1

Business & Climate Change?

2

Beyond The Science…

Experts consensus (over 2000 scientists from around the world who advise governments are on the IPCC)

Governments may/will legislate in accordance with: scientific opinion, “precautionary principle” and/or political agendas – the ball is in the Governments’ courts now…

Stern review establishes it is worth taking action as a form of insurance

Apart from slow recovery from crisis events, climate change can impact food and energy supply and subsequently political stability – possibly become a matter of national security

Climate is changing anyway & countries will act, so we need to step up adaptation and position for new business opportunities today, since it takes time to implement…

3

Can Climate Change Affect Business?

Potential indirect impacts include: Loss of stakeholder confidence Customers directly impacted Demand growth limited Need for new management skills Opportunities for new products and

services New policies, regulations and

incentives

Sooner or later new climate-related policies, regulations and incentives may appear everywhere & therefore affect business.

4

Can Climate Change Affect Business?

Potential direct impacts include: Flooding Potential for brownout and

unplanned outages Increased wear and tear Loss of efficiency and

reduction of capacity Problems accessing water etc…

Climate change can have direct physical/operational impacts.

55

Possible Business Opportunities?

Direct impacts – opportunities for new equipment & measures to protect against impacts?

Emerging regulations – new business opportunities arising from changing market conditions.

Investment strategies – opportunities in monitoring and mitigating climate risk for companies.

New technologies – opportunities in the technologies needed for a more sustainable future.

Businesses should monitor potential climate change impacts and regulations, build in climate investment criteria and develop business strategies to reduce risk and maximise opportunities.

66

What Could A Low Carbon Future Look Like?

Look on the bright side…. Being more efficient in production & operations?

During this financial crisis it’s a good opportunity to “clean house” and tighten operations with more efficient systems & processes

Transition away from sunset industries to new low carbon ones? You don’t lose a job – you change it (although you will need to

be retrained) Less products but higher quality and price?

Total revenue could be the same

We tend to change habits only in a crisis…so this is the time for change!

7

Energy & Climate Change

88

Energy and Climate Change

Power sector has the largest potential for carbon emission reductions – it contributes approximately 40% of total global carbon dioxide emissions from the energy sector.

99

Energy and Climate Change

Power sector has the largest potential for carbon emission reductions – it contributes approximately 40% of total global carbon dioxide emissions from energy sector.

10

What Would It Cost?

Global Climate Impact Abatement Map, Vattenfall, McKinsey chart

Need a carbon price – some measures can pay for themselves but many for the larger reductions still not commercially viable today

11

RD&D and the Commercialization ProcessPolicies and public funding decisions that

encourage private sector investment…

12

Policy options for different reduction “wedges”

For each energy-related area: Current status of technology Challenges Domestic policies & measures to promote

development and deployment International policies and measures to

support cooperation and transfer of low-carbon technology in the electricity sector

December 2008

December 2007

Need new policies & funding to help advance all technology wedges – to encourage low carbon technologies & discourage carbon intensive ones

13

A roadmap for energy technology policy options

The two-fold purpose of a policies and measures framework for the sector should be :

Drive investments towards available efficient power delivery and end-use equipment and carbon-free/low-carbon power generation technologies through the first two decades following the renegotiation of an international framework (2013-2025/2030) ;

Ensure that the promising technologies researched and developed today are brought to market in the following decades (2025/2030-2050), with a long-term objective of substantial decarbonization of the sector (e.g., halving sectoral GHG emissions worldwide by 2050).

“Governments should adopt

climatepolicies and

measures that theeconomy can

withstand not onlyin times of

prosperity but even

in times of recession.”

Tokyo international

roundtable, 2008

14

CLP Climate Vision 2050

1515

Who Should Reduce By How Much? CO2 intensity and Generation Mix

0% 20% 40% 60% 80% 100% 120%

Norway

Switzerland

Sweden

Brazil

France

Austria

Canada

Belgium

Denmark

Spain

Germany

J apan

United States

China

Hong Kong

Australia

India

020040060080010001200

Renewables Nuclear CO2 Intensity (grammes CO2 per kWh)

Sources: Electricity Information 2009, IEA (2007 Country Gross Generation Data)CO2 Emissions from Fuel Combustion - 2009 Edition, IEA (2007 Data)

2007 Country CO2 Intensity & Non-carbon Fuel Mix (excluding imported energy)

Country’s carbon intensity is influenced by the energy/fuel mix portfolio of the country

1616

The carbon footprints of people in our region and across the world also differ widely because of economic and industrial activity

0.0

5.0

10.0

15.0

20.0

25.0

Sources: Electricity Information 2009, IEA (2007 Country Gross Generation Data)CO2 Emissions from Fuel Combustion - 2009 Edition, IEA (2007 Data)

2007 Tons CO2 Per Capita (from fuel combustion)

Who Should Reduce By How Much?

17

Reference: (1) SGM Energy Modeling Forum EMF-21 Projections, Energy Journal Special Issue, in press, reference case CO2 projections. (2) Non-CO2 emissions are from EPA's Global Anthropogenic Emissions of Non-CO2 Greenhouse Gases 1990-2020.

Dilemmas of the East Versus West

Historical emissions from developed economies.

Not just emerging and developing economies growing, but developed countries continue energy use.

West’s dilemma: Relatively energy intensive lifestyle with older infrastructure not ready for demolition – what can they do?East’s dilemma: How do the meet growth? Who will pay the difference for low emission energy?

1818

There is no quick fix to reduce emissions from the Asia-Pacific power sector

Climate Change – A Regional Dilemma

Asia-Pacific region is critically important to the success of global efforts to combat climate change

Our dilemma –

Many of the communities we serve are in urgent need of more power for economic growth & social development

We have the ability to provide it

Coal is the most affordable energy source and the one with the highest GHG emissions

19

CLP’s Climate Vision 2050CO2 Emissions

Intensity

0.8(kg CO2/kWh)

0.7(kg CO2/kWh)

0.45(kg CO2/kWh)

0.2(kg CO2/kWh)

0.84(kg CO2/kWh)

Towards The Future

Energy Efficiency & Conservation

Renewable

Energy

Natural Gas

Nuclear

Clean Coal

By

Non-carbon Emitting

20%(non-carbon)

5%(renewables)

<1%(renewables)

OngoingReview of

Target

2007

2010

2020

2035

2050

2004

>75%

~15%

>45%

~5%

2009 (year end):• ~ 0.85kgCO2/kWh• ~10% renewables• ~15% non-carbon

20

Changing For A New Era of Uncertainty

Power sector is generally Slow to change as

assets take time to build AND last a long time skills associated with the operations don’t change much technology evolves slower than other industries

More risk-adversed than other industrial sectors as investments are large Investments locked in over multiple decades

As changes in public awareness and expectations as well as government policies and regulations gather speed, adapting to sustain our business has become increasingly challenging…

21

Decision-making In A New Era of UncertaintyMitigating and adapting to climate change requires

urgent and massive changes, so we need to…

Start making decisions without all the information/certainty we are used to having at a speed that is much quicker than we are used to that perhaps require a higher risk appetite

Strong leadership from senior management at the top is required to make many of these urgent and massive changes on direction and strategy, coupled with buy-in from the bottom up to move more quickly on implementation

22

Decision-making In A New Era of UncertaintyMitigating and adapting to climate change requires

urgent and massive changes, so we need to…

Develop strategies that can take uncertainties into stride – if emitting carbon is an inevitable liability, need to start reducing carbon exposure in portfolio pricing carbon liabilities into investment decisions instigating the changes in our capabilities necessary for

the low carbon future

New requirements in existing systems and processes, as well as new systems & processes and even new functions…

2323

Backup Slides

24

Greenhouse Gases & Air Pollutants

These issues are fundamentally different issues that are related and that can impact each other

Air Pollution Climate Change

Major Emission Sources fossil fuel combustion

Combustion Efficiency increasing combustion efficiency reduces BOTH air pollutants and greenhouse gases

Human Health Impacts direct indirect

Major Gases air pollutants

(e.g. SO2, NOX, particulates, etc.)

greenhouse gases

(e.g. CO2, CH4, N2O, HFCs, PFCs, SF6, etc.)

Relevant Fuel Content sulphur, ash, toxics carbon, moisture

Emissions Control mature

(e.g. electrostatic precipitators, flue gas desulphurisation, etc.)

not commercially viable

(e.g. carbon capture and storage (CCS))