Alignment of company emissions targets with the Paris goal of holding the increase in the global average temperature to well below 2 degrees is a key indicator of long-term commitment to the low-carbon transition. A shocking 46 of the 50 companies assessed do not have emissions reduction targets aligned to the well-below 2-degrees Paris Agreement goal, and 23 of these have not set any emissions reduction targets or have no targets that extend beyond 2022. This demonstrates an overwhelming lack of ambition and commitment to the Paris Agreement.
Even carbon-neutrality targets set by companies such as Vattenfall, Iberdrola, EDF and E.ON are not ambitious enough to meet the rate of emissions reductions required by the well-below 2-degree pathway. This is because the electric utilities sector, with its potential for rapid decarbonisation, is expected to reach negative emissions in many regions by 2050. Negative emissions mean a company removes more emissions than it produces. However, companies are too slow in developing the carbon capture and storage technologies to do this (see key finding 5). Of the 50 companies assessed, 92% must have negative emissions by 2050 to be aligned with the well-below 2-degree scenario.
The time horizon of emissions targets is another key indicator of their credibility. Given the longevity of fossil assets, companies must ensure they set targets long enough to cover the emissions already locked in by these assets. Ideally, companies have targets with a long-term horizon that covers the majority of their assets’ lifetimes, as well as intermediate targets of no more than five years apart that incentivise short- and medium-term action. Only 13 companies have set targets that cover 75% or more of their assets’ lifetimes. This means 37 companies have failed to set targets that cover the majority of their assets’ lifetimes and as such are not committing to long-term decarbonisation.
Consequently, just four companies have targets ambitious enough to meet the well-below 2-degree scenario. These are high-ranking companies Enel, EDP, Ørsted and AES. Ørsted, EDP and Enel are on track to achieve their targets. However, AES is not currently on track to meet its ambitious goal of a 70% reduction by 2030, compared to a 2016 base year. The company still has time to correct its course, though it is likely to have to retire some of its fossil fuel portfolio, which accounted for 68% of installed capacity in 2018.
Electric utilities can demonstrate their commitment to the Paris goals by setting credible emissions reduction targets through the Science Based Targets initiative. Indeed, Ørsted, EDP, Enel – and since June 2020, SSE* – have well-below 2-degree science-based targets. EDF has also committed to setting a science-based target in line with a 1.5-degree pathway. A further four companies – Iberdrola, Vattenfall, Origin Energy and Engie – have set science-based targets, though these are only sufficient for a 2-degree scenario. These companies should tighten their science-based targets to align with a well-below 2-degree or even 1.5-degree pathway as climate ambition increases.
Below shows the targets of the top five ranking companies overall. The target pathways set by the companies are shown in blue, and their their well-below 2-degree pathways are shown by the black dashed lines.
*This was too late for inclusion in the quantitative part of the performance assessment.