Cooling sector falls short on low-carbon development

A report from CDP, a global non-profit provider of climate research, finds the major consumer electronic and capital goods firms that dominate the cooling sector are failing to innovate or make the latest technology widely available.

CDP assessed 18 high-impact publicly listed companies that dominate the cooling sector (combined market cap of over US$550 billion) on product efficiency, emissions disclosure and low-carbon innovation.  CDP’s in-depth analysis of product portfolios in the major markets for air conditioners in the United States, Japan, China and India found companies are not deploying their most efficient products, resulting in a significant gap between what is technically possible and minimum efficiency standards.  

Trane Technologies (US), Mitsubishi Electric (Japan) and LG Electronics (S. Korea) were found to lead the sector on climate related financial metricswith Blue Star (India) Hisense (China) and Chigo (China) lagging.

Carbon emissions from space cooling have tripled since 1990and are continuing to surge, with space cooling set to become the strongest driver of growth from buildings electricity over the next 30 years, according to the International Energy Agency. Cooling technologies also contribute to emissions through the leakage of fluorocarbons such as HFCs. 

Deep transformation of the sector is needed to accelerate the pathway to a healthy, resilient, zero emissions future, but CDP’s research points to a lack of innovation with spending on R&D at 2.2 per cent of net sales significantly lagging the capital goods average of 3.5 per cent. Most companies’ sustainable innovations are only delivering incremental efficiency gains based on a 100-year-old compressor technology and only 5 per cent are involved in transformational demand management solutions needed such as smart grids and renewable sources. This is reinforced by patent filings, with 60 per cent in compressor technologies.

Only 22 per cent (four out of the 18) of the companies assessed have set targets to reduce emissions throughout the value chain by 2050: Hitachi and Mitsubishi Electricare targeting an 80 per cent reduction, while Daikin Industriesand Electroluxaim to achieve net-zero emissions.

CDP’s research points to a huge opportunity for cooling businesses to innovate, compete and position the sector at the forefront of climate action. A radical step-change in efficiency standards, innovation and R&D is needed for the sector to make the emissions cuts needed to be aligned with Paris goals to achieve net zero emissions by 2050.

The cooling market is valued at approximately $300bn and growing fast. The number of global unit sales a year will rise by close to 40 per cent by 2030 compared to 2019. Rapidly rising emissions from the sector are attracting attention from policymakers, with a call for action of industry-wide zero emissions commitments ahead of the COP26 climate negotiations. COVID-19 is also raising the importance of global health issues, and cooling is vital in keeping vaccines cool and protecting against heat stress health issues linked to climate change.

Carole Ferguson, head of investor research at CDPsaid: “It is striking to see how many companies scored poorly on climate-related opportunity metrics, showing that as a group there is little or no meaningful innovation.  This is backed up by financial metrics such as their R&D spend, patent filings and capex/sales ratios.”


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