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Pictures of the Future
The Magazine for Research and Innovation

Efficient Energy Use

CO2-Neutrality as a Business Model: Why Climate Protection Can Be Profitable

Siemens plans to invest €100 million over the next three years to improve the energy balance of its buildings and production facilities, such as its headquarters in Beijing (above). A range of technologies from the company’s own portfolio will be used -- part of Siemens’ Energy Efficiency Program (EEP).

At the most recent United Nations Climate Change Conference, participating countries declared that they would aim to drastically reduce man-made emissions. Germany is already taking associated measures with its “energy transition” program, and even the pope has called on politicians to meet their obligations in his encyclica Laudato Si. Siemens supplies innovative technologies that help address this global challenge and save money in the process. Now the company itself is heading towards CO2-neutrality.

The international media called it a “milestone” and even a “historic climate pledge”, when the heads of state and government of the G7 countries agreed to a number of crucial climate-related resolutions at their summit in Elmau, Bavaria, in early June 2015. German Chancellor Angela Merkel and her six high-ranking guests announced that the G7 countries plan to reduce global emissions of greenhouse gases to zero by the end of this century. This process of decarbonization will ultimately mean that the world will completely dispense with coal, oil and natural gas.

In the wake of the remarkable commitment agreed to by the heads of the G7 countries in Elmau, the issue will also be addressed at the 21st United Nations Climate Change Conference in Paris at the end of November 2015. The representatives of 194 countries will come together here to negotiate a follow-up agreement to the Kyoto Protocol in order to specify binding emission targets for all of the signatories of the United Nations Framework Convention on Climate Change.

Such an agreement is needed because mankind can’t carry on as it has done till now. According to the UN’s Intergovernmental Panel on Climate Change (IPCC), human beings have emitted more than 2,000 billion metric tons of CO2 into the atmosphere since industrialization began — and 35 billion metric tons in 2014 alone. Greenhouse gas emissions have already caused the average temperature of the Earth to rise by one degree Celsius. If the output remains as high as it is now, the total amount of emissions since the beginning of industrialization will probably surpass the 3,200 billion metric tons in 30 years. According to experts, this will cause global warming to exceed two degrees Celsius, a mark that is of crucial importance for the Earth’s climate. However, if global emissions are drastically reduced, it might be possible to keep global warming within manageable limits.

Four Levers for Reducing CO2 Emissions

Politicians aren’t the only ones who are aware of the need to take action, as many companies are also conscious of it. Siemens, for example, has increased its CO2 efficiency by 20 percent over the past four years. The company has now set itself the ambitious target of cutting its carbon footprint of 2.2 million metric tons per year (status of fiscal year 2014) in half by 2020 and of even becoming CO2 neutral in the long run, by 2030.

To achieve this goal, Siemens plans to invest €100 million over the next three years in order to improve the energy balance of its buildings and production facilities. Various technologies from the company’s own portfolio will be used for this effort, which is part of Siemens’ Energy Efficiency Program (EEP). The list of appropriate products from the Siemens portfolio is long and includes energy management and monitoring systems, automation technology for buildings and production processes, and energy-efficient drive systems. Siemens considers the increase of its own energy efficiency, and thus also of its carbon efficiency, to be a win-win situation. This is because companies that reduce their energy consumption not only protect the environment, but also cut their costs. For many years now, Siemens has been offering its customers an energy performance contracting concept and combining it with financing solutions that don’t impact liquidity. Based on experience from a former energy efficiency program, Siemens expects currently planned investments to reduce its energy costs by €20 million per year.

However, the EEP is only one of a total of four levers that Siemens is using to cut its CO2 emissions in half. Distributed energy systems, for example, will also help the company to achieve its 50-percent reduction goal. For this purpose, Siemens plans to combine power generation from combined heat and power plants, wind turbines, and photovoltaic systems with innovative storage and smart energy management technologies. The first practical example of this will be the Siemens Campus in Erlangen, Germany.

Positive Feedback Loop

Siemens, which has always been a byword for electrification, also plans to focus even more strongly on renewable sources of energy. In some cases it will buy the green electricity that its own technologies produce from customers worldwide. As a supportive measure, Siemens also plans to make investments that will actively assist the energy supply transition. For example, Siemens Financial Services is investing in offshore wind parks, in which it already owns a 125-megawatt share of generating capacity. As a result, around 100,000 households are already receiving electricity from offshore wind turbines in which Siemens owns shares. A further 300 megawatts of capacity are already under construction or planned.

Last, but not least, the company’s vehicle fleet will also help it achieve its ambitious CO2 target. This fleet is currently responsible for about 300,000 metric tons of carbon dioxide per year. Emissions in this sector will be reduced significantly by strict requirements regarding new vehicles’ gasoline consumption and a bonus and penalty regulation that is based on CO2 emissions and an innovative e-mobility concept.

Emissions as a Cost Factor — and a Business Model

However, emissions reductions are not only necessary from an ethical standpoint, but also because they affect a company’s business results. Siemens expects its CO2-neutrality program to lead to substantial cost savings. Moreover, the associated technologies enable the company to help customers achieve their own sustainability targets and CO2 savings. For example, Siemens’ environmental portfolio, which primarily encompasses sustainable products and solutions, has become a key factor in growth during recent years. In 2014 alone, this portfolio generated 46 percent of the company’s income. But that’s not all. Customers who use energy-efficient technologies from the Siemens environmental portfolio emitted 428 million metric tons less carbon dioxide last year than if they had used conventional systems. This amount is nine times the carbon dioxide emitted by New York City and almost half of the CO2 emissions of Germany.

These figures demonstrate that technologies that can drastically reduce emissions and thus make the achievement of the two-degree target look realistic are already being used. What’s more, these technologies are used along the entire electrification value chain, from electricity generation and efficient electricity transmission to buildings, production facilities, and mobility systems.

Toward a CO2-Free Era

The road toward achieving the Elmau target of complete decarbonization will nevertheless be a long one. However, there is unanimity that this course is without alternative. “We agree with the goal of limiting global warming to two degrees Celsius, although we are fully aware that it is very ambitious,” says Siemens Managing Board member Roland Busch. “Innovative technical solutions play a key role in reducing CO2 emissions — in this area, industry can take the lead in the transition toward a CO2-free era.” Busch is also calling on other companies to help shape this transition process. Moreover, he considers the Climate Change Conference in Paris at the end of November to be a great opportunity to get all of the 194 attending nations to commit themselves to a common goal. “Paris will offer us a great opportunity that we will have to use,” Busch says.

Sandra Zistl