Commensurate carbon pricing – Munich companies for climate protection

Climate change concerns everyone: politicians, private sector and consumers alike. Under the motto of "Munich companies for climate protection", Munich Re Foundation invited representatives from BMW, Munich Re and Siemens to a discussion between experts. The issue is high on the agenda of all three companies.

Year after year, Munich's Klimaherbst programme draws attention to the responsibility that we all share. Under the motto of "Politik. Macht. Klima. – und wir?" (Politics. Power. Climate. and us?), the Netzwerk Klimaherbst e.V. association again organised more than 60 exhibitions, films, excursions, lectures and discussions in October 2015. Munich Re Foundation participated with a panel discussion on 20 October.

Climate protection on the agenda
"For us, climate change is a strategic issue," said Prof. Peter Höppe, Head of Munich Re's GeoRisksResearch and Corporate Climate Centre, opening the evening. As far back as 1973, Munich Re publications warned that climate change problems would increase, long before the United Nations began to think along these lines. Munich Re has a vested interest in curbing the global rise in temperature as far as possible, because: "90 per cent of the global insured losses incurred by natural disasters are today caused by weather-related catastrophes." And climate change obviously plays a role in this. Higher ocean temperatures cause more water vapour and thus more energy to enter the atmosphere. Prof. Höppe is convinced that "This certainly influences storms, cyclones and floods."

Alexander Rossner, founder of the zukunftswerk eG, asked which role the panelists' companies can play to better protect our climate.

The panel's host, Alexander Rossner, member of the Executive Board of Network eV Klimaherbst, cited the use of fossil fuels in industry and transport as a major cause of climate warming. Ursula Mathar, Head of Sustainability and Environmental Protection with the BMW Group, rallied by pointing out the recent successes in the automotive industry. "BMW is working hard to reduce carbon emissions – not only in production but also in the fleet. Forty-five BMW models already are below 120 g CO2/km, eleven models produce even less than 100 g CO2/km." The key parameter is the total emissions over the lifetime of a vehicle, not just the carbon emitted during production in the factory.

Carbon emissions
Ralf Pfitzner, Vice President of Sustainability – Resource and Energy Efficiency with Siemens AG agrees. Emissions caused by production are only one side of the coin. Siemens' global carbon emissions amount to approximately 2.2 megatons, the equivalent of roughly 25 per cent of the carbon produced by the City of Munich. "We want to halve our emissions by 2020; by 2030 at the latest, we want to be carbon neutral." However, in this context too, the emissions produced during the utilisation phase are of greater significance. "For this reason, increasing energy efficiency is top priority for us," underlined Pfitzner. Siemens benefits from the debate. "Climate protection and sustainability open up new fields of business." Technical expertise is of great importance, for example in the case of the energy turnaround. The most important factor in this respect is efficient power grid development. "Siemens played a key role in the meanwhile successful connection of offshore wind farms to the German power grid, and made major investments."

Without e-mobility, the energy turnaround is inconceivable. Old production methods must also be abandoned and new paths explored. "We are already participating very successfully in car sharing with DriveNow, and not just in Europe," explained Ursula Mathar. However,  society must accept that the future of mobility will generally be different from today: "Apps will inform us of the least expensive, fastest and most environmentally friendly way of getting from A to B." Alternative models for individual transport by private car will evolve. Professor Höppe called for eco-friendly mobility, observing that "The question arises as to whether we need to travel with large cruise ships just for pleasure. Especially when you know that these ships still run on heavy fuel oil and that shipping traffic accounts for as much carbon emission as air traffic."

Prof. Peter Höppe (Munich Re), Ursula Mathar (BMW) and Ralf Pfitzner (Siemens) agreed that carbon should have a commensurate and much higher price.

Who shapes the turnaround?
"If climate change brings economic benefits, why do corporations such as BMW and Siemens not refocus their attention exclusively and immediately on green products?" Alexander Rossner wanted to know. Both Pfitzner and Mathar agreed that any new technology takes years to become established. Investments must be financed through profitable divisions, otherwise a company cannot survive in the long term. If products are not profitable, their chances of enduring are small – the same applies to projects in the context of climate change. A company must therefore weigh up which business model it abandons or replaces, and when to do this.

Consumers also play a major role. Their decisions are not always rational. But must people then be forced to forgo mobility for the sake of the environment?  If we intervene too strongly in this respect, we not only compromise competitiveness but also restrict every individual's freedom of choice and quality of life, the panellists were convinced. Aviation and shipping must also be taken into consideration with much greater stringency in reduction regulation.

Climate-friendly investments as a key
What then can people today do, quickly and relatively simply? Professor Höppe had a clear answer to this: "Investments are an important lever for greater climate protection. The insurance industry is the world's second largest investor after pension funds." If investors withdraw capital from non-sustainable sectors and increasingly invest in climate-friendly enterprises, they can bring about tremendous changes. "Munich Re plans in the near future  to invest eight billion euros in innovative technologies such as renewable energy systems and the associated infrastructure."

A political framework must be defined
The private sector can have a positive impact in many ways. For this purpose, the political establishment must specify the requisite framework. All the panellists agreed that carbon should have a commensurate and much higher price. "The best thing would be the introduction of global emissions trading, but we are unfortunately still a long way off from this goal," the experts maintained. That a global climate agreement would be adopted in December at the upcoming UN COP 21 Climate Change Conference in Paris was not questioned by any of the panellists. What is uncertain, however, is whether the Paris climate treaty will be effective – or proves once more to be a toothless tiger.

CB, 29 October 2015