Two Keys to Unlocking the Climate Challenge

Two Keys to Unlocking the Climate Challenge

Image CC licensed by Flickr user otodo

The status and legal implications of the global negotiations on climate change remain unclear. Some governments have stepped into the breach, setting national or regional targets for emissions reduction, but they are made in ways that are often unrelated to the science at hand and with a limited understanding of the private sector tools available to achieve them.

The business community can be a constructive partner here, both by guiding development of policy targets based on our collective emissions reduction experience, and by also offering pointed, business-friendly tools to help economies meet those targets.

Environmental regulation, particularly in countries such as the U.S., has traditionally adopted a prescriptive approach by strictly defining activity-based pollution targets and dictating inflexible methods to reduce them. In contrast, market-based mechanisms offer much more flexibility in meeting environmental targets and foster an accelerated rate of technological innovation.

Yet recent climate policy debates have largely centered on the trade-offs between environmental certainty (e.g., hard emissions caps) and economic certainty (taxes). Therefore, one major area where the business community can help influence the policy debates is proving a positive correlation between environmental protection and economic prosperity, which also leads to new markets for clean technology and job creation.

An example of this dual role is the methodology we developed at design software company Autodesk for corporate GHG target-setting that is business-friendly, science-driven and transparent: the Corporate Finance Approach to Climate-Stabilizing Targets ("C-FACT").

C-FACT tackles a number of issues within the policy debate, such as intensity versus absolute emissions targets. By combining the emissions reduction recommendations from the scientific community, macro-economics and financial accounting techniques, it helps to estimate a 2050 GHG reduction target for companies seeking to take proactive measures. When the consultants at Clear Carbon Inc. ran the C-FACT model for the IT companies in the Carbon Disclosure Leadership Index (CDLI), they concluded that these companies alone could tackle 9 percent of the absolute reductions necessary to stabilize the climate.

Business software firm SAP plans to incorporate the C-FACT methodology into its energy and carbon management software tool, Carbon Impact OnDemand, to help customers leverage this tool effectively as part of their corporate GHG management plans. Companies need to quickly get beyond the mere measurement of environmental impacts such as carbon emissions, and find the most effective ways to profitably reduce them throughout their value chain, sustaining continuous reduction over the long term.

This type of creativity and corporate joint venture is a necessity. It not only enables businesses to be proactive in reduction efforts in today's circumstances of ineffectual global policy, but also provides them a financial motivation for offering effective tools in the marketplace.

Image CC licensed by Flickr user otodo.