CLP Holdings Limited (CLP) has a commitment to achieve net zero emissions by 2050. However, we do not think CLP’s net zero plan is currently Paris-aligned. The company has insufficient plans for the retirement of its coal fleet and no concrete phase out plans for its gas fleet. In fact, CLP’s strategy to reduce its coal exposure is partly to rely on more gas generation capacity.

Given CLP is investing in gas plants it is likely that the company will still generate some emissions after 2050. CLP intends to rely on carbon offsets for any residual emissions post 2050. It is extremely unlikely that carbon offsets will be viable at scale and should not be considered as part of a credible net zero strategy.

From an economic and climate perspective CLP should focus on building out its renewables business rather than adding more gas plants, especially as the company acknowledges that climate change poses a specific risk to its operations.

In FY21 one quarter of total operating earnings were generated from fossil fuels, of which coal represented around 10%. Nevertheless, when excluding non-generation business lines, operating earnings from fossil fuels were almost 50%.

Operating earnings in FY21 exhibited a 25% decline compared to FY20 owing to declines in both earnings from coal and gas generation. This serves to highlight the risk and volatility of earning streams reliant on fossil fuel generation.