According to research conducted by the We Mean Business Coalition (WMBC), two hundred international businesses with combined revenues of approximately US$5 trillion and more than 100 investors with more than US$8 trillion in assets under management have made in excess of 500 commitments with respect to climate change. These numbers are just the start, however they represent a very impressive start indeed.
Such actions are only possible as a result of the clear economic case for climate action. Many businesses are driven by the risks and opportunities they know climate change will realise, and innovative policy from leading Governments is creating opportunities for innovation in the low carbon space which is underpinning the transition to a low carbon economy.
During the period 2012/13 the WMBC found that nearly 1450 businesses reportedly saved 420 million Metric Tonnes of carbon per year as a result of investing US$170 billion in low carbon projects. Policy is a very important driver for low carbon investment, and evidence is mounting that carbon emissions are being reduced in contexts in which a financial return alone would not have been sufficient to justify the initial investment. In Europe, renewable energy policies in 2013 stipulated that more than 70% of new power capacity is sourced from renewable sources, when 80% came from fossil fuels a decade ago.
WMBC’s research also found that visionary businesses are able to identify opportunities to make smart and cost effective business decisions that are in alignment with a low carbon economy. They make strategic decisions with regards to aggressive carbon reduction targets and actions that will realise high financial returns. Going forward, these businesses will be required to maintain investments that can deliver larger carbon reductions. Compared to their regional competitors, those businesses that make the largest investments in low carbon (relative to operating costs) receive at least the same (if not higher) economic returns.
Executive Secretary of the UN Framework Convention on Climate Change Christiana Figueres has commented that the catch 22 regarding whether Governments or businesses need to act first has been broken-in no small part as a result of business being heard by policymakers as recently stated in New Scientist. Figueres pointed out that business played a fundamental role in any climate solution and that an ever growing number of Fortune 100 and 500 businesses are realising that it is profitable for them to take action. She also noted the time had come for policymakers to empower more businesses to join these visionaries, as policymakers need to inspire and guide businesses to understand the numerous possibilities that a low carbon economy presents into the future.
According to WMBC, a binding agreement in Paris will realise a number of outcomes including the following:
- decarbonising the global economy (net zero greenhouse gas emissions) this century
- ensuring Governments regularly update of and improve their commitments through clear rules
- providing clear policy signals that will shift the requisite trillions of dollars for low carbon investment (eg. carbon pricing mechanisms)
- strengthening economic resilience to the impacts of climate change.
In reading the WMBC report I couldn’t help but notice that businesses around the world are investing tremendous capital in their commitments to climate action. I also noted the clear message regarding the importance of Government implementing innovative policies that create opportunities for businesses to act boldly.
I was particularly interested in the range of locations from which commitments were being made including Africa, India, Japan, South America and the United States. The list of actions to which they were committing-including procuring all of the electricity they need from renewable sources, setting science based emissions reduction targets, pricing carbon and increasing their investment in renewables and other low carbon assets are not currently mandated or incentivised in Australia.
What does this have to do with Australian businesses?
I acknowledge that the Turnbull led Government has only been in place for a matter of weeks, however the Paris meeting is only 2 months away and their stance on climate change is coming under increasing media scrutiny. In Monday’s blog I discussed the queries raised by China and the US with regards to the Australian Government’s Paris commitment and aspects of their Emissions Reduction Fund (ERF) which underpins that commitment.
The Government has recently trumpeted the flexibility of the ERF and communicated that it can accommodate additional instruments in future. They have also stated that policy revisions will be considered in 2017/18, however they have also made commitments to their National Party coalition partners. Given such commitments, the extent to which the Government can balance appeasing the National Party with amending the ERF such that Australian businesses and jobs are not put at further risk are likely to be keenly observed by many.
Australian businesses could find it very difficult to compete, which will ultimately cost jobs and livelihoods
There are two rather clear messages in this for the Australian Government – firstly they need to implement innovative policies that empower businesses to identify and pursue low carbon opportunities, and secondly they need to ensure that future policies mandate or incentivise businesses procuring a large percentage of their energy needs from renewables, setting science based emissions reduction targets, pricing carbon and investing in renewable and other low carbon assets. If the Government is unable to successfully deliver both of these, Australian businesses could find it very difficult to compete, which will ultimately cost jobs and livelihoods.