University of Cambridge report: EU ETS provides competitive advantage and cost efficiencies for ambitious businesses
New report: 10 years of Carbon Pricing in Europe: A business perspective
LONDON. 9 JULY 2015
A new report, out today, finds that the existence of the EU Emission Trading System (ETS) has helped companies focus on carbon emissions reduction, and those companies that have shown leadership and recognised that the future is low-carbon have been rewarded with declining costs, and a drive for creativity and innovation.
The report, commissioned by The Prince of Wales's Corporate Leaders Group, found that most of the companies interviewed start with a compliance approach to carbon reduction, but those with a higher level of ambition, investment and an innovative approach have made significant carbon reductions, operational efficiencies and costs savings.
These efficiencies that companies are uncovering will maintain a downward pressure on the price. This will mean an ever tighter cap is required to maintain a carbon price that will drive the low carbon transformation in less progressive companies or in sectors where decarbonisation is most challenging.
Jill Duggan, Senior Associate at Cambridge Institute for Sustainability Leadership and author of the report said: "Our findings highlight how far-sighted leaders have looked into the future, and seen the need for their business to take action on carbon – to maintain or increase market share. These companies have been rewarded with efficiencies, creative new business models and competitive advantage, even when there has been a low carbon price.
"However, we need to see even more companies find the ambition, leadership and human inventiveness to transform their businesses into creative powerhouses that reduce their CO2 emissions at the same time as boosting profitability."
One of the businesses interviewed uses CO2 as its global measure of efficiency and believes its efforts to improve efficiency and reduce emissions made it more able to withstand competition from outside Europe, not less.
Sandrine Dixson Decleve, Director of The Corporate Leaders Group, said: "We continue to urge the EU Commission to do everything in its power to keep Europe on track for developing a low carbon economy and energy system, by moving forward with ambitious plans to revise the Emissions Trading System next week.
"We know that European businesses in general would like a much more streamlined and less overlapping climate policy framework, and that carbon-pricing is key to deep cuts in greenhouse gas emissions and decarbonisation of the economy. Therefore it is vital that the policy environment enables business to flourish as the engine of growth, investment and innovation in the low carbon economy."
Jos Delbeke, Director General for Climate Action, European Commission said: "Since 1990 economic growth [in the EU] is up 45% and emissions are down 19% – that has been a very important achievement. We know that the biggest [carbon] reductions have been in the ETS sectors. Agriculture, transport, households – all have made some improvements but the ETS has been responsible for a big chunk in delivery."
The report looked at nine companies from a variety of sectors to establish what action companies have taken when it comes to carbon emissions reduction and whether the European carbon price had impacted these actions. It uncovered some new insights on the benefits of carbon reductions:
- Ownership structure, leadership and long-term strategies of companies are important in realising efficiencies through investment and innovation.
- The drive for innovation from leadership comes from a desire to ensure products and services have a place in a low carbon economy.
- Reducing carbon has made these companies more efficient and reduced emissions.
The report also highlighted key insights on the role of the EU ETS:
- The ETS acts to reinforce the benefits of emission reductions.
- Some energy intensive companies would like to see changes to the allocation method.
- Although the recession caused carbon prices to drop, carbon reductions continued as companies strove to improve efficiency to survive.
University of Cambridge Institute for Sustainability Leadership (CISL)
Gemma Pryor, Media Consultant, CISL
Email: email@example.com, Mob: +44 7968 318 149
About Cambridge and CISL
For 800 years, the University of Cambridge has fostered leadership, ideas and innovations that have benefited and transformed societies. The University now has a critical role to play to help the world respond to a singular challenge: how to provide for as many as nine billion people by 2050 within a finite envelope of land, water and natural resources, whilst adapting to a warmer, less predictable climate.
Within the University, the Cambridge Institute for Sustainability Leadership (CISL) empowers business and policy leaders to make the necessary adjustments to their organisations, industries and economic systems in light of this challenge. By bringing together multidisciplinary researchers with influential business and policy practitioners across the globe, it fosters an exchange of ideas across traditional boundaries to generate new, solutions-oriented thinking. His Royal Highness the Prince of Wales is the Patron of CISL and plays an active role in its work.
A particular strength of CISL is its ability to engage actors across business, finance and government. With deep policy connections across the EU and internationally, dedicated platforms for the banking, investment and insurance industries, and executive development programmes for senior decision-makers, it is well-placed to support leadership in the real and financial economies.
About The Prince of Wales's Corporate Leaders Group (CLG)
The Prince of Wales's Corporate Leaders Group (CLG) is a select group of European business leaders working together, under the patronage of The Prince of Wales and with the support and advice of the University of Cambridge Institute for Sustainability Leadership, to advocate solutions to climate change to policy makers and business peers at the highest level, both within the EU and globally. Unilever is one of the CLG's member companies. For more information, see: www.cisl.cam.ac.uk/clg .