Carbon Masters’ CEO Kevin Houston was recently invited to give a keynote speech at the CMRS pre-summit in Quito, Ecuador. We have included a copy of his full speech below:

“Good Morning Ladies and Gentlemen. I would like to thank the organisers of this conference for inviting me to speak to you this morning. It is always a pleasure and a privilege to visit your beautiful country.

I want firstly to put my remarks today in a broader context. As citizens of Ecuador you share with citizens from beyond your borders three very large challenges: 1. A warming climate caused largely by our ongoing and continued use of fossil fuels; 2. Increasing concern about our energy security, with very volatile oil prices, political unrest sweeping many parts of the world that today supply a great deal of that oil; And, 3. an overall need to constrain our current overuse of the world’s resources as our population grows from todays 7 billion to an estimated 10 billion by 2050.

What is clear is that we cannot continue with our current business as usual approach and need to find and build a more sustainable way of growing our collective economies, reducing inequality and raising overall living standards. I would suggest to you that that can be achieved by setting out to build a low carbon economy

I have spent the last 5 years of my life seeking to make a contribution to tackling climate change. Following a lengthy commercial career with companies like Procter & Gamble, PWC and IBM I took up the cause of climate change in 2008 by returning to University of Edinburgh to study climate change and, following that, I set up Carbon Masters in 2009. Today Carbon Masters helps organisations in the UK and internationally to measure, manage and reduce their carbon emissions.

At its root, the issue of climate change is about the management of risk.

The scientific evidence is now overwhelming that by burning fossil fuels we are causing a build up of GHG gases, notably carbon dioxide, in the atmosphere, which is impacting global temperatures in a way that is already starting to have and will continue to have catastrophic effects on our climate, on sea levels, on vector borne diseases; and which could result in large scale population movements with hugely negative social and political impacts.

A few weeks ago we recorded that the concentrations of carbon dioxide had now reached 400 ppm, up from 280 ppm at the beginning of the Industrial Revolution. Our climate scientists tell us that is we breach a CO₂ level of between 440 and 450 ppm we run the risk of global temperatures exceeding 2 degrees of warming, which those same scientists indicate will have very damaging impacts as we approach the end of this century.

While this scenario is accepted by the entire climate change scientific community, and more importantly by most governments and political parties, global agreements to address this have fallen well short of what is required. While hopes are already being raised that the UNFCCC COP meeting in Paris in 2015 will finally achieve a global pact to address this issue, I for one remain skeptical as to whether there is the sufficient political will to overcome the many barriers that still exist and to find a common agreement.

So in my view it is even more important that in the absence of global agreements, individuals, organisations and countries need to do everything they can to begin addressing the nature of their own carbon impact, the carbon risk they face, and take steps to reduce that risk. The good news on this front are that world wide there are millions of individuals, thousands of organisations and hundreds of countries that are beginning to do so.

However there are many that are still skeptical about the science and some even think the whole thing is a scam. To those people I say that even if that were true there would still be good reasons to take steps

to reduce carbon emissions. And that is because of likely future cost of energy. Now, while no one can accurately predict the future its my view and the view of many others that the future direction of energy costs is only in one direction, Due North.

The basis for that are a series of macro economic developments which collectively will results in higher energy costs. These are

Peak oil – as new oil is found its is increasingly in places where it is becoming more costly to extract and refine. To see the evidence of that one only has to look at the return on equity of the major oil producers to see that they are having to invest more and more for lower returns . In addition our ability to pump oil on a daily basis is declining as demand is rising which is leading to a best volatile prices and at worst higher prices. Brent crude the benchmark oil price is still around $ 100 dollars despite most of the word recovering from a deep recession so its very likely to increase as the global economy begins to grow again.

Rise in numbers of a global middle class – one of the key benefits of globalization has been the rise of a new middle class particularly in countries like India, China and in other parts of Asia as well as parts of Latin America. While there is much to celebrate in this, it will impact energy demand as a rising middle class adopt western life styles and move from rural villages to cities where they will live in apartments that require electricity and heat and air conditioning as well as a plethora of electronic equipment as well as drive cars and trucks In fact last year we crossed an important global milestone where there are now more people living in urban ares than are living in rural areas – for the first time in our history.

Finally, major changes in the energy infrastructure around the world will drive up costs. Most of the coal fired power stations in US and Europe are now aging and need substantial investment to bring them up to current environmental standards, many of the nuclear power stations in those countries will also incur substantial decommissioning costs as they come to the end of their operating life. Europe has

also made binding political commitments to decarbonising its electricity grid, increasing the proportion of renewables in its electricity generation and moving its transport infrastructure from fossil fuels to electric vehicles. The investment required to do that runs into trillions of Euros and will have eventually to get reflected in higher prices for electricity and fuel. For example, in the UK today we are paying $1.95 for a litre of diesel vs 26 cents you are paying in Ecuador. Whilst that is a very extreme example as in the UK the government taxes diesel while in Ecuador you subsidise it, it does indicate the current gap and where likely energy prices could gravitate too.

But, as I said earlier, organisations and countries are seeing the risk that climate change poses and taking action to address that risk and accelerate the move to a low carbon economy.

In Europe, all 28 member states have signed up for legally binding carbon reduction targets 20% reduction in emissions by 2020, to increase their renewables to 20% of their energy mix and to improve energy efficiency by 20%. Policy options to increase those targets and to set a decarbonisation target for Europe’s electricity grid by 2030 are under active discussion.

Scotland the country where I now live which has a population less than half that of Ecuador has agreed the most ambitious legally binding carbon emission targets on any country in the world. Scotland is doing that for many reasons but two stand out:

1. That it wants to show that even as a small country it can show real leadership in the fight against climate change and encourage other countries to follow suit

2. It sees that the opportunities for future growth in green jobs, in investment in building low carbon expertise and skills in developing off-shore wind and wave technologies as well as carbon capture and storage technologies are where its future lies and its going after that opportunity with a high degree of commitment.

Now you might well argue that Europe and America are highly developed economies and that they do not serve as good examples for developing countries like Ecuador so I think the example of the Telecoms sector in India might serve as a salutary lesson about how fossil fuel costs and carbon risk can come together with challenging consequences for an entire industrial sector.

You may not be aware but the Indian Telecoms sector is the second largest in the world and will likely exceed that of China in the next few years. From having 24 million mobile subscribers in 2003 it now has 790 million. It is very much an Indian success story with Indian telecoms companies having the dominant share of the market. Now to achieve that rapid growth the Indian Telecoms sector has invested in and built a network infrastructure of some 450,000 telecom towers across India with shared base stations to support that mobile network. Most of these towers are, however, in

rural and semi rural areas where grid electricity is only available for portions of the days. To meet their regulatory requirement for a 99% uptime they use batteries and diesel generators as a back up power source.

This state of affairs has many downsides:

1 The energy costs for a typical telecoms operator are 30 to 35 % of their total operating costs due to the relatively high cost of diesel vs grid electricity,

2 The sheer size of the sector means that they are now the second largest commercial user of diesel in the country consuming some 3 billion litres per year.

3 This is now a cause of real concern for the regulator and the Indian government. Firstly because just as in Ecuador the price of diesel is subsidised by the government, though the level of subsidy is being reduced on an annual basis as the Indian Government can no longer afford to keep subsidising a fuel that is imported at rising world prices and the cost of that subsidy just in the telecoms sector alone is 126 billion rupees a year.

4 And, finally, the carbon emissions caused by the sector is large 16 million tonnes per annum and likely to grow substantially as the number of telecoms towers grows to 600,000 by 2020 due the roll out of data as well as voice services .

5 The result is that the Indian telecoms regulator in 2012 has mandated the sector to measure and report its carbon footprint bi annually to reduce its emissions by 25% by 2020 and to achieve targets for renewable sources of energy displacing diesel in both rural and urban towers by 2025.

This is resulting in the sector now having to urgently explore several alternative energy alternatives including from solar pv, wind, compressed biogas and hydrogen cells. Clearly, the sector staying on diesel as a source of back-up power was unsustainable but it is now in the throws of painful and costly transition due to the confluence of rising energy costs and carbon risk.

Now, lets turn our attention closer to home. What can Ecuador do to play its part in rising to the challenge presented by climate change? While a relatively small country, it is home to one of

the most diverse ecosystems in the world and therefore extremely vulnerable to future climate change risk.

Fortunately, concern regarding the environment in general and mitigating the future impacts of climate change is very high on the Government’s agenda. Ecuador is unique in that it is the only country in the world to recognise legally enforceable Rights of Nature, or Ecosystem Rights within its constitution.

Your Ministry of Environment has developed policies for both adaptation and mitigation of climate change and is considering compensation measures and incentives for reducing carbon emissions in the industrial sector.

But what can individual organisations do to act responsibly in this area?

Our advice is to begin the journey towards a low carbon future by first assessing your carbon risk by carrying of an assessment of your organisation’s carbon footprint.

This process will help you identify:

1. Areas where you can become more energy efficient and thus reduce your operating costs.

2. Identify the most carbon intensive parts of your operation or supply chain and then plan to reduce that carbon impact over time. This is can be done by developing a carbon management strategy that outlines the business case for low carbon investments that can reduce an organisation’s dependence on fossil fuels. This may involve moving in a first step from highly carbon intensive fuels like diesel and LPG to natural gas which, as well as offering lower costs, is also less carbon intensive than these other hydrocarbons. The use of natural gas in the UK has been a key transition fuel to reduce the UK’s carbon emissions by displacing the use of coal and oil for heating and cooking.

3. It can also help in identifying new opportunities for business growth by the provision on low carbon products and services. Again in the UK the growth of green products and services has been the fastest

growing part of the UK economy since 2010.

This will not be without its challenges given that the current subsidised prices of fossil fuels in Ecuador do not encourage large scale energy efficiency improvements. But, as we have seen with the example in India this can change very rapidly given the rising cost of energy that we are seeing globally.

In conclusion, I do want to take the opportunity to commend two particular companies here in Ecuador who are already showing the leadership in this area that is required. We are proud to have worked with both the Pfizer corporation and with Adelca to assist them in measuring their organizational carbon footprints and to begin with them the journey to a lower carbon more sustainable and profitable business. In closing, I hope that in the future many more organisations in Ecuador will follow the lead set by Pfizer and Adelca and that Ecuador can begin to make significant progress in building a lower carbon economy for the benefit of all its citizens and to nurture and protect the very valuable, beautiful and diverse ecosystem that God has blessed you with. Thank you.”