The Future of the Energy Transition
Author: Nicole Stika | Published: October 4th, 2022
More and more companies in every industry are taking steps to make the energy transition from fossil fuels to renewable sources. The energy transition refers to the global energy sector’s shift from fossil-based energy sources (including oil, natural gas, and coal) to renewable energy sources like solar and wind, in order to reduce greenhouse gas emissions to net zero. This is also referred to as the decarbonization of the energy system.
The push for a global energy transition has largely been driven by the work of the United Nations Framework Convention on Climate Change (UNFCCC), the organization responsible for the 2015 Paris Agreement. The goal of the UNFCCC is to keep the global rise in temperature within 1.5 degrees Celsius of pre-industrial numbers. Leaders around the world recognize that climate change will take an irreversible toll on Earth if action is not taken now.
In order for the 1.5ºC target to be achieved, scientists have calculated that global emissions need to be reduced by 45% before 2030 and to have reached net zero by 2050. Net zero references the objective of individuals, entities, and organizations reducing and offsetting their carbon emissions to balance out the amount of energy they produce and use. According to a report published by The Energy and Climate Intelligence Unit and Oxford Net Zero, as of 2021, net zero pledges cover more than two-thirds of the global economy.
Given the sheer size and scale of global energy networks, infrastructure, and energy-using equipment across the world, the energy transition will be complex and challenging. It will also be fragmented, meaning every company’s journey may look different.
How to Transition to Net Zero
Starting your business’ energy transition and making steps towards net zero can be overwhelming. At World Kinect, we’ve divided this process into four steps:
1. Understand Your Energy Use
Understanding your baseline emissions is half the battle. Carbon footprint reporting can help you and your team know what energy you use and where. The first step is an internal energy audit and measuring baseline emissions.
2. Develop a Carbon Reduction Plan
After an energy audit, your company should identify potential energy leaks in your system. On the journey towards net zero, finding energy-efficient solutions and cutting back on usage go a long way towards reducing emissions and saving money, and implementing these energy-saving solutions goes hand-in-hand with an audit and Carbon Reduction Plan.
3. Source Renewable Energy
The next step is transitioning to cleaner energy sources when possible. According to the International Renewable Energy Association (IRENA), renewable energy has the potential to help companies reach up to 90% of the emission reductions required to achieve carbon zero. Achieving carbon zero is important on the journey towards net zero, but it’s important to understand that these terms are not synonymous. Carbon zero means that no carbon emissions are generated at all, such as when a wind turbine produces electricity. Net zero, on the other hand, refers to balancing all greenhouse gas (GHG) emissions produced, including ozone (O3), methane (CH4), water vapor (H2O), chlorofluorocarbons (CFCs), and carbon dioxide (CO2).
4. Offset Carbon Emissions
A popular method used to accomplish net zero is called carbon offsetting, and it can be both a helpful first step and a crucial last step. Financing climate action projects to offset your unavoidable remaining emissions can immediately reduce your carbon footprint while a long-term plan is built, and offsets can still be a part of that long-term plan in the end.
The Future of the Energy Transition
You may question why you would prioritize an energy transition and whether or not it is worth the investment. There are many reasons to have an energy transition plan in place as soon as possible, but perhaps one of the main ones is regulation. Most large public companies release an annual Sustainability or ESG Report aligned to ESG reporting standards; soon, the U.S. Securities and Exchange Commission (SEC) may mandate these ESG disclosures. Just as it’s important to have digital and marketing strategies as a private business, it’s also important to have an energy transition strategy to maintain financial, social, and environmental sustainability into the future. Transitioning to cleaner energy makes your company more appealing to employees and consumers, more than half of whom are willing to pay more for sustainable products. Transitioning can also save you money in the long run by maintaining a sustainable energy source for your company instead of relying on a finite resource that will only increase in price as it becomes scarcer. If ESG is not yet integrated into your business model, it is important to prioritize incorporating it in order to ensure your company is well-positioned for the changing climate, expectations, and regulations to come.
Energy-Saving Examples in Business
Some of the biggest global enterprises, such as Swiss Re and IKEA, have paved the way for other companies, big or small, to follow in their footsteps in the journey to net zero. Swiss Re, a Swiss insurance firm, has mentioned the implementation of internal levies for every ton of CO2 emitted. This would provide incentive for all employees to make more carbon-conscious decisions. IKEA has committed to being a climate-positive company as early as 2030. Jesper Brodin, CEO of IKEA in the Netherlands, stresses that a big part of becoming climate positive involves becoming a circular business. The company plans to start this process by using only recycled or renewable materials. This provides a business model that is not only good for business and the economy but the environment as well, emphasizing the Triple Bottom Line instead of just the bottom line.
Figuring out how to calculate, mitigate, and report carbon emissions can be intimidating, and sometimes it is difficult to know where to begin. Everywhere along the Sustainability Journey, there can be roadblocks and challenges. Thankfully, there are resources available that can help. At World Kinect Energy Services, we use our expertise in the energy sector to find solutions that are right for you and your company. According to a report by McKinsey, “Now is the moment for companies to spot green growth opportunities and move boldly to take advantage.” There is no better time to invest in renewable resources and take confident steps towards net zero; in fact, not taking action now will be financially and environmentally detrimental in the future. Wherever you are on your Sustainability Journey, connect with our energy experts today!