Guidelines for a Clean Revolution
The Forum’s Low-Carbon Prosperity Task Force presented its proposals to Gordon Brown, Prime Minister of the United Kingdom, in New York today, where the UN General Assembly is conducting a climate change summit.
“This report shows that there is a strong business lobby for an ambitious climate change agreement at Copenhagen. I welcome the role of this authoritative task force in showing the benefits of such an agreement for low-carbon growth and job creation. I hope other world business leaders will join this initiative,” said Brown.
Richard Samans, Managing Director of the World Economic Forum, said: “The world needs a two-track approach to climate change that includes not only a top-down set of national commitments, which is what governments will try to negotiate in Copenhagen, but also a more direct, bottom-up strategy to speed green innovation, investment and the application of best available technology in the private sector. So far, the international community has focused on the top-down track. This report makes an important contribution to the climate change debate by describing how a complementary strategy of public-private cooperation could unleash investors, consumers and business managers to drive the transition to low-carbon economic growth by removing impediments in a number of crucial areas.”
Sam DiPiazza, former global CEO of PricewaterhouseCoopers International and Chair of the World Business Council for Sustainable Development said: “Building a global, low carbon economy will require the rapid mobilisation of substantial public and private funds. This report sets out specific and practical proposals to encourage both business and investors to get behind the large scale initiatives that are needed to make real progress on tackling climate change. It’s a call for action on a global deal at Copenhagen, and a clear commitment from business leaders to work with governments and policy makers to accelerate the transition to a low carbon economy.”
Finance. Developing country demands for large-scale financial and technological assistance from developed countries has emerged as one of the major sticking points in the UN negotiations. The Task Force breaks new ground by proposing regional, public-private, low-carbon energy investment funds around the world. Run by the private sector, these funds would be capable of leveraging increases in foreign aid many times over with equity and debt investment from private investors.
These public-private funds could mobilize an estimated US$ 50-75 billion every three years in each region of the world. They would achieve this by blending equity investments from a wide range of governments, pension funds, insurance companies, sovereign wealth funds and philanthropies with debt financing.
The creditworthiness of the low-carbon infrastructure projects in which they invest would be enhanced by partial guarantees from multilateral development banks like the Asian and African Development Banks. This financing structure would be capable of generating over US$ 1 trillion in investment in developing countries over the next 15 years. This is far beyond what is likely to be generated by increased foreign aid alone.
Accounting. To empower investors to make more informed choices, the report proposes the creation of a new, uniform accounting standard to permit apples-to-apples comparisons of carbon-related risks and opportunities. This would take the form of a joint project between the International Accounting Standards Board and the Climate Disclosure Standards Board, an organization of businesses and environmental NGOs, to develop an international financial reporting standard for industry climate disclosure that could be adopted by regulators.
Consumers. To help consumers make more informed choices, the report proposes the creation of a global standard for the labelling of carbon footprints on consumer products. This would build on a standard that the business and environmental communities have already established, namely, the Greenhouse Gas Protocol.
Energy Efficiency. To increase the application of the most energy-efficient technology, the Task Force proposes that a new, private sector dimension be added to the post-Kyoto climate framework. It suggests that an official platform be created for companies around the world in the same industry to work together on sharing and spreading technology. Firms and governments would also look to develop minimum global standards for certain energy-intensive industrial products. Patterned on a successful Japanese programme, these efforts would be facilitated by the International Partnership for Energy Efficiency Cooperation (IPEEC) at the International Energy Agency.
Technological Development. To speed the development of promising new technologies and make efficient use of public and private R&D expenditures, the Task Force proposes the creation of public-private consortia:
- A public-private initiative to create an international portfolio of 10 large-scale integrated smart grid demonstration projects across different major cities and regulatory regimes.
- A public-private initiative to create an international portfolio of up to 25 carbon capture and/or sequestration (CCS) demonstration projects between 2013 and 2025.
- A network of regional energy research and innovation centres modelled on the Consultative Group on International Agricultural Research (CGIAR). The new Consultative Group on International Energy Research (CGIER) would support nationally appropriate mitigation action plans. Expertise would be drawn from all sectors and regions, while funding would come from a range of public, private and philanthropic sources.
The Task Force calls upon governments meeting in Copenhagen later this year to authorize work with the private sector and other non-governmental experts over the next two years to build these new, bottom-up pieces of climate change architecture. For reasons of efficacy, it suggests that the process not be limited to the UN, but have a variable geometry encompassing the most relevant intergovernmental institutions processes. This could potentially include the Major Economies Forum, which was established by United States President Barack Obama.
The Task Force argues that adding a practical agenda of public-private cooperation to the international community’s current climate change strategy would be in the political interest of all governments. Scientists have warned that the world must act very soon if it is to succeed in stabilizing greenhouse emissions by mid-century at safe levels.
By taking these steps to spur earlier and more widespread action within the private sector, governments could not only ensure faster achievement of the targets they set in the UN negotiations, but also maintain momentum in the fight against climate change if it turns out that they need more time than anticipated to conclude these talks or implement effective national limits on emissions.
At its Annual Meeting 2008 in Davos, Prime Minister Brown, a Group of 20 Chair, asked the World Economic Forum to create a Task Force including business leaders, NGOs, economists and other experts to come up with proposals on how to begin building the low-carbon economy. Other proposals of the Task Force include:
- Remove energy subsidies - Launch an intergovernmental dialogue among major energy consuming and producing economies to develop an international agreement on removing energy subsidies. Industry representatives and experts would provide input into the agreement, which governments could formally consider in 2011.
- Reforestation - Build international and national structures needed to implement “REDD+” and engage the private sector by 1 January 2013. This could be done through discussions between the public and private sectors as well as international organizations and civil society hosted by key forest nations.
- Carbon markets - Support development of the rules and institutions needed for efficient, interlinked carbon markets. A transparent and structured dialogue between government and private sector experts would define common design criteria to enable linkage and ensure a shared level of environmental integrity across schemes. The discussions would also look to reform the offset market, design features to reduce price fluctuations without distorting the markets, as well as reform the use of revenues from auctioning.
- Adaptation - Develop innovative public-private financing mechanisms for adaptation through discussions between the public and private sectors as well as international organizations, bilateral aid agencies and civil society, hosted by developing countries. Discussions could be launched at the UNFCCC Conference of Parties in Copenhagen (COP15), or shortly thereafter. They would also aim to develop the national policies required to engage the private sector in adaptation and a specific analysis of how to engage the private sector in support of adaptation efforts in least developed countries.
“Over 200 professionals took part in the Task Force - economists, environment experts, representatives from nongovernmental and international organizations like UNEP, OECD and IEA, as well as over US$ 3 trillion-worth of listed companies,” said Dominic Waughray, Senior Director and Head of Environmental Initiatives at the Forum.