INSIGHT: Business can move fast to cut carbon

27 November 2007 17:14  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--A key climate change report from the UK employer’s organisation, the Confederation of British Industry (CBI), could energise a broader spectrum of businesses into taking action to reduce carbon emissions.

The trade group’s climate change task force, whose members are drawn from across UK-based businesses, thinks that despite calls for a global carbon tax, international agreement on a global cap and trade system currently looks more likely.

It welcomes the EU’s revamped emissions trading scheme (ETS) but explores ideas that might create more of a level playing field for EU-based producers.

Simply working under the burden of increasingly difficult to achieve carbon reduction targets is not an option for most companies.

The report, entitled "Cimate Change - Everyone's Business" and put together over 10 months with the help of consultants McKinsey & Co, charts the progress that could be possible if companies, consumers and government are able to take more concerted action.

It focuses on what needs to be done by 2030 to be on track to meet the UK government’s 2050 carbon emission reduction targets.

“The report calls for a shift to a world where carbon becomes a new currency so that consumers and businesses are rewarded for making the right choices,” the CBI says.

“Carbon has to be priced according to supply and demand, under a system which leads to lower emissions, crosses national borders and rewards good behaviour,” it adds.

In Europe the climate change debate is moving on fast. Business is reacting not so much to government carbon reduction targets but to a wider groundswell of opinion.

The debate over who might be right or wrong is rapidly becoming a thing of the past.

Some of the leading companies headquartered in the UK, including chemicals giant INEOS, have contributed to the report, which makes significant recommendations on climate change that might impact consumers and business and help drive government intent.

McKinsey suggests, for instance, that the current cost of carbon - under €30/tonne ($45/tonne) - is too low.

Additional action is needed in the UK to meet government targets which imply a maximum price of €40 per tonne of CO2 equivalent by 2030, provided that a full range and scale of initiatives are implemented.

"The maximum price would be higher in 2002 (€60-90 per tonne of CO2 equivalent) and possibly more given the cost of emerging technologies in the short term,” the report says.

CBI task force members have welcomed the report and stressed carbon change opportunities although the threat to energy-intensive sectors such as chemicals is acknowledged.

The possibility of requiring importers of goods from outside the EU to buy carbon allowances according to the carbon intensity of the products they are bringing in could be explored. A contentious point certainly but one which cuts to the thrust of the thinking behind the study.

Indeed, it is not so much the report's recommendations but the impetus that lies behind them in the world of business that are important.

“Are we sure that climate change exists? I am sorry, but that is not a question for us,” says Ben Verwaayen, chairman of the CBI’s Climate Change Task Force and chairman of telecoms giant BT in the report's introduction.

“The best question for the business community is whether we can be certain that climate change presents a substantial risk; a risk that will have a profound impact on society and the economy?

“To this the answer is clearly 'yes'. And so, as with all substantial risks, it is vital to mitigate the danger.”

There has been too much talk about climate change and too little study of how the climate change agenda can become part of what the CBI calls the DNA of business. That, however, is changing.

The CBI report suggests that business is taking climate change much more seriously and can see the opportunities presented by gaining early mover advantage.

($1 = €0.67)

By: Nigel Davis
+44 20 8652 3214

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