by: Joel Makower

Two thousand seven is barely a fortnight old, but it's already shaping up to be the year that climate change action reaches a tipping point. The signs seem to be everywhere.

For example, the London-based Guardian reported today that "George Bush is preparing to make a historic shift in his position on global warming when he makes his State of the Union speech later this month," perhaps agreeing to a U.S. cap on greenhouse gas emissions for the first time, the paper suggests.

And then there's the Reuters story just out revealing that Exxon met with U.S. environmental groups last month to discuss how the heretofore recalcitrant oil giant might finally respond proactively to global warming. Reported Reuters: "This move was the latest hint that the world's biggest public company could be open to shifting its position of opposing mandatory caps on emissions of heat-trapping gases."

George Bush and Exxon changing their tunes on climate? Maybe pigs DO fly!

I'm not holding my breath on either score. But I'm intrigued and impressed by a new group formed by some of the world's largest companies last week, with an aim to putting "a global framework coming into force in 2013." Translated, that means developing an effective global climate protection policy for the period following the expiration of the Kyoto Protocol in 2013.

The new group, calling itself the 3C Initiative -- for Combat Climate Change -- formed with little fanfare on January 11 in Brussels. It began its life with 18 major corporate members, many from the energy sector, including both power companies (Duke Energy, Endesa, Eskom, PG&E, Suez, Vattenfall) and manufacturers of power-generating equipment (ABB, Alstom, GE, Siemens). The group has issued an "urgent request to the global community and all its representatives" to join in. The goal, says 3C, is:

to underline the need for urgent action by the global community and to influence the post-Kyoto process by demanding a global framework supporting a market-based solution to the climate change issue. This can be achieved by getting as many companies as possible aboard and by getting our common platform well known and well understood.

What's going on here? Has the global business community finally seen the light -- or, perhaps, felt the heat?

That remains to be seen. But these companies join those -- perhaps even Exxon -- that are finding themselves hampered by the lack of certainty about where climate change policy is going -- and, as a result, where carbon markets are headed. And that represents a sea change.

For years, it made sense for companies to dig in their corporate heels on climate: denying the problem existed; or acknowledging its existence but casting doubts about its seriousness and whether humans caused it; or conceding that it was serious and that humans were responsible but arguing over who should "fix" it, who should pay, and how quickly action needed to be taken.

But such delaying tactics no longer play to companies' advantage. With the growing recognition that action is needed and regulation inevitable -- whether in the form of carbon caps, emissions trading, carbon taxes, some combination thereof, or something entirely different -- companies increasingly need to know what lies ahead. Without that knowledge they are less able to plan effectively for the future, from business strategy to investment strategy to market strategy.

The 3C group has rooted its approach in a rather enlightened report published last year by the Swedish energy company Vattenfall, which is coordinating the 3C Initiative. The Vattenfall report (Download - PDF) outlines an "adaptive burden-sharing model" for addressing climate change.

The model is based on the assumption that an overwhelming majority of all countries commit to participate in the system given that they will only face restrictions once the country is wealthy enough in relative terms. The long-term predictability and the flexibility needed for economic growth can thereby be sustained. Most important is that we start now by forming a burden-sharing model built on commitments to long-term reductions.

"Curbing climate change is about combining technology, finance, and policy in a wise way," write the report's authors. "If that is done worldwide a carbon dioxide market will follow. Technology is not an unsolvable problem, given time and incentives, neither is financing. The real challenge is policy."

So, what should an effective climate policy look like? The 80-page report outlines the components in some detail -- more than most readers will likely want or need. What impressed me most were the plan's ten "overriding principles":

  • All countries should participate -- participation is a part of being a member of the global community.  
  • No poor country shall be denied its right to economic development -- no extra cost burden on the poorest.  
  • No rich country shall have to go through disruptive change.  
  • Richer countries pull a larger weight (emission caps do not embrace countries until they have reached a certain economic level; poorer countries with caps get higher allocations compared to richer countries).  
  • There shall be a level playing field. The proposed framework shall not change relative competitiveness.  
  • The system shall be robust. As new knowledge is accumulated parameters may change, but not the principles underlying the system.  
  • Emission caps should be binding.  
  • Emission allowances are allocated to each country in relation to its share of gross global product (i.e. gross GDP).  
  • The final allocation to individual companies or facilities will be made at the national level.  
  • The mechanism should be able to achieve wide acceptance as being fair and balanced. 
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    It all sounds so . . . sensible. Something that should have happened long ago.

    I also commend reading the "3C Statement" (Download - PDF), which summarizes the group's nine key "conclusions" calling for, among other things: a switchover to a "low-emitting economy," a global price on greenhouse gas emissions, a global emissions market, and a combination of both short- and long-term goals. Clearly, this is not big business as usual.

    True, this is not the first time a bunch of big companies have come together to address climate issues. There's the Pew Center on Global Climate Change, a think tank whose members include a few of 3C's members. There's the company members of Ceres, only one of which (PG&E Corp.) is part of 3C. And the U.S. EPA's rather toothless Climate Leaders initiative, which, by definition, includes only U.S. companies. And several other groups, none of which amounts to much, as far as fomenting real action on climate change policy.

    As a result, it's easy to dismiss this as yet another well-intentioned (or, for more cynical readers, ill-intentioned) corporate initiative with no real purpose or plan.

    But maybe not. What's different here is that a corps of corporations from around the world seem to be asking for comprehensive, effective, and fair regulation on climate change. I can't recall that ever happening. And there's some encouragement to be found in the ambitious corporate climate goals of Vattenfall, the group's coordinator. According to its Web site:

    We have a vision and a plan for how to move forward, which could result in almost 80 percent decrease of carbon dioxide CO2 emissions, that would stabilise our atmosphere.

    You can click here to see a presentation of the plan, which extends for the next 100 years.

    Could the world's countries and corporations come together under such an ambitious plan? It seems hard to imagine, given the recent years' struggle to enact -- partially, at least -- Kyoto's fairly weak remedies. But reading 3C's refreshingly frank documents, it seems tantalizingly possible.

    And maybe pigs will, indeed, fly.

    Original Post: http://makower.typepad.com/joel_makower/2007/01/can_the_worlds_.html

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