The environmental challenges we face should not cost us money but should help make us money.
The past 10 years has seen a massive shift in how society has started to understand climate change and the impacts it is causing and will continue to cause around the world as we progress through the coming century. The irony is that the link between global warming and increased greenhouse gas emissions from human activities was established as long ago as 1824 but has taken us this long to truly understand the catastrophic consequences it will bring if it goes unchecked.
Since the start of the last century we have seen the average global temperature rise by more than 0.7°C. While there will always be some uncertainty surrounding the prediction of changes in such a complex system as the world’s climate, what is now clear is that our increased usage of fossil fuels and change in land use through deforestation is contributing to these increased temperatures. These increases will see rising sea levels, more intense precipitation events in some countries, increased risk of drought in others, and adverse effects on agriculture, health, biodiversity and water resources.
The most recent Intergovernmental Panel on Climate Change (IPCC) Report, the most comprehensive scientific analysis on climate change which received contributions from more than 4000 of the world’s top scientists, was published at the end of last year. The report concluded with 90% certainty that temperatures will continue to rise, with average global temperature projected to increase by between 1.4oC and 5.8oC above 1990 levels by 2100. This was the urgent call to governments and business that action is really needed now – and on a global scale.
In 2003, during my time as chief scientific adviser to the UK government, the UK pledged to reduce carbon dioxide emissions by 60% by 2050. It is now clear that we may need to go further, perhaps towards a 70% to 80% reduction by 2050. Our emissions of carbon dioxide still currently match the European average, at 11 tonnes per person per year. An 80% reduction implies that we should fall to a level of 2.2 tonnes by mid-century, close to the average emissions per person in India today.
Many people and in particular governments around the world have asked why the UK took this leadership decision – whether it would actually do any good globally for a country that emits just 4% of the world’s carbon dioxide to cut its emissions so drastically and furthermore whether this could cause long-term economic downturn for the UK. There were two reasons why the UK made this commitment. The first was to show leadership to other countries. The second was to show that decarbonising your economy can give you a competitive economic advantage.
Efficiency dividend
Much of the private sector has already grasped the opportunities for wealth creation through these developments. GE’s Ecomagination has developed and deployed high-tech, low-carbon products and services which now have revenues of more than £5bn ($8.96bn) a year. Companies such as Dow Chemicals have saved more than $2bn over the past 15 years due to improved energy efficiency measures. BP introduced an internal cap and trade emissions trading system some years ago, which led to an energy consumption saving estimated at $230m a year.
DuPont, once labelled by Greenpeace as “number one pollutor”, introduced a market system of awards and rewards which has resulted in a 72% reduction in carbon emissions over 15 years. It became fully embedded in DuPont’s mode of operation.
But we now have a new challenge – how to decarbonise our economies with faltering economic growth and the current high energy prices. While we need to take proactive action in helping our economies back to health, changing rainfall patterns, increasing food prices, competitive demands for scarce resources with a growing global population, and rising temperatures will all require investment to manage the risks, and our obligation to countries unable to manage these impacts will create further demands.
However, we will only really manage our economic growth successfully and sustainably if we also reduce the impacts of global warming by reducing our carbon dioxide emissions. The important message should be that the environmental challenges we face should not cost us money but should help make us money. It should also be noted that companies ranked as the most sustainable are usually the most profitable.
While there are numerous ways in which we can work to reduce our emissions, one route we should not go down is the introduction of a single global tax on carbon. Who would want to be the global tax collector and how would this system be regulated and monitored? What we must accept is the need for differing trajectories for carbon emissions for different nations. For advanced economies, emissions must fall by 70% to 80% by 2050, while for developing economies, the trajectory should be allowed to rise first and then fall. Alongside this, trading in carbon emissions must be encouraged between nations, mimicking what happens among companies.
Carbon trading
Today, the EU emissions trading market is already worth about €55bn ($78bn). A tonne of carbon dioxide now trades for about €28. Make this €50 to €60 and suddenly changes will transform the continent. And, by auctioning permits for the carbon markets, a global fund would be generated to assist the necessary low carbon technology transfer to the developing world, to help them manage the impacts of climate change, and to pay for the preservation of the rainforests.
We in the advanced economies are very largely responsible for the extent of the problem. But leadership from all emerging economies, including China, is essential. With businesses in the vanguard developing new technologies I am hopeful that we will meet those challenges.
