After COP 15, What’s the Outlook for Business?

by | Dec 21, 2009

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unilateral emissions cutsWhile the Copenhagen talks yielded a non-binding political agreement, some business sectors say a better outcome would have included a more concrete set of targets.

In the Copenhagen Accord (PDF) that was reached, a cap was set on worldwide temperature increases of no more than 2 degrees. Unilateral GHG targets would be set by each nation (see image).

The agreement puts business leaders in the uncomfortable position of not knowing how environmental policy will force decisions about the costs of doing business, reports the Wall Street Journal.

Without a legally binding carbon target, the outlook for clean tech investment is not as rosy, for instance, said Joan McNaughton, Senior Vice President, Power and Environment Policies, at Alstom Power, a clean-coal firm.

The uncertainty has led to a fall in the price of carbon allowances in the EU, with prices falling 5 percent on Dec. 17, the biggest drop in six months, according to WSJ. Prices fell 8 percent further the morning of Dec. 21, reports Reuters.

Matthew Curtin, a Dow Jones columnist, wrote that the talks proceeded on a faulty premise of tracking how much CO2 gas each nation produces, instead of how much fossil fuel each nation consumes.

For corporate sustainability leaders, the lack of a binding agreement means that multinational firms should update their climate change and sustainability strategies, according to a report from Verdantix, “Business Implications of the Copenhagen Accord.”

Here are some take-aways from the Verdantix report:

From 2010-2011, focus on national climate policies. Consider the business implications of a possible carbon tax in France and allowance auctions in the EU Emissions Trading Scheme and the Carbon Pollution Reduction Scheme in Australia. For companies operating in the U.S., focus on immediate actions regarding CO2 from the Environental Protection Agency.

– Avoid investing in markets covered by the Kyoto Clean Development Mechanism. The global carbon market created by the mechanism may be the biggest casualty from the Copenhagen Accord, Verdantix notes. Poor market rules, insufficient administration and a depressed carbon price make investing in the mechanism “very high risk.”

– Be prepared to explain to company leadership why carbon management should remain a priority. Some CEOs will see the lack of firm emissions targets as a reason to scale back on a company’s carbon reduction plans, Verdantix notes. But the Copenhagen Accord sets in motion a series of nation-based carbon reduction efforts. Additionally, carbon management yields reduced energy costs and builds environmental brand value.

– Conduct a climate change adaptation risk assessment. Consider the impacts on your supply chain from water availability, energy costs and other factors.

Some business sectors, including the aviation and shipping industries, had sought an international accord with defined expectations for their carbon reduction. Without one, companies will be subject to emissions standards that vary from nation to nation, or even by region.

For instance, the EU is planning strict emissions standards for aviation and shipping. The U.S. airline industry has launched a shot across the bow of the aviation emissions standards by filing a lawsuit.

While some EU nations wanted taxes on aviation and shipping to pay for a $100 billion climate fund for developing nations, that approach was fiercely opposed by the sectors, reports the Telegraph.

The European steel industry fears that, without binding international targets, the EU may unilaterally impose a 30 percent GHG reduction target, up from 20 percent. The EU steel industry says it would need free carbon allowances in order to compete internationally with nations that do not have emissions targets, said the European Confederation of Iron and Steel Industries.

Thomas Friedman, the outspoken New York Times columnist, said that the U.S. business sector would benefit from an all-out attempt by the U.S. to control carbon emissions – whether through carbon taxes, pursuit of energy efficiency or construction of renewable energy infrastructure.

The key is economies of scale, he told Grist, in a Q&A. “There’s only one thing that’s as big as Mother Nature and that’s Father Greed. It is the market. And the way you leverage the market is to get the world’s biggest, capitalist country is to take the lead in the clean tech industry,” he told Grist.

Additionally, the lack of a Copenhagen climate deal will have negative implications on the fisheries industry, reports the Business Standard.

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