• Written by Richard Holden, Professor of Economics, UNSW
Shutterstock

Every January Larry Fink, the head of the world’s largest funds manager, BlackRock, sends a letter to the chief executives of major public companies.

This year’s letter focused on climate risk. “Climate change has become a defining factor in companies’ long-term prospects,” Fink wrote. To put sustainability at the centre of its investment approach, he said, BlackRock would stop investing in companies that “present a high sustainability-related risk”.


Read more: BlackRock is the canary in the coalmine. Its decision to dump coal signals what's next


Now business leaders – even big money managers – express opinions all the time, and major companies keep doing what they are doing. But this was different.

Fink, who’s in charge of US$7 trillion (that’s not a typo – $7,000,000,000,000), says in his letter: “In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.”

It’s emphasised in bold type. That’s something to which chief executives pay attention.

Even before the letter was sent – but knowing what was coming – major US companies like Amazon, Delta Air Lines and Microsoft announced new climate action plans.

These three companies are in different industries with different abilities to take action. But the plans they’ve outlined illuminate the three key strategies needed to achieve net-zero carbon emissions by 2050.

Delta Air Lines

Delta, being an airline, burns a lot of fossil fuels. Bar an extraordinary technological shift in aircraft, it will burn a lot of fossil fuels well into the future.


Read more: Flight shame won't fix airline emissions. We need a smarter solution


The airline’s goal by 2050 is to cut its carbon emissions to half the levels they were in 2005. It plans to do this through a combination of fuel-efficiency measures and helping spur the development of more sustainable jet fuels. In the medium term (up to 2035), its goal is “carbon-neutral growth”, buying carbon offsets for any increases in emissions from jet fuel due to business growth.

Delta Air Lines operates about 5,000 flights a day. Jet fuel accounts for about 99% of its total emissions. Shutterstock

Let’s consider the economics of the Delta plan – at least up to 2035.

Buying carbon offsets increases the airline’s costs. These are passed on to customers – in which case it is simply a form of carbon tax – or paid for by shareholders through lower profits. I’m betting it’s not the shareholders who will pay.

So Delta is essentially imposing its own carbon tax in the hope customers who care about the environment will be more attracted to its brand or that other airlines follow suit.

Amazon

Amazon, which reported a carbon footprint of 44.4 million metric tons in 2018, is doing two broad things.

The company has a fleet of about 30,000 delivery vans. It plans to have 100,000 electric vehicles by 2024. This will reduce the company’s carbon footprint so long as the vans are charged with power from sustainable sources.

Amazon’s founder, Jeff Bezos, has also announced the Bezos Earth Fund, which will give away US$10 billion in grants to anyone with good ideas to address climate change or other environmental issues.

Again, let’s consider the basic economics at play here.

Moving to electric vehicles is a smart hedge against rising fuel costs from a price on carbon – something that already exists in California.

The Bezos Earth Fund, meanwhile, is an excellent example of taking money generated from maximising shareholder value – Amazon is valued at about US$1 trillion and Bezos’s personal fortune (pre-divorce) was about US$130 billion – and redistributing it to socially productive causes.

Microsoft

Finally, Microsoft – the least-carbon-intensive business of the three mentioned here – plans to be carbon-negative by 2030, and by 2050 to have offset all the emissions it has been responsible for (both directly and through electricity consumption) since its founding in 1975.

Since 2012 it has had an “internal carbon tax”, which in April 2019 was doubled to US$15 a tonne. This price mechanism is used to make Microsoft’s business divisions financially responsible for reducing emissions.

On top of this, Microsoft has developed the AI for Earth program, which provides cloud-computing tools for researchers working on sustainability issues to process data more effectively.

Lessons for Australia

Australia’s Coalition government and Labor opposition would do well to heed the lessons of these three companies.

Together they show three clear strategies:

  • a technological push to lower emissions
  • a price on carbon to drive technological innovation and uptake
  • clear goals to reduce emissions.

Our political parties both have one out of three. Right now Labor has announced a goal. The Coalition is promising a technology plan some time soon.

Prime Minister Scott Morrison is right to criticise Labor for not having a plan. Opposition Leader Anthony is right to criticise the Coalition for not having a suitable goal.

But neither of them advocates a price on carbon, without which neither technology road maps nor ambitious goals will translate into sufficient emissions reductions.


Read more: Carbon pricing: it's a proven way to reduce emissions but everyone's too scared to mention it


Technology investment, a carbon price and clear goals are all necessary to effectively reduce carbon emissions. Without all three we are bound to fail.

And we no longer have time for that, according to climate scientists.

Richard Holden does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Authors: Richard Holden, Professor of Economics, UNSW

Read more https://theconversation.com/vital-signs-a-3-point-plan-to-reach-net-zero-emissions-by-2050-132436

Carpet Cleaning Tips

After work, the best feeling is to get home, your haven, where you can find peace and calm. But when you take a glance at your carpet, your heart shatters into pieces. The grime, dirt, and is it all...

News Company - avatar News Company

All Australians will be able to access telehealth under new $1.1 billion coronavirus program

Scott Morrison will unveil on Sunday a $1.1 billion set of measures to make Medicare telehealth services generally available during the coronavirus pandemic and to support mental health, domestic viol...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

How much more expensive is a two storey home?

The idea of adding a second storey to your home is exhilarating. Imagine, more living space, more bedrooms, more bathrooms, and a significant bump on the resale value of your home! For families, ha...

Digital 360 - avatar Digital 360

Parents, These FAQs Will Help You Prep for Childcare in Australia

If you’re a new immigrant in Australia, perhaps you have plenty of questions about childhood education. What school should you pick, or what’s the best age for them to attend school? To help you...

Darren Cunningham - avatar Darren Cunningham

Hotel quarantine for returning Aussies and 'hibernation' assistance for businesses

All Australians arriving from overseas will be quarantined in hotels or other facilities under strict supervision for a fortnight, under the latest crackdown in the battle against the coronavirus.Anno...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

how sharing your data could help in New Zealand's level 4 lockdown

New Zealand and much of the world is now under an unprecedented lockdown. Public health experts say this is the best way to suppress the spread of the virus. But how long will such a lockdown be socia...

Jon MacKay, Lecturer, Business Analytics, University of Auckland - avatar Jon MacKay, Lecturer, Business Analytics, University of Auckland

What is orthohantavirus? The virus many are Googling (but you really don't need to worry about)

ShutterstockAccording to Google Trends, the top globally trending topic this week is “orthohantavirus”, as spurious sites claim it’s the next pandemic on the horizon.Take it from me:...

Allen Cheng, Professor in Infectious Diseases Epidemiology, Monash University - avatar Allen Cheng, Professor in Infectious Diseases Epidemiology, Monash University

MyGov's ill-timed meltdown could have been avoided with 'elastic computing'

DAN PELED/AAPThese past few weeks have shown the brittleness of Australia’s online systems. It’s not surprising the federal government’s traditionally slow-moving IT systems are buck...

Erica Mealy, Lecturer in Computer Science, University of the Sunshine Coast - avatar Erica Mealy, Lecturer in Computer Science, University of the Sunshine Coast

Why New Zealand’s coronavirus cases will keep rising for weeks, even in level 4 lockdown

ShutterstockThe number of New Zealanders testing positive for COVID-19 will continue to rise despite the strict conditions of the four-week lockdown that began this week. As of today, there are 368 ca...

Arindam Basu, Associate Professor, Epidemiology and Environmental Health, University of Canterbury - avatar Arindam Basu, Associate Professor, Epidemiology and Environmental Health, University of Canterbury

Sick and Tired of Your Dead End Job? Try Teaching!

Tired of the same old grind at the office? Want an opportunity to impact lives both in your community and around the world? Do you love to travel and have new experiences? Teaching English is the perfect job for you! All you need is a willingness to ...

News Company - avatar News Company

The Impact of an Aging Population in Australia

There’s an issue on the horizon that Australia needs to prepare for. The portion of elderly citizens that make up the country’s overall population is increasing, and we might not have the infrastructure in place to support this. Australians h...

News Company - avatar News Company

CBD



News Company Media Core

Content & Technology Connecting Global Audiences

More Information - Less Opinion