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Exclusive Interview: Pekka Piirainen, ET Index Research

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Pekka Piirainen

Pekka Piirainen is responsible for investor engagement at ET Index Research, a low-carbon investment solutions provider dedicated to helping investors understand, manage and reduce carbon risk.

Pekka is a climate and sustainability expert, having worked on both private and public climate change engagement. Pekka has a broad range of experience in both the renewables sector and international climate negotiations, working on wind energy deployment at RenewableUK and representing UK youth as a delegate at COP21 as a part of the UK Youth Climate Coalition (UKYCC). He is also actively involved in the Fossil Free divestment movement, calling on institutions to end their investments in fossil fuels.

Before joining ET Index, Pekka headed the Environmental Investment Organisation’s Project 1% climate campaign and completed his military service in the Finnish Defence Forces. He holds a degree in History from UCL.

What is ET Index Research?

ET Index Research is working to accelerate the low-carbon economic transition, redirecting capital from high-carbon to low-carbon companies. We are a low-carbon investment solutions provider helping our clients identify, understand and manage carbon risk. We help investors reduce the risks associated with climate change in their investments, while allowing them to make the most of the opportunities arising from the clean energy transition that is already well underway.

Our services range from portfolio carbon footprinting and extensive analytics to a series of low carbon and fossil free index products that include supply-chain emissions. Our aim is to revolutionise the way investments are made in a carbon-constrained world. All ET Low Carbon Index products are linked to a transparent and public ranking of the world’s largest 2,000 companies. For corporates in the rankings, the only means of moving up the index and increasing capital allocation is by continuously lowering emissions. In other words, if enough money were to flow through our indexes, the change in demand would tie a company’s share price to its carbon efficiency.

What was the driver behind this?

The world is warming at an unprecedented rate, threatening the continued existence of global civilisation. Not only are temperatures and oceans rising, with stronger hurricanes, deeper droughts and a plethora of other physical risks, climate change is changing the geopolitical fabric of the planet. Increasing evidence is linking the conflict in Syria to changes in climatic conditions in Northern Africa – what happens when changing rainfall patterns cause crops to wither globally and hundreds of millions fall into poverty and starvation? Already we are seeing a multitude of refugee crises, a rising tide of populism and xenophobia, and the rise of a new wave of demagogues.

Yet at the same time, the world is beginning to wake up to the challenges of the 21st century. The Paris Agreement signals a monumental shift in global action on climate change, while the costs of solar and wind are falling rapidly. Fossil fuel generation is facing an existential crisis, while low-carbon companies are already reaping the profits of the ongoing transition. Prudent investors are presented with a new set of opportunities for the taking.

Who does it primarily serve?

ET Index Research serves both the investor and the wider public at large. We are helping investors manage the greatest investment risk of the 21st century while playing our part to avoid the worst effects of catastrophic climate change.

What difference does ET Index Research want to make?

ET Index Research wants to accelerate the low-carbon transition, maximising investor returns in a carbon-constrained world while stopping climate change. Our aim is to allocate capital to the economy of tomorrow, rather than that of yesterday. This change must occur throughout global supply chains, bringing us toward a zero-carbon economy as fast as possible.

What are the barriers to making that difference?

The main barriers we face to action are the challenge any new entrant has in the financial system, a lack of track record. It is worth noting that our low carbon indexes have been live for over a year and performing well; backtested, they have outperformed relevant benchmarks for the past five years running. We have been ranking companies on their carbon emissions since 2010, with our latest ranking out in November.

Who’s helping you overcome those barriers?

A range of prudent investors realising the risks and opportunities of climate change in regards to their portfolios. The Fossil Fuel Divestment movement has been instrumental in shifting the discussion around finance and climate change, while international cooperation, exemplified in the Paris Agreement, is rapidly shifting the investment landscape.

Are companies doing enough to reduce their emissions?

In short, no. While some forward-looking companies are increasingly responding to climate change, cutting their carbon emissions and investing heavily in renewables, most have a long way to go. This is precisely why we create the ET Carbon Rankings each year to highlight the leaders and laggards. It also highlights the need for a credible mechanism to allocate capital from high-carbon to low-carbon companies, steering the whole economy to action.

How can people – individuals and organisations – find out more about ET Index?

Find out more about us on our website – etindex.com – or send me an email at pekka.piirainen@etindex.com.

 

Economy

Will Self-Driving Cars Be Better for the Environment?

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self-driving cars for green environment
Shutterstock Licensed Photo - By Zapp2Photo | https://www.shutterstock.com/g/zapp2photo

Technologists, engineers, lawmakers, and the general public have been excitedly debating about the merits of self-driving cars for the past several years, as companies like Waymo and Uber race to get the first fully autonomous vehicles on the market. Largely, the concerns have been about safety and ethics; is a self-driving car really capable of eliminating the human errors responsible for the majority of vehicular accidents? And if so, who’s responsible for programming life-or-death decisions, and who’s held liable in the event of an accident?

But while these questions continue being debated, protecting people on an individual level, it’s worth posing a different question: how will self-driving cars impact the environment?

The Big Picture

The Department of Energy attempted to answer this question in clear terms, using scientific research and existing data sets to project the short-term and long-term environmental impact that self-driving vehicles could have. Its findings? The emergence of self-driving vehicles could essentially go either way; it could reduce energy consumption in transportation by as much as 90 percent, or increase it by more than 200 percent.

That’s a margin of error so wide it might as well be a total guess, but there are too many unknown variables to form a solid conclusion. There are many ways autonomous vehicles could influence our energy consumption and environmental impact, and they could go well or poorly, depending on how they’re adopted.

Driver Reduction?

One of the big selling points of autonomous vehicles is their capacity to reduce the total number of vehicles—and human drivers—on the road. If you’re able to carpool to work in a self-driving vehicle, or rely on autonomous public transportation, you’ll spend far less time, money, and energy on your own car. The convenience and efficiency of autonomous vehicles would therefore reduce the total miles driven, and significantly reduce carbon emissions.

There’s a flip side to this argument, however. If autonomous vehicles are far more convenient and less expensive than previous means of travel, it could be an incentive for people to travel more frequently, or drive to more destinations they’d otherwise avoid. In this case, the total miles driven could actually increase with the rise of self-driving cars.

As an added consideration, the increase or decrease in drivers on the road could result in more or fewer vehicle collisions, respectively—especially in the early days of autonomous vehicle adoption, when so many human drivers are still on the road. Car accident injury cases, therefore, would become far more complicated, and the roads could be temporarily less safe.

Deadheading

Deadheading is a term used in trucking and ridesharing to refer to miles driven with an empty load. Assume for a moment that there’s a fleet of self-driving vehicles available to pick people up and carry them to their destinations. It’s a convenient service, but by necessity, these vehicles will spend at least some of their time driving without passengers, whether it’s spent waiting to pick someone up or en route to their location. The increase in miles from deadheading could nullify the potential benefits of people driving fewer total miles, or add to the damage done by their increased mileage.

Make and Model of Car

Much will also depend on the types of cars equipped to be self-driving. For example, Waymo recently launched a wave of self-driving hybrid minivans, capable of getting far better mileage than a gas-only vehicle. If the majority of self-driving cars are electric or hybrids, the environmental impact will be much lower than if they’re converted from existing vehicles. Good emissions ratings are also important here.

On the other hand, the increased demand for autonomous vehicles could put more pressure on factory production, and make older cars obsolete. In that case, the gas mileage savings could be counteracted by the increased environmental impact of factory production.

The Bottom Line

Right now, there are too many unanswered questions to make a confident determination whether self-driving vehicles will help or harm the environment. Will we start driving more, or less? How will they handle dead time? What kind of models are going to be on the road?

Engineers and the general public are in complete control of how this develops in the near future. Hopefully, we’ll be able to see all the safety benefits of having autonomous vehicles on the road, but without any of the extra environmental impact to deal with.

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Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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renewable energy policy
Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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