carbon

Subscribe to carbon via RSS

With the recent UK “Green Day” announcements confirming the government’s support for CCUS, interest in UK CCUS projects is expected to continue to grow. While there are significant opportunities for investors, careful consideration will be needed to navigate a number of industry specific issues to achieve a successful CCUS project.

By Beatrice Lo, JP Sweny, Simon J. Tysoe, Evelyne Girio, James Richards, and Alexander Leighton

As governments and businesses around the world have committed to decarbonisation and achieving net zero by 2050, there has been growing activity in the development of, and investment in, carbon capture, usage and storage (CCUS) technologies. As the UK has one of the greatest carbon dioxide storage potentials of any country in the world (the UK Continental Shelf in the North Sea, accounting for approximately 85% of Europe’s carbon dioxide storage potential and able to safely store 78 billion tonnes), CCUS is a key focus for the government’s decarbonisation ambitions.

By Paul Davies and Michael Green

France adopted an ambitious energy transition package in August 2015 that sets out various targets designed to achieve the gradual de-carbonisation and increased sustainability of its economy.

The package includes consumption reduction targets, energy production cuts and provisions for a long-term programming scheme for public authorities to manage the country’s energy mix.

The Objective

Consistent with the EU’s energy strategy, France’s objective is to:

  • reduce its energy consumption by 50 percent by 2050 (with reference to 2012 energy consumption levels)
  • achieve an intermediate target of an overall 20 percent reduction by 2030
  • reduce fossil fuels consumption by 30 percent by 2030

In parallel, and perhaps more controversially, France aims to significantly reduce its production of nuclear electricity. France currently sources 75 percent of its electricity from nuclear energy – the highest worldwide – and is targeting a one third reduction of its nuclear energy sourcing by 2025.

By Paul Davies and Andrew Westgate

China’s National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) have ordered local authorities to stop construction of coal-fired power plants in 13 provinces where capacity already outstrips demand. A further 15 provinces will be required to delay construction of previously approved coal-fired power plants. These provinces include Shanxi and Inner Mongolia, home to much of China’s coal industry.

These orders reinforce China’s efforts to transition towards a lower-carbon economy – an economy no longer heavily dependent on coal power.

By Paul Davies and Michael Green

dsc20050604_133440_3421In December 2015, world leaders met to negotiate the Paris Agreement. Setting aside whether the Paris Agreement goes too far, not far enough or is just right, one cannot dispute that government commitments to limit an increase in the global average temperature to well below two degrees Celsius will almost certainly impact private equity funds. In particular, regulatory and investor demand are likely to change the way climate-related risks are assessed. As Blackrock notes, “…carbon-heavy industries are not immune from disruption, nor are asset prices from regulatory efforts to mitigate climate change risk. We believe investors should thoughtfully consider these dynamics in order to build sustainable portfolios and take advantage of investment opportunities as we move towards a low-carbon economy”.

The private equity sector is in general paying closer attention to Environment, Social and Governance (ESG) issues throughout the investment cycle, whether voluntarily (for example, KKR’s Green Solutions Platform) or in response to investor pressure. French private equity firms Apax Partners, Ardian, Eurazeo, LBO France and PAI Partners committing to reducing greenhouse gas emissions Private equity goes green across their portfolio companies is perhaps the most recent illustration of this shift in focus.