Ed Crooks Vattenfall’s CEO on clean energy, and not being a “lone wolf” on climate change

Vattenfall's Schwarze Pumpe carbon capture and storage pilot  plant

Vattenfall's Schwarze Pumpe CCS pilot

Lars Josefsson, who this week stepped down as chief executive of Vattenfall, has earned the right to take some pride in his achievements in his nine years leading the the Swedish state-owned power group.

Apart from his role in turning a national electricity company into an important player across northern Europe, Josefsson was also a pioneer among industry executives – alongside Lord Browne at BP – in taking seriously the threat of climate change.

As he steps down, however, to be replaced by Øystein Løseth, there is a question over how far Vattenfall will remain ahead of the pack, if at all. As Josefsson observes, there has in the past decade been a revolution in business attitudes to the risks presented by greenhouse gas emissions:

The mind-set of businesses has already changed. Businesses have accepted that they have to address climate change. In fact it seems that is much more accepted by business than it is by political leaders.

Lars Josefsson, VattenfallHis own role in that revolution, which has included giving advice to Angela Merkel, Germany’s chancellor, has been central. He remembers the prevailing view of global warming when he took over at Vattenfall in 2000:

At that time nobody wanted to discuss it, because nobody thought it was a problem. The debate, even five years ago, was very different from today. At that time I was a lone wolf; and today everyone is aware of the issue.

His take on the threat is that the principle of the greenhouse effect is well known, and it would be “very very surprising if carbon dioxide did not have a heating effect on the climate”. That atmospheric concentrations of carbon dioxide have risen sharply is also not in doubt, he adds. His conclusion:

If you look at the basic facts, for me that’s enough to say this seems extremely serious, and we’d better have an insurance policy to control the situation

That said, he believes the debate is often unproductive:

Extremist warnings, saying the Himalayan glaciers will melt by 2020 or whatever, that do not then turn out to be true, are very destructive, because it disguises the real problem. And there are extremists on the other side, who dispute whether there is any man-made climate change whatsoever. So you have a battle of two extreme views, both equally wrong.

In that context, he believes the recent furore over the leaked emails from the University of East Anglia, and the flaws uncovered in IPCC reports, can be helpful in stimulating a proper debate over what the evidence really suggests. Similarly, the disappointing outcome of the Copenhagen climate talks last December will not necessarily prove a setback for efforts to cut emissions.

Copenhagen created momentum, and the issue took centre stage. We now have the major economies taking the problem seriously.

And in spite of everything, he is optimistic about prospects for further progress in international climate negotiations.

We do not have a new climate treaty, and that is very much up in the air. I believe the UN process is being re-thought, and nobody knows how that will turn out. Unfortunately, we still do not have any US legislation in place, and it is very unlikely that there will be a new international agreement in Mexico [at the UN climate talls at the end of the year]. But hopefully we can get one in South Africa next year.

He has ideas about the form that agreement could take:

Maybe it should not be a Kyoto-style agreement, but something different. I am personally not sure that it has to be legally binding, if enough of the large economies sign up to it. All the countries in the world would like to be responsible, and I think under peer pressure people will behave. It is possible to do more with a positive international model: more of a carrot, and less of a stick.

In spite of the investment slowdown caused by the global recession, he adds, businesses have not changed course. Investment in low-carbon energy is continuing.

Look at carbon capture and storage, for example: the timetable for that is unchanged. So I have to praise those governments that are backing it.

And if there is a setback to the effort to curb emissions, it is unlikely to be permanent:

It could reverse. In a worst case scenario, if there is a total breakdown in the global process to get to a deal; if the US never makes an emissions reduction commitment; if China and India decide they only want economic growth, and if the European Union says let’s scrap the emissions trading scheme, then you can imagine business saying: ‘nobody wants this’. But then you can imagine, as the science progresses, that the pressure will return.

If we are not taking strong action this decade, then it is too late. The good news is that, though the world failed at Copenhagen, it is not too late now.

For him, the revelation came very early in his time at Vattenfall, at the end of 2000, when the company bought a high-emissions “brown coal” (lignite) power plant in Germany.

Out of that came some very personal convictions on my side: that climate change was a real problem; that the Kyoto Protocol would not do the trick; and that business had to be involved, because without business the problem would not be tackled.

In particular, it became clear to him that the EU’s emissions trading scheme, used to deliver the Kyoto commitments from 2005, would have a profound effect on the energy industry. That was his “lone wolf” period, when he began espousing arguments that are now commonplace among European energy executives.

That vision drove Vattenfall to become a leader in technology for coal-fired power plants that capture and store their carbon dioxide emissions, building the world’s first integrated project, at Schwarze Pumpe in Germany; even if the project is very small – “a toy”, one rival called it – and local opposition has prevented the carbon dioxide being stored underground as planned. Vattenfall is also one of the world’s top two offshore wind power companies, alongside Dong of Denmark. Josefsson says:

Our strategy is very much focused on offshore wind. That is where the opportunities are, and where we have a competitive edge.

It is also investing in new transmission technology, to enable grids to cope with the intermittent supply from wind power; plug-in hybrid electric cars, through a joint venture with Volvo, the Swedish manufacturer; and in biomass such as wood chips to be burnt instead of coal in power stations.

However, in all these efforts, Vattenfall is now matched to some extent by every other power company in Europe. Towards the end of his tenure, Josefsson came under pressure from politicians for not doing enough to cut emissions, and the company is being pushed into a potentially risky commitment to use a high proportion of biomass in its coal-fired plants.

Løseth, as the FT piece puts it, has “fossil fuels coursing through his veins”. Will he try to set Vattenfall ahead of the pack the way Josefsson did? Perhaps we should not expect it.