Realising the New Climate Economy: Better together
7 July 2015
We all know that 2015 is a critical year for climate action and sustainable development, with the agreement of a new treaty at the UN Conference of the Parties in Paris at the end of the year, following the agreement of the Sustainable Development Goals at the end of the summer. It will however look very different from the treaty we envisaged all those years ago in Copenhagen and even further back, in Kyoto.
But what should it look like? Today’s Global Commission on the Economy and Climate’s New Climate Economy (NCE) report, of which Cambridge Institute for Sustainability Leadership (CISL) was a contributor, makes the clear case for collaboration for innovation achieving both economic growth and closure of the emissions gap.
The second annual report identifies actions in 10 key areas which can drive growth and achieve as much as 96 per cent of the emissions reductions needed by 2030 to keep global warming under 2°C.
The report calls for any future agreements and successful action on climate change to be built on the bottom-up actions and contributions that international investors, business leaders, communities and governments are bringing to the table. If designed well, this can provide a foundation framework that enhances economic, social and environmental action.
Our most recent work in this area has allowed us to make a significant contribution to the latest NCE report. And in the next few weeks we will be publishing a report containing five case studies of cooperative initiatives that involve the private sector – analysing the initiatives’ current and potential future emission reductions, as well as barriers to, and opportunities for, scaling up their impact.
Understanding the nature of these collaborations, and determining how to increase their impact, is the theme of work being conducted by CISL. Over the past few years, in partnership with sustainable energy consultancy Ecofys, we have been working to track, highlight and support the strengthening of cooperative climate initiatives, including Enhancing Ambition of International Cooperative Initiatives for the Nordic Council of Ministers and a strategy paper for the Dutch government.
More recently, the project launched a public database of climate initiatives. The database offers an online portal for collecting, sharing and tracking information about cooperative initiatives and is already being used as an important tool to support international climate change efforts (for example, the data is being used to feed into the UNFCCC’s NAZCA Portal).
Such collaborations can help to speed up the transition to a low carbon economy by increasing access to cutting edge research and development, new technologies and markets, and access to wider, tested best-practice knowledge bases, and momentum is building. For example, 40 countries have adopted or are planning carbon pricing, and 28 countries are undertaking energy subsidy reforms, aided by lower oil prices. Over 1,000 major companies and investors have signalled their support for carbon pricing.
In addition, companies representing 90 per cent of the global palm oil trade have committed to ending deforestation across their supply chains by 2020. This goal is supported and facilitated by the Tropical Forest Alliance 2020. Ending deforestation would not only provide a stable, sustainable economic base for their products in the future but would also help reduce carbon emissions associated with cutting down trees.
The NCE report clearly shows how working in collaboration can help businesses deliver both economic growth, and make a significant contribution to driving down carbon emissions and managing climate risks. For example, businesses are driving a US$5.5 trillion global market in low carbon technologies and products and the CDP index of companies taking strong action on climate change outperformed the Bloomberg World Index of leading companies by 9.6 per cent over the last four years.
So what should these organisations take away from today’s report? Here are six practical points for business:
- Organisations should adopt and seek to achieve short- and long-term emissions reduction targets.
- Sectors and value chains should agree to market transformation roadmaps commensurate with the long-term decarbonisation of the economy.
- Common standards for measuring, reporting and verifying emissions should be adopted by companies, with results incorporated into integrated financial reports.
- Businesses should work to ensure their representative groups and trade associations do not seek to block action on climate change, and speak out when they do.
- Regulators and shareholders should require companies and financial institutions to disclose critical carbon and environmental, social and governance factors, incorporating them in risk analysis, business models and investment decision-making.
- The finance sector should increase long-term ownership and financing practices, and improve its capacity to facilitate the decarbonisation of the global economy.
While we’re clearly starting to see progress, there is a lot more potential. Countries are currently in the process of announcing their “intended nationally determined contributions” (INDCs) for the Paris agreement that set out their emissions reduction targets for 2025 or 2030. Already it is clear that when all have been added together, the sum total of countries’ national ambitions will fall short of the level required in 2030 to keep global warming under 2°C. What’s more, fewer than 10 per cent of businesses with climate targets have long-term goals in line with a 2°C trajectory.
Today the Global Commission on the Economy and Climate rightly urges the international community to seize the unique opportunities of 2015 and embrace a low carbon, climate-resilient growth and development path, using the Paris agreement as a 'floor, not a ceiling' to ambition, which can be scaled up as technological change and international partnerships create new low carbon opportunities at lower cost.
First published in Business Green.