 2015, aims to “limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.”

Much of the discussions at Glasgow will be centered around nationally determined contributions, or NDCs. In simple terms, NDCs refer to individual countries’ targets for cutting emissions and adapting to the effects of climate change.

In his interview with CNBC Turner noted how the NDCs presented at COP26 would, when added up, be “nothing like the scale of emission reductions that we need.”

“We are going to have to think about additional action on top of that,” he said. “And that will require further tightening of NDCs in future years but also, maybe, some cross-cutting initiatives at COP26 on methane, on deforestation, on accelerating the drive towards electric vehicles, which can be agreed across all countries.”

Governmental role

When it came to getting results, Turner stressed the important role national governments could play.

“You need not only corporates to be committed and to make voluntary commitments because they want to do the right thing,” he said, but strict government “regulations and taxes and other instruments as well.”

He explained how establishing a framework to create the conditions in which businesses could then deliver was key.

One example of how governments are attempting to generate change is in the automotive industry. The U.K., for instance, wants to stop the sale of new diesel and petrol cars and vans by 2030 and require, from 2035, all new cars and vans to have zero tailpipe emissions.

“The automotive industry is pivoting towards EVs at an amazing pace,” Turner said. “But we need to make that even faster by just telling them you can’t sell an internal combustion engine car beyond 2035. So yes, you need strong action from government — sometimes the best action is regulation, sometimes it’s a carbon price, sometimes it’s a subsidy or support.”

When it comes to climate change and action, topics related to increased government regulation and carbon pricing have generated a significant amount of debate in recent times.

In a separate interview with CNBC’s Steve Sedgwick over the weekend, former U.S. Energy Secretary Ernest Moniz touched upon these subjects.

Moniz said he thought the energy transition to net zero was “a $100 trillion-plus affair.” He was, he said, encouraged at how financial institutions were “demanding things like disclosure from … companies … in order to be able to shape their own investment portfolios.”

“But we know that most areas of the clean energy transition right now do not have, let’s say, the returns that an investor would like without government coming in and reshaping policy and regulation,” Moniz said. “So that I think is a key step now that needs further attention.”

He was then asked if a carbon tax would level the playing field and make renewables more attractive when compared with hydrocarbons.

“First of all, I like to say clean energy and not renewable because we need the entire space, including carbon capture and hydrogen and nuclear.”

“But yes, a carbon pricing mechanism, I think, would be the most straightforward way of doing two things. One, to shape the playing field – assuming the price, frankly, is high enough. But secondly, what carbon pricing would do is create a pool of resources that I would strongly urge be used in a progressive way.”

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Net-zero carbon emissions could cost Asia trillions: ING

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An overpass during the rush hour in the north district of Qingdao City, in China’s Shandong province.

Cheunghyo | Moment | Getty Images

Three of Asia’s largest economies will spend an estimated $12 trillion to achieve net-zero carbon emissions in their transport industries, according to Dutch bank ING.

China, Japan and South Korea account for almost two-thirds of all carbon dioxide emissions in Asia-Pacific, and approximately a third of global emissions, said the bank.

Both Japan and South Korea have pledged to achieve net-zero carbon emissions by 2050, and China by 2060. Net-zero emissions refer to removing more greenhouses gases from the atmosphere than produced.

The $12.4 trillion cost estimate is “equivalent to more than 90% of China’s 2020 GDP,” according to Robert Carnell, ING’s Asia-Pacific head of research and author of the report.

It will cover the electricity generating capacity needed by countries to supply new fleets of battery electric vehicles, electrified rail, hydrogen-powered trucks, sustainable aviation fueled planes, and ammonia-burning ships, he wrote.

The $12.4 trillion price tag doesn’t include infrastructure spending to replace existing vehicle fleets, install electric vehicle charging points, or store new fuels in the industry, he noted.

With up to 30% of total energy consumption coming from the transport systems of the three countries, they would need to act fast and adopt sustainable solutions to ensure their goals are within reach, said ING.

If China, Japan and South Korea start their energy transition process today and spread out their efforts over the next 30-40 years, the cost to achieve net-zero carbon emissions in transportation will be manageable, the bank said.

China’s race to net-zero

China is the world’s biggest carbon dioxide emitter and achieving net-zero carbon emissions will cost its transportation sector $11 trillion — or “1.8% of GDP per year through to 2060,” the report said.

Citing the 2020 China Renewable Energy Outlook, ING pointed out that passenger car transport in China will more than double to 450 million by 2050 — from 220 million vehicles in 2018.

China has seen rapid growth in the electric vehicle space, and ING predicts that if the country fully adopts battery plug-in electric vehicles by 2060, the total energy demand from passenger vehicles by 2050 could decrease significantly.

China’s marine industry would require the most investments to achieve net-zero carbon, ING said, adding that the demand for sea freight is estimated to grow to around 120% of today’s levels by 2060.

However, it would be impossible to achieve carbon neutrality without substituting diesel and liquefied natural gas with green ammonia, hence incurring extra cost of $3.7 billion and an additional 433 gigawatts of electricity generating capacity.

Japan and South Korea’s carbon neutral goals

Both Japan and South Korea have set their sights on 2050, and aim to reach their carbon neutral goals by then.

It will cost Japan $1 trillion to transition to a net-zero plan for its transport system, in terms of the electricity generating capacity required, according to ING’s forecast. This accounts for “about 20% of current Japanese GDP” — but that number can fall to “0.6% GDP per annum when spread between now and 2050.”‘

The report said Japan has made little progress in decarbonizing its economy as fossil fuels still make up more than two-thirds of the country’s primary energy supply. In a positive light, this means “Japan has a lot of low-hanging fruit to exploit in the transition process offering the prospect of rapid progress.”

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ING estimated that the total green energy capacity costs for transforming South Korea’s transport sector toward a net-zero carbon future would cost around $400 billion, or 0.6% of today’s GDP per year when spread over the next 30 years.

Although the cost countries will have to spend on transitioning their transportation systems can be “immensely depressing,” it’s important to remember that “all of this spending is going to show up as GDP,” Carnell wrote.

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Investors watch Evergrande stocks; China markets closed

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SINGAPORE — Shares in Asia-Pacific declined in Tuesday morning trade as investors continue to monitor the situation surrounding embattled developer China Evergrande Group.

Japanese stocks declined as they returned to trade following a Monday holiday. The Nikkei 225 dropped 1.61% while the Topix index shed 1.69%.

In Australia, the S&P/ASX 200 dipped 0.14%.

MSCI’s broadest index of Asia-Pacific shares outside Japan traded 0.17% lower.

The liquidity crisis over at China Evergrande Group could continue weighing on investor sentiment regionally after the Hang Seng index in Hong Kong was dragged down by more than 3% on Monday.

Markets in mainland China and South Korea are closed on Tuesday for a holiday.

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Overnight stateside, the S&P 500 saw its worst day since May, dropping 1.7% to 4,357.73. The Dow Jones Industrial Average plunged 614.41 points to 33,970.47 while the Nasdaq Composite fell 2.19% to 14,713.90.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 93.239 following its climb late last week from about 92.8.

The Japanese yen traded at 109.43 per dollar, having strengthened yesterday from around 110 against the greenback. The Australian dollar changed hands at $0.7258 as it struggles to recover after declining from above $0.73 last week.

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Facebook playing defense after WSJ reports on failure to protect users

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Facebook Chief Executive Officer and founder, Mark Zuckerberg, leaving the Merrion Hotel in Dublin after meeting with Irish politicians to discuss regulation of social media, transparrency in political advertising and the safety of young people and vulnerable adults. On Tuesday, April 2, 2019, in Dublin, Ireland.

Artur Widak | NurPhoto | Getty Images

Facebook spent the weekend on the defensive after a series of stories in The Wall Street Journal last week exposed just how far the company has gone to prioritize profits over the health and safety of its billions of users.

It’s a familiar pattern to those who have followed the social-networking giant over the past few years. Troubling anecdotes about Facebook and the behavior of its leaders get published by a major news outlet, followed by a firestorm of criticism and threats by lawmakers to regulate the company and to call top executives before Congress.

Then Facebook half-heartedly apologizes but not before taking swipes at the accuracy of the reporting and blaming the leakers who, in this case, were company employees. On Saturday, following the in-depth series from the Journal, Nick Clegg, Facebook’s vice president of global affairs, put out a blog post titled, “What the Wall Street Journal got wrong — about Facebook.”

The Journal’s investigation showed how Facebook has repeatedly failed to properly address crucial problems highlighted in internal studies conducted by the company’s own employees, such as how the most divisive content surfaces in so many news feeds because of its high engagement. The reports come two months after President Joe Biden said Facebook is “killing people” with misinformation about Covid-19 and vaccines and after the company struggled to find a consistent message for dealing with false information about the 2020 election.

The problems highlighted by the Journal were consistent with what Facebook critics have been saying for a long time: Executives are consumed with revenue growth and engagement.

One of the stories said that CEO Mark Zuckerberg was given a recommendation by an employee about a change the company could make to reduce the algorithmic boost given to harmful content that captured eyeballs and outsized attention. Zuckerberg responded by telling the employee he’d reject the proposal if it materially impacted users’ interactions with one another, according to the report.

In a separate piece, the Journal outlined how Facebook has ignored or brushed over the mental health problems caused by Instagram, particularly for teenage girls. Facebook knew about the issues because the conclusions were drawn from its own research. Not only has the company failed to make improvements, but it’s now planning a version of Instagram for kids under 13.

One thing Facebook tested as a potential fix on Instagram was hiding likes. After experimenting with the idea, Facebook found it didn’t improve anything. Yet the company decided to roll out hiding likes as an option for users because it “would be received by press and parents as a strong positive indication that Instagram cares about its users,” Facebook executives wrote, according to the report.

Another Journal report found that Facebook rarely addresses problems in markets outside the U.S. because it doesn’t have enough people who speak the local languages or dialects needed to identify the issues. Thus, there are places where the site is overrun by anti-vaccine misinformation and other lies and conspiracy theories.

For a company that’s worth $1 trillion and generated $86 billion in revenue last year and almost $30 billion in profit, an inability to hire the right experts is a poor excuse.

Facebook defended itself as it often does. The company accused the Journal of mischaracterizing its actions and for implying egregiously false motives on the part of its leaders and employees.

“Facebook understands the significant responsibility that comes with operating a global platform,” Clegg wrote in the post responding to the series. “We take it seriously, and we don’t shy away from scrutiny and criticism. But we fundamentally reject this mischaracterization of our work and impugning of the company’s motives.”

However, Clegg didn’t refute any specific facts reported by the Journal, as the paper’s own reporters have noted. And if the past is any indication, we shouldn’t expect any dramatic changes from Facebook, as long as investors keep buying the stock and regulators fail to act.

A Facebook representative didn’t have a comment beyond the blog post, but said, “we’ve also been working with WSJ reporters to make sure our responses are included in the series.”

WATCH: Facebook facing congressional probe on impact on teens and children



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