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Business Perspectives on International Climate Policy

Business Perspectives on International Climate Policy. Dr Nick Campbell Chairman of the UNICE Climate Change Working Group Chairman of the ICC Task Force on Climate Change. Outline. Introduction Background The EU Situation Business Actions for Climate Change Ways Forward for the future

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Business Perspectives on International Climate Policy

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  1. Business Perspectives on International Climate Policy Dr Nick Campbell Chairman of the UNICE Climate Change Working Group Chairman of the ICC Task Force on Climate Change

  2. Outline • Introduction • Background • The EU Situation • Business Actions for Climate Change • Ways Forward for the future • EU • International • Some Concluding Thoughts

  3. Background – Setting the Scene1 • World primary energy demand is projected to expand by almost 60% between 2002 and 20302. Two-thirds of this increase will come from developing countries.The average Carbon content of energy will hardly change. • Meeting projected demand will entail cumulative investment of U$16 trillion from 2003 to 2030. • IEA, World Energy Outlook, 2004 and 2006 • IEA Reference Scenario

  4. Cumulative Energy Investment 2003-2030 OECD North America OECD Europe OECD Pacific Transition Economies China Other Asia Middle East Africa Latin America Power sector absorbs 62% of global energy investment in the period 2003-2030

  5. The European Union Situation • EU-15 bound by Kyoto Protocol obligation to reduce emissions from 6 GHGs by 8% in the period 2008-2012 • Emissions Trading Directive (ETD) establishes basis for GHG regulations in two periods: 2005-2007 and 2008-2012 • Regulations for 2005-2007 are largely in place • Establish an allowance-based emissions trading scheme (ETS) • Facility based: cover CO2 only from select sectors: Power, Refining, ... • Transport not included (addressed via voluntary “CAFE-like” agreements with auto manufacturers and bio-fuel standards) • EU-ETD will not significantly change for 2008-2012; NAPs are currently under review by the European Commission • 2006/7 Review of ETS will produce significant changes • EU also developing strategy for Post 2012 international negotiations

  6. European Environment Agency, 2004

  7. Business Actions for Climate Change • EU companies have already reduced their greenhouse gas emissions by implementing technological improvements and management systems. • Many companies have taken action as a result of the EU ETS, in particular, monitoring, reporting and verification.

  8. European Environment Agency, 2004

  9. Ways Forward for the Future • The European Union and Beyond 2012 • Commission Communication: ‘Winning the Battle Against Global Climate Change’, February 2005 • Commission Green Paper on post-2012 commitments expected early 2007 • EU Spring Council 2007

  10. Some Perspectives from UNICE • Climate protection is a long-term challenge: global participation, technology R&D, ongoing scientific research and flexibility will be essential over the coming decades. • The EU cannot solve the challenge of climate change on its own. Only global solutions will work – regional absolute caps will lead to considerable carbon leakage, and associated loss of investments to regions without caps.

  11. Some Perspectives from UNICE (2) • Cost-efficiency is the key - climate protection will cost money. Real costs are incurred now, while the associated policy benefits will materialise later. The short and long-term wealth creation capacity and competitiveness of EU industry will be instrumental in making the necessary environmental investments. • Industry needs an investment friendly environment, where objectives are set with a long-term perspective and revised following new technological breakthroughs and scientific evidence. A long term perspective, with non-binding medium-term milestones, can signal to the market what kind of investments should be undertaken.

  12. Some Elements for post-2012 (1) • Establish a long-term, well functioning, market-based policy framework with full participation extending through to 2030 that will give investors confidence in the long-term value of their investments. A significantly improved version of the EU Emission Trading Scheme (ETS) may provide the basis for such a framework. • The architecture has to be economically feasible, based on respective capabilities and fair in order to avoid leakage and to safeguard the level playing field for all the actors competing on the same global markets. Climate and development diplomacy must aim to persuade key developing countries also to open themselves to an international climate protection, adaptation and mitigation policy with clear objectives.

  13. Some Elements for post-2012 (2) • Significantly increase public support for research, development and demonstration to encourage solutions to the problem, including public private partnerships and the removal of barriers to market-driven innovation. • Expand and expedite the use of flexible tools such as Joint Implementation (JI) and Clean Development Mechanism (CDM) for post-2012 for the transfer and deployment of new and existing technologies.

  14. Some Elements for post-2012 (3) • Actively support low-carbon energy technology in EU, and partnership with other developed countries and industrialising countries including renewable energies, carbon capture and storage (CCS), clean coal with CCS and nuclear. • It is also essential that other sectors of society, such as households and transport contribute to reduction efforts.

  15. Way Forward for the Future (2) • The International Arena and Beyond 2012 • UNFCCC, Bonn, May 2006 – The “Dialogue on longer-term commitments” starts, along with the Ad-hoc Working Group(AWG) on post-2012 under the Kyoto Protocol • COP-12, Nairobi, November 2006 – further Dialogue and AWG • COP-13, November 2007 – a mandate to negotiate post-2012 commitments?

  16. Positions of the Main Players • The European Union • Involve all Parties – differentiated approach – ‘deep cuts (60-80%)’ required by 2050-60. • USA • Commitment to technology approach and research and development – wait and analyse impacts of current national policies and measures. • Canada/Japan • Struggling to meet current Kyoto commitment – against further absolute reduction commitments – other policies and measures needed. • Developing Countries • Concentrate on adaptation and development – against discussion of developing country targets.

  17. Twelfth session of the Conference of the Parties to the Climate Change Convention (COP 12) and second meeting of the Parties to the Kyoto ProtocolUnited Nations Office at Nairobi, Gigiri, Kenya, 6-17 November 2006 • Major decisions were not expected… • …but a number of significant decisions were taken • primarily to aid developing countries: • Decision detailing activities for the next • few years under the “Nairobi Work • Programme on Impacts, Vulnerability • and Adaptation” • Principles for the management of the Adaptation Fund under the Kyoto Protocol agreed • Discussion on ways to increased penetration of CDM projects in many countries, i.e. in Africa.

  18. Twelfth session of the Conference of the Parties to the Climate Change Convention (COP 12) and second meeting of the Parties to the Kyoto ProtocolUnited Nations Office at Nairobi, Gigiri, Kenya, 6-17 November 2006 Results: Commitments of industrialized countries for post-2012 under the Kyoto Protocol concluded with the agreement on a detailed work plan (no timeline specified) New meeting in September/October 2006, attempt to conclude a mandate to negotiate new commitments at COP-13 in 2007. It is generally thought that such a deal on new commitments will be concluded end-2009 or 2010.

  19. Twelfth session of the Conference of the Parties to the Climate Change Convention (COP 12) and second meeting of the Parties to the Kyoto ProtocolUnited Nations Office at Nairobi, Gigiri, Kenya, 6-17 November 2006 Sir Nicolas Stern presented his review on the “economics of climate change” He stressed urgency of action in the next 10-20 years; economic costs of strong and early action to stabilize atmospheric levels of greenhouse gases would amount to 1% of global GDP. Importance of long-term goals and short-term flexibility. He warned of the serious economic impacts of delaying action, and noted that the costs of curbing emissions are consistent with growth.

  20. Twelfth session of the Conference of the Parties to the Climate Change Convention (COP 12) and second meeting of the Parties to the Kyoto ProtocolUnited Nations Office at Nairobi, Gigiri, Kenya, 6-17 November 2006 Peter Carl, DG Environment, announced that the EU will announce an 'autonomous target somewhere below 30%' in the light of expected non-action by other nations. Bjorn Stigson from WBCSD (also member of the High Level Group) stressed that the global challenge needs a global solution and pointed out the importance of the business community in delivering such solutions.

  21. The International Situation – Some Concluding Thoughts • The post-2012 Climate Change regime is likely to look very different from Kyoto • Differentiation by countries/regions (?) • Differentiation by sectors (?) • Differentiation by targets (?): e.g. absolute, intensity, GDP, per capita (?) • Technology and R&D (?)

  22. The International Situation – Some Concluding Thoughts (2) • The negotiation will be tough – it will be about the three pillars of sustainability – environment, social and economic. • Development and adaptation needs of developing countries will be to the forefront. • WE MUST NOT LOSE SIGHT THAT THIS IS A POLITICAL NEGOTIATION

  23. The EU Situation – Some Concluding Thoughts • Vital to continue the focus on competitiveness • Monitor and assess the impacts, both environmental and economic of current policies through thorough and comprehensive cost benefit analyses • Continuity is important for business • Long-term horizons help long-term business planning. • The EU cannot solve the challenge of climate change on its own –GLOBAL PARTICIPATION IS VITAL

  24. Thank you for your attention

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