How Business Can Help Shape Policy in Copenhagen

How Business Can Help Shape Policy in Copenhagen

So, what's going on in Copenhagen, how is business involved, and what matters to business here?

Last question first. In terms of the climate negotiations, a lot should matter to business over the medium to long term. For companies that have high emissions, or those with big opportunities to sell products and services that reduce or capture emissions, the climate negotiations are key to gaining certainty about how markets will change. The big emitters need this so they know how much they need to invest, and when, in low-carbon capital projects like clean power plants.

Those with new business opportunities want emissions constraints to transform markets as fast as their big customers can stand it without reaching the point where policy causes major financial and political disruption, and they want to know how heavily to invest in new clean technologies.

The Copenhagen talks are not likely to reach a complete new global agreement on climate, but it could frame out major pieces of a global deal and propel further progress in the months ahead.

{related_content}Although how national governments set up national policies and regulations under a global regime will have a more immediate financial impact on business, international emissions limits -- or at least a cap on as many of the major emitters as possible (and clear path to caps for all major emitter countries) -- is ultimately the biggest issue for business.

Caps, combined with taxes and other policies, creates a price signal that will transform the economy and shift market demand for goods and services in favor cleaner technologies.

Also, emissions limits are a prerequisite for establishing global carbon markets, which offer the potential to reduce the cost of climate change for society but also to channel money to the most efficient investments in reducing or capturing emissions. The clearer and stronger the price signal in the market, the stronger the pull will be for early stage investment in next generation technologies.

But there are other big issues for business as well. Whatever the negotiators decide regarding technology diffusion and deployment -- as well as how to finance a major scale-up of R&D, demonstration, and deployment -- will materially affect companies doing international deals in advanced technologies.

Moving beyond notions of "technology transfer" is critically important. Key parts of the negotiations around technology and finance include whether or not a global deal involves any compulsory sharing or pricing of intellectual property and the shape of a global institution that might be created to support technology (or added to an existing body such as the U.N. or World Bank).

COP15 progress on forests and sequestration also matters to business. The greater the progress in opening up various types of forest conservation for offsetting emissions, and in allowing overseas forestry offsets to count for domestic emissions, the lower will be the cost to emitters of meeting regulations.

Another major issue for business heating up the talks in Copenhagen is trade measures against goods that have high embedded carbon. Carbon intensive manufacturers like steelmaker Nucor and utilities like American Electric Power that serve such manufacturers, are pressing the US government to include carbon border adjustments, claiming competitive risk from foreign producers that would not face carbon regulations.

Some labor unions agree. But other major global companies like Caterpillar and Intel argue strongly against distorting trade barriers, saying these could lead to higher costs for them and the potential for spurring retaliatory duties. Chinese officials have objected strongly that some fear border adjustments could launch a major rift in global trade relations.

These issues together shows another broad reason business should get more engaged -- at its core, a lot of the international climate policy challenge is around trade and investment. I and other former negotiators of these issues in the Kyoto Protocol believe the international trade and investment framework may be a better setting to tackle parts of the climate challenge -- at least the bureaucrats and negotiators in those arenas tend to understand better than their counterparts in the UNFCCC world how technology investment and diffusion actually happen.

There are more financially meaningful issues under the UNFCCC negotiations, but I'll leave that for another day.

Now, what's going on in Copenhagen, and how is business involved here?

First of all, Copenhagen is a crazy scene right now -- essentially six or more big global events that are only connected with each other, spread over a picture-perfect city decked out for Christmas, full of lovely old buildings mixed with striking contemporary designs, thousands of bikes everywhere, an astounding mass transit system, and heavy police presence throughout the city growing more noticeable as heads of state start to arrive. The main pieces of the Summit spread around the city include:

• A business convention / trade show for couple of thousand well funded companies that are either Big Carbon and/or those that stand to win big in an emission-constrained world;

• Another less well heeled but more fun and spirited trade show for small and medium green business people;

• A festival-like bundle of events/marches/protest/exhibitions all across the city composed of less-plugged-in NGOs, students, activists, locals, and people that just like being at festivals;

• A convention of state and municipal governments working on local green policies, programs, and partnerships (note that states and cities are taking a lead on climate ahead of the federal government in the U.S., Australia, and many countries -- as Michael Northrop and David Sassoon wrote last week in Yale's Environment 360;

• The actual Conference of the Parties (COP) -- government negotiators over at the "Bella Center" (a huge convention center on the outskirts of town) along with numerous NGOs and some of the savvier business community people trying to lobbying them;

• Something akin to a huge academic conference with presenters sharing a vast amount of information, analysis, and opinion about climate science, clean tech, business and finance issues, policy options, etc.

The big business convention ran mainly from Friday through yesterday, including World Business Day and Copenhagen Climate Council meeting at the iconic Kronborg Castle outside Copenhagen (famed as the place where Shakespeare wrote Hamlet).

Dozens of corporate leaders have talked about major initiatives and investments that prove the potency of the private sector to deploy climate-friendly technologies on huge scale -- at least when markets are adjusted appropriately by policy.

When it comes to policy, though, business engagement in COP negotiating process at the Copenhagen Summit is far from what is needed.

Jim Rogers, CEO of Duke Energy, summarized Friday's CEO roundtables saying that business needs to have one voice calling for a government framework now, because business needs that certainty to operate -- and to make the deep investments in R&D and deployment of new clean technologies, because there is no way that investment will come from governments. His call has been echoed by many others -- Coca Cola CEO Muhtar Kent, Deutsche Bank's Kevin Parker, etc.

This is for two main reasons.

First, the business voice in Copenhagen is saying something a lot different from what government leaders are hearing at home, in the national capitals and the places where they were elected. This is especially true in the U.S., but it is certainly true in other countries as well.

Whereas most of the business participants in the early days of the international climate negotiations where opponents of emissions limits, Copenhagen is filled with companies that see some combination of opportunity or the dire need for certainty. As one U.S. CEO pointed out at Business Day, there are [2700] lobbyists in Washington; only 200 of those are work for the pro-cap companies here in Copenhagen.

Second, the UNFCCC negotiating process simply is not set up to allow the business community to weigh in effectively. Yvo de Boer, who heads the U.N.'s management of the negotiations, challenged the participants in World Business day, saying they are not doing enough -- calling on business to help negotiators shape new institutions, investment funds, and market-based approaches.

However, the U.N. bears part of the blame for why this is not happening. U.N. rules actually prohibit most formal business input in the negotiations. Also, the business community largely does not understand the alternate ways to significantly impact the byzantine process.

Moreover, as Senator Tim Wirth underscored at a dinner tonight hosted by Deutsche Bank and the United Nations Foundation -- attended by such experienced negotiators as Rio Earth Summit Chairman Maurice Strong, U.N. Special Envoy on Climate Change Gro Brundtland, and Nobel-winning IPCC Chairman Rajendra Pachauri -- few of the negotiators understand how business works and how it can help develop a successful global deal.

One thing the Obama Administration and other governments could do here in Copenhagen is both press business to step up with more concrete policy proposals -- but they also to give business official standing in the negotiating process. Let business help cope with the challenge of financing sustainability.

Truman Semans is Principal of GreenOrder, an LRN Company. GreenOrder is a strategy consulting firm working with GE and other large corporations in accelerating deployment of innovative climate technologies. He was a climate negotiator with the U.S. Treasury Department and served on the Executive Committee of the U.S. Climate Action Partnership.

Click here for full coverage of COP15 from the GreenBiz.com and ClimateBiz.com teams, including posts from Copenhagen by Executive Editor Joel Makower and Senior Contributor Marc Gunther, and from dozens of guest contributors from the business world.

Photo CC-licensed by Neil Palmer (CIAT).