Cutting Carbon

3 December 2009 Björn Stigson

As world leaders meet in Copenhagen to thrash out a successor to the Kyoto protocol, climate change demands a coherent and positive response. Björn Stigson, president of World Business Council for Sustainable Development, tells CEO how the business world needs to improve its approach to energy.

There are moments that come around once or twice in the life of a business that historians and economists will pore over to find lessons for future generations. This year will undoubtedly be one of them, for it is clear we are in the middle of a wholesale transformation of the global economy.

It will be the responsibility of chief executives everywhere to provide razor-sharp insight and leadership that not only addresses the near-term crisis, but also puts the economy on a trajectory of long-term growth. Nowhere is this more vital than in making a faster transition to a low-carbon economy.

Before the end of 2009, important decisions must be made to hasten this process. Negotiations to seek an agreement on a climate change framework will enter their final phase in Copenhagen in December. Whether the world leaders gathering there make the decisions necessary to address climate change for future generations will be the subject of close scrutiny, today and in years to come.

No corner of the globe will be unaffected by these decisions. In a short span of months, governments have collectively committed almost $185bn in green stimulus packages, an important catalyst for the low-carbon evolution, and for revitalising the world economy. Despite a deep global downturn, and a recovery that has so far been weak, clean energy investment has shown strong signs of rebounding in the second quarter.

Essential Agreement

"Business is at the vanguard of applying information and technology to finding ways to avoid the consequences arising from climate change."

An international climate change agreement that leverages business engagement is essential to a low-carbon economy, since business accounts for 80% of global investment in the development, deployment, diffusion and transfer of environmentally sound technologies to address climate change.

Business is a defining element in tackling environmental issues and is deeply engaged in finding solutions. In May 2008, 500 business leaders at the World Business Summit on Climate Change called on the political leaders who will gather in Copenhagen to reach an ambitious agreement that includes emissions targets for 2020 and 2050, and emissions reporting standards for rewarding business performance.

Continuing on our present course will not lead to emissions reductions of 50% by 2050 from current levels, an objective that is being seriously considered in climate change negotiations. That will require an unprecedented investment in clean technology. The International Energy Agency estimates annual incremental spending of $1.2tn is needed to reduce energy-related CO² emissions by 50% by 2050 from 2005 levels.

The World Business Council for Sustainable Development (WBCSD), a grouping of 200 leading international companies, shares its work in sectorial approaches, and for almost 16 years has been researching and working on a wide range of other sustainable development activities in which business is committed.

Business is at the vanguard of applying information and technology to finding ways to avoid the consequences arising from climate change. As a first step in tackling this problem, governments must develop a thorough audit of country and business risks, fed by information supplied by business.

Meeting the growing need for low-carbon energy is one of the major challenges facing business as the world strives to meet climate objectives. This challenge is made all the more formidable since the world’s population is expected to increase 50% by 2050. Delivering heat and light to three billion more global citizens and millions of new businesses must not lead to higher greenhouse gas emissions.

Power Players

A recently-published WBCSD report, Power to Change: A Business Contribution to a Low-Carbon Electricity Future, detailed a list of policies needed at international and national levels to drive the $11.6tn in business investment required in energy infrastructure until 2030. It showed that while many of the technological solutions already exist to address the challenge of climate change, new policies are needed to accelerate the shift.

"The financial downturn cannot be allowed to stall critical investments in power plants and electricity grids."

The financial downturn cannot be allowed to stall critical investments in power plants and electricity grids. Electricity networks, after decades of underinvestment, must be rehabilitated to accommodate intermittent green power from sources such as wind.

Policies must be crafted that pool research and development funds for emerging clean energy technologies, and encourage adoption of energy efficiency measures country by country.

The report also earmarked policies needed to prompt clean energy investment, including consumer tax credits to stimulate greater use of housing insulation, and more research and development for promising technologies, such as wave power. More public funds are needed for big technology demonstration projects, such as carbon capture and storage, where investment for a single project can run upwards of $1bn.

Getting the future electricity supply right also means setting electricity prices correctly, to reflect all costs, including the cost of cutting emissions.

Efficiency Practice

Next to changing the way we produce, consume and move energy, the greatest emissions reductions will come from using energy more efficiently, whether it is the refrigerator we buy or the process we use for making steel. Energy efficiency is expected to make up half of emissions reductions by 2050. Here again, the technology to accomplish this already exists. More challenging is ensuring these technologies are used to their fullest potential.

"Two-thirds of reduced energy use in buildings will come from adopting the best-available design and technical solutions."

The building trade in particular should be the focus of our energy efficiency efforts as it accounts for significantly more emissions than the transport sector. The WBCSD's report, Transforming the Market: Energy Efficiency in Buildings, showed, based on a comprehensive modelling technique, that the building industry is capable of slashing its energy use by 60% by 2050.

Two-thirds of reduced energy use in buildings will come from adopting the best-available design and technical solutions. Several practical steps will also spare energy use, such as reinforcing building codes, conducting regular energy audits and training all building professionals on energy efficiency.

Improving energy efficiency in buildings will provide a much-needed stimulus for the global economy, a large source of new jobs. As many as 20 million jobs could be created in renewable energy.

No economic recovery will be sustainable without an enduring recovery in job growth. Government stimulus programmes only go part of the way but climate challenge requires trillions, not billions, of dollars in new investment.

Let us aim to make 2009 the year when global leaders in business and government seize the challenge of climate change, prompting major investment and closer business-government cooperation. It could well make the difference between a recovery that splutters along and one that is fast off the mark.