“Are the European manufacturing and energy sectors on track for achieving net-zero emissions in 2050? An empirical analysis” this is the title of the article recently published on Energy Policy by Matteo Mura, Director of the Centre for Sustainability and Climate Change of Bologna Business School, Mariolina Longo and Leticia Canal Vieira, a study that can help us today understand to what extent businesses are effectively ready to achieve the first of Cop26 objectives: bringing global net emissions to zero by 2050 and aiming to limit temperature increase to 1.5°C.
We asked Leticia Canal Vieira, researcher at the Management Department (DiSA) for the project “Sustainability Transition: Measuring Sustainable Performance of Industrial Ecosystems” to explore with us some of the main points of the article, which you can read in full here.
European companies and technological constraints. What are we lacking, from this point of view, to reach the goal of zero carbon emissions?
The companies we examined belong to sectors that require high energy inputs , such as cement, steel, or pulp and paper. To date, it is difficult to produce the high quantities needed to power these types of production processes from renewable energy sources. There are experiments, in the production of steel and cement in particular, to promote the use of green hydrogen as a clean energy source alternative to fossil fuels, but we are, in fact, still in the experimental phase. There is also a use, for example in the oil industry or in the chemical industry, of raw materials of fossil origin, which should be replaced with raw materials from renewable sources: this would already be a first step to reduce emissions, but investments in research and development are still needed to make it viable.
What, instead, is meant by “institutional constraints” and what are the factors behind this delay?
To talk about institutional constraints, it is also necessary to start from the fact that a large part of company emissions is represented by fossil fuels and that these have shaped the habits of people and the economic activities that surround us. Leaving this context behind and creating new habits is not an easy task, for different reasons. When we talk about institutional constraints we refer to the rules, which can be both formal and informal, that organize our society, politics, and economy. To give a practical example, we can take the case of a company that wants to change the materials it uses from those of fossil origin to biodegradable ones. The first thing this company will need is an expert to help with this transition: a figure that will be hard to find on the market because until recently there were no university courses focused on these issues. This difficulty is obviously out of the company’s control and therefore becomes an institutional constraint. Another example might be that of a company that chooses to make only electric cars available to employees, but faces the reality that it cannot yet rely on an adequate network to charge electric cars and ensure efficiency on longer trips. This limitation in terms of infrastructure is not the company’s fault but it affects its ability to actively work on reducing carbon emissions.
Is the freedom to pollute really good for the wallet or is it a false myth? From this point of view, has the cost-benefit ratio of those 12-23% of companies owning super-polluting plants ever been evaluated?
Cost-effectiveness has not been specifically evaluated in this report. What we can say is that there is still no real cost to companies when they emit GHGs. Both emissions regulations and accounting are being developed, and the fact that clear assessment tools are not yet established, means that it is still economically viable for companies to buy carbon credits, when needed, rather than investing in changing their production process. With respect to the period examined in this article, what we have seen is that only in recent years has the carbon price, i.e., the cost of offsetting emissions, begun to be sufficiently high to make the investments necessary to innovate processes more attractive to companies rather than buying carbon credits.
What are the next steps for an update of the EU ETS database? In addition to the increased accuracy of the collected data, could there be further improvements such as, for example, a faster data collection or the possibility to grant access also to consumers, so that they can orient their purchases?
It would be very useful for everyone if the EU ETS database were to be more structured and more transparent. Unfortunately, today the citizen interested in knowing what the emissions of a specific industrial plant are will have a hard time finding this information from the EU ETS. In addition to guiding consumer purchases, a more efficient database would also help those living near these installations to get an idea of air quality. Moreover, a well-structured database would make it easy to identify the most polluting installations and help citizens become more aware of these issues. From a more technical point of view, it would be useful if the database provided information on why companies stop reporting their emissions. This can happen for a number of reasons, one of which is that the company has managed to reduce its emissions to the point where it no longer has a significant amount of emissions and therefore no longer needs to report them to the EU ETS. It would be, in this case, an improvement that would be interesting to track. But it can also happen that companies close down or relocate outside of the European Union and simply stop reporting. Understanding what is happening is very important because it improves the traceability of emissions and the truthfulness of the data, helping us understand if there has been a real improvement or if companies are moving to locations that have more permissive regulations, continuing to pollute. The latter is very important if you consider that reducing emissions is a global necessity and reducing them in one part of the world to increase them in another is clearly not a solution to the problem.
The role of education and research
The BBS Centre for Sustainability and Climate Change also deals with energy and new renewable sources, in line with the objectives of Cop26. Training the individuals that will support companies in this delicate transition is a commitment that the School supports through specific programs, seeing in the changing scenario the basis for new opportunities. To learn more about our dedicated Master’s programs click here.