We need to put a price on carbon and let companies find the most cost-effective way to cut emissions, writes Renat Heuberger, CEO of the South Pole Group. He talked to Agenda as part of an interview series for the Summit on the Global Agenda in Abu Dhabi.
What are carbon markets, and can they really reverse climate change?
In order to halt climate change, close to 100% of the world’s scientists agree that we must drastically reduce the level of greenhouse gas emissions. But how? What is a fair and efficient way to do so? Carbon markets are certainly part of the answer. They essentially work as follows. A government gives an emission reduction target to an entire industry. Where and how exactly the industry achieves the emission cuts is up to the individual players. They can either invest themselves in measures such as energy-efficiency improvements, or can pay their peers to do so through the carbon markets. The market thus ensures that the least cost-intensive opportunities are identified and made use of. In other words: the maximum amount of CO2 is reduced for a given amount of dollars.
Outside of markets, what else do leaders need to be doing to combat climate change?
At the moment, there is an amazing amount of business leadership on climate change – more than the world has ever seen before. To name a few examples:
- The RE100 initiative invites corporates to commit to purchasing 100% renewable energy by 2020
- The Corporate Buyers Principles act as an interest group representing industry-leading, multinational companies who want to buy grid-connected renewable energy in a cost-effective way.
- Business Leadership Criteria on Carbon Pricing, adopted by 50 large companies; According to the World Bank, at least 150 companies have adopted internal carbon pricing and even 1000 companies call on policymakers to adopt carbon pricing.
- 13 large US companies announced an investment of $140 billion in low-carbon development to support the Paris Deal.
- The insurance industry pledged to double its climate-smart investment from $42 to $84 billion by end of 2015
- In the Global Investor Statement on Climate Change, over 350 investors asked for a reliable and meaningful price on carbon.
- The Montréal Pledge, where over 100 investors committed to measure and publicly disclose the carbon footprint of their investment portfolios
- The Portfolio Decarbonisation Coalition, where investors set themselves targets to reduce their investments’ climate impact
- In the Low Carbon Investment Registry, you can find countless alternative investment strategies to reduce climate impact.
- Credit Suisse is now offering a real estate strategy that is fully climate neutral: it not only retrofits existing buildings and optimizes energy consumption but, for the first time, offsets emissions entirely. We expect the first pension fund to go both climate neutral and fossil fuel-free before year end.
- Various initiatives to boost deforestation free supply chains, among them through the Consumer Goods Forum to achieve zero net deforestation by 2020.
- The We Mean Business Coalition, a meta platform that presents a great overview of the above mentioned initiatives, as well as various others
- Carbon neutral strategies by large corporates such as Swiss Re, SAP, Cathay Pacific or WPP
Governments around the world urgently need to gear up ahead of the Paris climate conference. Expectations to reach a meaningful global deal including binding emissions reduction targets are very low. Therefore, attention now centers on action on national or even city level. The most important task for governments is to create rules and regulations, under which low-carbon business can unfold, including a price on carbon.
What technologies offer the most potential for helping address climate change?
Technology to address climate change is readily available, and covers a vast amount of sectors: decarbonized and decentralized energy production systems, battery storage, efficient building technology, low-carbon transport and communication systems, climate-smart agriculture, just to name a few. The problem: we need a substantial price on carbon, to improve market conditions for all these great technologies.
If you could achieve one thing at the GAC Summit, what would it be?
Our focus is on creating financial confidence, incentives and instruments to create a built environment that is net zero-emissions and resilient. My ambition is to link up with as many peers from related Global Agenda Councils as possible, to enable a platform that broadcast best practices.
The Summit on the Global Agenda 2015 takes place in Abu Dhabi from 25-27 October
Renat Heuberger is the Chief Executive Officer of South Pole Group and is a Schwab Foundation Social Entrepreneur.
Image: A bee flies to collect pollen on a mustard field in front of the cooling towers of the Temelin nuclear power plant near the South Bohemian city of Tyn nad Vltavou April 12, 2014. REUTERS/David W Cerny