Industry is a driver of innovation for global climate protection
The G20 Summit gets underway on Friday in Hamburg, Germany bringing together leaders of the world’s largest economies. Expectations for the group to endorse an ambitious climate and energy action plan are high but in this guest blog for ICC, Kurt Bock, Chairman of the Board of Executive Directors and CEO of BASF, and Chairman of the Business-20 (B20) Taskforce on Energy, Climate & Resource Efficiency says successful climate protection will only be possible through collective, global action.
The Paris Agreement of December 2015 represented a breakthrough: After years of intense negotiations, 195 countries adopted the first global convention on climate protection at the United Nations Climate Change Conference. The goal is to limit the increase in the global average temperature to well below 2°C compared with pre-industrial levels. The agreement entered into force at the beginning of November 2016. More than two-thirds of the signatory countries have already ratified it. We are now entering the phase where all countries have to rigorously implement the necessary measures. Successful climate protection will only be possible with collective, global action.
“The G20 countries have to work together: Successful climate protection will only be possible with collective, global action.”
During its G20 Presidency, Germany can provide impetus. This group, comprising 19 countries and the European Union, accounts for around three-quarters of global CO2 emissions. Furthermore, the G20 members generate around 80% of global gross national income*. Their common goal should be to boost the innovative strength of industry and accelerate the development of technologies. Only in this way will industry be able to make its maximum contribution to climate protection.
Companies such as BASF are very actively engaged in the Business 20 (B20), the forum for business representatives from the G20 states – including in the Energy, Climate and Resource Efficiency Taskforce. An important milestone in this process is the B20 Summit in early May 2017 in Berlin. What is our focus?
Even if the countries implement all of the currently agreed nationally determined contributions (NDCs), the international community will only be able to limit global warming to 3°C. Furthermore, countries that do not reach their targets will not face sanctions. Since in many countries growth, jobs and prosperity are still more important than climate protection, the global community is facing a major challenge in this respect.
Collective, global action on climate protection
For example, Germany – a country that accounts for barely 2% of global carbon emissions – cannot on its own contribute all that much to reducing emissions. Therefore, the G20 countries in particular have to work together. Europe currently has the world’s most ambitious goals for reducing greenhouse gases. Consequently, European industry bears a heavier burden than its international competitors. We therefore urgently need fair competitive conditions and a global approach to regulation. Otherwise, the energy and raw material costs in Germany and Europe – which are already high in worldwide comparison – will continue to rise and put the region at even more of a disadvantage. We would then have to reduce or even close production sites in Europe. Instead of exporting, we would import – likely from countries with a worse carbon footprint, since the energy and climate efficiency standards are lower in most countries outside of Europe. This does not support climate protection.
Climate protection requires innovation
Effective global climate protection requires innovations. And innovations require a competitive industry which can advance the research and development of energy-efficient products and processes.
With its products, the chemical industry contributes to saving energy, avoiding emissions and therefore to achieving the greenhouse gas reduction targets. For example, the energy required to heat a single-family house built in the 1960s with an area of 160 m2 can be reduced by around 60% by insulating the exterior walls. In renewable energy generation with wind turbine systems, curing agents and resin systems are decisive for the size and lifespan of the rotor blades and thus for the economic efficiency of the plants.
Furthermore, the utilization of chemical products over their life cycles avoids many times the amount of CO2 that was emitted during their production. We need the innovations that come from industry in order to make the transition to renewable energies economically viable and to reduce energy consumption and CO2 emissions in other sectors, such as construction and transportation. The important role played by industry should be recognized, especially by the G20.
In addition to the innovative contributions that chemical products are making to climate protection, the chemical industry has already made its production extremely efficient. The German chemical industry reduced its emissions by 47% between 1990 and 2014, making it a pioneer in Germany. At BASF, we have also accomplished a lot: While we have doubled our sales volumes since 1990, we have been able to cut our greenhouse gas emissions by half in absolute terms and by 75% when measured per metric ton of product. At this level, it becomes more and more challenging to develop new technological options to further avoid CO2 emissions.
Recommendations of the B20 Taskforce
In the B20 Energy, Climate & Resource Efficiency Taskforce, we address these developments and needs, and we focus our recommendations on three core topics:
First, we call for the establishment of a G20 Carbon Pricing Platform to accelerate the development of global pricing mechanisms. The aim is to create a dialogue forum to share experiences with greenhouse gas pricing mechanisms, such as emissions trading.
Second, we recommend the development of a G20 Energy Innovation Action Plan. This would enable governments to create incentives to develop and use innovative technologies, including digital solutions. This could bring about an enormous reduction in emissions.
And third, we suggest the creation of a G20 Resource Efficiency Platform. Resource efficiency is essential to succeed amid international competition and it can also lead to sustainable economic development. The information network proposed by the B20 will strengthen knowledge transfer and collaboration on technological developments and innovations, in order to optimize resource use.
And the G20 countries can do even more: At the moment, we are seeing a very volatile political environment. This makes it more difficult for industry to play its key role in climate protection and to push forward with the necessary innovations. For companies, it is therefore even more important that the G20 recognizes the key function that industry plays in achieving the climate targets set out in the Paris Agreement. The G20 should create a regulatory framework that fosters innovation and enables fair competition between industrial companies on a global playing field. Industry will then be able to fully utilize its innovative power and shape climate protection in an environmentally friendly, socially responsible and economical way.
* World Bank (2014)