Climate Change -- A Major Business Opportunity
Tom Delay, chief executive of the Carbon Trust, challenges business to adopt a rational approach to global warming.
Climate change may seem to us a remote problem -- and the most tangible consequences could be up to 50 years away. However, there is a direct relationship between our day-to-day activities and this problem. The challenge is to adopt a rational approach.
Whilst we need to be concerned, we can find reassurance in the knowledge that there is a relatively straightforward answer to this problem. To stabilize the atmosphere and stop climate change, emissions of greenhouse gases -- particularly CO2 -- must be reduced. To reduce CO2 emissions there must be a shift towards a ‘low carbon economy’.
Three key developments can help: a move to an economy with lower energy consumption per unit of GDP; better use of energy through greater energy efficiency; and more use of lower carbon energy sources such as gas, renewables, or nuclear. The balance will depend on cost, security of supply and public acceptance and clearly, the ongoing debate shows how varied opinions can be on what is the best way forward.
Carbon Trust has assessed the relative impact of these changes and the technologies which will drive them. The outcome is clear: it is technologically feasible for the U.K. to reduce its CO2 emissions by 60% or more by 2050.
This may all be achieved at little or no cost. Economic research suggests an impact ranging from a 4% loss in GDP to a 3% increase. In practical terms, this means that in the latter case, we would lose 1-2 years of economic growth over a century but in the former, we would be better off economically. One thing is certain - it will almost certainly cost more to stop climate change or adapt to its consequences if we wait to act.
So what should we do? In a transition driven by legislation and standards rather than by consumer demand, governments must signal their long-term commitment to addressing climate change. Political support in the U.K. is particularly strong and the set of policy measures extensive. For example, the U.K. is one of the few countries with a tax on energy use - the Climate Change Levy; we also have a trading system for emissions credits that should reduce the overall cost and various incentives to stimulate market and technology development. Going forward, the effectiveness of these policy measures needs to be reviewed regularly to ensure that behaviors change and investment is stimulated.
The recently-published U.K. Energy White Paper has confirmed the aspirational target of having at least 20% of energy in the U.K. produced by renewables by 2020. The next step is to turn aspirations into reality with tangible policies, programs and, most importantly, results.
In the transition to a low carbon economy, the winners will be those organizations which capture the tide of increased demand for low carbon products, services and behavior, reduce their energy costs and manage risk better. Significant results are already being achieved.
Earlier this year, the government announced that U.K. companies in climate change agreements had cut CO2 emissions by 13.5 million tons in 2002 -- almost three times above their collective targets. That is an excellent achievement. It demonstrates that U.K. businesses are already seeing the benefits of reducing their CO2 emissions and it is proof that voluntary agreements between government and business can work and work effectively. Those companies have led the way. Their achievements demonstrate that the potential for both CO2 and cost savings is real and is there for the taking. The challenge now is to build on this success and set a course for a low carbon economy.
What can businesses do?
Tackling climate change offers genuine commercial opportunities for businesses in two key areas.
First, by increasing energy efficiency, businesses can significantly reduce their energy use -- and hence CO2 emissions. Potential energy saving measures exist across all sectors but these are currently stifled by short-term budgeting and the low priority of energy costs on many management and domestic agendas. Obviously all businesses -- from SMEs to multinationals - have a vested interest in reducing their energy bills through improved efficiency. The potential for cost savings from up-front investment -- for which important tax incentives exist through the U.K. government’s Enhanced Capital Allowances scheme -- can deliver a significant impact to the bottom line.
Second, there is major potential for companies to develop low carbon products and services - including new, renewable energy sources - to meet the demands that increasing legislative and consumer pressures will bring. The Organization for Economic Co-operation and Development values the global environmental goods and services industry at £200 bn per annum, growing at 6% per annum. This means major commercial opportunities for low carbon products, services and technologies.
The message for businesses is clear -- take action now. The shift towards a low carbon economy provides significant commercial opportunities. It will be the organizations which see this potential early that will benefit the most.
We must not underestimate the scale of the challenge in tackling climate change but, at the same time, organizations should see climate change as the business opportunity it really is rather than as an economic threat.
----
Tom Delay is chief executive of the Carbon Trust, a U.K.-based organization dedicated to making business sense of climate change.
This article first appeared in the Energy and Climate Special Report published in September 2003 by Edie News, a GreenBiz.com affiliate.
Whilst we need to be concerned, we can find reassurance in the knowledge that there is a relatively straightforward answer to this problem. To stabilize the atmosphere and stop climate change, emissions of greenhouse gases -- particularly CO2 -- must be reduced. To reduce CO2 emissions there must be a shift towards a ‘low carbon economy’.
Three key developments can help: a move to an economy with lower energy consumption per unit of GDP; better use of energy through greater energy efficiency; and more use of lower carbon energy sources such as gas, renewables, or nuclear. The balance will depend on cost, security of supply and public acceptance and clearly, the ongoing debate shows how varied opinions can be on what is the best way forward.
Carbon Trust has assessed the relative impact of these changes and the technologies which will drive them. The outcome is clear: it is technologically feasible for the U.K. to reduce its CO2 emissions by 60% or more by 2050.
This may all be achieved at little or no cost. Economic research suggests an impact ranging from a 4% loss in GDP to a 3% increase. In practical terms, this means that in the latter case, we would lose 1-2 years of economic growth over a century but in the former, we would be better off economically. One thing is certain - it will almost certainly cost more to stop climate change or adapt to its consequences if we wait to act.
So what should we do? In a transition driven by legislation and standards rather than by consumer demand, governments must signal their long-term commitment to addressing climate change. Political support in the U.K. is particularly strong and the set of policy measures extensive. For example, the U.K. is one of the few countries with a tax on energy use - the Climate Change Levy; we also have a trading system for emissions credits that should reduce the overall cost and various incentives to stimulate market and technology development. Going forward, the effectiveness of these policy measures needs to be reviewed regularly to ensure that behaviors change and investment is stimulated.
The recently-published U.K. Energy White Paper has confirmed the aspirational target of having at least 20% of energy in the U.K. produced by renewables by 2020. The next step is to turn aspirations into reality with tangible policies, programs and, most importantly, results.
In the transition to a low carbon economy, the winners will be those organizations which capture the tide of increased demand for low carbon products, services and behavior, reduce their energy costs and manage risk better. Significant results are already being achieved.
Earlier this year, the government announced that U.K. companies in climate change agreements had cut CO2 emissions by 13.5 million tons in 2002 -- almost three times above their collective targets. That is an excellent achievement. It demonstrates that U.K. businesses are already seeing the benefits of reducing their CO2 emissions and it is proof that voluntary agreements between government and business can work and work effectively. Those companies have led the way. Their achievements demonstrate that the potential for both CO2 and cost savings is real and is there for the taking. The challenge now is to build on this success and set a course for a low carbon economy.
What can businesses do?
Tackling climate change offers genuine commercial opportunities for businesses in two key areas.
First, by increasing energy efficiency, businesses can significantly reduce their energy use -- and hence CO2 emissions. Potential energy saving measures exist across all sectors but these are currently stifled by short-term budgeting and the low priority of energy costs on many management and domestic agendas. Obviously all businesses -- from SMEs to multinationals - have a vested interest in reducing their energy bills through improved efficiency. The potential for cost savings from up-front investment -- for which important tax incentives exist through the U.K. government’s Enhanced Capital Allowances scheme -- can deliver a significant impact to the bottom line.
Second, there is major potential for companies to develop low carbon products and services - including new, renewable energy sources - to meet the demands that increasing legislative and consumer pressures will bring. The Organization for Economic Co-operation and Development values the global environmental goods and services industry at £200 bn per annum, growing at 6% per annum. This means major commercial opportunities for low carbon products, services and technologies.
The message for businesses is clear -- take action now. The shift towards a low carbon economy provides significant commercial opportunities. It will be the organizations which see this potential early that will benefit the most.
We must not underestimate the scale of the challenge in tackling climate change but, at the same time, organizations should see climate change as the business opportunity it really is rather than as an economic threat.
----
Tom Delay is chief executive of the Carbon Trust, a U.K.-based organization dedicated to making business sense of climate change.
This article first appeared in the Energy and Climate Special Report published in September 2003 by Edie News, a GreenBiz.com affiliate.