Tuesday, October 11, 2011

CBI urges Government to give investors certainty so business can fight climate change

Neil Bentley
Businesses want to and must maintain the trend to low carbon innovation, but need more investment, which requires commitment from politicians, both CBI Deputy Director-General Dr. Neil Bentley and Christiana Figueres, Executive Secretary of the UN Framework Convention on Climate Change (UNFCCC) told an audience of business leaders and the Energy Secretary Chris Huhne at the CBI’s first international Green Business Dinner in London last night.

Ms. Figueres also said that when countries like Britain fulfilled ambitious climate change targets this encouraged poorer countries like China and India to follow suit.

Companies are being given the wrong value by world stock markets, because the cost of their exposure to climate change is not being factored in, she said. "As long as these companies [that emit large quantities of greenhouse gases] have a high value, we are giving out the wrong signals," she said. "It has got to be that those companies that are investing in the technologies of the future are recognised."

She said that companies ought to take on board the political target of keeping global average temperatures below 2oC above pre-industrial levels. "We are moving to a low-carbon future – businesses need to understand that signal. This is a megatrend."

She said that by 2031 businesses will need to extract five times the economic value that they do today for every tonne of carbon dioxide emitted, calling on both governments and businesses to unleash the investment needed for "a transformation of the economy".

How committed are the Conservatives?

In the UK, the overwhelming feeling in the environmental industries sector is that George Osborne's speech to the Tory Party conference last week signalled an about-turn in Treasury thinking regarding support for low carbon technology.

Further evidence came from a Sunday Times article that Osborne is delaying rubber-stamping the Renewables Obligation Certificate banding review despite anger from David Cameron and other Ministers from DECC and Vince Cable's Business Department.

The consultation on an increase in speed limits, the proposal to reinstate weekly bin collections and, most importantly, Osborne's commitment to ensure the UK's carbon targets do not exceed those adopted by Europe were defended on Sunday's BBC Politics Show [22 minutes 20 seconds in] by Chris Huhne as marking either no change in the UK's position or not yet proven to have an impact on carbon emissions.

Osborne had hinted in his speech that part of his motivation for being cautious on the low carbon front was that there was opposition to green policies from members of the CBI.

Yet last night at the Green Business Dinner, the CBI’s Dr. Neil Bentley told the Government that British businesses are committed to tackling climate change, but blamed politicians at home and abroad for failing to provide clarity and certainty for investors about issues such as Electricity Market Reform, the Green Deal and a globally-binding emissions deal.

He said, "the case for a global emissions deal is even more compelling".

“Today, we find ourselves not ahead of the pack, but out on a limb," he said. "We’ve got no international deal, no global carbon price, no meaningful EU price and the UK tying itself in costly green policy knots.

"The UK is in danger of straining to hit its targets but missing the point: that we need an economy that’s low carbon and competitive.”

"We wanted first-mover advantage," he said, "We acted on the expectation of a global deal to address our competitiveness concerns. We acted without realising what was around the corner economically."

He blamed dithering and tinkering from Coalition politicians - such as making the Carbon Reduction Commitment into a straightforward tax, "adding to bottom-line costs and doing nothing to help businesses achieve their green goals" - as well as the low price of carbon due to an ineffectively managed EU Emissions Trading Scheme.

Europe's Environment Ministers, also meeting yesterday, are in agreement. They admitted that the number of "Assigned Amount Units (AAUs)" - free permits to pollute given to countries and industry - continues to be a problematic issue affecting the carbon price, but that suddenly reducing the number allocated would cause a mass sale and a price fall, which represents a double bind dilemma.

"We're going to have to continue to work on it," admitted Polish Environment Minister Andrzej Kraszewski after the meeting in Luxembourg.

Dr. Bentley also felt that that "the renewables target has skewed the economics of our energy market". The Treasury's carbon price floor is meant to address this but is not yet in force.

As a result, “investors are struggling to understand how to invest against the proposed framework while the resulting costs could damage parts of our manufacturing sector".

He also said there was "reluctance from financiers to take the risk of underwriting" the Green Deal, which could cause it to fail.

But yesterday, Energy and Climate Change Minister Greg Barker defended the Government's record.

In a statement responding on behalf of DECC to the Environmental Audit Committee's report on carbon budgets, which echoed the CBI leader's criticisms, he said the UK is "doing more than any other country in providing long term certainty to those investing in the low carbon economy".

He added the government was actually doing UK industry a favour by reviewing progress towards the EU emissions goal in 2014, to make sure it wasn't "disadvantaging British industry" and leading to "emissions being shipped overseas".

“Getting the rest of Europe to go further and faster in providing certainty to green investors is vital which is why we’re not letting up in pushing the EU to up its emissions reduction target to 30%,” Barker said.

The need for a deal at Durban

Dr. Bentley's speech underlined the necessity for a deal at the upcoming COP17 UNFCCC climate talks at Durban, since "last year saw the highest level of carbon emissions in history".

"Patience is wearing thin," he said, citing the failure at Copenhagen in 2009 and Cancun last year to reach global agreement. Wrangling "mustn’t drag on and on like the Doha Trade Round".
“In the absence of a deal," he continued, "companies have committed to get on with it because they understand that it’s not about what business can do for sustainability. It’s about what sustainability can do for business, driving innovation in new products and services."

He said the CBI is calling for two main outcomes from Durban: “Certainty that the Kyoto carbon markets will persist even if the protocol expires: if the Clean Development Mechanism is derailed, we’ll lose the most successful part of Kyoto and potential investment.
“And second, getting carbon finance flowing across the world, to places where it can encourage energy efficiency and help countries leapfrog high-carbon development and go straight for those green technologies. This will give the global economy the boost it needs."
He called for "a global, binding and comprehensive climate change deal. Otherwise business and nations will lose faith.”

EU ahead of targets

The EU will go to Durban well on its way to meeting its emissions targets from the Kyoto Treaty, which requires 20% cuts in Europe's emissions from 1990 levels by 2020.

Environment ministers in Luxembourg yesterday also committed to signing up to a 'Kyoto II' agreement at Durban, if other countries agreed.

Despite a 2.4 % emissions increase in 2010, and despite economic growth of 41% over the same period, Europe's greenhouse gas emissions were 15.5% below 1990 levels, according to estimates released yesterday by the European Environment Agency (EEA) on progress to meeting the continent's Kyoto targets.

In fact, the EU is likely to overshoot this target, which has inspired some member states, like the UK, to argue that it should be increased by to 30% cuts by 2020.

Climate Commissioner Connie Hedegaard said the figures showed that the EU has successfully decoupled emissions from economic growth through the wider use of low carbon technologies.

"The EU continued decoupling emissions from GDP during the recession," she said in a statement. "Between 2008 and 2009, emissions fell by 7.1 per cent in the EU-27, much more than the around four per cent contraction in GDP."

Of the 15 EU Member States with a common commitment under the Kyoto Protocol (the 'EU-15'), emissions were 10.7 % below base year levels (1990 in most cases), which is well beyond the collective 8 % reduction target. However, Austria, Italy and Luxembourg were still behind their targets.

"Many different policies have played an active role in bringing down greenhouse gas emissions", Professor Jacqueline McGlade, EEA Executive Director, said.

"Alongside renewable energy or energy efficiency, efforts to reduce water pollution from agriculture also led to emission reductions. This experience shows we can reduce emissions further if we consider the climate impacts of various policies more systematically."

Back at last night's Green Business Dinner, Christiana Figueres also was hoping that major progress will happen at Durban.

“Governments are willing to consider a document that is equivalent to a letter of intent of all Governments to move towards a comprehensive agreement that is binding to all and incentivising to all at some point in the future.”

She admitted that any agreement will take years to draw up but it would be a major leap forward if all countries agreed to the principal of a legally binding treaty.

She also hoped that Governments would agree on how to raise the $100 billion per year by 2020 they have committed to for adaptation to climate change, technology sharing and saving forests.

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