CLIMATE CHANGE
ROAD TO COPENHAGEN
THE COPENHAGEN CLIMATE CHANGE TALKS:
WHAT IMPACT ON BUSINESS?
INTRODUCTION
Despite much optimism earlier this year that Copenhagen would
produce a breakthrough deal on climate change, the odds are now
equally on a breakdown. We are presently witnessing official and poli-
tical efforts to lower expectations for a substantial deal, and to shift
focus to the detailed negotiations that are expected to follow the
conference.
However, climate change is now almost universally accepted as the key
global challenge facing human civilisation. The upward trend in extreme
weather events, changing patterns of rain and drought, melting polar ice
caps and rising sea levels are seen as signs that we are already experiencing
early impacts of climate change due to greenhouse gas (GHG) emissions.
The United Nations Climate Change Conference, which will take place at the
Bella Centre in Copenhagen, Denmark, from 7- 18 December 2009, is a key
milestone in global action against this problem. The conference is comprised
of the 15th Conference of the Parties (COP15) to the United Nations
Framework Convention on Climate Change and the Fifth Meeting of the
Parties (COP/MOP 5) to the Kyoto Protocol.
KEY ISSUES
Any agreement at the talks on climate change will be a complex matrix of
environmental, economic, scientific, political and social considerations –
comprising emissions targets, the role of emerging economies, compensation
for vulnerable low-lying nations, and the use and funding of new technology.
Four necessary building blocks of a successful climate change
framework at Copenhagen will be agreements on the following
broad key negotiation issues1:
> Emission reduction commitments from developed countries
should be the basis of any global agreement. The criteria for judging the
comparability of targeted reductions – and the degree of enforceability – lie
at the heart of the negotiations. Opinions diverge deeply because many
countries use different criteria and a different benchmark year to assess
targets. This debate focuses on whether to calculate individual targets by
comparing the clear-cut economic costs of making emission cuts or by
comparing a set of criteria such as ability to pay, mitigation potential,
business-as-usual (BAU) emissions growth and historic GHG emissions.
> Matching commitments from developing countries are needed to
reach a peak in global emissions in the next two decades, since the rates of
growth in their emissions are much higher than in the developed world.
However, developing countries point out that they bear less historical
responsibility for the emissions already in the atmosphere, and that their
emissions per capita are far less than those of the developed world. They
view demands for binding emissions reductions as being at odds with
the Millennium Development Goals. The role of so-called ‘offsets’ is also
important since emerging economies deplore this approach, which allows
developed countries to pass up domestic emission reductions by paying for
efficiency projects in developing countries where it is cheaper.
The meeting aims to agree a new framework for coordinated international
responses to climate change beyond 2012 to supersede the Kyoto Protocol.
The key political challenge will be to reach an agreement in which both the
developed world and developing nations accept mutual obligations that are
equitable, proportionate, measurable and accountable.
This Burson-Marsteller Insight looks at the main players and issues for these
vital talks – and at the impact of the climate change conference on business.
> Funding and the financial architecture refer to the necessary
arrangements for money transfers from developed countries to developing
countries. It is still unclear exactly what wealthier countries, especially the
United States, will propose. According to European estimates, the total
net additional cost of mitigation and adaptation in developing countries
could amount to 150bn USD annually by 2020. This bill needs to be
shared between domestic financing, carbon market-based financing and
international aid. A quasi-global emissions market could lessen the need for
government funding, generating billions in financial flows. However, in
recent negotiations, developing countries have requested up to 400bn USD
a year by 2020, far outstripping the money that developed nations are
likely to propose.
> Technology transfer arrangements refer to the process of sharing
skills, technologies, processes and R&D to ensure that low-carbon energy
and mitigation technologies are accessible to a wider range of countries. For
example, the EU has announced plans to finance pilot projects of carbon
capture and geological storage technology in cooperation with China. This
could act as a model for international action to combat climate change.
Intellectual property (IP) rights are critical to this, as most of the low carbon
technology is usually owned by the private sector in developed countries.
Developing nations, with the support of key environmental NGOs, argue that
climate technologies should either be open-sourced as common property or
provided on highly favourable terms.
1 Other issues on the table include reform of the Clean Development Mechanism (CDM; agreed under the
Kyoto deal), and inclusion of issues such as forestry, the global carbon market, aviation and shipping.
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KEY PLAYERS
It is generally accepted that the COP-15 outcome critically
depends on four key players: the ‘developed world’ economic
powers of the European Union and the United States, and the
two emerging powerhouses of India and China:
The European Union has made a commitment to cut
emissions by 20% below 1990 levels by 2020, as
stipulated in the ’climate change package‘ passed last year. The
EU has provisions to increase its commitment to 30% if other
developed nations commit to “comparable reductions”. In the
mid-term, the EU says that developed countries could achieve
collective reductions of 80% by 2050. The EU advocates that
developing countries must reduce their emissions by 15-30%
below BAU levels by 2020, following the principle of “common
but differentiated” responsibilities. The European Commission
has put forward a blueprint for a proposed EU contribution of
some 3-22bn USD a year by 2020 for climate change financing
to developing countries. After the last negotiations between the
EU and US, EU officials expressed concerns that the American
position is weak, and as a result the Copenhagen agreement
could turn into a mere ’political declaration’.
The United States House of Representatives has
passed the Waxman-Markey climate bill proposal,
which calls for emissions from the US to be reduced to 17%
below 2005 emissions levels by 2020, and 83% by 2050.
However, the 2020 target translates into a reduction of around
only four per cent compared to 1990 levels. Furthermore, the
Senate vote on the Waxman-Markey bill is delayed and is now
not expected until after Copenhagen, since the Obama adminis-
tration’s main priority is healthcare reform. Without a clear view
from the Senate, it will be very difficult for the President to make
any precise commitments to reduction targets – seen by Europe
as the essential condition for “success” in Copenhagen.
Moreover, in the past, fearing economic disadvantage the US
never ratified the Kyoto Protocol because it exempted developing
nations such as China and India from mandatory emissions
cuts. The Senate could end up accepting emissions limits but
only if trade penalties can be imposed on countries that do not.
That could trigger new geo-political earthquakes along the
developed-developing world fault line. As for the financing
question, the US has yet to make any formal public offers.
India has rejected any proposals to have developing
countries reduce their emissions by 15-30% below
BAU levels by 2020. It is categorically opposed to binding commit-
ments for developing countries but has pledged that it will not
allow its per capita emissions to exceed the average per capita
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emissions of developed countries. India argues that developed
countries should help finance a climate fund of up to 250bn
USD annually by 2020, as well as technology transfer cooperation.
Domestically, India has so far focused on improving energy efficiency
by introducing legislation and by establishing a Bureau of Energy
Efficiency. The country has also set itself a string of targets,
such as to improve efficiency of coal-fired stations, to better the
fuel economy of cars, and to increase the share of rail freight.
In the negotiations, India has strongly criticised proposals for
“carbon protectionism” and prefers a clause that would prevent
governments from erecting trade barriers to punish nations that
have lower carbon emissions targets.
China insists that it should not be forced to make
legally binding commitments, pointing to its efforts to
produce more renewable energy and to become more energy-
efficient. It has requested that developed countries commit to
reducing emissions at least by 40% by 2020 (compared to a
1990 benchmark). On financing, China’s position is that developed
countries should dedicate up to 1% of their GDP for climate aid
in developing countries. Domestically, China has outlined plans
to introduce alternative energies to coal which currently fuels
more than 70% of its electricity. It has set itself a target to source
15% of its energy from low carbon technologies such as solar,
wind biomass and nuclear by 2020. China considers that its
capacity for green growth and innovation is far greater than
developed countries and it has pledged to reduce the carbon
intensity of its economy from 2005 levels. Furthermore, China
wants to improve ex-ante environmental evaluation of new
economic projects.
“Unless rich nations agree to do
more to cut emissions, this year's
UN climate conference in Copenhagen
may be half-baked”
Yvo De Boer, Executive Secretary of the United Nations
Framework Convention on Climate Change (UNFCCC)
“The wiggle room is there even at
the stroke of midnight when
the conference is ending"
Rajendra Pachauri, Chairman of the Intergovernmental Panel
on Climate Change (IPCC)
ROLE OF BUSINESS
The key question for business will be whether a clear roadmap will be
agreed in the form of a deal to slash emissions without crippling the world
economy. A business-friendly deal at Copenhagen could create the neces-
sary conditions for investments to create a low-carbon global economy.
The business community is formally represented at the United Nations
Climate Change Conference by the International Chamber of Commerce
(ICC) and the World Business Council for Sustainable Development (WBCSD),
and individual member companies of both organisations (which can also
attend as part of national delegations or as members of professional and
scientific institutes). A large number of companies with low-carbon energy
technologies will also exhibit at the conference and participate in fringe
events to promote their solutions and products.
In New York on September 22, at the UN Leadership Forum on Climate
Change, 200 of the world’s largest companies joined leading NGOs
including Greenpeace and WWF to sign the Declaration by Business,
Investors and Civil Society – an appeal to world leaders for a decisive
outcome at COP-15. Among the key points in the Declaration:
> A global agreement on climate and a sufficient price for carbon that will
help ensure the continuation of a global marketplace based on openness
and competition. Strong markets are needed to diffuse climate solutions.
> Transition to low-carbon production and consumption presents a
tremendous value creation opportunity. By retooling the global economy in
this way, opportunities will arise in new markets, products and industries.
> Only through regulatory certainty can an engine of green growth emerge
which drives innovation, spurs massive global investments and enhances
efficiencies, allowing climate mitigation and adaptation approaches to
reach full scale.
> The transition to a low carbon economy is well within reach. Now what
is needed are the right incentives and regulatory certainty.
Equally, the Declaration was clear as to the impacts of a poor agreement
or failure to reach agreement:
> Trade tensions and competitive distortions that not only threaten the
foundations of our global economy, but also any future advances in sustai-
nable economic and social development.
> A lack of a global climate agreement and clear pricing on carbon will
undermine existing investments and projects and lead to higher costs for
business.
As increasingly supported by business advocacy groups, a good outcome for
business would probably include a specific target to reduce emissions by
around 50% by 2050 (which implies an 80% reduction in developed
countries); a commitment to a global carbon market mechanism, preferably
building on cap-and-trade schemes such as the EU Emissions Trading
Scheme (ETS); strong support for Carbon Capture & Storage (CCS) as a
significant abatement technology; and a mandate for climate change
technology funds to be used for early-stage R&D as well as demonstration
and deployment phases of promising technologies.
One of the key negotiations – the target for the stabilisation level of CO2-
equivalent (CO2e) atmospheric greenhouse gases – will be closely watched
by business2. The lower the target, the more difficult the adjustment will be
for high-emitting industries.
2 The concentration of atmospheric CO2 today is around 385 parts-per-million (ppm), or 420 ppm on a
CO2e basis (which includes other GHGs such as methane). Business has generally assumed targets
being set of 450-500 ppm – but there is now a substantial science-led push for a target of 350-400ppm.
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LOW CARBON FUTURE FOR BUSINESS

In a relatively short timeframe the drive for a transition to a low-carbon
economy – once the preserve of NGO voices on the fringe and lone crusaders
like Vice-President Al Gore – has moved to the mainstream and sits at the
centre of most government strategies for both energy security and industrial
renewal. Therefore, while Copenhagen is likely to prove to be a reality check,
we can expect this trend to accelerate and broaden.
For companies, particularly those in high-emission industrial and agri-
business sectors, it is extremely important to consider the impact of
public expectations around climate change together with government
regulations when developing their current and future business strategy.
The challenge on an operational level is to make sure that potential risks are
minimised and that potential business opportunities are identified early on in
the formulation of climate strategies.
context of emission reduction targets. It is likely that these requirements
will build on mechanisms developed by think tanks such as CERES and
the Investor Network on Climate Risk (INCR).
> A board-approved policy on climate change is increasingly seen as a
basic credential for stakeholder engagement in environmental policy issues.
Whether your company is concerned with reducing emissions to comply with
national or international regulations, or whether you wish to make your own
voluntary commitments, addressing these challenges requires an integrated
public affairs and communications strategy.
> Companies and industry sectors will need to be prepared to communicate
a clear vision on how they are adapting their business strategies to address
climate change. Furthermore, such communications will need to address an
increasing degree of public scepticism over ’greenwashing‘.

The implications of this rapidly-shifting landscape are significant: > Employee engagement provides a powerful opportunity for companies to
both align their people around the ‘vision and response’, but also to build
> Companies will need to prepare scenarios for course-changing strategies word-of mouth understanding through their employees own spheres of
or responses based on different (lower) targets for GHG stabilisation. influence and social networks. Sharing the CEO’s view of developments and
Compliance with existing targets or voluntary commitments is unlikely to be outcomes from COP-15, for example, would be a good place to start – but
enough – companies should start now to plan for accelerated programmes of embedding an ongoing engagement programme on climate change issues
emission reduction and/or offset and/or deployment of mitigation technologies. would constitute best practice.
Such plans will be more credible if supported by third-party verification.
CONTACTS
> Companies should be prepared to move towards disclosure require- Bill Royce, Managing Director Volker Wendt, Director
ments about climate risks and impacts, which could require detailed Practice Leader EMEA Energy, Deputy Practice Leader EMEA Energy,
Environment & Climate Change Environment & Climate Change
information on identified business risks and strategies in the overall Burson-Marsteller (London) Burson-Marsteller (Brussels)
Email: Bill.Royce@bm.com Email: Volker.Wendt@bm.com
Tel: +44 20 7300 6310 Tel: +32 2 743 66 29

Eric R. Biel, Managing Director Ian R. McCabe, Managing Director

Corporate Responsibility Public Affairs & Government Communications
Burson-Marsteller (Washington) Burson-Marsteller (Hong Kong)
Email: Eric.Biel@bm.com Email: Ian.McCabe@bm.com
Tel: +1 202 530 4559 Tel: + 852 2963 6700

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