Sustainable Development Goal No 13: Climate Action

By:

BM-A, Group 6

Aston Leo (B19010)

Ishaan Arora (B19020)

Parikshit Garg (B19032)

Raghav Bhatia (B19035)

Shubham Bhardwaj (B19050)

Vaasu Sehgal (B19057)

Introduction

A total of 17 Sustainable Development Goals were established during the 2030 Agenda for Sustainable Development by 193 members of the UN General Assembly. Each member pledged to act in the welfare of the planet, its people, and prosperity. To try and ensure that “no one will be left behind” at the same time “shift the world onto a sustainable and resilient path” by working in partnership with each other.

SDG 13 is defined as “Take urgent action to combat climate change and its impacts.”[i] It points out that no country in the world has not had been affected adversely by climate change. Increasing emissions of GHGs, now at a level 50% higher than the 1990 level[ii], coupled with global warming, has led to long term changes in the climate system. These changes now threaten the planet with irreparable consequences if we fail to act now. The financial loss of billions of dollars incurred each year due to earthquakes, cyclones, and floods and require approximately $6 billion for disaster management annually. [iii]

Targets that have been defined under this SDG includes:[iv]

Target 13.1: Enhance the resilience and improve the capacity to deal with hazards and disasters related to climate change across the globe.

Target 13.2: Integration of measures taken to curb climate change with government policies and planning.

Target 13.3: Improved awareness and education in humans when it comes to dealing with climate change and its effects and consequences – to mitigate risk by using means like early warning and adaption.

Target 13.a: In addition to these 3 Target 13.a talks about how developed economies can contribute to solving the problem of climate change. It proposes they jointly mobilize a sum of $100 billion by 2020 in Green Climate Fund on an annual basis to help developing nations undertake meaningful actions towards the establishment of targets under this particular SDG. And finally, Target 13.b mentions the need to focus on the youth and pay special attention to marginalized communities in the least developed countries.

Relevance

Climate change is occurring at a much faster rate than anticipated. Increased human-made emissions into the atmosphere have led to a 0.9-degree Celsius increase in the average surface temperature of the planet since the late 19th century (1). Climate change has also been the cause of warming ocean, shrinking ice sheets, ocean acidification and declining Arctic sea ice, to name a few.

Let us take the Indian context. Be it floods in Kerala due to unusually high rainfalls or farmers committing suicide due to drought, both find climate change at its core. A degree rise in temperature has an adverse effect on crop productivity. At a time when the Indian population is growing, this inevitably increases the pressure on our already pressurized resources.

Not only this, we see that climate change is related to other SDGs in the following ways:

Controlling climate change would reduce the disproportionate effect it has on those at the bottom of the pyramid and hamper the growing inequalities. (SDG 10)
Reducing hunger requires controlling rinsing temperature affecting crop productivity. (SDG 2)
Ocean acidification leads to loss of flora and fauna below the water. Prevention can help protect marine and coastal. (SDG 14)
We need to combat desertification, manage forests sustainability to reverse land degeneration. (SDG 15)
The poor are the most vulnerable to extreme events that are happening due to climate change. Hence to uplift them, measures need to be taken to reduce this vulnerability. (SDG 1)

There is enough evidence to prove climate change. The clock is ticking, and we need to take quick action to save our only planet.

Business Implications and Responses

Climate change not only has environmental impacts, but it also has greater impacts on the businesses of the world. It affects the economy; studies show a rise in temperature of 4.5 degree Celsius can reduce the global domestic product by $72 Billion[v]. Almost 66% of the companies responded in a survey for Global Resource Challenges Report that their businesses have been affected by various climatic factors in the past two years. Climate change can affect businesses in the following ways.

Resource scarcity and increase in cost
Unpredictable changes and fluctuations in demand
Disruption of services due to extreme weathers
New Regulations and policies from government and regulatory bodies
Increasing pressure from the public on using sustainable techniques and products[vi]

So, considering the huge impact of climatic changes on the business, companies are moving towards a more sustainable business model. According to CDP (Carbon Disclosure Project) there is a significant shift in the actions and mindset of corporates worldwide even after the denial of Trump administration of any climate change impact[vii]. Microsoft has pledged to increase the usage of renewable source of energy at its data centers to 70% by 2023. United Nations Environment Program (UNEP) tracks the gap between what world wants to do and what they are actually doing. This report provides us where businesses and countries are lacking in meeting their targets. California state has drafted a new policy to turn the state’s entire power grid to green, by using 100% renewable sources[viii].

Companies have claimed to contribute significantly towards the SDG 13. Here are some of the examples.

ITC : Climate change poses a significant risk to any kind of Agri-Business in India as it is largely monsoon dependent and any disruption can have very severe effects leading to increased prices and competition for procurement of Agri products[ix]. This is a risk for any company which procures it’ s material from farms. ITC has started LCA based approach for calculating energy footprint along the value chain to identify opportunities for improvement. To do this ITC engages the supply chain partners and focusses on reduction in energy used for transportation of RM, FG& waste. ITC sources it’s 90% energy needs form renewable energy sources.

Honda: Honda introduced Triple ZERO[x] approach as a step towards unifying it’s 3 “zeroing “efforts towards addressing climate change. The triple ZERO approach includes Zeroing CO2 emissions, zeroing energy risk by shifting to renewable resources and Zeroing Resource & disposal risk. Some of the commitments that Honda has made are selling two-third electric vehicles by 2030. Company has invested in development of PEHV, EV and fuel cell vehicles. Company has already set up close to 60 charging station in US. In India also, Honda is planning on developing standardized swappable battery EV infrastructure along with in collaboration with other Japanese firms (Kawasaki, Suzuki, Yamaha).[xi] Indian government is pushing for a 100% conversion to EV by 2030. This step has forced the automobile manufactures to fast track their progress towards EV development.

DHL: DHL is a German logistics provider, had launched a program to improve its carbon dioxide efficiency by 50% by 2020 compared to 2007 levels.[xii] The company has its operations supported by 11000+ vehicles and it is a major area where there is a scope for becoming carbon efficient. the company has started investing in technology with the introduction of aerodynamic trailers, LNG based transports & hybrid and electric vehicles. DHL is encouraging its employees (80%) to become Go Green specialist& involve them in their environment and climate protection activities. DHL seems to be the only major logistic provider (UPS & FedEx studied)[xiii] that has committed something tangible towards SDG 13.

Analysis

At the end of 2015, the Paris Agreement was considered to be a diplomatic success because it brought the need and intention of fighting climate change and its devastating effects to the limelight. It also introduced Intended Nationally Determined Contributions (INDCs). But, even at the current goal of not increasing global temperatures by more than 2°C till 2030, the costs to small island states and emerging economies can be highly detrimental.

One of the most important global policies that is hopefully an effective counter against climate change is carbon-pricing. Currently, some form of carbon pricing is active in 28 subnational and 46 national jurisdictions as per World Bank. At the policy level, carbon pricing requires two decisions to be taken- the coverage level (what all sectors will come under the purview of the policy) and stringency (average price per unit emissions). More often than not, a lot of focus is given to the latter part, i.e. the pricing structure. Additionally, the use of the revenue is another important indicator of how value is being created through the carbon tax.

The Stanford Energy Modelling Forum (EMF) has been studying the different alternatives policymakers can choose to tackle this issue. In its 32^nd exercise[^xiv], there was a convention of 11 teams to model different emission, pricing and economic impact scenarios. Some of the assumptions taken were that no significant climate policy would be introduced to change the carbon pricing regime and the government would not run into immediate crises which would require deficit management.

They study four price trajectories where the initial price per ton was either $25 or $50 and this was increased every year with the inflation and an additional premium over and above that which could be either 1% or 5%. The collection revenue could be used for either of the two decisions- provide direct rebates to households or cut labor/capital taxes.

To compare these decisions with the current scenario (without any policy) the first panel in the following graph shows a reference period. Under the status quo, the emissions would mostly remain flat for the next decade, i.e. continue at their current levels. Note, however, this does not mean that climate change and the subsequent costs would remain the same. As time passes, the costs of climate change would increase exponentially.

The following graph shows CO₂emissions (in million metric tons). The blue area shows the range of responses while the red line shows the average level of emissions for the next decade. Under all the other scenarios, there was a decline in emissions, as expected. However, the rate of decline, as seen by the steepness of the red line, shows that these policy decisions can have a disproportionate impact, at least in the modelled conditions.

However, it is notable that doubling the carbon tax does not lead to a similar reduction in emissions. The reason behind this is that as some sectors become decarbonised, the subsequent reductions must come from less price-responsive sectors like industry and transportation. The effect of the same is visible in the following table:

One of the biggest findings is that the third decision variable- the use of the revenue- has little, if any impact on the emission levels. This gives policymakers more room to tackle relevant issues such as impact on low-income households, deficits etc. without compromising on the main objective of the policy. Also, under all these four scenarios, the lower end of the commitments made in the Paris agreement are met by 2025.

Finally, looking at the revenue side, the revenues from the policy vary from $110 billion to $200 billion across the four scenarios. Practically speaking, this would depend on the coverage that the government decides for the policy. A lot of sectors are deemed critical to the country and their growth or smooth functioning cannot be impeded for a goal which needs to be met a decade from now. Therefore, the revenue estimate would depend on the geo-political situation of any particular country and which all sectors it would want to include under this policy.

Downsides

A carbon tax would increase energy prices and this would have a ripple effect in the economy, whereby most output prices would go up. This downward pressure on economic growth and sustained inflation usually dissuade emerging market nations from implementing these policies wholeheartedly.
Low-income households spend the bulk of their income on energy needs, which cannot be done away with. A carbon tax would put disproportionate pressure on them and might disrupt their livelihoods. Such a negative impact can be dampened through the use of revenue to reduce labor taxes on the poor, thereby also contributing to SDG 1.
The model assumes that the government wouldn’t have to deal with a crisis-like situation in the economy. While such an assumption can hold for a short period of time, it might be difficult to imagine that such a situation never arises in an entire decade.

Suggested Path Ahead

Environmental investing

Modern companies are run with the aim of shareholder maximisation. It becomes important to integrate this concept with SDGs to achieve optimal results. The government can certify companies based on their sustainable practices (emissions for SDG 13) and assign them grades. Mutual funds and investors investing in these companies can be given tax relaxations based on the grades. These tax exemptions should be given not just in the form of capital gains but reductions in their other taxes as well. Government can also make it mandatory for certain mutual and pension funds to invest in at least one stock above a certain grade. This will ensure investors keep such stocks in the long run. Companies following sustainable practices will get suitably rewarded with higher stock price. For unlisted companies, the company’s corporate tax rate can be adjusted to give them benefits.

Commuting

While production processes cause lots of pollution, a lot of CO2 emissions are generated by vehicles as well. Employees of companies contribute to the CO2 in the air indirectly, while traveling to and from work. Encouraging employees to use public transportation and carpool can go a long way in reducing these emissions. Companies should offer reimbursement of costs of public transportation of employees and limit parking space near the office to encourage employees to use public transport or carpool.

The government should consider increasing prices of public parking spaces. A cleaner and safer public transportation system is also pivotal to ensure its usage across the country.

Renewable energy

India is the third largest consumer of electricity and it becomes important to grow the share of renewable energy. Government should ensure timely completion of PPA agreements and following the terms and conditions (industry is currently plagued with plethora of PPA agreements being renegotiated, delayed and not being followed by the government itself). Concepts of rooftop solar and floating solar are growing. Things like net metering, which allow excess electricity generated to be sent back to the grid, incentivise households to set up in-house solar and wind power.