Corporate Responses- Interview with Dr Rory Sullivan

In November 2008, Greenleaf released a new book, Corporate Responses to Climate Change: Achieving Emissions Reductions Through Regulation, Self-Regulation and Economic Incentives, which P.E.D reviewed here. The book was edited by Dr Rory Sullivan, the Head of Responsible investment at Insight Investment. Recognised as one of the leading global experts on investment and climate change, Dr Sullivan has led Insight’s climate change-related research and engagement work over the past six years and has published a series of major reports on the subject. His academic research has focused on the role of self-regulation in public environmental policy, with a particular focus on voluntary approaches in climate change policy.

1. Where did the idea for the book come from?

The starting point was actually frustration with the nature of the public policy debate around business and climate change. In recent years, much of the discussion around business and climate change has been couched in very simplistic and quite antagonistic terms: companies bad/policy makers good (or vice-versa!), voluntarism bad/regulation good (or vice-versa again!). At the same time – and almost in a parallel universe – we have seen the first serious attempts by policy makers (most significantly through the EU Emissions Trading Scheme) to take meaningful and substantive action on greenhouse gas emissions. Companies have responded with a range of commitments and actions to reduce their greenhouse gas emissions. Yet, for all the rhetoric and action, global and corporate greenhouse gas emissions have continued to rise inexorably.

It is this context that the book is located. The objective is not to make a case for business or government action on climate change (a case that has been made many times before) but to carefully and systematically analyse current business practice and performance on climate change, in the light of the dramatic changes in the regulatory and policy environment over the last five years, and to use this analysis to provide concrete proposals on how the next generation of climate change policy instruments may be designed and implemented in a manner that delivers the real and substantial reductions in greenhouse gas emissions that will be required in coming years.

2. You set out with the aim

"to reflect on current business practice and performance on climate change in the light of the dramatic changes in the regulatory and policy environment over the last five years. More specifically, it examines how climate change-related policy development and implementation have influenced corporate performance, with the objective of using this information to consider how the next stage of climate change policy may be designed and implemented in a manner that is effective while also addressing the inevitable dilemmas at the heart of climate change policy”.

How far do you think you succeeded? Given the chance, what would you add to the book?

I think the book has delivered on its central objective of cutting through the lazy rhetoric that clouds the business and climate change debate and presenting a clear – albeit stark – assessment of the current state of play as well as providing credible, evidence-based proposals for public policy on climate change. The book covers the major topics that you would expect in a book on greenhouse gas emissions mitigation: corporate motivations, the role of leadership within the organisation, the manner in which external influences (policy, stakeholder pressure, etc) interact to influence behaviour, the strengths and weaknesses of different policy instruments (command and control, incentives, market based instruments, self-regulation), the key climate change policy instruments that have been adopted.

So, in response to your question, I wouldn’t change anything in the book. Indeed, the relative lack of progress at Poznan and the recent discussions around the European Union's climate change programmes confirm some of the central concerns raised in the book: that lack of progress on developing and implementing policy in this area is the key challenge, that governments have yet to explicitly answer the question of how they deal with potentially competing goals such as energy security, and that, ultimately, clear, robust, long-term public policy – i.e. ‘Long, Loud & Legal’ - is key if we are to see a significant change in corporate performance.

There is however one major topic that the book – by design – didn’t cover, namely adaptation.

Clearly, a discussion on corporate greenhouse gas emissions – the focus of the book – is only half the picture. The other is how companies are developing their business strategies to take account of the physical impacts of climate change and also the opportunities presented by a changing climate. While acknowledging the causal links between greenhouse gas emissions and the global climate, adaptation is still treated very much as a distinct issue by companies and by policy makers. Furthermore, with the obvious exception of sectors such as insurance, the thinking on how adaptation policy needs to be designed and implemented to incentivise appropriate corporate responses is still very much in its infancy and so a book on this subject is probably somewhat premature.

3. On page 35 of the book you write "Overall, there needs to be a scarcity of allowances in order to create a market price for carbon and thereby induce reductions in greenhouse gas emissions." Anyone reading the Financial Times recently could be forgiven for thinking that German industry- carmakers, steel etc- have just gutted the European Climate Programme, especially on the question of the auctioning of carbon credits for the emissions trading scheme. Is that a fair representation? If so, what signal does that send to energy-generators?

I’m not sure that the wording of the question presents a completely fair representation of the recent debate. There are actually two distinct issues at play. The first is whether the European Climate Programme will deliver the significant, substantial reductions in greenhouse gas emissions that are required. From the evidence to date, the EU does seem likely to deliver on its targets of reducing the EU’s greenhouse gas emissions by 20% by 2020. As an intermediate goals towards the longer-term goal of reducing greenhouse gas emissions by 80% by 2050, as suggested by the IPCC, this is an important and substantive contribution and the EU should be applauded for providing real leadership on this.

The second is the distributional effects of the EU’s policy actions. The EU is faced with significant challenges of keeping its Member States on board with its overall climate change goals; inevitably, this requires paying attention to issues such as protecting European companies from unfair competition from companies outside the EU who do not face the same carbon constraints, and avoiding EU businesses relocate to outside the EU with the loss of jobs that would entail but at no net benefit to the world’s greenhouse gas emissions. One of the consequences has been that some of the major beneficiaries have been the energy companies and large industrials. Clearly, this raises the ethical (or distributional justice) questions of whether companies should be rewarded for having historically high emissions. But, this outcome, uncomfortable though it may be, may be a necessary price to pay in order to deliver on the EU’s overall climate change goals.

4. Elsewhere in the book, an author points out that the EU negotiating position of "20% cut by 2020, or 30% if comparable economies come aboard" actually creates policy uncertainty for companies, which they generally don't like. Given the uncertainty over whether there will even be a deal at Copenhagen (there seems to be some back-pedalling and downward massaging of expectations), what would you like to see the EU doing? What are your hopes/expectations of Copenhagen.

Obviously, the ideal outcome from Copenhagen would be a binding agreement that sets clear targets for the world’s greenhouse gas emissions and puts us clearly on the pathway to a low carbon economy. However, we need to recognise that there are many obstacles in the way of such an agreement, and it may be 2010 or 2011 before we see any form of agreement emerge.

There are some positive signs at the national and regional level. For example, China has set a nationally binding goal to reduce energy consumption per unit of economic output by 20 % in 2010 from 2005, South Africa has said that its emissions will peak by 2025, with cuts starting a decade later and Mexico has said that it intends to halve its emissions by 2050 against a 2002 baseline.

I think we are, now more than ever, looking to the developed countries – the EU, the US and Australia seem the most likely - to provide leadership by example. If there is a single conclusion to be drawn from the EU’s experience over the past few years it is that meaningful policy action on climate change does not necessarily entail significant adverse economic effects and, indeed, any short-term costs should be outweighed by longer-term benefits such as improved energy security and more efficient use of energy. Furthermore, the EU Emissions Trading Scheme (EU ETS) has played a catalytic role in putting climate change on the corporate agenda, not only demonstrating that governments could act but that they were prepared to act and to take decisions that were not necessarily in the best short-term interests of all companies.

5. The UK Government has created the Department of Energy and Climate Change. What key decisions do you think it should make on nuclear and new coal-fired power stations? Does the lack of CCS mean there should be, as James Hansen proposes, a moratorium on coal-fired stations? Would the gap be filled by renewables, or something worse?

There is a lot of rhetoric around the government’s commitment to action on climate change, yet at the same time many of the individual projects being proposed/discussed – the third runway at Heathrow, the Kingsnorth power station – seem likely to significantly increase the UK’s greenhouse gas emissions.

New coal fired power stations represent the key litmus test of the government’s commitment to action on climate change. Allowing coal-fired power stations to proceed without carbon capture and storage would clearly demonstrate the lack of government appetite for substantive action on this issue.

A balanced approach to climate change policy does not mean that greenhouse gas emissions cannot or should not increase from specific activities but the government should explain how, if it does intend to allow such projects to proceed, it intends to reduce emissions elsewhere in the economy to compensate for increases that result from other of its decisions.

Poznan- very second thoughts

More Poznan info rolling in.

There's a brief impressionistic (those adjectives used in a non-pejorative sense) piece here, by Andy Revkin and Elizabeth Rosenthal of the New York Times, as spotted by fellow Pending Ecological Debacle author Marc Roberts.

There's a very good piece summarising the "progress" at Poznan, by the estimable International Institute for Sustainable Development. I've cut and paste it below, because it doesn't seem to be available on their site. If they tell me it breaches their copyright, then it's gonna disappear like a fist when you open your palm...

As and when the high-level NGOs like WWF publish briefings, we'll post 'em. The IISD thing below really is worth a read...

SUMMARY OF THE FOURTEENTH CONFERENCE OF PARTIES TO THE UN FRAMEWORK CONVENTION ON CLIMATE CHANGE AND FOURTH MEETING OF PARTIES TO THE KYOTO PROTOCOL

The United Nations Climate Change Conference in Poznań, Poland, was held from 1-12 December 2008. The conference involved a series of events, including the fourteenth Conference of the Parties (COP 14) to the UN Framework Convention on Climate Change (UNFCCC) and fourth Conference of the Parties serving as the Meeting of the Parties to the Kyoto Protocol (COP/MOP 4).

In support of these two main bodies, four subsidiary bodies convened: the fourth session of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA 4); the resumed sixth session of the Ad HocWorking Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP 6); and the twenty-ninth sessions of the Subsidiary Body for Implementation (SBI 29) and Subsidiary Body for Scientific and Technological Advice (SBSTA 29).

These events drew over 9250 participants, including almost 4000 government officials, 4500 representatives of UN bodies and agencies, intergovernmental organizations and non-governmental organizations, and more than 800 accredited members of the media.

These meetings resulted in the adoption of COP decisions, COP/MOP decisions and a number of conclusions by the subsidiary bodies. These outcomes covered a wide range of topics, including the Adaptation Fund under the Kyoto Protocol, the 2009 work programmes of the AWG-LCA and AWG-KP, and outcomes on technology transfer, the Clean Development Mechanism (CDM), capacity building, national communications, financial and administrative matters, and various methodological issues.

The main focus in Poznań, however, was on long-term cooperation and the post-2012 period, when the Kyoto Protocol’s first commitment period expires. In December 2007, negotiators meeting in Bali had approved the Bali Action Plan and Roadmap setting COP 15 in December 2009 as the deadline for agreeing on a framework for action after 2012. Poznań therefore marked the halfway mark towards the December 2009 deadline. While the Poznań negotiations did result in some progress, there were no significant breakthroughs, and negotiators face a hectic 12 months of talks leading up to the critical deadline of December 2009 in Copenhagen, Denmark.

This report summarizes the discussions, decisions and conclusions based on the agendas of the COP, COP/MOP and the subsidiary bodies. It includes sections on the COP and COP/MOP, also covering the reports of the SBI and SBSTA (which contribute to the COP and COP/MOP’s work). It also includes separate sections on the AWG-KP and the AWG-LCA, which focused on work under the Bali Roadmap and Action Plan.

The full report is available at: http://www.iisd.ca/download/pdf/enb12395e.pdf
and in HTML at: http://www.iisd.ca/vol12/enb12395e.html

Our analysis of the meeting is included below:

A BRIEF ANALYSIS OF COP 14 & COP/MOP 4
POZNAŃ AND THE (LONG) ROAD TO COPENHAGEN

A year after the historic Bali Climate Change Conference, negotiators are now at the halfway point on the Bali Roadmap, which launched a two-year process to strengthen international climate change cooperation. Looking back, progress has been achieved in 2008 through four sessions and discussions on the key elements of the future regime. However, pressure is mounting for the remaining 12 months: serious negotiations must begin as soon as possible in 2009 to secure an agreement in Copenhagen next December.

This analysis takes stock of progress made at the Poznań Climate Change Conference and analyzes the key remaining issues for the critical year ahead. It will first discuss the political context in which the Poznań Conference took place. It will then review the main expectations for the meeting and analyze the results, asking whether they are sufficient for a successful outcome in Copenhagen next year.

(POLITICAL) CLIMATE AT THE END OF 2008

The political context for the Poznań Conference was somewhat different from the Bali negotiations in 2007. In Bali, the atmosphere was characterized by the strong international reaction to the Fourth Assessment Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC) and a sense of urgency about climate change. In Poznań, by contrast, the negotiations took place against the backdrop of a rapidly worsening global financial situation. Many were concerned about climate policy falling victim to the crisis – and even the most optimistic were expecting the financial crisis to have some impact on the process.

The European Union and others at the Conference tried to stress their ongoing commitment to combating climate change, arguing that a transition to a low carbon society entails not only costs but also important economic opportunities. However, at the same time as the Poznań Conference, protracted negotiations were taking place on the EU’s climate and energy policy package to implement a 20% emission reduction target by 2020, causing some to question whether the EU’s leadership on climate policy is faltering. On the last day of the Poznań Conference, delegates were pleased to hear news that agreement had been reached in Brussels on the EU package, even though some NGOs criticized the concessions made to secure the compromise. The package, covering the period from 2013 to 2020, lays down rules for the third phase of the EU Emissions Trading Scheme (ETS), details individual emission targets for EU Member States in sectors not covered by the ETS, and contains a 20% target for renewable energy, a 10% target for biofuels and a 20% target for increasing energy efficiency by 2020.

At the same time, Barack Obama’s victory in the US Presidential elections was a reason for optimism in Poznań. Obama has promised to make climate change a high priority and highlighted a green energy economy as a remedy for the ongoing economic crisis. In Poznań, the US was still represented by the Bush administration and remained relatively subdued during the official negotiations. Some felt that uncertainty about the US position in 2009 caused other countries to refrain from making significant political advances in Poznań, and few expect developing countries to make significant moves before developed countries have clarified their positions on emission reductions and financing. Overall, most felt that the political circumstances surrounding the Poznań Conference were not ideal for major political breakthroughs, which could justify its modest results. “One of those less exciting in-between COPs,” was how some veterans characterized the meeting.

(VARIED) EXPECTATIONS AND OUTCOMES

The agenda in Poznań was exceptionally full, with six bodies considering more than 90 agenda items and sub-items. This put a strain on many delegations and highlighted the importance of prioritizing work. This meant that some of the less urgent agenda items were not given as much attention as usual, leading to a focus on issues related to the Bali Roadmap: the Ad Hoc Working Group on Long-term Cooperative Action (AWG-LCA), Ad Hoc Working Group on Further Commitments by Annex I Countries under the Protocol (AWG-KP) and the second review of the Kyoto Protocol under Article 9. Delegates also focused on a few other agenda items included the operationalization of the Adaptation Fund and the Clean Development Mechanism (CDM).

AWG-LCA: At its fourth meeting, the AWG-LCA spent a lot of time considering “a shared vision for long-term cooperative action,” which was the subject of an in-session workshop, contact group and a ministerial round table. According to the Bali Action Plan, “a shared vision” includes a global goal for emission reductions. While some optimists had hoped for an agreement in Poznań on a long-term global emission goal to guide the negotiations in 2009, there were no serious attempts to achieve such an outcome. Instead, many veterans are predicting that this question will not be resolved until Copenhagen, since it seems likely to be a key part of whatever package deal is reached. They took it as a positive sign, however, that a common understanding seemed to be emerging in Poznań that “a shared vision” covers all the key building blocks of the Action Plan, namely mitigation, adaptation, technology and finance. Many also felt that progress was made on the concept of monitoring, reporting and verifying (MRV) and the idea of a registry for nationally appropriate mitigation actions in developing countries.

In contrast, suggestions for differentiation among developing countries were firmly rejected by some groups within the G-77/China – while being endorsed by many industrialized countries. Some proposals on adaptation were also made more concrete, including the insurance mechanism proposed by AOSIS. These and many other ideas were incorporated in the “assembly document,” a collection of submissions and proposals, which was one of the key outcomes of AWG-LCA 4 and is expected to evolve into a formal negotiating text during the first half of 2009.

AWG-KP: For the AWG-KP, the focus was on a strategic discussion of all the key items on its agenda and on the work programme for 2009, with a view to agreeing on further actions required to finalize Annex I countries’ post-2012 commitments in Copenhagen. Some observers and developing countries were hoping for a clear decision on the aggregate range of mid-term emission reductions by industrialized countries. However, while the 25-40% range by 2020 from the AR4 once again appears in the AWG-KP’s conclusions, the language is similar to that used in previous conclusions and falls short of a definitive commitment. According to some negotiators, this was mostly due to the reluctance of some Umbrella Group countries to commit to a mid-term range at this point. However, many also noted the lack of serious attempts to reach an agreement on this issue in Poznań, possibly because delegates realized the political climate was not yet ripe for such discussions. Overall, most felt that the outcomes from the AWG-KP were modest, limited to the 2009 work programme and to agreement that Annex I countries’ further commitments should “principally” take the form of quantified emission limitation and reduction objectives (QELROs). Those with lower expectations for the meeting noted that little more than this might have been expected, as parties wait for the bottom of the market downturn and the arrival of the new US administration.

ADAPTATION FUND: Along with the Poznań work programme on technology transfer, the only concrete outcome of the Poznań conference was the operationalization of the Adaptation Fund. The COP/MOP adopted several decisions to make the Fund operational, including on arrangements with the Global Environment Facility and World Bank. Importantly, all three tracks to access funds – through implementing entities, accredited national entities, and direct access by parties – have been enabled. The Fund is, therefore, expected to start financing adaptation projects and programmes in developing countries in the next year.

The success on the Adaptation Fund was tempered by the inability to secure additional resources for the Fund due to lack of agreement on extending the share of proceeds (or “adaptation levy”) to Joint Implementation and emissions trading under the second review of the Protocol under Article 9. As many had predicted, these consultations were difficult and were unable to produce an agreement, leading COP/MOP 4 to conclude the second review of the Protocol without any substantive outcome. Most developing countries expressed deep disappointment at the failure to increase adaptation funding.

While many parties and private sector representatives had also hoped for improvements to the CDM under the Article 9 review, the lack of outcome on the review meant that the improvements negotiated in Poznań were not adopted. The AWG-KP, however, agreed to further consider issues related to the mechanisms in the post-2012 period in its March/April session.

FROM POZNAŃ TO COPENHAGEN: KEY TASKS FOR THE YEAR AHEAD

Leaving Poznań, there was little doubt in participants’ minds that plenty of critical work remains for 2009 under the Bali Roadmap. For both the AWG-KP and AWG-LCA, one of the first key tasks is generating formal negotiating texts that must be communicated to the parties at least six months before Copenhagen to comply with legal formalities. The Poznań Conference was widely seen as a successful step in that direction as the Chairs of both AWGs were mandated to prepare documents for the March/April meeting in Bonn.

The task of the AWG-LCA for 2009 will not be easy. The group will have to finalize an agreement on all four building blocks and a shared vision. It is the only body where all countries, including the US and developing countries, participate in discussions on mitigation. Thus, negotiations on a global long-term goal, comparability of mitigation efforts by developed countries and MRV in the context of nationally appropriate developing country mitigation actions are expected to be central. Importantly, MRV also applies to developed country support to developing countries through technology, finance and capacity-building, so ways of doing this will have to be identified. With regard to financing and technology, the AWG-LCA faces the challenge of reaching agreement on the architecture to both finance mitigation and adaptation actions, and facilitate technology development and transfer. Evaluation of proposals contained in the assembly document will be part of this task.

The AWG-KP has a clear objective for 2009: to agree on further commitments for Annex I countries in the post-2012 period. Some developing countries were therefore somewhat disappointed at the lack of clear sequencing of tasks in the AWG-KP’s 2009 work programme. Many developed countries were, however, pleased with text reaffirming the programme’s iterative nature and agreement to “maintain a coherent approach” between the Convention and the Protocol in relation to Annex I parties’ commitments.

Based on some signals in Poznań, some are predicting that the relationship between the Convention and Protocol tracks could become increasingly relevant in 2009. Many developed countries maintain that the work of the two AWGs should be coordinated given that both, for instance, address mitigation by developed countries. In Poznań, Norway, the EU and others also alluded to a “package” and “comprehensive agreement” in Copenhagen, and New Zealand proposed forming a Committee of the Whole and proceeding on the basis of a single negotiating text in June 2009. However, many developing countries and the US have sternly opposed attempts to link the Convention and Protocol tracks, with many developing countries concerned that this could take focus away from new emission reduction targets for industrialized countries under the Protocol, and the US seeking to avoid any proposals that would draw it into discussions related to the Protocol. It therefore remains to be decided in 2009 how to avoid duplication of work under the different tracks of the Bali Roadmap and what the legal outcome of the negotiations will ultimately be. Important as the legal and procedural questions are for the negotiators gathering in Copenhagen, most predict that it will be political will that determines the outcome.

ALL ROAD(MAPS) LEAD TO COPENHAGEN

While many agreed that the Poznań meeting resulted in some progress and positive steps forward, the general feeling was that negotiators had not achieved any major breakthroughs. Those who had hoped for decisive action blamed a lack of political leadership and determination they think would have signaled impending success in the coming year. Instead, many predict that agreement on the most critical issues, including mid- and long-term emission goals and finance, will not be reached before Copenhagen. This has led some to reconsider their expectations of what would constitute success in Copenhagen, and how many details of the new climate regime will need to be finalized after 2009.

Understandably, some participants left Poznań somewhat worried, feeling that while scientific evidence on climate change is strengthening, the “spirit of Bali” is weakening along with countries’ determination to fight climate change in light of the serious economic crisis.

Others, though, were not willing to abandon their optimism just yet. They referred to statements from both the EU and the US on measures to tackle the economic crisis that would also contribute to climate change mitigation and transition to a low carbon economy. Some veterans who are more used to the ups-and-downs of international negotiating processes also suggested that Poznań’s modest outcome could be a positive thing in the larger scheme of things. In the words of one observer, “delegates needed to be reminded that success is not inevitable, and that without strong political will it is quite possible that they will fail to make the historic breakthrough needed in Copenhagen.”

Poznan- very first thoughts

Hmm, as Paul Kelly said in a different context "take your time, this thing needs some working on."

But, famously, time is what we don't really have on climate change, having pissed the last 20 years against the wall...

I've only read a few things, from the Beeb, the FT, and the Grauniad. All highlight the fact that Scientists Say short term targets of 25-40% reductions by 2020 are necessary (these are the optimistic scientists, btw. Others think we're screwed.)

Anyway, the Beeb's Richard Black has a piece Mood mixed as climate summit ends.

It opens with a paragraph that could have been cut and paste from any UNFCCC circus for the last 15 years;

"The UN climate summit has ended with delegates taking very different views on how much it has achieved. Western delegates said progress here had been encouraging, but environment groups said rich countries had not shown enough ambition. Developing nations were angry that more money was not put forward to protect against climate impacts."

(Dwight: I think it was either Benito Muller or Saleemul Huq who said that all UNFCCC conferences were either successes or great successes...)

My favourite quote from the rest of it is Black's piece is this-

"It is not clear how a 'strong political signal' can be sent by not paying for pollution that you have caused," said Pakistan's delegate Farrukh Khan. "We would have hoped that our partners would have taken this necessary step on the road to Copenhagen; but unfortunately the road to Copenhagen is being paved with good intentions."

The Guardian's contribution is this, from David Adam, who's been doing lots of good stuff over the last couple of weeks (and maybe longer- I've not been following!)

"The Poznan talks have made no progress on deciding new global curbs on greenhouse gas pollution, which scientists say are needed to avoid catastrophic climate change. Officials said new targets would not be discussed until the summer, to give Barack Obama time to signal his intentions as US president

And the FT, bless it, wrote some very interesting things about the EU negotiations on 11th-12th, which are worth several separate posts.

"Industrial sectors such as cement, chemicals and steel will receive free carbon emission permits at least up to 2020, instead of having to buy buy them under an auction scheme, as envisaged in a Commission plan published last January. The concession represented a victory for Germany, by far Europe's largest manufacturing nation. It means revenues from teh auctions are expected to be closer to 30 bn euros a year by 2020 than the 50bn euros previously forecast."

Apparently

"EU diplomats said pressure from industrialists on the climate change plans had been relentless this year and had become impossible to resist once it was clear Europe had fallen into a serious recession and risked losing millions of jobs."

I haven't yet watched Al "we cannot negotiate with the facts" Gore's speech
which comes highly recommended.

But look, all this is just our species flailing around it its death throes. We didn't institute Contraction and Convergence, and now we'd need that, sink protection and a whole lotta luck- deux ex machina and all that. Sigh.


Anyway, over the coming week(s) we will try to check out and digest comments from-
e3g- Jennifer Morgan and Nick Mabey are worth listening to.
climate progress- Joseph Romm
Grist Magazine
New Economics Foundation