Managing Climate Change: Doing Everything, Everywhere For a Very Long Time

Geneva, 3 August 2007 - It may be, as many claim, showtime for energy and climate, but what is the plot? There is much talk of tipping point and watershed, but which way are we tipping and on which side of the ridge will the water be shed?

Without serious policy shifts we may be heading toward the double crisis of energy insecurity and climate change, Fatih Birol, Chief Economist of the International Energy Agency, told a WBCSD Liaison Delegates meeting in Montreux, Switzerland in March.

Yet Gregory Manuel, International Energy Coordinator for the US State Department, described to a WBCSD meeting in Washington DC a few months later a positive “watershed moment” involving the combination of a growing consensus in the US, high oil prices pushing India and China toward efficiencies, lower-carbon substitutes becoming more competitive, and management talent and capital markets “colluding to identify and take advantage of new opportunities.”

Controversy remains, but there are growing elements of clarity. As Karsten Sach, German Environment Ministry and European Union representative in the G8 process, told the Montreux meeting, “The science is clear.” He also argued that the macroeconomics are clear with prevention now costing a good deal less than adaptation later: 1% of GDP if we act now and 5-20% if we wait.

While it is trite to note that energy and climate (E&C) issues offer business opportunities and challenges, it is interesting to realize that for business the opportunities are mostly now, while the severity of the threats and challenges will increase over time.

Companies can seize opportunities now by developing products and services to both mitigate and adapt to climate change, and profit from all the first-mover advantages. Later will come the deeper challenges of changes in weather systems, extreme weather events, losses of ecosystem services, high insurance prices, water scarcities and new energy and carbon regulations.

Halldor Thorgeirsson of the UNFCCC, the United Nations climate change body, told the companies represented at the Montreux meeting to “be brave and demonstrate that this is a solvable problem. Many are not aware of the solutions that are possible.” He added that the public was looking to business for solutions and that business should take advantage of this situation.

The range of approaches is important because the 14 panelists at the Washington meeting in late June generally concluded that the E&C challenge would require a bit of every type of solution: economic (cap and trade carbon markets, fees and taxes), regulatory (standards and other forms of limits) and technological (carbon capture and storage and new and renewable forms of energy).

Solutions have to be global, and a few of the Washington panelists argued that a carbon constrained market in Europe and the US would entice countries like China and India into carbon limitation strategies. And all of this would be needed over a very long period. As WBCSD Chairman Travis Engen told the meeting, “five or ten years is just not going to cut it.”

This led one member of the audience to observe afterwards: “The consensus seems to be that to lick climate change we are going to have to do everything, everywhere, for a very long time.”

Phil Sharp, President of Resources for the Future and himself a former Congressman, cast some cold water on the consensus by saying that a politically agreed energy price rise “is just not going to happen.”

He echoed a worry often voiced by WBCSD President Björn Stigson, telling the largely business audience that “business has not put on the table a concrete set of proposals that include action by business.” Political leaders often ask Stigson what business can and is willing to do in the climate arena, and he admits that a clear answer is not available. Thus when lawmakers finally decide to act, they will see no reason to consult business. This concern was reflected in the Washington meeting.

In a note to WBCSD members in midyear, Stigson tried to bring more clarity to the debate by comparing what he saw as the necessities of managing climate to what was available. Results were mixed.

He noted that the first need is a common perception that we have a problem that must be addressed with some sense of urgency. Climate change may be at a tipping point, but it would be an exaggeration to say that this is a universally shared realization. Second, we need a willingness by governments to actually do something about it. That belief is lacking, as politicians do not yet see climate as a decisive election issue.

Third, we need, but lack, a feeling that there is an equitable sharing of the costs for solving the problem.The fourth need is realistic options for solutions, for example technologies that can create a more resource-efficient economy and/or can eliminate greenhouse gases, such as carbon capture and storage. We do seem to possess an effective arsenal of technology options.

Fifth, we need the tools to implement these options: regulations, standards, economic instruments, voluntary actions by citizens and business, etc. We do possess those tools, but need the political will to use them. Sixth, we need funding for actions like technology development and deployment, as well as restructuring societal infrastructure.

Such funding is lacking, but it could be provided if it was a political priority.

Seventh, we need a willingness on the parts of all economic actors to change behavior toward more sustainable lifestyles. This will depend on a number of the above-mentioned factors, but also on whether the actions are “profitable” within the prevailing economic paradigm. For this to be the case, there must be realistic prices for the use of resources, as well as costs for the pollution caused.

Eighth, we need constructive cooperation between the key parts of society – governments, business and civil society. Such cooperation is lacking.

It is an alarming report card.

However, though the G8 summit in June made no breakthrough, it did seem to suggest that governments are beginning to think along the lines suggested in the WBCSD’s Policy Directions to 2050 publication. These approaches include an agreed longterm global goal with intermediate targets. Also involved is the addition of more “bottom-up” efforts to the largely top-down approach of the Kyoto Protocol, as energy decisions are made locally and energy policy is made nationally.

Sector approaches, especially those that are big energy users and polluters such as iron, steel and cement, are also getting a lot of attention inside and outside of G8 deliberations. The Council’s own Cement Sustainability Initiative is looking into a sector effort by the cement industry.

The G8 Declaration said that “climate change will require a diversity of approaches to take into account differing circumstances,” another theme of our own publications. And we have also argued forcefully that there is an urgent need to provide the international business community with a predictable and long-term perspective and to strengthen and extend market mechanisms, a point made in the G8 Declaration.

As the E&C show moves toward the next UNFCCC climate change meeting in Bali in December 2007, the WBCSD continues to advocate its bottom-up approach wherever and whenever possible. And our members continue to try to follow the advice given by World Conservation Union Director General Julia Marton-Lefèvre in Montreux: “Treat the earth as if we intended to stay.”

Download

• Policy Directions to 2050 (high-resolution) ( 25.4 MB)
• Policy Directions to 2050 (low-resolution) ( 2.9 MB)
• Watch a presentation of Policy Directions by David Hone at UNFCCC 's session of the Subsidiary Bodies in Bonn, Germany (7-18 May 2007)
• Pathways to 2050 - Energy & climate change ( 2.9 MB)

• Facts & Trends to 2050 - Energy & climate change ( 1.9 MB)

Author WBCSD Publication Date 3 Aug 2007 Document Type WBCSD news Issue/Topic Energy & Climate Source WBCSD Include In RSS WBCSD News & Updates