Carbon Forum Asia 2011

"Money": The Role of Finance Related to Climate Security and Energy Security

Michael P. Totten
Senior Advisor, CI Singapore

mtotten@conservation.org

November 3, 2011

Founded: 1987 Employees: 900+ Global Offices: 30+ Partners: 1,000+ around the world Funds: $338 million in grant funds Charity Navigator Rating:

Our Vision
We imagine a healthy prosperous world in which societies are forever committed to caring for and valuing nature for the longterm benefit of people and all life on Earth.

Our Mission
Building upon a strong foundation of science, partnership and field demonstration, CI empowers societies to responsibly and sustainably care for nature for the well-being of humanity.

Leading the Responsible Corporate Movement

Business & Sustainability Council

Triple S Portfolio

Adopting Cost & Risk-Resilient Portfolio

Using portfolios of multiple-benefit actions to become climate positive and revenue positive
Pervasive Information & Communication Technologies Key to Success Ambitious, Continuous Efficiency Gains Smart Green Power Protecting Ecosystem Services

Promoting Triple S Portfolio through Innovative Policies

1)SHRINKING - CONTINUOUS EFFICIENCY
Adopt decoupling+ and comprehensive IRP for delivering utility services to the point of use at least cost & risk, fully including end-use efficiency improvements and onsite/distributed generation

2)SHIFTING GREEN/SMART ENERGY

Select only verifiable green power/fuels that are climate- & biodiversity-friendly, accelerate not slow poverty reduction, & avoid adverse impacts

3)SOURCING - ECOSYSTEM OFFSETS

Add standards-based (CCB) carbon mitigation
options to portfolio that deliver triple benefits (climate protection, biodiversity preservation, and promotion of community sustainable development)

$1.14 billion savings over 5 years on energy, water & chemical costs. 670% ROI
So the financial incentive is there, but as CEO Pasquale Pistorio stressed, its not enough.
If the chief executive is not totally committed, it wont succeed, Pasquale Pistorio, CEO, STMicro, 1987-2005.

STMicro Carbon Positive & Revenue Positive

SHRINK: Reduce total emissions of CO2 due to our energy consumption (tons of CO2 per production unit) by 5% per year: SHIFT: Adopt whenever possible renewable energy sources of wind, hydroelectric, geothermic, photovoltaic, and thermal solar. SOURCE: Compensate the remaining direct CO2 emissions through reforestation or other carbon sequestration methods, to reach CO2 direct emissions neutrality by 2015.
Between 1998-2010 STMicro planted 10 million trees in reforestation programs in Morocco, Australia, USA, France and Italy (9,000 ha total). 179,000 tons of CO2 sequestered.

Source: STMicroelectronics, Sustainability Report 2010, Our culture of Sustainable Excellence in Practice, www.st.com/internet/com/CORPORATE_RESOURCES/FINANCIAL/FINANCIAL_REPORT/ST_2010_sustainability_report.pdf

CO2 reductions at negative cost

Dow slashed energy intensity by ~40% between 1990-2005. $9.4 billion savings between 1994-2010 940% ROI

CO2 Abatement potential & cost for 2020

Breakdown by abatement type 9 Gt terrestrial carbon (forestry/agriculture) 6 Gt energy efficiency 4 Gt low-carbon energy supply

Zero net cost counting efficiency savings. Not counting the efficiency savings the
incremental cost of achieving a 450 ppm path is 55-80 billion per year between 20102020 for developing countries and 4050 billion for developed countries,

or about half the 215

Portfolio Part 1 SHRINKING

ecological footprints
(emissions, pollutants, waste, water, energy, land, & capital) through aggressive, ambitious and continuous efficiency gains

Rob Walton, Chairman, Walmart

Mike Duke CEO, Walmart

Our License to Grow is threatened

2004 in the Bulls eye

60,000 suppliers in 70 countries

100,000 product lines

Walmarts World

1.7 million associates

138 million customers every week

8,500-plus stores and clubs

South Korea Guatemala

Honduras

Top 15 Countries Walmart Imports 2008

China India Taiwan Hong Kong

Pakistan

Thailand

Brazil
Sri Lanka Bangladesh Malaysia Philippines

Indonesia

70% Walmart Imports from China 2008 25% from 14 other nations ( )

Most of Walmarts impact & cost is imbedded in products

Water Packaging

Indirect Impact = 92%

Agriculture

Marine

Factories

On Climate Change Action

We are looking at innovative ways to reduce our GHG emissions. This used to be controversial, but the science is in and it is overwhelming. Climate change doesnt cause hurricanes, but hot ocean water makes them more powerful. Climate change doesnt cause rainfall, but it can increase the frequency and severity of heavy flooding. Climate change doesnt cause droughts, but it makes droughts longer.

Lee Scott, CEO

21st Century Leadership
Presentation Nov. 24, 2005

We believe every company has a responsibility to reduce GHG as quickly as it can. Wal-Mart can help restore balance to climate systems, reduce greenhouse gases, save money for our customers, and reduce dependence on oil.

On Climate Change Action

We are committed to aggressively investing $500 million annually in technologies and innovation to do the following:
Reducing GHG at our existing store, club and Distribution Center base around the world by 20 percent w/in 7 years.
Designing and opening prototype stores 25-30 % more efficient and 30% fewer GHG emissions within the next 4 years. Increasing fleet efficiency 25% in 3 years, and doubling efficiency in the next 10 years.

Sharing all learning in technology with the world, including our competitors (the more people who can utilize this type of technology the larger the market and more we can save our customers)

100% RE Zero Waste

LCA goods

New & Expanding Business in CO2Reducing Product lines

In 2006, Walmart set a goal of reducing energy consumption & CO2 emissions in the USA by selling 100 million CFLs in 1 year.
Walmart exceeded that goal, selling 137 million.

By the end of 2010, Walmart had sold nearly half a billion CFLs.

$10 CFL 6-pak Purchase Value

$ 300
250 200 150 100 50 0 -50 Investment lst year 2nd year 3rd year 4th year

[source: SafeClimate.net]

6-pak CFLs Dow -Jones Average Bank Account

CFL factories displace power plants

The $3 million CFL factory (right) produces 5 million CFLs per year. Over life of factory these CFLs will produce lighting services sufficient to displace several billion dollars of fossilfired power plant investments used to power less efficient incandescent lamps.

source: A. Gadgil et al. LBL, 1991

New Goal to Supersede CFLs with LEDs

You cant just keep doing what works one time. Everything around you is changing. To succeed, stay out in front of change. Sam Walton, founder

lightemitting diodes

LED

LED light output (lumens) and luminous efficacy (lumens per watt of electricity) are doubling every 20 months. High-brightness LEDs compound annual growth rate of 24% worldwide. US$ 15 billion market in 2013. 1/3rd Asian incandescents replaced by LEDs by 2020.

On Climate Change Action We are committed to the following:

Assisting in the design and support of a green company program in China, where Walmart would show preference to those suppliers and their factories involved in such a program. Initiating a program in the U.S. that shows preference to suppliers who set their own goals and aggressively reduce their own emissions. Lee Scott, thenpresident and CEO of Walmart , speaking to 1000 Suppliers in China, October 2008

Walmart to Reduce 20 million tons CO2 by 2015

Reducing carbon in the lifecycle of out products will often mean reducing energy use. That will mean greater efficiency and, with the rising cost of energy, lower costs, making our business stronger and more competitive. And, as we help our suppliers reduce their energy use, costs and carbon footprint, well be helping our customers do that same thing.

Mike Duke, CEO, Walmart

Matt Kistler, Senior VP of Sustainability at Walmart Stores

Over the next five years were going to be focusing on certain categories, certain businesses where the biggest opportunity exists, where its the most efficient and most cost-effective to remove that GHG from that supply chain. Whether it be in apparel, whether it be in food, whether it be in home line products, were looking at the category of products where theres great opportunity.

Walmarts Biggest Competitor High Oil & Utility Prices

Aggressively pursuing regulatory and policy changes that will create incentives for utilities to invest in energy efficiency and low or no GHG sources of electricity, and to reduce barriers to integrating these sources into the power grid.

Integrated Resource Planning (IRP) & Decoupling sales from revenues are key to harnessing Efficiency Power Plants
For delivering least-cost & risk electricity, natural gas & water services
USA minus CA & NY 165 GW Coal Power Plants

Per Capital Electricity Consumption

New York

[EPPs]

California Californians have net savings of $1,000 per family

California 30 year proof of IRP value in promoting lower cost efficiency over new power plants or hydro dams, and lower GHG emissions. California signed MOUs with Provinces in China to share IRP expertise (now underway in Jiangsu).

US$26.3 trillion
global cumulative electric utility infrastructure investment needed between 2007 and 2030.

12.7 trillion kWh

Additional generation by 2030
Source: IEA, in 2007 US$; GEF & Global Smart Energy. 2008. The Electricity Economy, http://www.globalenvironmentfund.com/data/uploads/The%20Electricity%20Economy.pdf

Cost of new delivered electricity (US/kWh)

CCS

US current average

nuclear

coal

CC gas wind farm

CC ind cogen

end-use bldg scale recycled ind cogen efficiency cogen

Amory Lovins & Imran Sheikh, The Nuclear Illusion, May 2008, www.rmi.org

Coal-fired CO2 emissions displaced per dollar spent on electrical services

1: 93 kg CO2/$1

47

32

23

nuclear

coal

CC gas

wind farm

Amory Lovins & Imran Sheikh, The Nuclear Illusion, May 2008, www.rmi.org

CC ind cogen

end-use bldg scale recycled ind cogen efficiency cogen

ELECTRIC MOTOR SYSTEMS

Now use 1/2 global power 30-50% efficiency savings achievable w/ high ROI

Motor Market Transformation Path to Multi- Trillion Dollar Savings

Demand Facts
Industrial electric motor systems consume 40% of electricity worldwide, 50% in USA, 60% in China over 7 trillion kWh per year. Retrofit savings of 30%, New savings of 50% -- @ 1 /kWh.

Efficiency Outcomes
2 trillion kWh per year savings equal to 1/4th all coal plants to be built through 2030 worldwide. $240 billion savings per decade. $200 to $400 billion benefits per decade in avoided emissions of GHGs, SO2 and NOx.
SEEEM (www.seeem.org/) is a comprehensive market transformation strategy to promote efficient industrial electric motor systems worldwide

Support SEEEM (Standards for Energy Efficiency of Electric Motor Systems)

More Retail Efficiency Power Plants - EPPs Less Need for Coal Mines & Power Plants
Less Coal Power Plants

Less Coal Rail Cars

Less Coal Mines

Portfolio Part 2 SHIFTING

To green power and fuel options that are both climate & biodiversity positive, and have the smallest combined ecological impacts

SOLAR REFLECTORS
Over 4000 Walmart stores with white roofs, and standard practice since 1990 Reflects away 80% of solar heat

World of Solar Reflecting Cities

$2+ Trillion Global Savings Potential, 59 Gt CO2 Reduction

100 m2

Hashem Akbari Arthur Rosenfeld and Surabi Menon, Global Cooling: Increasing World-wide Urban Albedos to Offset CO2, 5th Annual California Climate Change Conference, Sacramento, CA, September 9, 2008, http://www.climatechange.ca.gov/events/2008_conference/presentations/index.html

2.7 km/l 529 million liters [6.4 mpg 140 million gal]

121,000 hectares

Land required if Wal-Mart Class 8 large truck fleet Switched from Fossil Diesel to BioDiesel from Oil Palm Plantations

40,000 hectares
When the truck fleet achieves triple fuel efficiency

2.7 km/l 529 million liters

5.5 km/l 265 million liters

2004

2011

8 km/l 176 million liters

Multi-billion $ Savings & Cost-free CO2 Reductions

Cost Comparison Biodiesel vs Truck Efficiency

$70
$60
per barrel cost

$50 $40

$65

$30 $20
$10 $-

$15

biodiesel

truck efficiency

Walmart is on the path to tripling its truck fleet efficiency. Over the past 2 years Walmart replaced ~2/3rd of their fleet with more efficient tractors.

Achieved 65% reduction in fuel per ton km over past 5 years.

In 2010, Walmart delivered 57 million more cases, while driving 79 million fewer km.

Avoiding ~40,000 t/CO2 -- equivalent to taking 7,600 U.S. cars off the road.
Source; Building the Next Generation WalmartResponsibility, 2011 Global Responsibility report

Walmart Mexicos Oaxaca I Wind Farm

67.5 MW to power 348 stores, clubs, restaurants, and distribution centers 100% dedicated to Walmart Mexico

Eximbanks Deal of the Year awarded to turbine manufacturer by President Obama

Now examining large-scale aggregation purchasing from independent suppliers at competitive price to utility rates

27 wind turbines in La Ventosa, Oaxaca

Portfolio Part 3 SOURCING OFFSETS

remaining footprints by prevention of threatened tropical forests (REDD+) and other intact ecosystems (e.g., mangroves, peat lands, grass lands) through standards-based conservation carbon offsets

High Quality

Multi-Benefit

Largest Corporate REDD Carbon Project to date

$4 million to protect the Tayna and Kisimba-Ikobo Community Reserves in eastern DRC and Alto Mayo conservation area in Peru. Will prevent more than 900,000 tons of CO2 from being released into the atmosphere. Using Climate, Community & Biodiversity Carbon Standards.

Protecting Critical Wilderness to Offset Operation Footprints

In 2005, Wal-Mart adopted the goal to permanently offset the land footprint of all their USA stores and distribution centers by protecting critical wildlife habitat in the USA. Walmarts $35 million donation over 10 years enables purchasing enough land to account for its stores current land-use, as well as the companys development throughout the 10-year period -roughly 60,000 hectares.

Need to Halt Deforestation & Ecosystem Destruction

Gigatons global CO2 emissions per year

Billion tons CO2

25 20 15 10 5 0 Fossil fuel emissions

IPCC LULUCF Special Report 2000. Tab 1-2.

14 million hectares burned each year emitting 5 to 8 billion tons CO2 per year. More emissions than world transport system of cars, trucks, trains, planes, ships

GHG levels

Tropical land use

Outsourcing CO2 reductions to become Climate Positive

Gigatons global CO2 emissions per year

Billion tons CO2

25 20 15 10 5 0 Fossil fuel emissions

IPCC LULUCF Special Report 2000. Tab 1-2.

5 to 8 billion tons CO2 per year in mitigation services available in poor nations, increasing their revenues by billions of dollars annually ; and saving better-off nations billions of dollars.

GHG levels

Tropical land use

Geological storage (CCS) vs Ecological storage (REDD)

Carbon Mitigation Cost $ per ton CO2

U.S. fossil Electricity CO2 mitigation cost annually (2.4 GtCO2 in 2007)
Carbon Capture & Storage (CCS)

$50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $- 0 CCS REDD

~$100 billion ~3 per kWh

Reduced Emissions Deforestation & Degradation (REDD)

~$18 billion ~0.5 per kWh

Source: Michael Totten, REDD is CCS NOW, December 2008

U.S. fossil Electricity in 2007 2.4 billion tons CO2 emissions

$7.50 per ton CO2 1/2 cent per kWh

$18 billion/yr REDD trade Poverty reduction Prevent Species loss

A A win-win-win win-win-win outcome outcome

Tropical Deforestation 2007 13 million hectares burned 7 billion tons CO2 emissions

1824 Liters per year

(10.6 km/l x 19,370 km per year)

4.8 tons CO2 emissions per year

~$48 to Reduce Emissions from Deforestation at $10 per tCO2 Adds 7 cents per gallon

Stay Tuned for Part 2 Accelerating & Scaling Best Opportunities

Green ATP

Michael P. Totten, mtotten@conservation.org