In 2017, the Group’s carbon intensity dropped from 0.82 kg CO2/kWh to 0.80 kg CO2/kWh and with the completion of our 17% investment in the Yangjiang nuclear power station in 2017, the declining trend is expected to strengthen in 2018.
In 2017, we developed a set of carbon transition scenarios to support the review of our Climate Vision 2050. The outcomes of the review included: tightening of our 2050 carbon intensity target from a 75% to 82% reduction from 2007 levels; introducing new carbon intensity reduction targets of 40% for 2030 and 60% for 2040; developing a new renewable energy target of 30% and non-carbon emitting target of 40% by 2030; and reporting our Climate Vision 2050 metrics on an ‘equity + capacity purchase’ basis to reflect more accurately our generating capacity needs. These new targets demonstrate CLP’s commitment towards a low carbon future and we will continue to review these targets on a regular basis to ensure that we take into account the changing pace of developments in the climate change arena.
Climate change remains one of the most significant global trends affecting CLP’s business. The physical impacts of extreme weather conditions can affect our operations as well as the value of our assets. Governments are expecting businesses like ours to help them achieve their Paris Agreement commitments. Economics and market forces are further supporting the energy transition as the costs of renewable energy continues to fall, while the replacement costs of fossil fuel generation are beginning to rise. Investors, lenders and insurers are also demanding more reporting on the management of potential business risks posed by climate change, as well as divestment from coal-related activities. The Recommendations of the Financial Stability Board’s Task Force on Climate Financial Disclosures (TCFD) is evidence of this latest trend.
We are also seeing regulations over other environmental impacts such as for air, water, waste and biodiversity for example, becoming increasingly stringent over time. This is happening in all our operational jurisdictions, particularly in Mainland China where protection of the environment has become a clear priority and President Xi has stated that China "will enforce stricter pollutants discharge standards and see to it that polluters are held accountable.” The expectation is that these regulations will ultimately make fossil fueled generation less attractive than renewable energy. However, we also believe that as more renewable energy is utilised, we may see more environmental-related regulations for renewable energy-related developments as well.
Our tradition of going beyond compliance essentially helps to prepare us in advance of anticipated regulations. We track the relevant emerging business risks, such as those arising from potential regulations and develop relevant mitigation measures, such as guidelines and policies, as well as any new capabilities needed to implement these measures. Incorporating flue gas desulphurization (FGD) equipment into the design of Jhajjjar in India, when it was not a requirement under the local government’s tender specification, is testimony to our ability to anticipate and make the necessary, often difficult, decisions to mitigate a risk that is not yet here today.
As countries pursue their energy transition, they must bear in mind the importance of balancing the energy trilemma. When delivering power, the three areas of energy equity, energy security and environmental sustainability, often compete with each other. For example, in Australia, in the face of coal plant closures, high penetration of renewable energy in some areas and an uncertain energy policy the security of power supply has been compromised, leading to price hikes and supply disruptions. As countries go through their energy transition pathways, they must keep balancing these three areas so that none of them is significantly and irreversibly compromised. With over a century of experience in this industry, CLP is capable to meet the energy trilemma challenges that may occur as we transition towards a low carbon future.
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