After Copenhagen: The European business perspective

European businesses were disappointed with the climate change agreement hammered out in Copenhagen. Here’s one way forward.

BUSINESSEUROPE was disappointed by the limited outcome of the Copenhagen conference on climate change. The national commitments likely to be attached to it by the end of January look insufficient to tackle climate challenge globally. European companies will have to face competitive distortions at the international level for a long time to come. While we are committed to developing new, low-carbon technologies and processes, it will be much harder to carry out the necessary investments without the certainty that clear, ambitious and equivalent greenhouse gas-reduction targets provide.

There are positive elements in the Copenhagen Accord. For example, the agreement creates key mechanisms on climate change adaptation, deforestation and technology transfer. The “Copenhagen Green Climate Fund” will manage a considerable amount of money, according to the general commitments made by the signatories, and the concrete pledges for 2010 to 2012 made by the US, Japan and the EU. But the institutional and political modalities of this fund are not clear at all. All the new mechanisms now have to be quickly given substance if we want to make real progress towards a truly global agreement. The EU’s conditional commitment to move from 20% to 30% emission reductions did not trigger meaningful further commitments from other countries. They were focusing their negotiations on the framework for a future international climate regime, while the EU was discussing figures.

Climate policy action will continue in 2010, not only within the UN Framework Convention on Climate Change culminating in COP16 in Mexico City in November, but also in the G20, the Major Economies Forum and other international bodies. In these continuing negotiations, a number of policy issues are key for European companies.

The ultimate aim of our efforts must be a global price on greenhouse gases across all countries and sectors, because only this will ensure an economically viable transformation of the world into a low-carbon society.

Equivalence: All developed countries must commit to binding emission-reduction targets that are equally strong in terms of quantitative reductions and the necessary financial efforts. In that respect, the evolution of the draft climate bill in the US Congress this year will be of utmost importance. On the domestic side, we call on the EU institutions not to further increase the 20% emission target until we are clear that other major economies have made more substantial and binding commitments. The EU should work with international partners to ensure that pledges to the Copenhagen Accord are as strong as possible and to fully analyse these national pledges once they are appended.

Competitiveness: Sound international competition for industry needs to be safeguarded at the global level. A process must be started so that industrial sectors exposed to international competition have equivalent obligations. Without a global level playing field, Europe should continue to give an adequate amount of free allowances to trade- and carbon-intensive industry sectors under the EU Emission Trading Scheme (ETS). The EU sticks to the emission-reduction target set for industry under the ETS, namely a 21% reduction from 2005 to 2020. Otherwise, unilateral EU action will lead to carbon leakage, i.e. fewer jobs in Europe and more emissions everywhere.

Actions in developing countries: As agreed under UNFCCC, countries have to act in line with the principles of common–but differentiated–climate-protection responsibilities and action based on respective capabilities. Advanced developing countries like China and India must commit to setting their own binding emission targets or policies so that global emissions peak by 2020 at the latest.

Transparency: All countries, except the least developed countries, must establish a strong, universal monitoring, reporting and verification regime for all major economic sectors, including land-use and forestation. A small first step towards this end was made during the Copenhagen conference, when developing countries agreed to regularly publish their domestic mitigation action according to international guidelines and to have those actions that require international support independently monitored. It is essential to build on this. An enforceable and strong sanction mechanism for non-compliance with reduction commitments must also be established.

Intellectual property rights: Technology dissemination must be promoted by creating enhanced national and regional enabling environments involving the private sector while protecting intellectual property rights. The “Technology Mechanism” created in the Copenhagen Accord must be substantiated in that spirit.

Market-based finance mechanisms: Like the Kyoto Protocol’s Clean Development Mechanism, these provide incentives to business to invest in emission reductions within developing countries, and must be strengthened. Companies need certainty as soon as possible about the future of these mechanisms after the first commitment phase of the Kyoto Protocol ends in 2012.

These views are those of BUSINESSEUROPE.


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