Asset-level data and the Energy Transition: Findings from ET Risk Work Package 2


Asset-level data and the Energy Transition: Findings from ET Risk Work Package 2

Detailed and complete data on corporate assets are required in order to adequately assess risk in companies and the diffusion of that risk through the financial system. At present, data on corporate assets may only be released piecemeal, incomplete, or long after the fact, and the public is usually reliant on patchy voluntary disclosure in order to assess absolute and relative corporate risks. Not only does this put various stakeholders in a problematic position, but regulators are frequently forced to make crucial decisions against a backdrop of pervasive uncertainty. This paper outlines the potential benefits and users of asset-level data and details the construction of a demonstrator asset-level database: the Assets@Risk database. This database aggregates asset-level data across the globe for the major carbon emitting industries: Power, Steel & Iron, Cement, Automobile, Airlines, and Shipping industries, and applies robust peer-reviewed methodologies for the construction of Cumulative Committed Carbon Emissions (CCCEs) and technologies for Reducing Cumulative Committed Carbon Emissions (RCCCEs) to each individual asset. Furthermore, each industry database comprises sufficient assets to account for at least two-thirds of total global emissions within its industry. This combined database uniquely allows for the granular estimation of global climate related risks and the potential for their mitigation.
As a preliminary demonstration of the capabilities of this database, we report the Cumulative Committed Carbon Emissions (CCCEs) for each asset, and aggregate these across major emitting nations and asset status. The analysis shows that the power industry dominates committed emissions, accounting for 88% of the 646 billion tons of committed CO2 emissions attributable to the five industries. The Steel & Iron and Automobile industries comprise another 10% of emissions covered, and Airlines and Shipping have minor contributions. The proportion of emissions attributable to the power industry is also expected to increase as 85% (293.9bt/345.2bt) of the CCCEs of active assets arise from power, compared to 90% (272.5bt/299.5bt) of pipelined CCCEs. Furthermore, across the five industries it is shown that there is roughly an equal split between the committed emissions attributable to currently active assets (53%) and those in the planning pipeline (47%). In terms of national geographies, Table 13 shows that China, India, and the US combined account for over 60% of the 646 GtCO2 expected to be emitted from existing and pipelined assets.
The total CCCEs expected to be emitted from both existing and pipelined assets compare unfavourably with common emissions targets. For instance, in order for the climate to have an equal chance of warming less than 2°C, the CO2 budget for power as of mid-2016 (commensurate with our data) is approximately 300 GtCO2. However, the analysis shows that the power industry alone is slated to register nearly double the required CCCEs to achieve this level of warming (566 GtCO2). Combining committed emissions from Steel, Automobiles, Aviation, and Shipping for existing and pipelined assets yields 646 GtCO2. Indeed, this level of emissions is commensurate with estimations for temperature rises exceeding 3°C.3 It is therefore clear that if the 2°C carbon budget is to be maintained then deep carbon emission cuts will have to be made, either in the form of premature asset retirement or through asset retrofits which reduce carbon emissions.