Tiina Kähö: Towards Carbon Neutral Economy
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Transcript of Tiina Kähö: Towards Carbon Neutral Economy
Towards carbon neutraleconomyTiina Kähö, Senior LeadLUT, Cleaner Technologies and Markets18th February 2015
Sitra Tiina Kähö 18.2.2015
Our duty is to promote Finland's:
• stable and balanced development;
• quantitative and qualitative economic growth;
• international competitiveness and co-operation.
Act on Sitra, the Finnish Innovation Fund (717/1990)
2
Heading for the future
Sitra is a fund operating directly under the Finnish Parliament. We finance our operations from the returns on our endowment capital and venture capital investments.
As an independent societal actor, we offer training and bring together experts who seek solutions to systemic challenges, which may even be applicable on an international basis.
We anticipate change and its impact on the Finnish people. We try out new operating models and accelerate business activities aimed at generating sustainable well-being.
We influencesocietal structures and promote changesthat increase well-being.
An independent
societal game changer
3Sitra Tiina Kähö 18.2.2015
Sitra as a Change Agent
Venture capital and societal trainingFunding R&D Societal change agent
?
Global service society
Closedindustrialsociety
1990
2000
2014
1970
1980
4
Resource-wise and carbon-neutral society
Sitra creates the conditions for a resource-wise, carbon-neutral society and for business operationschasing this goal.
Preparing for the impact of climate change and its proactive prevention call for systemic and phased long-term action.
Concern about the scarcity of natural resources and the need to improve our resource efficiency is beginning to guide consumption habits and production activities.
However, increasing our resource efficiency will not be enough – we also need to find alternative materials, services and solutions, and learn to let go of old practices.
We are moving towards a carbon-neutral society based on the principles of one planet living. Our focus is on the opportunities presented by this change.
We promote business activities that solve ecological, social and well-being challenges
We help Finnish companies to expand abroad and further their growth and competitive strength.
We speed up testing and introduction of new business and funding models.
We actively participate in developingthe business of the companies in which we invest in and support their success.
We invest in growth companies that promote sustainable well-being.
5Sitra Tiina Kähö 18.2.2015
Inter-dependency is increasingCommunities
are empowered
Europe's structures
are crumbling
Skills are challenging information
Human lifespans are
increasing
Technology is being
integrated into everyday
life
Job stability is
disappearing
Power relationships are shifting
Inequality is growing
The roles of cities are growing The effects of
climate change are broadening
Ecological footprints are outgrowing our “shoes”
Well-being is becoming
more important
Megatrends | Sitra 2014/2015
7
Growth is weak across the world economy
OECD countries
Still recovering from
financial crisis – loss of
fiscal flexibility
Slower productivity growth
Infrastructure renewal
challenge
Income inequality
China
Looking to restructure its
economy and reduce
energy intensity
Excess financial
leverage
Significant pollution
problems
Low-income countries
Too dependent on
commodity
exports/cycle
Capital constraints
Remaining deep
poverty, including lack
of access to energy,
water, health, food
Middle East
Excess dependency
on hydrocarbon
exports
Insufficient private
sector employment
Middle Income countries
Need escape from “middle
income trap”
Two speed economies with
large productivity gaps
India
Significant
infrastructure gap
Regulatory
complexity
New chance to
catch up
Source: New Climate Economy, 2015Sitra Tiina Kähö 18.2.2015
8Sitra • Tiina Kähö • 18.2.2015 •
Climate Change poses both Threats and Opportunitiesto the Global Economy
Sources: World Bank, OECD, IEA World Energy Investment Outlook 2014, Ministry of Employment and the Economy
OECD: 0.7%-2.5% Global GDP Loss by 2060 – Effects of Climate Change
World Bank: GDP Growth $1.8-2.6 trillion a Year by 2030 – Climate Change Mitigation
IEA: $48 trillion in Energy Investments over the Period to 2035$
Ministry of Employment and Economy: Global Cleantech Market €1600bn€
10
Next stepsThe Global Commission recommends 10 transformative actions
Source: NCE. For details please see the NCE Global Action Plan (2014)
1 Integrate climate risk into strategic decisions
Secure a strong international climate agreement
End subsidies for the high-carbon economy
Price carbon to send a clear market signal
Scale-up low-carbon innovation
Reduce the cost of capital for low-carbon investment
Move toward connected and compact cities
End deforestation
Restore degraded lands
Phase out unabated coal fast
2
3
4
5
6
7
8
9
10
Sitra Tiina Kähö 18.2.2015
11
Key drivers of growth and climate performance
RESOURCE
EFFICIENCY
INNOVATION
INFRASTRUCTURE
INVESTMENT
HIGH QUALITY, RESILIENT, INCLUSIVE = BETTER GROWTH
ENERGYLAND
USECITIES
WIDER
ECONOMY
Source: New Climate Economy, 2014 Sitra Tiina Kähö 18.2.2015
12Sitra • Etunimi Sukunimi • 00.00.2014 •
Carbon risk and divestments are stepping up on the investors’ agenda
HS 18.2.2015
Sitra Tiina Kähö 18.2.2015
14Sitra • Tiina Kähö • 18.2.2015 •
• Carbon Tracker: To reduce the chance of exceeding 2°C warming to 20%, the global carbon budget for 2000-2050 is 886 GtCO2, of which already 36% was burned by 2011.
• In order to stay within the carbon budget, up to 80% of current reservesshould never be dug up and burned
Sources: Carbon Tracker Initiative: Unburnable Carbon, The Economist
All currently known fossil fuelreserves cannot be burned if
we are to limit global warmingto 2 degrees
Carbon Risk: A Carbon Bubble in the Financial Markets?
• The share prices of oil, gas and coal companies depend in part on their reserves, but what if some of those reserves can never be dug up and burned?
15Sources: Carbon Tracker Initiative: Unburnable Carbon, The Economist,
McKinsey&Carbon Trust
Carbon Risk: A Carbon Bubble in the Financial Markets?
• Carbon Tracker: All currently known fossil fuel reserves cannot be burned if we are to limit global warming to 2 degrees. In order to stay within the World’scarbon budget, up to 80% of current reserves should never be dug upand burned
• If energy consumption continues unfettered, unburnable carbon will be reached in just 16 years (according to the latest IEA projections of energy-related fossil fuel CO2 emissions)
Regulation
Financing
Public Opinion
Other external factors
?
Sitra Tiina Kähö 18.2.2015
16Sitra • Tiina Kähö • 18.2.2015 •
Carbon Risk: A Carbon Bubble in Energy Sector?
• The fossil fuel reserves held by the top 100 listed coal, oil and gas companies represent potential emissions of 745 GtCO2
• Given only 20% of the total reserves can be used to stay below 2°C, then only 149 GtCO2 can be used unabated
Sources: Carbon Tracker Initiative: Unburnable Carbon, The Economist
17Sitra • Tiina Kähö • 18.2.2015 •Sources: Nordea
Towards a Low-Carbon World?
…boost transition towards clean energy while investments in high-emissions projects lose their appeal.
Carbon Price and Taxes
…in wind, solar and energy efficiency erode the competitiveness of fossil fuels.
Technological Development
…and increased attention to climate issues affects the operating environment of fossil fuel companies.
Consumer and Investor
Behavior
All this puts pressure on fossil fuels but also createsopportunities for new business
Jouni18
“If a petrochemical
firm can do this,
anybody can ”
CEO Ray Anderson,
2009
Interface carpets; pioneer in low-carbon transformation and resource efficiency
Source: Jouni Keronen, 2014 Sitra Tiina Kähö 18.2.2015
19
Source: Tesla motors website, scdigest.com, autonews.com
Triggering competitive
response
Transforming the auto industry
Tesla market cap: $26bn
~25,000 cars sold in 2013
GM market cap: $54bn
~9.7 million cars sold in 2013
Promoting new
materials
Pioneering batteries
and energy storage
Tesla motors is challenging the status quo in many industries,
and creating huge wealth in the process
Sitra Tiina Kähö 18.2.2015
20
Google is becoming one of the biggest “clean tech” companies
on the planet
Source: Google, Greentech Media Sitra Tiina Kähö 18.2.2015
21
Finland’s performance in different global cleantech and environmental policy rankings varies from poor to great
Index
The Global Cleantech
Innovation Index 2014
The Global GreenEconomy Index
2014
Environmental Performance Index
The Climate Change
Performance Index 2015
EY Renewable energy country attractiveness
index (9/2014)
Index provider
Cleantech Group, WWF, Tillväxtverket
Dual Citizen LLC Yale UniversityGermanwatch & Climate Action
Network EuropeEY
Index description
Assessment of countries’ potential and conditions for
developing cleantech
innovations.
Assessment of countries'
performance in Green Economy.
Country assessmentbased on 20 national
environmental indicators.
Assessment of countries’ climate
policy and success in tackling climate
issues.
Assessment of the attractiveness of
countries’ renewable energy investment and deployment opportunities.
Finland’s ranking
2./40 8./60 18./17832./61
(Grade: Poor)37./40
Top3 –countries
1. Israel 2. Finland3. USA
1. Sweden2. Norway3. Costa Rica
1. Switzerland2. Luxembourg3. Australia
1. Denmark (4.)2. Sweden (5.)3. UK (6.)*
1. China2. USA3. Germany
Countriesranked next to Finland
Sweden (4.), Denmark (5.), UK (6.), Canada (7.), Switzerland (8.), Germany (9.)
Switzerland (6.), Austria (7.), Iceland (9.), Spain (10.),Ireland (11.), New Zealand (12.)
New Zealand (16.)Portugal (17.)Ireland (19.)Estonia (20.)Slovakia (21.)
Italy (22.)
Ukraine (30.), India (31.),Latvia (33.),Croatia(34.),Greece (35.),Austria (36.)
Philippines (34.), Saudi Arabia (35.), Kenya (36.), Russia (38.), Indonesia (39.), Ukraine (40.)
*None of the countries achieved positions one to three.Sitra Tiina Kähö 18.2.2015
22Sitra • Tiina Kähö • 18.2.2015 •
Finnish Companies have managed to turn Climate Change into Business Opportunities
Energy Efficiency and Related Solutions
Energy Efficient Use of Resources
The role of public risk
capital
• Traditionally most economists argue that the government should focus on the
framework conditions in supporting innovation, and let innovation and
business flourish in the free market
• However, promising or societally important innovations may not appear
tempting to private capital due to substantial risks, capital intensity or the
time horizon from innovation to cash flows – a sort of market failure often seen
with for example radical new medicines or energy sources
• This is where long-term public risk capital can step in, assuming the risks
and uncertainty associated with innovation that would otherwise not find financing
from the private sector
25
Slush
• Slush is a non-profit event organized by a community of entrepreneurs,
investors, students and music festival organizers, supported by
seasoned entrepreneurs and venture capitalists
• In the past three years, Slush has grown from a local, 300-person event
to become one of the leading tech and startup events in the world
• In 2014, Slush brings together 10.000 attendees and more than 2500
companies for the two-day event, which takes place on November 18-
19th in Helsinki
Copyright: Slush
26
NegaWattEnergy
Efficiency Fund
• NegaWatt Energy Efficiency Funds utilizes an innovative investment model in financing
investments in the built environment, all with the aim of increasing efficient energy use.
• Business rationale: Investment financed by the fund and savings from these energy
efficiency investments are shared between the investor (fund) and the asset owner for a
period of time. After this the benefits flow to the asset owner.
• Funds financially profitable technological measures which achieve material
improvements in the energy efficiency of across buildings, infrastructure and industry.
• Financing for example geothermal heat systems, extensive lighting modernizations, heat
recovery, solar power and many other energy efficiency solutions.
• A prime example of Sitra’s investment target: potential to contribute to improving the
national economy’s competitiveness and reducing both dependency on imported energy
and carbon dioxide emissions.
27
CleantechInvest
• Investment fund investing in companies that do profitable business in generating
clean energy and providing solutions for efficient natural resource use
• Energy production
• Energy storage, quality, transfer and efficiency
• New materials and recycling
• Clean water and air
• Operates between cleantech growth companies and large industrial corporations as
a pathfinder, combining the innovative powers of entrepreneurship with industrial
scalability
• Sitra an early investor, IPO in 2014. Stock listing enables also retail investors to
invest in a portfolio of cleantech ventures through the stock market.
28
AW-Energy
• AW-Energy Ltd is a Finnish company developing the WaveRoller concept to utilize
ocean wave energy
• WaveRoller has passed the proof of concept stage through extensive marine
testing in Peniche, Portugal as well as in Orkney, Scotland.
• The evidence from the marine testing indicates that WaveRoller has the potential
for becoming a significant driver in making wave energy a mainstream energy
source.
• Sitra amongst the first investors; a strong strategic fit to Sitra’s vision
• A good example about the role of public risk capital: capital intensive, long-term
development project with many uncertainties but immense potential
Sitra accelerating industrial transformation towards a carbon-neutral society
• 5-10 leading corporations commit to developing solutions to challenges posed by climate change
• Large corporations lead the industrial transformation
• Building home markets and ecosystems
• 1-3 national pilot projects
• Policy recommendations
Sitra • Tiina Kähö • 18.2.2015 •
Carbon-neutralindustry
Targeted results
Transformation
has acceleratedthe energy transition
of the whole society, and large companies
lead the way
Increasedcompetitiveness
secures the success of the businesses in the future
Pilot projects and areas
add informationand build the home market
Recommendations
support a functioningbusiness environment
30
Sitra prepares Finnish industry for a carbon neutralityjourney
Awareness
•Backgroundstudies
Understanding
•Discussions on selected issueswith group of companies
Acceptance
•Developmentprojects withselectedcompanies
Commitment
•Building blocks for everyone to use
• Carbon neutrality transformation building blocks are generic
• Sitra facilitates cross company co-operation
• Sitra promotes reference areas and pilot projects
• Sitra wants to reach the Finnish industry and help them in thetransformation
Sitra Tiina Kähö 18.2.2015
31
Building blocks for carbon neutrality transformation
Strategy
Leadership & Culture
Carbon Efficiency
New CleantechBusiness
Carbon neutrality
Resource wisdom
Bu
sin
essS
ocie
ty
Sitra • Tiina Kähö • 18.2.2015 •
32
In addition, carbon neutrality should be understood in a wider context
Strategy
Leadership & Culture
Carbon Efficiency
New Cleantech Business
Carbon neutrality
Resource wisdom
Bu
sin
essS
ocie
ty
Eco
syste
ms
Value chain and carbon hand print
Corp
ora
te
citize
nsh
ip
Sitra • Tiina Kähö • 18.2.2015 •
Industry cases
Generictopics
33
Building blocks in Carbon neutral industry focus area
Strategy
Study: How carbonneutrality is
changing the globalbusiness?
Industry workshop
Carbon neutralityrisks
Tools and methodsfor climate and
carbon risk analysis
Industry workshop
Building blocks for Carbon neutral industry transformation
Carbon neutrality opportunities
Industry workshop
New cleantechbusiness and
financing modelsreview
Industry workshop
Cleantech innovationsreview
Next best ecosystem Next best value chainNext best carbon
hand print
Next best leadershippractises
Next best innovationpractises
Next best business models
Next best carbonneutrality LCA
Sitra • Tiina Kähö • 18.2.2015 •
Climate Leadership Council
Main projects
• Low carbon roadmap/building block development
for companies
• Supporting the clean tech developments in the
capital area of Finland
• Supporting World Bank Carbon Price initiative
• Development and piloting climate and carbon risk
analysis methods
• CLC utilises the results of Sitra Carbon-neutral
Industry Focus Area: and develops collaboration
with relevant national and international partners
J Keronen, Climate Leadership CouncilSitra • Tiina Kähö • 18.2.2015 •
36Sitra • Tiina Kähö • 18.2.2015 •
”Business and goverment must work together to design effective policy to support the transition to green economy ”
Lähde: KPMG, Sustainable Insight, 2012.
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@SitraFund
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