Portugal shows the way to climate neutrality by 2050

“If you don’t know where you are going, any road will do”. The Irish proverb’s logic shows us the way forward on the greatest challenge that we face today, of achieving climate neutrality by 2050.

As the President of the European Petrochemical Association, Marc Schuller, highlighted last month when issuing a ‘call to action’:

“The Youth of the the world is calling for ambition and transformation. There is a new sense of urgency and as business leaders we should ensure that we embrace it and that our response as an industry is keeping up with this new pace of change and level of ambition.”

Governments also have a major role to play.  And it is important that they speak in language that ordinary people can understand.

This is why Portugal’s Roadmap for Carbon Neutrality 2050 is so important.  As the chart shows, it positions climate neutrality as an opportunity. Most people, after all, would prefer to be up with the peleton – challenging for the yellow jersey and the lead, not stuck at the back.

There is also very little doubt that climate change is taking place.  After all, as the chart on the right shows, the global population has more than trebled since 1950, from 2.5bn to 7.8bn today.  An increase of this size must have a major impact on the world in which we live.

The chart on the left shows one aspect of this impact in terms of the rise in surface temperatures from 1960, versus 1850-1900.  We have good data for both periods, and so the data’s reliability is high.

Of course, correlation doesn’t always equal causation. And no doubt there are a range of other factors involved – some positive, some negative. But given the observable risks of climate change today, it makes no sense to ignore the issue and hope it will go away.

This is why voters are telling their leaders that climate change is important.  After all, what is the point of a better standard of living, if at the same time you worry that you might get flooded out of your home – or it might be burnt to cinders?

Portugal’s response is an excellent example of a government taking a lead, within the framework of the European Green Deal to be launched early next year. As the chart shows, it is focused on the key areas and aims to carry the population with it:

  • “Eliminating coal-based power generation by 2030 and achieving full decarbonization of the power generation system by 2050
  • Decarbonizing mobility by strengthening public transport, decarbonizing fleets and reducing the carbon intensity of sea and air transport
  • Expanding conservation and precision agriculture and reducing emissions associated with livestock and fertilizer use
  • Preventing waste generation, increasing recycling rates and reducing waste disposal in landfill
  • Applying carbon tax, changing consumption and production patterns, environmental education and awareness
  • Promoting skills development towards new economic opportunities” 

Of course, nobody likes change. But as the chart above shows, the world is already changing.

As I discussed last month,  the world’s population is now expanding because people are living longer, not because women are having lots of babies.

  • Nearly a third of the world’s High Income population, those earning at least $12k/year, are in the Perennials 55+ generation. Their incomes decline as they retire, and so Sustainability is critically important for them as a way of doing more with less
  • Younger people, the Millennials,  still want mobility, but owning a car doesn’t excite them. Similarly, they want the benefits provided by plastics, but they don’t want the waste and pollution generated from applications such as single-use packaging

As Portugal has realised, most people – given the choice – would like to be at the front of the pack. We all want to enjoy the opportunities that the rise of the sustainability agenda will provide.

Corporate leaders need to respond – unless they want to risk finding themselves on their own, at the back of the pack.

EU banks cut lending to the PIIGS by 23% of GDP

BIS loans May12.pngOn 7 September 2008, in its now famous warning that a financial crisis was imminent, the blog noted that “‘Deleveraging’ is an ugly word, and it has ugly implications“.

The chart above shows just how ugly these implications are becoming for the PIIGS countries (Portugal, Italy, Ireland, Greece, Spain).

It is based on data produced since 2009 by the Bank for International Settlements (the central bankers’ bank), and shows the major EU lending flows to the PIIGS. It includes data just published for December 2011:

• Lending to Italy (a G7 group member) has fallen 37%
• Lending to Spain (the world’s 12th largest economy) has fallen 40%*
• Lending to Greece (now in default) is down 54%
• Lending to Portugal is down 32%, and to Ireland down 41%

Major countries simply cannot continue to operate ‘as normal’ when these vast sums of money are being withdrawn from their banking systems:

• Italy has lost $352bn, equal to 32% of its GDP
• Spain has lost $$313bn, 21% of GDP
• Greece has lost $99bn, 33% of GDP
• Portugal has lost $75bn, 32%: Ireland has lost $203bn, 93%

Overall, $1.04tn has been withdrawn, a 39% reduction since December 2009. This is equal to 23% of the PIIGS’ combined GDP.

These numbers, of course, explain why the European Central Bank (ECB) made its emergency €1tn ($1.4tn) loans at the end of December. It says it was seriously concerned “a dangerous loop involving low economic activity, funding stress for banks and a reduction in lending” might occur. This is central bank-speak for saying that the European banking system might well have collapsed.

But the ECB’s lending under the Long Term Refinancing Obligation was just that, lending. It dealt with the immediate cash-flow problem in December. But it did not deal with the solvency issue. Many of these loans will never be repaid, as the assets behind them are now worthless.

* Netherlands lending to Spain is estimated in line with June 2011 levels, as the data is not yet available