burson-marsteller copenhagen insight

8/14/2019 Burson-Marsteller Copenhagen Insight

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ROAD TO COPENHAGEN

THE COPENHAGEN CLIMATE CHANGE TALKS:

WHAT IMPACT ON BUSINESS?

INTRODUCTION

CLIMATE CHANGE

KEY ISSUES

Any agreement at the talks on climate change will be a complex matrix of

environmental, economic, scientific, political and social considerations

comprising emissions targets, the role of emerging economies, compensation

for vulnerable low-lying nations, and the use and funding of new technology.

Four necessary building blocks of a successful climate change

framework at Copenhagen will be agreements on the following

broad key negotiation issues1:

Emission reduction commitments from developed countries

should be the basis of any global agreement. The criteria for judging the

comparability of targeted reductions and the degree of enforceability lie

at the heart of the negotiations. Opinions diverge deeply because many

countries use different criteria and a different benchmark year to assesstargets. This debate focuses on whether to calculate individual targets by

comparing the clear-cut economic costs of making emission cuts or by

comparing a set of criteria such as ability to pay, mitigation potential,

business-as-usual (BAU) emissions growth and historic GHG emissions.

Matching commitments from developing countries are needed to

reach a peak in global emissions in the next two decades, since the rates of

growth in their emissions are much higher than in the developed world.

However, developing countries point out that they bear less historical

responsibility for the emissions already in the atmosphere, and that their

emissions per capita are far less than those of the developed world. They

view demands for binding emissions reductions as being at odds with

the Millennium Development Goals. The role of so-called offsets is alsoimportant since emerging economies deplore this approach, which allows

developed countries to pass up domestic emission reductions by paying for

efficiency projects in developing countries where it is cheaper.

Funding and the financial architecture refer to the necessary

arrangements for money transfers from developed countries to developing

countries. It is still unclear exactly what wealthier countries, especially the

United States, will propose. According to European estimates, the total

net additional cost of mitigation and adaptation in developing countries

could amount to 150bn USD annually by 2020. This bill needs to be

shared between domestic financing, carbon market-based financing and

international aid. A quasi-global emissions market could lessen the need for

government funding, generating billions in financial flows. However, in

recent negotiations, developing countries have requested up to 400bn USD

a year by 2020, far outstripping the money that developed nations are

likely to propose.

Technology transfer arrangements refer to the process of sharing

skills, technologies, processes and R&D to ensure that low-carbon energy

and mitigation technologies are accessible to a wider range of countries. For

example, the EU has announced plans to finance pilot projects of carbon

capture and geological storage technology in cooperation with China. This

could act as a model for international action to combat climate change.

Intellectual property (IP) rights are critical to this, as most of the low carbon

technology is usually owned by the private sector in developed countries.

Developing nations, with the support of key environmental NGOs, argue that

climate technologies should either be open-sourced as common property or

provided on highly favourable terms.

1 Other issues on the table include reform of the Clean Development Mechanism (CDM; agreed under the

Kyoto deal), and inclusion of issues such as forestry, the global carbon market, aviation and shipping.

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Despite much optimism earlier this year that Copenhagen would

produce a breakthrough deal on climate change, the odds are now

equally on a breakdown. We are presently witnessing official and poli-

tical efforts to lower expectations for a substantial deal, and to shift

focus to the detailed negotiations that are expected to follow the

conference.

However, climate change is now almost universally accepted as the key

global challenge facing human civilisation. The upward trend in extremeweather events, changing patterns of rain and drought, melting polar icecaps and rising sea levels are seen as signs that we are already experiencing

early impacts of climate change due to greenhouse gas (GHG) emissions.

The United Nations Climate Change Conference, which will take place at the

Bella Centre in Copenhagen, Denmark, from 7- 18 December 2009, is a keymilestone in global action against this problem.The conference is comprisedof the 15th Conference of the Parties (COP15) to the United Nations

Framework Convention on Climate Change and the Fifth Meeting of theParties (COP/MOP 5) to the Kyoto Protocol.

The meeting aims to agree a new framework for coordinated internationalresponses to climate change beyond 2012 to supersede the Kyoto Protocol.The key political challenge will be to reach an agreement in which both the

developed world and developing nations accept mutual obligations that areequitable, proportionate, measurable and accountable.

This Burson-Marsteller Insight looks at the main players and issues for thesevital talks and at the impact of the climate change conference on business.


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It is generally accepted that the COP-15 outcome critically

depends on four key players: the developed world economic

powers of the European Union and the United States, and the

two emerging powerhouses of India and China:

The European Union has made a commitment to cut

emissions by 20% below 1990 levels by 2020, as

stipulated in the climate change package passed last year. The

EU has provisions to increase its commitment to 30% if other

developed nations commit to comparable reductions. In the

mid-term, the EU says that developed countries could achieve

collective reductions of 80% by 2050. The EU advocates that

developing countries must reduce their emissions by 15-30%

below BAU levels by 2020, following the principle of common

but differentiated responsibilities. The European Commission

has put forward a blueprint for a proposed EU contribution of

some 3-22bn USD a year by 2020 for climate change financing

to developing countries. After the last negotiations between the

EU and US, EU officials expressed concerns that the American

position is weak, and as a result the Copenhagen agreement

could turn into a mere political declaration.

The United States House of Representatives haspassed the Waxman-Markey climate bill proposal,

which calls for emissions from the US to be reduced to 17%

below 2005 emissions levels by 2020, and 83% by 2050.

However, the 2020 target translates into a reduction of around

only four per cent compared to 1990 levels. Furthermore, the

Senate vote on the Waxman-Markey bill is delayed and is now

not expected until after Copenhagen, since the Obama adminis-

trations main priority is healthcare reform. Without a clear view

from the Senate, it will be very difficult for the President to make

any precise commitments to reduction targets seen by Europe

as the essential condition for success in Copenhagen.

Moreover, in the past, fearing economic disadvantage the USnever ratified the Kyoto Protocol because it exempted developing

nations such as China and India from mandatory emissions

cuts. The Senate could end up accepting emissions limits but

only if trade penalties can be imposed on countries that do not.

That could trigger new geo-political earthquakes along the

developed-developing world fault line. As for the financing

question, the US has yet to make any formal public offers.

India has rejected any proposals to have developing

countries reduce their emissions by 15-30% below

BAU levels by 2020. It is categorically opposed to binding commit-

ments for developing countries but has pledged that it will not

allow its per capita emissions to exceed the average per capita

emissions of developed countries. India argues that developed

countries should help finance a climate fund of up to 250bn

USD annually by 2020, as well as technology transfer cooperation.

Domestically, India has so far focused on improving energy efficiency

by introducing legislation and by establishing a Bureau of Energy

Efficiency. The country has also set itself a string of targets,

such as to improve efficiency of coal-fired stations, to better the

fuel economy of cars, and to increase the share of rail freight.

In the negotiations, India has strongly criticised proposals for

carbon protectionism and prefers a clause that would prevent

governments from erecting trade barriers to punish nations that

have lower carbon emissions targets.

China insists that it should not be forced to make

legally binding commitments, pointing to its efforts to

produce more renewable energy and to become more energy-

efficient. It has requested that developed countries commit to

reducing emissions at least by 40% by 2020 (compared to a

1990 benchmark). On financing, Chinas position is that developed

countries should dedicate up to 1% of their GDP for climate aid

in developing countries. Domestically, China has outlined plans

to introduce alternative energies to coal which currently fuels

more than 70% of its electricity. It has set itself a target to source15% of its energy from low carbon technologies such as solar,

wind biomass and nuclear by 2020. China considers that its

capacity for green growth and innovation is far greater than

developed countries and it has pledged to reduce the carbon

intensity of its economy from 2005 levels. Furthermore, China

wants to improve ex-ante environmental evaluation of new

economic projects.

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KEY PLAYERS

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Unless rich nations agree to do

more to cut emissions, this year's

UN climate conference in Copenhagen

may be half-bakedYvo De Boer, Executive Secretary of the United NationsFramework Convention on Climate Change (UNFCCC)

The wiggle room is there even at

the stroke of midnight when

the conference is ending"Rajendra Pachauri, Chairman of the Intergovernmental Panelon Climate Change (IPCC)

CLIMATE CHANGE


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ROLE OF BUSINESS

The key question for business will be whether a clear roadmap will be

agreed in the form of a deal to slash emissions without crippling the world

economy. A business-friendly deal at Copenhagen could create the neces-

sary conditions for investments to create a low-carbon global economy.

The business community is formally represented at the United Nations

Climate Change Conference by the International Chamber of Commerce

(ICC) and the World Business Council for Sustainable Development (WBCSD),

and individual member companies of both organisations (which can also

attend as part of national delegations or as members of professional and

scientific institutes). A large number of companies with low-carbon energy

technologies will also exhibit at the conference and participate in fringe

events to promote their solutions and products.

In New York on September 22, at the UN Leadership Forum on Climate

Change, 200 of the worlds largest companies joined leading NGOsincluding Greenpeace and WWF to sign the Declaration by Business,

Investors and Civil Society an appeal to world leaders for a decisive

outcome at COP-15. Among the key points in the Declaration:

A global agreement on climate and a sufficient price for carbon that will

help ensure the continuation of a global marketplace based on openness

and competition. Strong markets are needed to diffuse climate solutions.

Transition to low-carbon production and consumption presents a

tremendous value creation opportunity. By retooling the global economy in

this way, opportunities will arise in new markets, products and industries.

Only through regulatory certainty can an engine of green growth emergewhich drives innovation, spurs massive global investments and enhances

efficiencies, allowing climate mitigation and adaptation approaches to

reach full scale.

The transition to a low carbon economy is well within reach. Now what

is needed are the right incentives and regulatory certainty.

Equally, the Declaration was clear as to the impacts of a poor agreement

or failure to reach agreement:

Trade tensions and competitive distortions that not only threaten the

foundations of our global economy, but also any future advances in sustai-

nable economic and social development.

A lack of a global climate agreement and clear pricing on carbon will

undermine existing investments and projects and lead to higher costs for

business.

As increasingly supported by business advocacy groups, a good outcome for

business would probably include a specific target to reduce emissions byaround 50% by 2050 (which implies an 80% reduction in developed

countries); a commitment to a global carbon market mechanism, preferably

building on cap-and-trade schemes such as the EU Emissions Trading

Scheme (ETS); strong support for Carbon Capture & Storage (CCS) as a

significant abatement technology; and a mandate for climate change

technology funds to be used for early-stage R&D as well as demonstration

and deployment phases of promising technologies.

One of the key negotiations the target for the stabilisation level of CO2-

equivalent (CO2e) atmospheric greenhouse gases will be closely watched

by business2. The lower the target, the more difficult the adjustment will be

for high-emitting industries.

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2 The concentration of atmospheric CO2 today is around 385 parts-per-million (ppm), or 420 ppm on a

CO2e basis (which includes other GHGs such as methane). Business has generally assumed targets

being set of 450-500 ppm but there is now a substantial science-led push for a target of 350-400ppm.


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LOW CARBON FUTURE FOR BUSINESS

In a relatively short timeframe the drive for a transition to a low-carbon

economy once the preserve of NGO voices on the fringe and lone crusaders

like Vice-President Al Gore has moved to the mainstream and sits at the

centre of most government strategies for both energy security and industrial

renewal. Therefore, while Copenhagen is likely to prove to be a reality check,

we can expect this trend to accelerate and broaden.

For companies, particularly those in high-emission industrial and agri-

business sectors, it is extremely important to consider the impact of

public expectations around climate change together with government

regulations when developing their current and future business strategy.

The challenge on an operational level is to make sure that potential risks are

minimised and that potential business opportunities are identified early on in

the formulation of climate strategies.

The implications of this rapidly-shifting landscape are significant:

Companies will need to prepare scenarios for course-changing strategies

or responses based on different (lower) targets for GHG stabilisation.

Compliance with existing targets or voluntary commitments is unlikely to beenough companies should start now to plan for accelerated programmes of

emission reduction and/or offset and/or deployment of mitigation technologies.Such plans will be more credible if supported by third-party verification.

Companies should be prepared to move towards disclosure require-

ments about climate risks and impacts, which could require detailedinformation on identified business risks and strategies in the overall

context of emission reduction targets. It is likely that these requirements

will build on mechanisms developed by think tanks such as CERES andthe Investor Network on Climate Risk (INCR).

A board-approved policy on climate change is increasingly seen as a

basic credential for stakeholder engagement in environmental policy issues.Whether your company is concerned with reducing emissions to comply with

national or international regulations, or whether you wish to make your ownvoluntary commitments, addressing these challenges requires an integratedpublic affairs and communications strategy.

Companies and industry sectors will need to be prepared to communicate

a clear vision on how they are adapting their business strategies to addressclimate change. Furthermore, such communications will need to address anincreasing degree of public scepticism over greenwashing.

Employee engagement provides a powerful opportunity for companies toboth align their people around the vision and response, but also to buildword-of mouth understanding through their employees own spheres of

influence and social networks. Sharing the CEOs view of developments and

outcomes from COP-15, for example, would be a good place to start butembedding an ongoing engagement programme on climate change issues

would constitute best practice.

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CONTACTS

Bill Royce, Managing Director

Practice Leader EMEA Energy,

Environment & Climate Change

Burson-Marsteller (London)

Email: [email protected]

Tel: +44 20 7300 6310

Eric R. Biel, Managing Director

Corporate Responsibility

Burson-Marsteller (Washington)


Tel: +1 202 530 4559

Volker Wendt, Director

Deputy Practice Leader EMEA Energy,

Environment & Climate Change

Burson-Marsteller (Brussels)


Tel: +32 2 743 66 29

Ian R. McCabe, Managing Director

Public Affairs & Government Communications

Burson-Marsteller (Hong Kong)


Tel: + 852 2963 6700

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