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Climate Change—Business Must Take the Lead

Can industry rise to the challenge of a low-carbon economy?

Published: Thursday, July 8, 2010 - 14:28

There is no doubt that the mixed and incomplete messages coming from regulators, markets, competitors, and stakeholders on how to address climate change make investment decisions for business more challenging and uncertain.

Nevertheless, many businesses are forging ahead with innovative and collaborative ways to reduce their greenhouse gas emissions, despite little clear direction on global emissions targets emerging from the UN Framework Convention on Climate Change (UNFCCC) Conference of Parties meeting that took place in Copenhagen in December 2009. This was the fifteenth meeting between the conference of parties (COP 15).

Some sectors with no global regulatory bodies are being proactive about making difficult decisions rather than waiting for a final global agreement from the regulators. These industries are designing and implementing energy-efficiency standards and emission-reduction strategies that will affect their activities around the globe.

This article looks at the climate change challenge for business and at what actions are being taken in the marine, aviation, and energy sectors.

Ultimate goal—a low-carbon economy

The more than 100 countries that have signed the Copenhagen Accord have formally acknowledged that global warming must be kept below 2°C above preindustrial levels to avoid catastrophic climate change.

“To achieve this, scientists estimate that we need to reduce global emissions of greenhouse gas by about 50 percent between 2000 and 2050,” says Anne-Marie Warris, Lloyd’s Register’s environmental advisor. “With China and developing countries expected to increase emissions during this time period, the developed world will need to make the deepest cuts—some estimate by about 80 percent.”

Based on the pledges made in the Copenhagen Accord so far, this target will not be achieved. Much more is required, and business has a major role to play.

Challenge to business

“It is no longer enough for business to ask governments for clarity,” said UNFCCC executive secretary Yvo de Boer in a February 2010 speech. He finished by noting, “Enlightened business can and must offer solutions to these questions if it wishes to benefit itself and the world in the inevitable low-emission economies of the future.”

If businesses want certainty and an assurance that they will not be unfairly penalized, they will need to provide input to the solutions.

How can business have an effective influence? “One possibility is the way British business, through the UK Emissions Trading Group, successfully developed the ‘golden rules’ against which to evaluate the suitability of any UK scheme to effectively reduce industrial greenhouse gas emissions,” says Warris. “The UK Emissions Trading Group has consistently demonstrated the benefit to both industry and government of the free exchange of information and support in developing practical and effective reduction measures.

“Business is also facing supply chain and stakeholders’ pressures,” Warris adds. “Examples of responses to this so far include RightShip’s development of an environmental and energy rating, the Carbon War Room’s focus on market-driven solutions, and the various emerging carbon footprint standards.”

Skepticism

Another challenge facing business and nongovernmental organizations (NGOs) is human acceptance. “Indeed, global climate change skepticism could have been the greatest barrier to success at Copenhagen,” says Ian Hamilton, technical director, human engineering, part of the Lloyd’s Register Group. Before Copenhagen’s UNFCCC meeting in December 2009 a shift in public opinion was apparent, possibly driven by the economic downturn. Data from The Times indicated that only 41 percent of people in Britain think that climate change is largely man-made, and even more worrisome, only a quarter of those surveyed think it is a serious problem. Public opinion in the United States is similar. “If people see climate change as a myth, or even if they accept it but regard it as a natural change, they can argue that there is nothing to be done,” says Hamilton.

Businesses need to consider whether to lead or move in step with public opinion. When human acceptance swings from “cannot be bothered” to “this is real,” it will affect business risk. And that uncertainty presents challenges of getting products and services right.

Taking action now

“The uncertainty around future developments in the climate change arena has not diminished but has actually increased; and uncoordinated climate change policies will create fragmented regulatory frameworks and increased costs,” says Warris.

The Copenhagen conference exposed the immense difficulty in reaching global agreements among countries with highly divergent politics, economies, and objectives. The parties will continue to meet throughout 2010, culminating in COP 16, which happens in Mexico in December, where expectations, understandably, will be lower but still with the intention of achieving a lasting agreement.

“Even if COP 16 comes to an agreement, there will still be a considerable period of time before governments turn them into domestic and international policies that have direct impact on consumers and business,” says Warris.

The challenge is well illustrated by developments in the United States. “There is action in the United States, but it is fractured and inconsistent,” says Ivor John, senior vice president of Climate Change Services at RMA, a member of the Lloyd’s Register Group. “It is this unintended consequence of failed federal leadership that is having an adverse affect on the competitiveness of our businesses that are trying their best to take action in the absence of a well-defined, consistent playing field here in the United States.”

Elsewhere around the world, China has been very public about its ambitions to become the birthplace of low-carbon technologies. It is unwise for business to sit back and wait for international agreement before taking action.

Maritime industry moving forward

The International Maritime Organization (IMO) is the United Nation special agency responsible for regulating the global shipping industry. It brings together member states (governments), representatives of industry bodies, and NGOs to develop regulations and rules.

The IMO, through its Marine Environmental Protection Committee, has worked on greenhouse gas issues since 1997. In March 2010, it agreed to mandate technical and operational measures to increase the energy efficiency of new ships under (MARPOL) Annex VI. Adoption of the necessary amendment is expected to occur in 2011. Agreement was also reached on how to move forward in relation to market-based measures—which, if pursued, could set an emissions target for global shipping.

“After the negative impact of the UNFCCC Copenhagen meeting, it was positive to see successful negotiations on a global scale,” says Warris. “The IMO demonstrated international leadership and sent a clear signal to the UNFCCC that it can, and will, deal with the climate change challenge related to international shipping.”

Aviation industry targeting emissions

The global aviation industry is establishing targets and energy efficiency improvements.

The International Aviation Trade Association (IATA)—the global association for the airline industry—has committed its members to carbon-neutral growth with a 50-percent net reduction in carbon dioxide emissions from 2005 levels by 2050.

The association is now working with the International Civil Aviation Organization (the airlines’ UN equivalent to the IMO) to implement key actions, including fully quantifying aviation emissions, coordinating economic measures on a global scale, and ensuring access to global carbon markets. Although IATA would have liked to see global targets for aviation set at the Copenhagen conference, it considers the Copenhagen Accord as a step forward and will continue to pursue its goals.

Aviation has already seen the advent of regional regulation, typified by the European Union’s Emission Trading Scheme (EU ETS) covering flights in and out of EU air space as of 2012.

“The inclusion of the aviation industry into Phase II of the EU ETS provides the global carbon markets with the confidence that airline emissions are being addressed in a transparent manner,” says Madlen King, LRQA’s global head of climate change.

Energy sector responding to uncertainty

The energy sector, the largest global emitter, believes that mandatory emission targets would establish the long-term certainty and fairness needed to minimize the risks of investing in cleaner energy technologies. Uncertainty about targets, unstable carbon prices, and a lack of a global regulatory regime for the energy sector means that companies are delaying decisions on some long-term investments.

Despite these issues, “energy companies are responding to society’s demands and supporting governments aiming to build the energy systems of the future,” says Sean Cuthbert, energy sustainability advisor at Lloyd’s Register. “From the Desertec Industrial Initiative1 to the $200 billion investments in wind, solar, biomass, marine, and geothermal energies expected in 2010, energy companies are creating business streams and research groups dedicated to delivering energy from sources other than the burning of coal, oil, and natural gas.

“However, the energy sector recognizes that the transition from a ‘cradle-to-grave’ approach to energy supply to one that embodies the ‘cradle-to-cradle’ approach will require the mobilization of all aspects of society on a scale similar to that experienced during World War II,” adds Cuthbert.

Investments in “bridging” technologies such as CO2 capture and storage, and advanced Generation III nuclear reactors are also being made to deal with the transitional period.

The way ahead

“The ‘three-legged stool’ of the future includes business, government, and stakeholders,” says Warris.

One leg relates to businesses, which are forging ahead with understanding and mitigating their greenhouse gas emission impact. They need to continue to show leadership and provide the solutions to the mitigation challenges. Another leg relates to governments, which need to continue to build on the cooperation and consensus they demonstrated at IMO in March 2010 and ensure we get an international agreement, avoiding the consequences of fragmented regulation and hence increased costs. And the third leg relates to the influence and action that stakeholders, be they NGO or individuals, can bring to ensure the achievement of the 2°C target in the Copenhagen Accord.

“Will we get a balanced three-legged stool? I am optimistic, but it will take time,” says Warris.

Discuss

About The Author

LRQA Business Assurance’s picture

LRQA Business Assurance

LRQA is a member of the Lloyd’s Register Group and an independent provider of business assurance services including certification, validation, verification, customized assurance and training. Serving more than 45,000 clients across more than 120 countries, LRQA Business Assurance helps companies manage their systems and risks to both improve and protect the current and future performance of their organization. Accredited by more than 45 independent accreditation bodies around the world, LRQA’s key services include ISO 9001, ISO 14001, OHSAS 18001, FSSC 22000, AS9100 and ISO 50001. 

Comments

Climate Change Scam

Man caused climate change is the greatest scam of the century. There is not a single piece of actual evidence to support this theory. Anyone who claims there is should give a page reference to it in the latest IPCC report.

The AGW scam is based on a selection of computer that assume our atmosphere is based on positive feedbacks, that is the tiny effect of warming by CO2 is amplified by water vapour. In reality, all the data points to the contrary.

Even Jones, head of the CRU, one of the chief architects of the scam, now admits there has been no warming for 15 years. ClimateGate revealed that AGW is based on fraud and data manipulation.

Unbiased assessment?

I smell a conflict of interest here. LRQA seems to be in the business of certification to standards. Therefore, more standards to comply with equals more certification business for LRQA. The whole anthropogenic global warming "concern" always seems to come back to some type of money-making ploy.

As Thomas Pyzdek pointed out in 1998 with simple SPC tools, global temperature more closely tracks solar activity than carbon dioxide emissions (http://www.qualitydigest.com/mar98/html/spctool.html & http://www.qualitydigest.com/april98/html/spctool.html). With the Climate-gate fiasco, lack of warming for the past few years, and discredited studies/scientists, one would think that the man-made global warming industry would have been dealt a serious blow to its credibility.