What is the future of decarbonisation?

21 January 2022

Back to insights and resources

What is the future of decarbonisation?

Ever since the signing of the Paris Agreement – the international treaty committed to limiting global warming below 2°C – attentions have increasingly been turning to decarbonisation. Following the conclusion of the 26th UN Climate Change Conference of the Parties (COP26) in November 2021, the outstanding parts of the Paris Agreement have now been finalised. It’s an encouraging sign that this attention will now become action in the not-too-distant future.

Clearly, as entire nations, and a slew of corporations, investors and citizens get more decisive in their approaches to low carbon, decarbonisation only looks set to grow as we move into the future.

Along with a definition of decarbonisation and why it’s so important in these environmentally minded times, we’ll take a look at what the future of decarbonisation might look like for businesses below.

What is decarbonisation?

Decarbonisation refers to the process of reducing carbon dioxide (CO2) emissions that are created by human activity. Ultimately, it is hoped that decarbonisation will eliminate emissions entirely, with industry bodies from the likes of energy, transport, and consumer products all publicly declaring their intention to become carbon neutral by 2050.

While it may be some time before that happens, the good news is that three of the highest emitting sources of carbon emissions (electricity generation, stationary energy use and transport) are all expected to decarbonise more and more as time goes on.

  • Electricity generation can decarbonise through a move towards renewable sources like wind and solar, which are becoming cheaper and more efficient
  • Stationary energy (created by things such as space heating and manufacturing) can decarbonise through certain renewable technologies or by using things like hydrogen as a fuel source
  • Transport can decarbonise through the use of electric vehicles or by moving to lower emission fuels. The phasing out of new petrol and diesel vehicle sales by 2030 will help to contribute to the lowering of emissions

Why is decarbonisation important?

Many sectors, including industrial, residential and transport, are powered mainly by fossil fuels. This means that their energy is made by combusting fuels such as coal, oil or gas.

When CO2 is emitted from this combustion, it acts as a greenhouse gas, contributes to global warming, and damages the environment. By opting for alternative sources of energy instead, such as green gas, industries and businesses can reduce the amount of CO2 released into the atmosphere, curbing the effects of climate change in the process.

And while progress is certainly being made, it’s been suggested that we’re still a long way from the targets set out by the Paris Agreement. The World Economic Forum has stated that full decarbonisation of our energy systems is the only solution to climate stabilisation.

What is the future of decarbonisation?

So, what does the future hold for decarbonisation in terms of businesses? Political action on the matter has been visible, as with the conclusion of COP26 mentioned above. After two weeks of debate, the conference ended with some strong intent: that climate action must be urgent and more accelerated.

Highlights from the talks included:

  • Almost 200 countries agreed to speed up their action on climate as part of the of the Glasgow Climate Pact. This means that a move towards keeping global warming to pre-industrial levels of 1.5C are still on the table – but only with immediate global effort.

  • As part of the Glasgow Climate Pact, all countries agreed to revisit their current emissions targets to 2030. Known as Nationally Determined Contributions (NDCs) these will be carried out in conjunction with a yearly political roundtable to consider a global progress report, along with a Leaders summit in 2023.

  • The Paris Rulebook – the guidelines for delivering the Paris Agreement - has been completed after six years. As a result, the full delivery of the landmark accord is now possible, with greater transparency from participating countries.

  • For the first time, the COP agreed to reduce the use of fossil fuels in countries most affected by climate impact.

  • The Adaptation Fund signalled greater commitment from developed countries to double their financial support to developing countries by 2025.

However, businesses have seemingly been less proactive in comparison. Only 45% of FTSE companies are committed to Net Zero by 2050, and 84% lack a proper strategy to meet 2050’s goal of limiting global warming. To reach that goal, businesses must think more about introducing emissions targets into their current strategy.

Understanding your Net Energy Consumption is just one way your business can implement a realistic plan of action. By calculating your net business energy usage, your business can more readily stay compliant, energy-efficient, and cost-effective as you progress towards the ultimate goal of net zero.

Businesses shouldn’t be put off by the cost of investing in decarbonisation, however. All manner of organisations have taken new approaches to developing their existing products, using fewer raw materials, and creating alternative materials using carbon waste.

Whether it’s Unilever’s laundry capsules made with recycled carbon emissions or beauty company Coty using sustainable ethanol in their fragrance products – wherever the need for decarbonisation exists, it seems innovation and value are never far behind.

A greater understanding of their largest sources of energy usage, as well as things like transportation and waste creation, can allow businesses to understand their carbon footprints. Equipped with this information, opportunities to save on cost and reduce carbon outputs can more readily emerge.

And with business energy being one of the biggest sources of carbon emissions for many businesses, it’s not unrealistic to suggest that we’ll see an upswing in alternative options such as renewable gas and electricity and carbon offsetting.

With regards to meeting their own goals, greater collaboration between businesses and regulators is something we might also be seeing more of in the future. An increase in partnerships will serve to speed up decarbonisation and allow businesses to invest in more renewable energy sources.

Take BrewDog for instance. The popular brewery and pub chain has already become carbon negative by working with carbon offset partners to purchase a forest to plant trees in.

Decarbonisation may also affect the ways in which investors and insurers work with businesses. Where loans and insurance are concerned, we could see businesses being refused on the basis of damaging and outdated practices. Those who can readily demonstrate their decarbonisation efforts, however, could well reap financial benefits, along with the knock-on effects of a more positive brand reputation.

opens in new window