COP17: Business, govt must work together

By Bjorn Stigson

An important topic for discussion during my recent South Africa trip was the17th Conference of Parties (COP17) of the United Nations Framework Convention on Climate Change (UNFCCC), which is being hosted in Durban this year.

COP 17 is important in order to steer a course towards a sustainable world. But scepticism surrounds this event which the South African government, to its credit, has taken on with great enthusiasm.

Business and government need to work together in order to effectively address climate change with its linkages to energy access and security. In my view the South African government should drive the UNFCCC agenda to foster this cooperation, focusing on the frameworks and financial support needed at national levels.

Global target setting has not delivered the necessary emissions reductions in the years following the Kyoto Protocol agreement, which advocated “top-down” approaches. As a second commitment period for the Kyoto Protocol post 2012 it is unlikely. Durban’s focus should be on developing bottom-up actions at a national level that should fit into an international framework.

Government and business have complimentary goals. Governments want to improve quality of life for people and this requires goods and services delivered by business.

So how can government and business leverage their respective strengths and further encourage sustainable growth? Government will need to give clear guidance that can stimulate consumption patterns that the green technology markets need.

Business is the main mechanism to deliver products and services that are needed for a sustainable future and has the majority of the financial, human and management resources to succeed.

Financing the energy transition poses a major hurdle and Durban is an opportunity for government to progress the Green Climate Fund — pledged as part of last year’s UNFCCC Cancun Agreements — and get private by-in on next steps.

A climate fund is a good starting point but we should expect the bulk of financing to be delivered through the markets. This means that we must continue to focus on the mechanisms and structures within the market to ensure delivery.

Unless we unlock private sector additional investment we will not be able to achieve the needs for adaptation and mitigation. The next 40 years will see continued increases in the global population to more than nine billion people who will all need access to clean energy and sustainable technologies.

Energy security compatible with sustainable development is a central constraint of national planning worldwide. How to decarbonise the energy mix is a further challenge. There is a need to internalise a cost of carbon in order for the market to allocate capital to the cheapest carbon reduction areas.

Business thrives in competitive environments. For business to invest in low carbon or no carbon projects they must be profitable. To capture business’s attention governments should agree on a financial framework which addresses key business parameters of risk, rate of return and size of market. This could be a true and significant achievement of the Durban conference.

To qualify Durban as success depends also on the clarity of the expectations of potential outcomes. Durban is not an endpoint in climate negotiations but a valuable milestone on the longer journey to a sustainable future.

Bjorn Stigson is the president of the World Business Council for Sustainable Development.