A $5.5 trillion market for low-carbon technologies
The New Climate Economy report offers some good reasons to be optimistic about countries reaching a climate accord in Paris — or just deciding to take action.
We all know that 2015 is a critical year for climate action and sustainable development with the hope for an agreement of a new treaty at the U.N. Conference in Paris at the end of the year as well as for sustainable development goals at meetings before hand.
The Paris agreement, however, likely will 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 to achieve 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 percent of the emissions reductions needed by 2030 to keep global warming under 2 degrees Celsius.
The report calls for any future agreements and successful action on climate change to be built from 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 contribute to the latest NCE report. And in the next few weeks Business Green will be publishing a report containing five case studies of cooperative initiatives that involve the private sector — analyzing the initiatives’ current and potential future emission reductions, as well as barriers to, and opportunities for, scaling up their impact.
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. 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 signaled their support for carbon pricing.
In addition, companies representing 90 percent 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 not only would provide a stable, sustainable economic base for their products in the future but also would help reduce carbon emissions associated with cutting down trees.
The NCE report clearly shows how working in collaboration can help businesses deliver economic growth and make a significant contribution to driving down carbon emissions and managing climate risks. For example, businesses are driving a $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 percent over the last four years.
So what should these organizations take away from today’s report? Here are six practical points for business:
Organizations 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 decarbonization 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; and
The finance sector should increase long-term ownership and financing practices, and improve its capacity to facilitate the decarbonization of the global economy.
While we’re clearly starting to see progress, there is a lot more potential. Countries are 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 percent 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” for ambition, which can be scaled up as technological change and international partnerships create new low-carbon opportunities at lower cost.