Big Spending Energy Lobby & Carbon Pricing

No wonder business confidence has collapsed. While the US and Europe apparently grind towards a new financial crisis and recession, Australia’s politicians busy themselves with a fraudulent debate about climate change. Because it is impossible for Australia to meet the proposed greenhouse gas emissions target through domestic action, says business commentator Alan Kohler. Meanwhile, Christiana Figueres, executive secretary of UNFCCC, said the companies which are ‘stuck in the technologies and fuels of yesterday’ have ‘a voice that is louder and better funded’ than more progressive companies.

Alan Kohler in Business Spectator (14 September 2011):

No wonder business confidence has collapsed. While the US and Europe apparently grind towards a new financial crisis and recession, Australia’s politicians busy themselves with a fraudulent debate about climate change.

Why fraudulent? Because it is impossible for Australia to meet the proposed greenhouse gas emissions target through domestic action, and everyone knows it.

In her speech to Parliament yesterday, the Prime Minister Julia Gillard said: “Liable parties will be able to meet up to half of their obligation through the use of international carbon units.”

What she didn’t say is that buying permits from overseas is not simply an option, but an essential part of the plan.

At least she is half honest about it. The Coalition continues to pretend that its “direct action” plan can achieve the same proposed emissions reduction as the government’s, when it would also clearly have to rely on international carbon units to cut emissions by 5 per cent of 2000 levels by 2020.

Yet, Tony Abbott and his Shadow Minister for Climate Change Greg Hunt remain magnificently unquestioned about their own policy while hammering away at the government’s. It is a beautiful thing to be able to successfully criticise careful and detailed government legislation that has been 20 years in the making while not having to worry about developing a credible policy of your own.

But that’s the golden place in which the Coalition finds itself, and good luck to them I guess.

Unfortunately, the lack of any sort of sophisticated discussion about the issue is causing a lot of uncertainty among business people and consumers and contributing to the big drop in their confidence.

No one, for example, is remarking on the fact that while Australia’s “Clean Energy Future” relies on buying international carbon units, the only place you can get them from at the moment – the European Union – appears to be falling apart.

About 85 per cent of the world’s carbon permits are generated in the EU emissions trading scheme, which remains the only deep carbon market to have come out of the 1997 Kyoto Protocols.

Despite two attempts so far – at Copenhagen and Cancun – there is no sign yet of a successor international agreement to replace Kyoto. The World Bank reports that the global carbon market has stagnated, even as the global economy recovered in 2010 and the world’s temperature was the hottest on record at the same time.

There is virtually no chance of an agreement in Durban at the end of this year, or next year, wherever that meeting is held. That means Kyoto will expire in 2012 and it will be every country for themselves… no international market.

That means, realistically, the only place that Australia’s 500 “big polluters” will be able to buy permits outside this country – as they must – will be Europe. But will they be able to?

The EU ETS is not falling apart with the Economic and Monetary Union at this stage, but the future of everything about the eurozone is extremely unclear.

The German Constitutional Court has decisively ruled out a permanent European Stability Mechanism as well as the issuing of eurobonds. In effect, a fiscal union seems to be off the agenda now, which is why financial markets have reacted so negatively in the past week, since the German Constitutional Court ruling.

German Chancellor Angela Merkel has publicly ruled out the insolvency of Greece, but that’s not carrying much weight against the combination of Germany’s legal and right wing forces standing in the way of practical solutions.

So will there actually be an EU ETS in 2015 when Australian companies have to start buying permits from it? Who knows? No one wants to talk about that.

More importantly, nor do they want to talk about what Australia’s response to a new financial crisis and recession ought to be. More cheques in the mail? Another Building Education Revolution? What should happen with the budget?

Australia’s politicians are too busy struggling for power to worry about stuff like that.

Source: www.climatespectator.com.au

Progressive companies must be braver if they want to fight climate change amidst a field of timid politicians and powerful fuels lobbyists.

Jo Confino for the Guardian Professional Network (16 September 2011):

Christiana Figueres, executive secretary of UNFCCC, said the companies which are ‘stuck in the technologies and fuels of yesterday’ have ‘a voice that is louder and better funded’ than more progressive companies.

A lack of courage and co-ordination is preventing progressive businesses from matching the firepower of energy companies that are investing heavily to sow the seeds of doubt about climate change and prevent timid politicians from introducing tougher regulation.

This was one of the conclusions from a debate hosted this week on the Guardian Sustainable Business website between business leaders from across the world under the auspices of the Carbon Disclosure Project (CDP).

Christiana Figueres, executive secretary of the United Nations Framework Convention on Climate Change, warned that efficiency gains alone would not succeed in reaching the quantum leap needed to address climate change and that companies needed to band together to offer an “orchestrated and compelling” case to policy makers to counter the power of the energy intensive industry.

She said: “There is a serious group of companies that have a voice that is much louder, that is better funded, that operates much more in unison and that is still stuck in the technologies and the fuels of yesterday.

“So if we don’t have a voice that is equally as orchestrated with arguments that are at least equally as compelling, then governments are going to be taking very timid decisions and they’re not going to be tipping the scale.”

This view was echoed by Johannes Meier, the chief executive of the European Climate Foundation, who said politicians were looking for a clear signal to act and that new partnerships between business, NGOs and consumer groups needed to be created to challenge the energy intensive companies.

“Policy makers and politicians very much like a clear signal,” he said. “I think those opposing the transformation towards a low carbon economy have been exceptionally good at creating noise, creating doubt on the value of science and producing as their product basically doubt. I think that the challenge we have as a group and beyond business is to change the signal to noise ratio.”

Ian Cheshire, CEO of the world’s third largest home retailer, agreed that more pressure needs to be put on politicians and that business had a clear role in doing that.

He said: “As a retailer we can obviously reach millions of people with messages about resourcing, responsible choices they make on the products they buy but I do also think that actually unleashing the power of the consumers on the politicians is another important link.

“So it’s okay if I can persuade all our customers that they have chosen a wood product which is forest friendly and it’s sustainable, but actually I also want them to start creating the political space that allows the politicians to act.

“One of the things that I have found generally quite surprising is the fear the politicians have in this area of making the regulatory change and almost the need they have for business leaders not just to say from a business point of view we want it, but that we will engage with our consumers to create the political awareness and the political room to allow you to act.”

Niall Dunne, chief sustainability officer at BT, also pointed to the need to inspire a consumer revolution.

Dunne said that “one of the paradigm shifts that we need to spend a lot more time understanding is how we unleash demand globally in this space, because we’re seeing a much more networked consumer that is taking the advice of friends and strangers online.”

Much of the discussion centred on the barriers to systemic change with the criticism of politicians matched only by attacks on the financial sector for failing to credit those companies that were investing for a low carbon economy.

Several speakers spoke of a market failure with asset owners, fund managers and analysts showing a lack of interest in adjusting valuations, despite the likely advantages of those companies that are able to reduce resource use and open up new markets.

James Bevan, Chief Investment Officer at CCLA Investment Management Ltd (Church Commission Local Authorities), said investors needed to get much tougher and disinvest in those companies that failed to take action on climate change: “I have serious reservations about the capacity for markets to step up to the place, because I still see market failure as a core problem for the global economy.

“I think it’s critical that we act together and in concert. It’s very clear that doesn’t happen and I think we have to be very clear with companies that if we don’t see solid action that we will divest. I would encourage investors globally to say look guys if you’re not going to disclose, you’re not going to step up to the table, then really you shouldn’t be taken as a serious investment opportunity.”

Mark Makepeace, chief executive of FTSE Group, said investors were starting to engage on these issues and that this would give companies more confidence to invest in a low-carbon economy.”

But Cheshire said there was no evidence that this was happening: “I would like to believe that investors would do this. I have to say my experience as a public company CEO says that they’re absolutely not, and the issue for the investment community is currently they have no way of changing valuation based on a more or less sustainable business. We have great disclosure but there isn’t yet a feed through to the investment portfolio manager who’s saying the MPV of this business is more valuable because it’s more sustainable. I can apply a higher multiple to the terminal value. This therefore is a better quality business.

“And in the recent weeks, as we see in this compression of yield correlation of stock, there isn’t really the sort of opportunity to stand out, so at the moment I still think it requires business leadership to make the change, because the investment valuation metrics I think are part of the market failure.”

Another reason given for the slow rate of change was the lack of business CEOs who are prepared toput their head above the parapet and take a leadership position.

Cheshire said one of the main problems was that executives were not able to articulate a different future because they were too embedded in the current economic system: “A fundamental barrier is actually probably us as businesses being very, very comfortable with existing business models, because they’ve made us a lot of money, we’re used to it, we’ve actually worked out how to get better and better and better. We have optimised these models through successive bits of re-engineering and to ask people to step away from that and really re-imagine a different model is a really big ask.

“We’re going to have come up with quantum differences in the way we address businesses and create value. I think that requires a very structured, very different bit of thinking, which goes against the grain of most organisations.”

While there was much in the debate to create pessimism, there was also a recognition of the huge business opportunities opening up as a result of the need to move rapidly to a low carbon economy.

However, there was general agreement that companies needed to actively concentrate their research and development resources on sustainable solutions if they were going to open up a competitive lead.

Several attendees made it clear that this will not happen by accident, but by a determined and consistent focus on creating innovative products and solutions.

Linda Fisher, chief sustainability officer at science-based products and services company, DuPont, said 85% of their research and development budget was now concentrated on finding sustainable solutions in areas such as agriculture and renewable energy technology.

She pointed out that the company is already seeing the benefits of this approach with strong demand for sustainable products in spite of the recession: “I think that’s a good sign for getting to a low carbon economy,” she said.

Arunavo Mukerjee, vice president of Indian conglomerate Tata, said every one of their businesses needed to have a three-year plan that included innovation around climate change.

The global nature of the CDP debate, held simultaneously across four continents, also reflected on the carbon opportunities in the developing world.

One of the key messages was the ability for developing countries to avoid the mistakes made in the West as they develop new infrastructure.

Somak Ghosh, group president, corporate finance and development banking at India’s YES Bank, said a key milestone for a low carbon economy would come if business were able to supply renewable energy to those in the developing world who do not currently have access to electricity.

He said: “If one looks at India or emerging economies, the key challenge is providing basic goods and services to what is known as bottom of the pyramid. If business cannot achieve that, at least in emerging markets, I don’t expect this quantum leap in terms of moving towards a low carbon economy to happen.”

Source: www.reg.guardian.managemyaccount.co.uk