Businesses need signals from governments on climate change

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Source: GLOBE Foundation

Environmentalists are not the only ones who will be holding their breath during the upcoming Copenhagen Climate Change Conference. A follow up agreement to Kyoto may be unlikely, but businesses require a clear and unambiguous signal that the world is finally serious about tackling global warming.

Business is ready to act, as declared by the Combat Climate Change coalition group that includes industry giants like BP, General Electric, Unilever and Duke Energy. But it cannot do so without a clear framework and a binding international deal on carbon emissions.

This is not posturing. Investments in low-carbon technologies that would reduce greenhouse gas output depend on having firm rules regarding carbon pricing, along with incentives to reduce emissions.

We see this happening in Germany, Sweden and Britain, three developed and industrialized countries where policies have spurred investments in clean technologies and reduced dependency on fossil fuels. All three nations are on track to meet their Kyoto commitments.

But three countries can’t stop global warming. To stop climate change before it’s too late all major carbon emitting nations in both the developed and developing worlds must unite under a single policy regime.

And we must manage energy use as a single planet, not 180-plus countries. Current energy-use trends put the world on track for a temperature rise of up to six-degrees Celsius. Cost-effective technologies to avoid such catastrophe are within our reach. But they won’t come cheaply.

Because of the cost, most - probably about 80 per cent - of the money needed to deploy clean energy technologies will come from the private sector. Governments simply cannot solve climate change without the full participation of the private sector. But the private sector needs committed governments and clear rules. Public financing should work alongside, and help spur, private markets and capital.

Copenhagen is absolutely critical but even the outright success there will not solve climate change. More important will be post-Copenhagen policies and programs to make investment in clean technologies more attractive.

This is where political leadership becomes imperative but, alas, where many governments are found wanting, including those of the United States and Canada.

Transparency, longevity and certainty - TLC - in carbon policies are all critical to maximize the mobility of capital. Investors are increasingly concerned about regulatory risks - the chance that rules may change or have unforeseen effects. Such risks can scare off investors who would otherwise provide the funds necessary for the large-scale clean technology investments the world so badly needs. Those countries that do have transparent, comprehensive and consistent rules will be better able to attract global capital to their green enterprises.

If companies see that governments mean business, they will invest. But the same goes in reverse: wary and uncertain action by governments scares off business.

Fortunately, next week in Copenhagen world leaders have a perfect opportunity to show their commitment.

The goal of the Copenhagen meetings is to reach an agreement on a global 80-per-cent reduction of greenhouse gases by 2050. Notwithstanding that goal the reality is that Canada (along with many other high emissions nations) will be extremely lucky to reach its stated goal of a 20-per-cent reduction of emissions by 2020. Achieving that target will require major policy changes to reduce energy consumption, the introduction of new technologies on an unprecedented scale and major financial investments in transportation, green buildings and energy infrastructure.

Such a transformation requires long-term horizons to maximize results. They also need policy realism, political leadership and co-operation and enthusiasm from the public. And still, governments will be forced to make tough decisions.

In the United States, President Barack Obama’s stimulus package aims to create or save between three and four million American jobs by 2010. At $825-million (U.S.), this works out to around $235,000 per job.

The private sector is much more efficient: Nicholas Parker’s Cleantech Group has calculated that every $100-million of venture capital that is invested in clean technology creates 2,700 jobs. This works out to $37,000 per job, a huge savings in anybody’s book. But the availability of such sums of venture capital money - and Parker’s mood when he speaks at the GLOBE 2010 conference next March in Vancouver - will depend on government’s support for clean technology and the coming climate summit.

Copenhagen will not produce a final climate change agreement, but it can start us on the path to one and, perhaps even more importantly, give us a signal that says, to quote President Obama’s eloquent mantra, 'Yes We Can, and Yes We Will.'

Dr. John D. Wiebe is President and CEO of the GLOBE Foundation of Canada, a Vancouver-based not for profit organization that provides a forum for leadership on matters related to the business of the environment and the path to sustainability.

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