Big business wants big cuts in emissions

Tokyo, Japan - The top executives of 100 of the world’s biggest companies are calling on the world’s top political leaders to agree to huge cuts in greenhouse gases to stimulate a “green industrial revolution”. But the message may fall on deaf ears as insiders planning the upcoming G8 Summit in South Korea next month say no breakthroughs are likely.

Detailed climate change recommendations to the GLOBE 2008 Summit, backed by the influential group of CEOs from many of the world’s largest companies were delivered to Prime Minister Yasuo Fukuda of Japan, who will host the G8’s annual summit in July, 2008 in Hokkaido. Despite the clear signal that world leading businesses are ready to take action, G8 heads of government are not expected to announce any significant long-term pledges on cutting greenhouse gases.

The recommendations presented by the CEOs outlines a new, more “environmentally effective and economically efficient” long-term policy framework to succeed the Kyoto Accord. The recommendations are the culmination of a year of discussions facilitated by the World Economic Forum (WEF) and the World Business Council for Sustainable Development (WBCSD).

In total, 99 companies from around the world, including Alcoa, British Airways (BA), Deutsche Bank, EDF, Petrobras, Shell and Vattenfall, argued that cutting emissions must be made to carry economic advantages. The recommendations were presented on behalf of the group of 99 chairmen and CEOs by World Economic Forum Executive Chairman and Founder Klaus Schwab.

Citing scientific and economic evidence assembled by the Intergovernmental Panel on Climate Change (IPCC) and the Stern Review mean, they believe, that taking climate action now would be prudent.

“While recognising that there are still some uncertainties in the scientific and economic evidence available, these CEOs conclude that a responsible risk management approach to the issue requires political and business leaders to take action now,” the document states.

In their recommendations, the CEOs urge adoption of a rapid and fundamental strategy by governments to bring about a low-carbon world economy. They call on the G8 and other developed country governments to provide leadership through deep absolute cuts in their greenhouse gas emissions (GHG), as well as direct work with the international business community to develop a pragmatic strategy of cost-effective, medium-term carbon abatement opportunities.

The new policy framework recommended by the CEOs represents a significant departure from the structure of the 1997 Kyoto Accord - more flexible and more results-oriented.

The business executives suggest a combination of top-down international commitments by governments, particularly by developed economies but also including emerging economies, and practical bottom-up efforts within and across industry sectors in the form of a multifaceted agenda of intensified public-private cooperation.

These efforts will be aimed at speeding the development and diffusion of low-carbon technologies, mobilizing financial support to help developing countries adopt such technologies, spurring changes in consumer purchasing behaviour, and establishing common metrics to create a positive dynamic of improved corporate benchmarking, disclosure and investment decision-making with respect to GHG mitigation.

At the same time, the business heads urged adoption of both a long-term goal, such as the aspiration to at least halve global GHG emissions by 2050, and a series of clear intermediate targets to be achieved in the least cost-effective manner possible through the use of market mechanisms that create clear economic value from emission reductions, including a deep and liquid international market for carbon.

They also noted that economic opportunities will arise from change solutions. “We see enormous opportunities for the financial industry, beyond the challenge we face as global citizens,” said Caio Koch-Weser, vice chairman of Deutsche Bank. “If leadership is there to create a Kyoto successor that is based on cap and trade, then it creates a global carbon market - and then we are in business.” Most importantly, the recommendations clearly show that businesses around the world are committed to helping develop solutions to climate change.

The business leaders hope their ideas will feed through the G8 into the series of UN climate meetings that are aiming to produce a successor to the Kyoto Protocol when its current targets expire in 2012.

Some of the report’s elements fall close to aims already articulated by political leaders. Last week, Mr. Fukuda declared an ambition to cut Japan’s greenhouse gas emissions by 60-80% by 2050.

“It’s important that the business community demonstrates a desire to work with governments to tackle the challenge that climate change represents,” said BA CEO Willie Walsh. “But the report makes it clear that business can’t operate in a policy vacuum - we need strong leadership from governments.”

Only time will tell if the CEO’s message gets through. At the G8’s most recent planning meeting in Seoul, South Korea, a draft accord on greenhouse gas emissions was reached. The draft will be presented at the G8 summit next month but sources at the talks said there were no breakthroughs in the pact.

South Korea’s Foreign Ministry would not release details of the tentative deal but said in a statement it included “setting mid-term and long-term goals to reduce greenhouse gas emissions, technology transfer and financing”.

“The business community has a crucial contribution to make to the design of a more effective global strategy to combat global warming, and these business leaders are sending a clear message to governments that they are willing and able to engage with ideas and other support if invited to do so,” said World Economic Forum Founder and Executive Chairman Klaus Schwab.

“Having reached consensus among leading firms from virtually every industry and region, they have given us a concrete vision of how the international community could construct a plan that is both environmentally and economically sound.”

You can return to the main Market News page, or press the Back button on your browser.