Written by Charlotte Hugman and Jennifer van Beek

The urgency of climate action has never been greater. Rising temperatures have worsened extreme weather events; wildfire seasons are months longer; and the effects of rising sea levels and coastal erosion are a reality for people now, not sometime in the future. Climate change will continue to have a disproportionate effect on the world’s most vulnerable people. We need to take immediate action to mitigate carbon emissions.

Why is it important to benchmark the electric utilities sector?

The production of electricity and heat is the single highest direct greenhouse gas-emitting sector, accounting for 25% of global emissions.[1] Over three-quarters of electricity is currently being generated from non-renewable resources.[2] At the same time, the demand for electricity continues to grow, due to population and prosperity growth. Producing clean electricity is therefore essential to achieving the Paris Agreement goal of limiting global warming to well below 2 degrees and pursuing efforts to limit it to 1.5 degrees.

Further, increasing the share of electricity used in transport, buildings, and industry – instead of using oil, coal, or natural gas-based energy – is crucial for reducing emissions, too. The International Renewable Energy Association (IRENA) estimates that in a scenario to 2050 that achieves the Paris goal, 86% of electricity generation must come from renewables.[3] In other words, we can electrify all we like, but the electricity used needs to be sustainable too.

To provide an accountability mechanism to measure private sector progress against the Paris Agreement and the SDGs, the World Benchmarking Alliance (WBA) has published its next Climate and Energy Benchmark methodology report on the electric utilities sector. This Benchmark will rank 50 of the most influential electric utilities companies on their power generation emissions reductions and other activities needed to align with the low-carbon transition.

Why are we doing this now?

Against the backdrop of the urgency of climate action, there is evidence that this sector is ripe for change. The International Energy Agency (IEA) reported this month that the flatlining of energy-related CO2 emissions in 2019 was in large part due to a steep decline in these emissions from the power sector in advanced economies.[4] The policy landscape can be seen to be stimulating this shift: 67 countries and eight US states have now set net-zero carbon ambitions. Further, in the run-up to COP26 in November 2020, where countries will come together for the first global stocktake, the time is now for a call to action on the part of electric utilities.

Access to modern energy underpins basic social needs, including health and education, and increases standards of living, production and consumption cycles and the speed at which technological innovations become a reality. This is especially the true in emerging markets in the global South. It is therefore fundamental not only to achieving SDG 7 (Affordable and Clean Energy) but also to the wider 2030 agenda and leaving no-one behind. Our benchmark will include an assessment of each company’s implementation of future business models, such as acting as local low-carbon energy access providers and large-scale low-carbon electricity generators.

What do we hope to achieve with this benchmark?

Electricity plays a critical role in people’s lives, so we want the results to empower consumers to make sustainable choices in who to purchase electricity from. Policy plays a big role in this sector, so we are excited to see how our findings can help governments set more sustainable frameworks. We aim to encourage a race to the top of those companies already aligning with the Paris goals, and in turn, stimulate a race to achieving the Paris goals and the SDGs. We also hope the benchmark incentivises those companies that have been slower to change to align their activities with the low-carbon transition.

These 50 most influential electric utilities companies together own nearly 2500 GW in installed generation capacity, which represents more than one third of global capacity,[5] equivalent of more than the capacity of China and India combined. If these 50 companies generate one third of global electricity by 2050 with renewables, and transport and heat are electrified, this can deliver 20% of the emissions reductions needed to achieve Paris.[6]

Ultimately achieving the Paris goals and the SDGs are not a nice to have; they are absolutely necessary to avoid the worst impacts of climate change. The time for action is now.

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[1] IPCC, ‘Climate Change 2014 Mitigation of Climate Change. Contribution of Working Group III to the 2 Fifth Assessment Report of the Intergovernmental Panel on Climate Change.’ 2014. (Online). Available at: https://www.ipcc.ch/site/assets/uploads/2018/02/ipcc_wg3_ar5_full.pdf

[2] IRENA, ‘Global energy transformation: A roadmap to 2050 (2019 edition).’ 2019. (Online). Available: https://www.irena.org/publications/2019/Apr/Global-energy-transformation-A-roadmap-to-2050-2019Edition

[3] IRENA, ‘Global energy transformation: A roadmap to 2050 (2019 edition).’ 2019. (Online). Available: https://www.irena.org/publications/2019/Apr/Global-energy-transformation-A-roadmap-to-2050-2019Edition

[4] IEA, ‘Global CO2 emissions in 2019.’ 2020. (Online). Available: https://www.iea.org/articles/global-co2-emissions-in-2019

[5] IRENA, Renewable Energy Now Accounts for a Third of Global Power Capacity.’ 2019. (Online). Available:  https://www.irena.org/newsroom/pressreleases/2019/Apr/Renewable-Energy-Now-Accounts-for-a-Third-of-Global-Power-Capacity

[6] Calculated using data from IRENA, ‘Global energy transformation: A roadmap to 2050 (2019 edition).’ 2019. (Online). Available: https://www.irena.org/publications/2019/Apr/Global-energy-transformation-A-roadmap-to-2050-2019Edition