#WhyESGMatters Four pathways to global decarbonisation | Article – HSBC VisionGo
Four pathways to global decarbonisation
Carbon dioxide emissions, primarily from burning fossil fuels, account for 70% of greenhouse gases (GHGs) in the atmosphere. This and other emissions (including methane) come from a wide range of human activities across the world. As they continue to have a profound effect on global warming, governments, companies and investors project greater focus to net-zero policies, in efforts to accelerate economy-wide decarbonisation.
In this issue of #WhyESGMatters, we look at the catalysts that drive radical decarbonisation. We explore how technological innovation and energy efficiency can reduce major sources of emissions across four sectors: power generation, transport, buildings and industrials. Investors can regard these as ‘decarbonisation pathways’ with the potential to reduce total emissions by 81% by 2050.
Decarbonisation across sectors
Radical decarbonisation across the four sectors can be connected via one trend: electrification – or the shift to electricity as a power source. With increased methodologies to generate renewable power at scale, this single transition driver can gradually replace fossil fuels, thus lowering emissions across landbased transport modes, in buildings (e.g. heating/cooling) and multiple industrial activities. Achieving energy efficiency and technology innovation are also key – less energy demand will have a positive impact on emissions.
Power generation is the highest emitting sector – at 26.2% of total GHGs and within that, 35.4% of CO2 emissions. This sector has also received the most attention in driving decarbonisation, with increasingly cost-efficient, scalable alternatives and emerging technologies to fossil fuel combustion.
Industrial activities account for 21% of global emissions. This is a complex and diverse sector, covering metals and mining, oil & gas, cement, gases and chemicals. Multiple pathways are necessary for decarbonisation, with materials efficiency, recycling, electrification and hydrogen all playing a role.
Decarbonisation pathways are diverse – energy efficiency has been a larger focus so far, via higher levels of heat integration, updating equipment and utilities, smart process control and monitoring, and predictive maintenance. Some electrification may be underway, and we are yet to see build-out of carbon capture and clean hydrogen deployment in the sector.
As the world shifts towards the ambitious targets of the Paris Agreement, technological innovation and energy efficiency deployed across major pathways can help reduce major sources of emissions. Investment in specific technologies can increase the rate at which emissions can descend towards net zero. While 2050 is only a generation away, many radical changes can take place in terms of politics, policies, economics and technological advances. Investors should take note of emerging developments aimed at lowering emissions, as they will play a key role in decarbonisation efforts and to limit global warming.