Weak carbon pricing, the dangers of claiming “carbon neutrality” and a challenge to United Nations green opportunity rhetoric were amongst the points raised by a leading corporate social responsibility expert at a Hong Kong business roundtable this week.
In a presentation to a 40-strong group of Hong Kong General Chamber of Commerce members, CSR Asia director Dr Richard Welford spoke of the business impacts and challenges surrounding the upcoming COP15 climate talks to be held in Copenhagen this December.
Sharing the stage with CLP Holdings Group Environmental Affairs director Dr Jeanne Ng, Welford had some unpleasant news for businesses, pointing out that climate change solutions were not all “win win” and that costs would be involved in tackling the issues.
Furthermore, he said, opportunities from the so-called “green economy” were largely exaggerated.
“We have to start getting real about the rhetoric of market opportunities,” he said. “If you were to believe publications coming out of the United Nations Environment Programme, you would think climate change was going to save the world, not destroy the world.”
According to Welford, the UN had tried to sugarcoat climate change issues for business by talking of green growth strategies and green job creation – but this should be challenged. “I’m not sure [the UN] is not misleading us,” he said. “I see very little evidence of green growth, of green jobs being created at the moment.”
As Welford pointed out, the global recession may have had significant impact on green development. “It is very difficult now to talk about climate change in the current economic situation,” he said. “On the other hand, because of the recession, governments are increasingly worried, increasingly reluctant to put pressure on the business sector. Businesses may not be pushed as much as they would have been,” he said.
One of the key issues in the run up to Copenhagen, according to Welford, will be how to create new frameworks for combating climate change without hurting economies unnecessarily. Business will bear the brunt of regulation arising from COP15, he said. “We need to think very carefully about the types of regulation that will actually encourage innovation.”
Energy pricing, for example, needs serious debate, he said. “Energy is probably too cheap. High oil prices may not be good for people’s profits, but they sure get people thinking about alternatives to fossil fuels.”
CLP’s Ng was a little more optimistic about the opportunities climate change could create for business, in particular given the recent economic turmoil. “The financial crisis provides an opportunity for you to look at your efficiency,” she said. “If you become more efficient, you will become more prosperous.”
While Ng sees specific opportunities around energy efficiency, she said business at all levels needs to start considering the importance of carbon pricing.
“If there is one thing business has to realize, it is that a price will be put on carbon,” she said. “So, if there is going to be a price on carbon, what does that mean for my business? That’s a good starting point. It is time for business to at least start monitoring carbon risk.”
And where there are risks, Ng said, there are also opportunities. “Carbon is one area where we could be positive about [climate change opportunities],” she said.
Carbon too cheap
But while requirements for monitoring and even reporting greenhouse gas emissions will likely become the norm following Copenhagen, the use of carbon as a policy tool to promote clean energy financing may be some way off.
According to Welford, the price of carbon is far too low and not yet at a useful level for generating behavioral change. “Interesting projects will be financed when the price of carbon gets to such a level that makes them economically viable,” he said. “A price of carbon at around US$20, as it has been for a while, does not seem to be providing the incentives for innovation and investments in exciting new renewable energy or energy efficiency projects.”
Welford pointed to research which suggests the price “probably needs to be moving from that US$20 benchmark to around US$50 – and that brings in questions around, how will you price carbon in the future.”
Welford believes carbon taxation would be a far more effective way to set the price of carbon, even though taxes are obviously more controversial than cap-and-trade schemes. But, now established, cap-and-trade is probably here to stay according to Ng. “It is easier to pass through a cap-and-trade system than it is a tax,” she said. “And once that is set up, it is very hard to dismantle it, there’s a lot of energy and effort that is already put in.”
Ng said the present global scheme – the UN’s Clean Development Mechanism – falls way short of meeting clean energy financing needs. “People realize we are at least one zero short of the kind of financing volumes we need, which CDM is not providing,” she said. “CDM is great, but it is not bringing in those volumes that we clearly need.”
Indeed, “finance transfer” and clean energy funding may well be a bigger issue at Copenhagen than “technology transfer”, at least according to both Ng and Welford. In response to a comment from the floor regarding the fairness of developed countries “giving away” their technology to developing nations, Ng said that while intellectual property rights was frameworks were important, financing was now more critical.
“There are already a lot of technological innovations in developing countries – these countries are now saying, we have the knowledge, we have the technology, we just don’t have the money to scale it up and actually implement it,” she said.
Welford added that technology transfer did not necessarily imply transfer at “zero cost” and that developed nations with advanced clean technology could still hold a competitive advantage. Welford also pointed out that technology transfer should not just cover the traditional view of technology. “We mustn’t get too fixated on hard technology, there’s a lot of soft technology, a lot of skills, a lot of systems approaches that we need to share as well,” he said.
Whatever path the Copenhagen negotiations take, Welford says any agreements must be global. “One of the big challenges will be the need to avoid ‘carbon havens’ – we need to avoid there being countries where you can go and get away with producing as much greenhouse gases as you like. What we need therefore is a global agreement on climate change, not one that only covers parts of the world.”
Welford was also critical of inappropriate use of carbon credits from developing world and other dubious sources to allow western companies to claim green credentials. “I have some very big reservations about companies who describe themselves as carbon neutral,” he said.
Offsetting carbon should be a last resort, not a first resort, according to Welford. “Companies who claim to be “carbon neutral” will live to regret the claims,” he said.
“I think it’s a little bit like companies 20 years ago calling themselves ‘environmentally friendly’ – there is no company in the world, I don’t think, that is ‘environmentally friendly’, 100%, and carbon neutrality seems to be the same sort of claim.”
While Copenhagen agreements will provide top-down regulation for tackling climate change, this must be matched by willingness for business itself to act – a “bottom-up approach” as Welford calls it.
“There are companies doing amazing work on climate change issues,” he said, citing CLP and Cathay Pacific as leaders in Hong Kong. “But I suspect those leaders are sometimes saying that it’s about time the rest of business starting to act too. They don’t want to always have to be leading on climate change or CSR or whatever – I think we need more buy-in from business, and as part of that, we are going to have so see a lot more ‘bottom-up’ approach from business.”
Bottom-up approaches would include sector-specific partnerships, together with “sub-sector” development work. “The transport sector is incredibly diverse – climate change issues around private car transport versus railways versus aviation are really rather different,” he said. Spatial and geographic approaches are also required, said Welford. “We need locations, countries, territories and cities to have their own approaches to climate change solutions.”
Ng gave a good example of the benefits of a sector-based approach – CLP’s “voice” at Copenhagen comes through its participation with the World Business Council for Sustainable Development, where a group of leading international power companies contributes to a power sector position paper. “There is so much inequity between developing and developed countries which can halt negotiations,” she said. “Whereas if you have a whole sector [across developed and developing countries] there is a lowest common denominator we all agree to which gives the views some substance.”