“We must try and make this a transition that works for everybody.” Claire O’Neill on calculating energy emissions and international policy
In Episode 30 of Cleaning Up, Michael Liebreich talked to Claire O’Neill, Minister of State for Energy and Clean Growth from 2007 to 2009, during which time she prepared the way for the UK to pledge net zero emissions by 2050 and led the bid for Glasgow to host the UNFCCC’s COP26 conference.
Claire is now Managing Director responsible for Climate & Energy at the World Business Council for Sustainable Development (WBCSD). She is also a board member of Ikigai, a sustainable investment consultancy.
In this conversation, Michael and Claire discuss the reforms to the definition of Scope 3 emissions, UK and international politics, Brexit, the Global South, and the “climate sisterhood” of powerful women leaders who pushed through the Paris Agreement.
Below is an abridged transcript of the conversation, edited for clarity.
Michael Liebreich: WBCSD is the organisation that brought us the Greenhouse Gas Protocol – which gave the world Scope 1, 2, and 3 emissions. Can you give our audience a quick reminder of what they refer to?
Claire O’Neill: Scope 1 is all the stuff that you are burning yourself - in your boilers, your driving cars associated with the company and so on. Scope 2 is that plus emissions from the energy you purchase, so factoring in what is the biggest source of emissions globally. And Scope 3 is all the emissions associated with your business going down your supply chain and forward to your customers.
You'll say, “that's ridiculous. How can I possibly account for the fact that my customer Claire O’Neill might be sitting in a home that's powered by coal? How could I be responsible for her emissions?” So, then you get into questions of materiality, how far should you incorporate your Scope 3 emissions into your own footprint. At the moment, it's a bit of a wild west.
ML: Scope 3 involves so much double-counting, it’s impossible to figure out the footprint of your investment portfolio isn’t it?
CON: There is a question of what you can influence in that process. You can influence your fleet, your fuel purchases, you can be investing in lower carbon fuels, you can have a conversation with the airline, but you can't really change the energy footprint of the McKinsey consultant who's on the flight.
But Isn’t it good that we're asking these questions? What's so fascinating now is the sense of corporate responsibility. One of the things I've seen in the public space, and now in the private sector, is we can talk about COP and the incredible tent-pole moments. But when you get to the how of decarbonization… these tough questions. What tools do you need to decarbonize? That's one of the things the World Business Council for Sustainable Development does.
ML: OK, I think it is fantastic that we're asking these questions. But it feels to me like we really need to go back to first principles. It's the fossil fuels that create the emissions – plus a few other things. Let's count them and then go downstream until we find the decision-maker that could have said: “no, I won't have a 4.4-liter petrol SUV, I'll have an electric vehicle.”
CON: Two hugely important points, one is that we in no way are using commonly-available digital technology to support this process. Whether it's accounting for Scope 3 or accounting for carbon markets, it’s hugely important that we have tools that we can use, and one of the pathfinder projects we are working on at WBCSD is exactly that: an emissions reporting system grouped around the world-leading consumer goods companies, with their supply chain, and enablers like SAP and IBM, who are actually designing a distributed ledger so we can start to track where emissions come from and where they are going.
Second, anyone making a net-zero pledge, in almost any industry, and indeed any country, is going to have to mitigate the hell out of their emissions. This has been a painful debate for many years, both in the NGO and the COP space. I co-chair the Natural Climate Solutions Alliance, alongside Justin Adams from the World Economic Forum, [asking] how do you create accounting rules around this? And how do you create nature positive solutions to deliver real benefits from the ton of money that is flowing?
ML: But what about the double-counting, if British Airways goes net zero, and BP goes net-zero, who must buy the offset? How do you keep this stuff straight? Because with no accounting that is robust…
CON: Think about the debt markets. So, whether it's a sovereign debt or corporate debt there's a set of rules, a set of accounting principles; a ledger, effectively. The more you can get disclosure the more you can see where these double counts are and strip them out. The urgency of this stuff just builds up and I am fed up having arguments about the perfect [solution]. We've just got to crack through some of these conundrums, and it won't be perfect. But if we do it in a transparent, trustworthy way, it will be good.
ML: You left government at the last General Election, and wanted to stay on as the President of COP26. Do you think part of the reason why that didn’t work out was Brexit? You were a Remainer, quite outspokenly. Or were they worried you were going to be very rude about President Trump?
CON: I don't think so. I actually reached out to President Trump's Chief of Staff in Davos last year. I said, “you misunderstand the Paris Agreement and the opportunity for homegrown green jobs. What you should be campaigning for is a trade adjustment on carbon.” You know, I think Kwasi Kwarteng is a great Secretary of State for Business, Energy and Industrial Strategy. I wish Kwasi well, and I'm working with the various elements of the COP team and doing what I can to help.
ML: Aren't you sort of shocked and pleasantly surprised just how much the UK Government is now singing from our song sheet? I mean, Kwasi Kwarteng was not a climate warrior, Andrea Leadsom was not a climate warrior. Yet when you listen to them now, the song sheet is climate action. There doesn't even appear to be a resistance movement anymore.
CON: Around the Cabinet table, there was always that institutional resistance from the Treasury. [I’m] delighted by the way that they're now issuing a sovereign green bond. Theresa May was extraordinarily positive about this. Huge credit to her for just making this front and center of the Tory offering. Boris Johnson is a pragmatist, even when we were starting to have the conversation about whether we should have the COP in Glasgow. He was Foreign Secretary at the time, he was one of the first people I phoned. I said, this is a brilliant opportunity for post-Brexit Britain, and he just got it completely.
ML: We’re at this amazing point in time, all those net zero pledges. But I'm very worried about India, Indonesia, Malaysia, Egypt, Iran, Bangladesh, Thailand, Vietnam; the very populous countries. If you look at why Kyoto failed, it was because nobody anticipated the extraordinary surge in Chinese wealth, productivity, and environmental damage. I worry that we're going to do all of this work and declare victory in November this year at COP26, but then over the next 15 or 20 years, these countries are going to become very wealthy and create the next set of problems from an environmental perspective.
CON: I think that's right. You, I, and others who are watching this will know Kyoto was extraordinarily difficult because there was an element of mandating about it. Paris, you know, incredible diplomatic achievement, but very, very light touch in terms of what was actually required. The key challenge is when you visit those countries you mentioned and you say, “how are you going to do this?” the local politician says my first pledge is to give the people of my country 24/7 electricity. How can you expect us to be installing different grid systems and paying for expensive renewables? That is always the point I make to what can feel like a very Northern European group, advocating for much more rapid emissions reduction. I think it's doable, [but] I think it's much more difficult.
Personally, I think there is a role for gas in the transition mix, and particularly clean gas, where you can do carbon capture and storage on it. The other thing is that 1 billion people in the world have no access to energy as we would recognise it. Three billion people are still using primary biomass, wood, and dung. Again, the debates that we have in a highly integrated, developed electricity market are irrelevant for a third of the world's population, and we can't forget that. We must try and make this a transition that works for everybody.