Shifting to a Low-Carbon Economy: notes from the APPCCG

On Tuesday 13th October, I attended the All Party Parliamentary Climate Change Group’s (APPCCG) event on ‘Coordinating a coherent response to climate change to build growth across world markets’.

The APPCCG aims to encourage effective policymaking in Westminster through a number of key events, roundtable discussions and fundamental research activity. It is hosted by Caroline Lucas, the MP for Brighton Pavilion and former Leader of the Green Party (2008 – 2012).

The panellists at the event on Tuesday included:

  • Peter Bakker – CEO & President of the World Business Council for Sustainable Development
  • Lord Deben – Chairman of the Committee on Climate Change
  • Barnaby Wharton – Senior Policy Advisor at the Confederation of British Industry (CBI)
  • Jonathan Shopely – Managing Director at Carbon Neutral from Natural Capital Partners

Naomi KleinThis Changes Everything

All of the panellists agreed that the science on climate change was settled – it is happening and we have little time to act – and that now is the time to focus on action.

Peter Bakker illustrated the challenge that lies ahead; if the world is to stay below 2°C of warming (defined by scientists as the limit of safety) then we must move to net zero emissions by the second half of the century, say by 2050. This will require that we completely transform our entire global economy.

Lord Deben, who is infectiously optimistic about the next few decades and our ability to move towards a better world, suggested that the change that is required will be the biggest philosophical change since the renaissance; we will have to live and work completely differently and “create a world that gives opportunity to the whole world but not at the expense of the planet”.

Indeed, climate change is not a singular issue; it is fundamentally interconnected with global justice, food security, poverty, and water scarcity, and therefore now is our chance to address them all.

The Cost of Inaction is Now Greater Than the Cost of Action

Lord Deben urged us to shift the rhetoric from the impact climate change will have on future generations and to focus instead on the extreme weather events caused by climate change that are already impacting human populations today. Examples include the on-going record California drought and the record breaking heat wave causing bushfires in Australia.

There is mounting evidence that suggests that the cost of inaction is now greater than the cost of action; in the last decade, the world spent $2.7 trillion more on natural disasters than usual. Paul Polman, the CEO of Unilever, said that in the last ten years, the same disasters are costing Unilever around €300m a year.

Growth in the Context of Resource Constraint

The panellists felt it was important to invert the topic of the event, “Coordinating a coherent response to climate change to build growth across world markets”; instead, the more pertinent issue is about growth within the context of resource constraint – is it possible, and if so, how can we deliver growth across world markets through our response to climate change?

The speakers suggested that it is indeed possible to grow in the context of resource constraints. For example, Barney Wharton from the CBI argued that the UK’s green economy is already worth £120bn a year, and that between 2010 and 2013, the green economy grew at more than 7% a year, compared with less than 2% a year for the UK economy as a whole. Similarly, the circular economy, which is founded on the understanding of resource constraint, now contributes £29 billion to UK GDP and provides 175,000 more jobs. There is therefore significant business opportunity associated with the growth of the green economy.

Peter Bakker pointed to the Better Growth, Better Climate report by The New Climate Economy which suggests that in the next 15 years around US$90 trillion is likely to be invested in infrastructure in the world’s urban, land use and energy systems which represents a huge potential to invest in greater efficiency, structural transformation and technological change to drive the shift to a low carbon economy.

What Should Companies Be Doing?

Peter Bakker identified a number of key actions that businesses should be taking:

  1. Set science based targets

Science based targets are emission reduction goals aligned with current climate science; by aligning targets with the level of decarbonisation needed to keep global temperature rise below 2˚C, companies can ensure their targets are meaningful.

  1. Set 100% targets

RE100 is an ambitious global initiative to engage, support and showcase influential companies committed to using 100% renewable power.

  1. Drive transparency through disclosure

Mark Carney, Governor of the Bank of England said in a recent speech at Lloyds of London, “Any efficient market reaction to climate change risks as well as the technologies and policies to address them must be founded on transparency of information.”

  1. Establish corporate governance for climate change risks and opportunities

Bakker suggested that the VW scandal (what he described as fraud) will have a positive impact since it has highlighted the significant business risks associated with failure to comply with environmental regulations… this scandal is already reverberating around other industries.

And why should companies do this? According to Bakker the answer is simple:

  • The cost of inaction is now greater than the cost of action
  • Inaction poses a risk to a company’s licence to operate
  • There are huge business opportunities associated with the complete transformation of the way in which we live that is required to avoid dangerous climate change.

What is the Role of Policy?

Bakker suggested that the role of policy is clear – we need a strong global agreement that will deliver net zero by 2050. This agreement will have a clear statement on carbon pricing and will have mechanisms to allow ratcheting. Governments must collaborate with business, NGOs and civil society to identify solutions, understand which policies are barriers to addressing climate change and introduce incentives that will accelerate the shift to a low carbon economy.

However, many of the panellists pointed to the gap between political rhetoric on climate change and policy response in the UK specifically. Lord Deben suggested that “It is easy to be green in opposition but harder to be green in Government.”

This, in my opinion, certainly makes sense, since the Conservatives vowed to be the “greenest government ever” back in 2010 and since then have consistently undermined policies designed to deliver emission reductions. Barney Wharton (CBI) suggested that the roll-back of renewables policies and the mixed messages on energy efficiency are hugely damaging to since they undermine investor confidence.

Despite these recent policy setbacks, historically the UK has been seen as a global leader in climate change action. The Climate Change Act (2008) established a target for the UK to cut its emissions by 80% compared to 1990 levels by 2050. To ensure that regular progress is made towards this long-term target, the Act established a system of five-yearly carbon budgets.

Lord Deben chairs the Committee on Climate Change which is an independent body which advises the UK Government on tackling and preparing for climate change and sets these carbon budgets. The Committee will publish its advice to government on the fifth carbon budget in December 2015, covering the period 2028-2032, as required under Section 4 of the Climate Change Act. The government will propose draft legislation for the fifth budget in 2016.

The 80% 2050 emissions reduction target was seen as ambitious when set back in 2008, however, science is now telling us that we should be looking at net zero emissions by 2050, which suggests that even if we reach this target, it may not be enough.

Since 2000, the UK economy has grown by 23% while greenhouse gas emissions have fallen by 18%.

What is the Role of the Market and Carbon Pricing?

Lord Deben expressed frustration at the right wing idea that the market alone could solve climate change since the market we currently have is not a free market because we do not pay the true price. It is therefore the role of policy to help the market work effectively by internalising the cost of GHG emissions through carbon pricing.

Indeed, the panellists were unanimous in their position on carbon pricing; a global carbon price is essential.

While it looks highly unlikely that a global carbon price would be agreed at COP21 in Paris this December, a movement is happening with trading schemes being established in Korea, China and regionally within the USA, as well as a number of companies setting internal prices for carbon on their investments. See this link. http://www.worldbank.org/en/programs/pricing-carbon

Be Courageous!

We require a complete transformation of everything that we know to shift to a low-carbon economy in the timescale remaining. The science is settled – we know that climate change is happening and we have a responsibility to act on this knowledge. But be positive about the massive changes that lie ahead – there is a huge opportunity for businesses and Governments to collaborate to create a more equal and sustainable world.

Peter Bakker urged the UK Government and business community to be courageous!

Scarlett APPCCG Blog

Image: Copyright 2009 Joel Pett in USA Today.

(Main header image: William Warby, Flickr Creative Commons)

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