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Shaping the sustainable economy : summary report of the World Business Summit on Climate Change, Copenhagen, 24-26 May

2009

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Shaping the

sustainable economy

A Monday Morning Initiative

Summary report of the World Business Summit on Climate Change

Copenhagen, 24-26 May 2009

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Summary report Summary report

THERE IS NOT MUCH TIME.

WE HAVE TO DO IT THIS YEAR.

NOT NEXT YEAR.

THIS YEAR […]

THE CLOCK IS

TICKING BECAUSE MOTHER NATURE DOES NOT DO BAILOUTS.”

Former U.S. Vice President Al Gore

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Summary report

Summary report Foreword 3

The Copenhagen Climate Council is a global collaboration between international business and science founded by the leading independent think tank in Scandinavia, Monday Morning. The members of the Copenhagen Climate Council have come together to create global awareness of the importance of the UN Climate Change Conference, in Copenhagen, in December 2009.

Foreword

The World Business Summit on Climate Change was convened in Copenhagen from 24-26 May at the same venue that will host the COP15 in December this year.

Over the course of three days, global leaders from business, policy, civil society, and science, all engaged in dialogue on the road to a low-carbon future and the recommendations for an ambitious new climate change framework.

They heard from the United Nations Secretary-General on the need for business engagement and leadership;

former U.S. Vice-President Al Gore on the critical importance of an effective climate treaty and business leaders from more than 40 countries.

The key objective of the World Business Summit on Cli- mate Change was to contribute input to the work of the Danish government and the United Nations negotiations entering their final phase before COP15 in December. At the culmination of the Summit, the Copenhagen Call was presented to Danish Prime Minister Lars Løkke Ras- mussen by Copenhagen Climate Councilors and senior business representatives at the Summit.

This statement is an unequivocal call for a more effective and ambitious global climate treaty. It was informed by work at the Summit and the contributions of those partners who supported the event: the World Economic Forum Climate Change Initiative; the World Business Council for Sustainable Development; the United Na- tions Global Compact; the Climate Group and 3C.

Business leadership on climate change is vital, because politicians listen to those agents that create wealth and value. And vital because if we are going to reduce emissions and get the carbon cycle back into some kind of balance, those agents must create wealth and value in ways that do not result in carbon pollution.

What we take from this Summit is a positive commitment to action. It is clear to all that the world is in the midst of a global recession. But having been part of discussions during the three days in Copenhagen, among leaders within oil, energy, transportation, green tech, ICT and many other industries, our hopes are high. We are optimistic. From deliberations at the Summit, and the clarity of the Copenhagen Call, it is clear that global leaders want change and are ready to deliver what is required.

Our hope is that global political leaders will demonstrate the same leadership as global business leaders did on 24-26 May in Copenhagen.

Tim Flannery Chair

Author and scientist

Erik Rasmussen Founder

Editor-in-Chief and CEO, Monday Morning

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Summary report Summary reportSummary report

4 Index

Foreword

Executive summary The Copenhagen Call

Working group session summaries Outcomes of side events

List of participants

About the Copenhagen Climate Council Next steps

About Monday Morning About Planet Call

03 05 10 14 28 30 34 37 38 39 40

Index

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Summary report

Summary report Executive summary 5

Executive summary

The objective of the Summit was to mobilize private sector engagement in the development of the future policy framework on climate change, and to provide constructive ideas and practical proposals to support an ambitious global deal on climate change at COP15 in Copenhagen in December 2009.

The Summit was convened by the Copenhagen Climate Council in collaboration with The Climate Group, 3C (Combat Climate Change), the United Nations Global Compact, the World Business Council for Sustainable Development, and the World Economic Forum’s Climate Change Initiative, and with the full support of the Dan- ish Government.

The underlying ambition of the Summit was to address the twin challenges of the climate and economic crisis. Participants at the Summit addressed how these risks can be turned into opportunities if business and governments work together and what policies, incentives, and investments, will most effectively stimulate low-carbon growth.

Key messages from the Summit

Business is ready to act. If there is one overriding mes- sage from business leaders at the Summit, it is that the current economic downturn must not temper the ambi- tions of governments to achieve a robust climate treaty in Copenhagen, as business is ready to respond and turn talk into action. Business leaders have the available models and technologies, as well as the willingness to implement what a new ambitious political framework would demand. Economic recovery and urgent action to tackle climate change can be complementary by boosting the economy and jobs through investment in the new infrastructure needed to reduce emissions.

The Copenhagen Call

At the end of the Summit, the Copenhagen Cli- mate Council and its partners presented business recommendations – the Copenhagen Call - to the Danish Prime Minister Lars Løkke Rasmussen and the UNFCCC Secretary General Yvo de Boer, which calls upon political leaders to agree an ambitious and effective global climate treaty at COP15 in Copenhagen. You can find the full text of the Copenhagen Call on pg. 10.

The challenge is manageable and affordable. There was recognition that while action to tackle emissions growth will result in short-term costs, this will be outweighed by long-term benefits of avoiding dangerous climate change. The technical solutions are to a great extent available or emerging, but need to be fully implemented and supported by policy frameworks.

Business recognizes and should act on climate change science. Business stands ready to invest and develop solutions to climate change, based on input from the scientific community of the urgency and scale of the problem. IPCC chair, Dr. R.K. Pachauri, noted during discussions that we are “towards the upper end of the range” of the emissions paths assessed in the 2007 Fourth Assessment Report. This concern was shared by former U.S. Vice President Al Gore, who expressed how future generations would look back at us if “we choose not to take action to avoid the horrendous catastrophe that the scientific community spelled out and told them would happen if they did not act.”

During the Summit, Pachauri and other scientists warned that by not tackling climate change, here and now, politicians would lead the world on a path toward an increased threat of war, population displacement, and terrorism.

Politicians need the confidence to demonstrate true leadership. It was clear during the Summit that business leaders as well as civil society must support their national political leaders. Several discussion leaders also stressed that in order to reach a successful outcome in December 2009 focus on a bottom-up approach is crucial

On 24-26 May 2009, more than 500 business leaders from some 40 countries met with leading experts, government officials, and NGO representatives at the World Business Summit on Climate Change, in Copenhagen.

“If I were a climate negotiator now, with six months to go, I’d be hoping that business would step up the pres- sure on me. We need to be a bit brutal at times on the negotiators. Some of them might even welcome that.”

Lord Michael Jay, Advisory Board Member,

Globe International

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6 Executive summary

Focus areas for business

The Summit debates offered a variety of concrete recommendations from business leaders to their peers and from other stakeholders to business on how corporate leaders can operate successfully in the world of economic recession and climate change, and support the transition to a low-carbon economy.

• Ensure the company is geared toward a full transition to a low-carbon future when agreement is reached on a new global framework on climate change, by incorporating climate and corporate business strategies.

• Implement optimal energy efficiency systems, cleanest possible energy sources, and low-carbon technologies, both in scale and scope.

• Turn rhetoric into hard action and demonstrate to share and stakeholders that your business is prepared to move into the low-carbon economy.

• Ensure a competitive advantage and attract young talent, by creating a green profile and engaging employees in both internal and external carbon emissions reduction that will help stimulate a bottom-up approach.

• Involve the company in partnerships between governments and sectors. These partnerships are crucial to ensure the right investments and foun- dations for long-term, low-carbon, prosperity.

“We all need to be active. It doesn’t end here. There are 208 days to go.

Everybody that’s here needs to think, If I’m not satisfied with what comes out of Copenhagen, did my organiza- tion, my company, did I do everything I could to get the best deal. Success will have many parents.”

Steve Howard, Chief Executive Officer, The Climate Group

– both internally and externally. By mobilizing employees in this regard, business leaders can help facilitate the public support political leaders need to make bold decisions and reach ambitious agreement.

Next steps towards December 2009

Business leaders at the Summit demonstrated a clear commitment to the development of an ambitious future policy framework for climate change and stand ready to work with policymakers to help reflect their ideas and concerns in the international climate change treaty, which they hope will be agreed at Copenhagen. The Summit highlighted two fundamental means to success in December 2009:

1. Business involvement, partnerships, and knowledge-sharing. Business has a critical role to play in financing, developing, and deploying low-carbon solutions. Business is expected to provide the bulk of the investment required in the transition to a low-carbon economy, so it is important to understand that investors – whether pension funds, companies, or venture capitalists – need to make returns on their investments.

Business also has a key role to play in low-carbon technology innovation and deployment, but there is also a need for new alliances, and in some cases partnerships with government. Technology innovation will only occur if government goals and policies are clear and longterm.

Next steps

• Ensure a clearer understanding between government officials of how incentives or regulations can make low-carbon investments commercially viable.

• Improve the quality of information, transparency, and measurability for investors allocating funds for low-carbon technologies.

• Establish closer collaboration and consultation between governments and business.

2. Politicians need to get the mechanisms right.

Mechanisms and regulations designed by governments, whether carbon markets, public-private partnerships, standards, or taxes, need to be designed to promote business engagement on climate change.

Carbon markets should continue to play a central role in climate policy, but must be scaled up to a global level and complemented by other policies. It is vital that policies put a clear and long-term price on carbon emissions that can steer the choices of consumers, businesses, and governments, over coming years and decades. Shifting major infrastructure investment down a low-carbon path will only happen if the regulatory landscape is clear to investors.

Next steps

• Ensure involvement of businesses and organizations when designing mechanisms for a new global framework.

• Create partnerships between business, science, and governments, on specific mechanisms crucial to a new global framework.

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Summary report

Summary report Executive summary 7

Recommendations to policymakers

The Summit focused on nine issues, ranging from technology collaboration to adaptation, which are critical in the transition to a low-carbon economy and form key parts of the UN negotiations leading up to COP15 (all working groups were built around the five core themes from the Bali Action Plan). A summary of each of these working groups and key recommendations is presented in this report (pg. 14).

In spite of the differences in subject matter, a consistent set of recommendations emerged from the nine working groups:

• Ensure robust, clear, and long-term, regulatory signals for investors. Whether trading programs, performance standards, or taxes – that provide greater predictability, transparency, and security when making long-term capital allocation deci- sions, such as investment in infrastructure.

• Create the right environment for new collabo- rative financing mechanisms. Such as green infrastructure funds, public-private partnerships, and ‘climate bonds’ to support the development of low-carbon technologies that are currently not commercially viable, and to scale-up the deploy- ment of those technologies that are.

• Support technologies and methods that ensure cost-effective greenhouse gas emissions re- ductions. Governments should be ‘technology neutral’ while focusing on incentivizing energy efficiency improvements and limiting deforesta- tion, or forest degradation, as these can deliver significant, cost-effective carbon emissions reduc- tions as well as provide a range of other benefits.

• Secure better and more transparent disclosure to drive change among investors and consumers.

This includes disclosure of corporate strategy and capital investment decisions, greater use of car- bon labeling and energy efficiency performance, robust monitoring, reporting and verification pro- tocols, and transparency in the costs and benefits of new policies developed by governments.

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Opposite page: Li Xiaolin, Chairwoman and Chief Executive Officer, China Power International Development. This page, clockwise from top left: Indra K. Nooyi, Chairman and Chief Executive Officer, PepsiCo; Philippe Joubert, President, Alstom Power; Alan Salzman, Chief Executive Officer, VantagePoint Venture Partners; Sir Martin Sorrell, Chief Executive, WPP;

Yvo De Boer, Executive Sectretary, UNFCCC; Jim Prentice, Minister of the Environment, Canada; Orville Schell, Director, Center on U.S.-China Relations, Asia Society; Connie Hede- gaard, Minister of Climate and Energy, Denmark, Erik Solheim, Minister of Environment and International Development, Norway; Richard Samans, Managing Director, World Economic Forum; Cate Blanchett, Co-Artistic Director, Sydney Theatre Company. © Copenhagen Climate Council / Peter SØrensen.

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10 The Copenhagen Call

The Copenhagen Call

As global business leaders assembled at the World Business Summit on Climate Change, we call upon our political leaders to agree an ambitious and effective global climate treaty at COP15 in Copenhagen. Sustainable economic progress requires stabilizing and then reducing greenhouse gas emissions. Success at COP 15 will remove uncertainty, unleash additional investment, and bolster current efforts to revive growth in a sustainable way.

By addressing the magnitude of the climate threat with urgency, a powerful global climate change treaty would help establish a firm foundation for a sustainable economic future. This would set a more predictable framework for companies to plan and invest, provide a stimulus for renewed prosperity and a more secure climate system. Economic recovery and urgent action to tackle climate change are complementary – boosting the economy and jobs through investment in the new infrastructure needed to reduce emissions.

Business is at its best when innovating to achieve a goal and the goal of reducing greenhouse gas emissions is vital to our common social, economic and environmental future. At the Summit we agreed that this will require:

1. Agreement on a science-based greenhouse gas stabilization path with 2020 and 2050 emissions reduction targets.

We support the scientific evidence of the IPCC’s 4th Assessment Report. We are concerned that some recent scientific evidence suggests the problem may be worse than many of the IPCC estimates.

An effective global climate treaty must establish an ambitious goal and set emission targets that protect us and future generations from the risks of climate desta- bilization. Limiting the global average temperature increase to a maximum of 2 degrees Celsius compared to pre-industrial levels would entail abatement of around 17Gt versus business-as-usual by 2020. This will require an immediate and substan- tial change in the current global greenhouse gases emission trend: it must peak and begin to reduce within the next decade. Longer-term targets must be informed by the evolving science, but the IPCC’s 4th Assessment Report indicates that global emissions must fall by at least half of 1990 levels by 2050. We believe that working to reduce emissions now is less costly than delaying our efforts. There is nothing to be gained through delay. The deepest reductions should initially be made by developed economies though global emissions reduction will require all nations to play a part.

Emissions reduction at this scale will profoundly affect business, and business is already taking action to drive down greenhouse gas emissions. We are ready to make those changes and support ambitious political decisions to address the climate challenge wherever we operate. If policies are well designed and implemented, the benefits of early action will outweigh the short-term adjustment costs. This early action can only be achieved by setting an ambitious 2020 target.

Presented at the World Business Summit on Climate Change

Copenhagen on 26 May 2009.

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Summary report

Summary report The Copenhagen Call 11

The Copenhagen Call

2. Effective measurement, reporting and verification of emissions.

Achieving and tracking greenhouse gas emissions reduction is vital to measuring convergence towards the objectives of an effective climate treaty. As businesses we can set an example by contributing to a unified, coherent and reliable measurement, reporting and verification discipline leading to mandatory reporting.

Accounting for the emissions we are responsible for will provide the basis for emissions reduction beyond what may be required by regulation and allow our performance to be properly judged and rewarded by investors and the public.

3. Incentives for a dramatic increase in financing low emissions technologies.

To promote effective, efficient, equitable and ambitious action to address climate change the world will need to mobilize the scale of investment necessary to achieve the emissions reduction required. Properly established, an international carbon market framed around ambitious reduction targets can enable both cost- effective abatement and create the carbon price stability to drive the deployment of technologies that will deliver large-scale emissions reductions. The first steps to establishing a global market will be to enable linkage between national and regional carbon markets. An international agreement will help secure investor confidence in the carbon market, and national actions will help generate new financial flows for climate investment.

The new climate treaty must “push” the development of new technologies through the use of public funds to leverage private finance in early stage demonstration and deployment. This will require policy measures that create clear, predictable, long- term incentives to stimulate private investment and enable the global diffusion of capital and technology.

4. Deployment of existing low-emissions technologies and the development of new ones.

The private sector is already the source of over two-thirds of the world’s investments in clean technology innovation, and is the most effective source of know- how and technology dissemination and transfer. Many lowcarbon technologies already exist and can significantly reduce global emissions. Significant emissions reduction can be achieved through energy efficiency, much of it with positive financial returns. Standards and regulations are the best way to achieve this. A new treaty must support deployment of lowcarbon solutions by encouraging incentives for public and private purchasers to choose the lowest emissions infrastructure and technologies and for investors to account for climate risk in their decisions.

Government and business must work together to ensure that all nations have equitable access to new clean energy technologies and other innovations by, among others, working with developing countries to improve the infrastructure required for effective deployment.

An effective global climate treaty must provide the means to fund research, development and the deployment of new clean energy technologies. Pricing can help

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12 The Copenhagen Call

“pull” these technologies through the innovation chain, generate revenue and enhance the flow of investment to developing countries. Governments should strive to end the current perverse subsidies that favour high emissions transport and energy infrastructure and promote deforestation.

A shift to a low-carbon economy, supported by private sector participation and government, has the potential to drive the next generation of technological innovation, address the environmental and economic challenges that climate change presents, and contribute to global development.

5. Funds to make communities more resilient and able to adapt to the effects of climate change.

We recognize that adaptation is as important as mitigation in an effective global climate treaty. Adaptation planning will require a holistic and long-term planning per- spective, which will require different levels of activity at the international, national and local levels. Businesses will be responsible for building much of the infrastructure needed to protect us from climate impacts. An effective global climate treaty will mobilize funding that supports public private partnerships to enhance development, adaptive capacity, climate resilience and management of risk.

6. Innovative means to protect forests and balance the carbon cycle.

Because a significant proportion of the CO2 reduction required by 2020 comes from the sequestration of carbon in forests and agriculture lands, an effective climate treaty must facilitate such sequestration. If emissions reductions targets are to be met, there is an immediate need to protect forests and enhance carbon sequestration. The private sector can play an important role in reducing deforestation, particularly in developing countries, through mechanisms structured to value conservation.

We believe these elements should form the core of the international climate change treaty agreed at Copenhagen. As business leaders we stand ready to innovate and operate within the framework established through that treaty and national policies.

Reducing the emissions that until now have been so linked to our economic growth and betterment will be an enormous, unprecedented global challenge but will also provide significant opportunities for sustainable growth, development and innovation. Acting together, we owe it to future generations to meet this challenge. Now is the time to create the foundations for long term, low carbon prosperity. We are willing to work with government to do so.

Presented by the Copenhagen Climate Council, informed by discussions with the World Business Council on Sustainable Development; 3C; the World Economic Forum´s Climate Change Initiative; the UN Global Compact and The Climate Group, and deliberations among participants at the World Business Summit on Climate Change, 26 May 2009.

The Copenhagen Call

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Summary report

Summary report The Copenhagen Call 13

“I ask all of you to support The Copenhagen Call […] Use your influence as business leaders to bring climate change to the attention of policymakers and the public. Instruct your govern- ment affairs teams to lobby vigorously and relentlessly for a successful outcome in Copenhagen in December. Do it now. […]

Mobilize employees, partners, clients and customers to take a stand and demand climate action from governments.”

His Excellency Ban Ki-moon, Secretary General, United Nations

Tim Flannery, Chair of the Copenhagen Climate Council, presents the Copenhagen Call to Danish Prime Minister Lars Løkke Rasmussen.

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14 Working group session summaries

Working group session summaries:

Recommendations to policymakers

The program of the Summit focused on exploring how best the global climate treaty can be shaped to encourage business action on climate change. The goal was to put forward recommendations and practical proposals that addressed:

• Effective policy instruments

• Business strategies

• Models for public-private partnerships

Key to reaching this outcome were nine working groups convened – under the guidance of skilled facilitators – to share experiences, debate lessons learned and generate collaborative solutions under the following themes:

• Financing the transition to a low-carbon economy

• Carbon markets

• Technology push

• Technology diffusion and collaboration

• Energy efficiency

• Forestry and terrestrial carbon

• Adapting to climate change through strategic planning and collaboration

• Measuring and communicating progress

• Value chain

“We are investing into a black box. It is absolutely necessary that we get a long-term framework to operate in;

and it absolutely necessary that we get a price on carbon.”

Anders Eldrup, President and Chief

Executive Officer, DONG Energy

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Summary report

Summary report Working group session summaries 15

Financing the transition to a low-carbon economy

A report prepared by the World Economic Forum and New Energy Finance in January 2009 estimates an average annual investment of over US$ 500 billion is required from now until 2030 in renewable energy and energy efficiency technologies alone – and this in the context of the current economic situation, where developing and developed countries alike are faced with mounting public-sector deficits and a global slowdown in capital flow. Discussions in this working group – chaired by Alan Salzman, Chief Executive Officer of Vantage Point Venture Partners – focused on three ques- tions:

1. What drives private sector investment in low-carbon solutions?

2. What are the barriers to private sector investment?

3. What policies are needed to scale up investment into the low-carbon economy?

When considering the challenge of how to mobilize the necessary flows of capital for the transition to a low-carbon economy it is important to acknowledge the obvious: delivering an adequate and reliable return on low-carbon investment is an essential driver for investors, whether pension funds, venture capitalists or others along the investment chain. Furthermore it is necessary to distinguish between the different recipi- ents of capital (entrepreneurs, established businesses) and the different sources of capital (pension funds, large corporations, venture capitalists, or governments) as each will have different motivations and appetites for risk.

Catalyzing capital flow

While the scale of the climate challenge is immense, there are historic examples of game-changing technologies breaking through, moving down the cost curve and becoming commercially viable for mass distribution.

Between them, the global policymaking community and the private capital market players have the money, the policy insights, and many of the technologies needed to modify our emissions trajectory. Thus, reorienting finance to meet the climate challenge is less a problem of capital availability than it is one of capital flow.

Addressing the challenge of climate change will require a radical mobilization of – as yet – untapped sources of funding.

Three key observations emerged amongst participants:

• First, because of the short time-frame suggested by science, accelerating capital flow is critical – we need to get to scale more quickly than a normal market evolution would.

• Secondly, policy frameworks need to establish both sticks (standards, regulations, price signals) and car- rots (risk rewards).

• Finally, the perception that risk associated with investment in the low-carbon economy is higher than it actually is must be redressed.

Participants recognized that agreement on a long term low-carbon trajectory would be a critical enabler for increased low-carbon investment. With long-term mandates in place, policy uncertainty will no longer erode the returns and valuation of these investments.

However, a regulatory framework needs to be designed that will provide a solid foundation for investors, without picking individual technology winners. Designing the regulations to encourage a ‘family’ of low-carbon winners was proposed as a possible way to shape the market without distorting it.

The discussion on Financing the transition to a low-carbon economy continues under the um- brella of the Business-Expert Task Force on Low- Carbon Economic Prosperity, facilitated by the

World Economic Forum´s Climate Change Initiative.

To receive more detailed information, please write to copenhagen@weforum.org.

“Right now, the risk-reward equation isn’t doing the trick. The institutions aren’t seeing either the nearness of the returns based on historical prece- dents, or they perceive there to be too much risk to free the capital flows.”

Alan Salzman, Chief Executive Officer,

Vantage Point Venture Partners

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Recommendations to policymakers

• Create robust and long-term carbon pricing signals that provide greater predictability for investors when making long-term capital allocation decisions, such as investments in energy infrastructure. This could be achieved through a variety of instruments, such as market mechanisms, taxes, emissions or efficiency standards, feed-in tariffs, risk insurance etc., according to national circumstances. Whilst necessary, however, a carbon price signal will not be sufficient on its own, given the speed of investment change that is required.

• Develop new financial products and strategies to encourage pension funds and retail investors to finance low-carbon investments. Governments could help develop funding schemes such as ‘climate bonds’, low-carbon microfinance, etc.

• ‘Push’ the development of new technologies in the new climate treaty as well as national policies, through the use of public funds to leverage private finance in early stage demonstration and deployment.

• Promote greater transparency and mandatory carbon disclosure among investors and businesses to ensure that investment decisions, whether in low or high-carbon technologies, are well understood.

• Implement measures to increase rewards and decrease risks to accelerate low-carbon capital flow and transformation. These could include taking a longer-term policy orientation, the creation of public-private partnerships to invest in new technology, government incentives with sunset clauses to ensure that new entrants into the market can compete with incumbents, leveling the playing field for clean technologies, and educating and training a strong base of low-carbon investment specialists.

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Summary report

Carbon markets

Although carbon markets have a short history and have faced a number of well-documented challenges, participants in this working group agreed that international and domestic carbon markets should continue to play a central role in climate policy. The discussions were chaired by Samuel A. DiPiazza, Jr., Chief Executive Of- ficer of PricewaterhouseCoopers International.

It was emphasized that existing emissions trading schemes have led to emissions reductions, changed boardroom behavior and created market infrastructure.

The EU Emissions Trading Scheme (EU ETS) resulted in emissions reductions of between 80 and 100 MtCO2e between 2005 and 2007 and further reductions in 2008.

However, the uncertainty over the long term future of the carbon market and the short term nature of the current budgetary periods means that few companies operating both inside and outside Europe have taken a price of carbon into account when investing in long- term assets such as power plants or steel mills.

Recommendations to policymakers

• Endorse the use of markets and price signals as a tool for reducing emissions. However, carbon markets need to be complemented by other policy measures to drive the deployment of solutions that respond less readily to carbon pricing, such as energy efficiency measures, transportation, and the development of new low-carbon technologies.

• Adopt ambitious short, medium, and long-term emissions targets. Scarcity is fundamental to a cap and trade program, as it creates a price that will stimulate non-marginal low-carbon investments.

Ambitious targets for the short, medium and long- term is critical to ensuring this scarcity.

• Employ the most effective means to maintain market confidence. The unpredictability of price fluctuations and periods of extreme price volatil- ity and market illiquidity is a deterrent to broader market participation. Further work is needed to identify the most effective and least market-distorting way to maintain market confidence until the market matures.

International and domestic carbon markets should continue to play a central role in climate policy.

Furthermore, there are concerns that emissions trading does not provide a sufficient incentive to downstream technology innovation and consumer switching to low- carbon choices.

“In a very young market, we’ve learned a great deal. We’ve learned that markets do change behavior, and they do affect decisions being made.”

Samuel A. DiPiazza, Jr., Chief Executive Officer, PricewaterhouseCoopers Interna- tional

• Create conditions that will enable a global carbon market to evolve over time. A global market is an important goal; however, it is not necessary to design a global market from the outset. The following measures can support this objective:

• harmonization of rules on monitoring reporting and verification (MRV);

• consistency between compliance periods; and

• harmonization of rules on offset eligibility and the encouragement of their use in all emissions trading systems.

• Build on the current project-based approach to investment in emission reductions. While further work is needed to improve the efficiency of the Clean Development Mechanism (CDM) and to develop mechanisms for rewarding private sector finance of projects and programs under new sectoral approaches, immediate use of common dynam- ic emissions benchmarks in the CDM can be an effective first step towards sectoral crediting.

This working group was developed and organized by The Climate Group. For more information, please go to www.theclimategroup.org or contact Lauren Bird at lbird@theclimategroup.com.

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Technology push

Major transitions in energy infrastructure take time, as evidenced by the move from wood to coal and then from coal to oil. The move towards low-carbon economy will face similar inertia, particularly during periods of economic recession when investment levels fall dra- matically.

Participants in the working group on Technology push, chaired by BP Group Chief Executive Tony Hayward, agreed that different technologies face different challenges – challenges which may also vary from region to region. Clearly, no single technology is likely to solve the climate problem.

However, there are extensive opportunities in emerging economies to meet growing energy demand through renewable energy rather than traditional fossil fuels.

Small scale energy technology and decentralized or distributed energy markets also have potential to grow locally.

Coal provides a significant share of global power generation. About 30% of units globally have a low (24-26%) thermal efficiency compared to the potential efficiency of about 45%. This represents a significant opportunity for cost-effective emissions reductions.

Commercializing and deploying low-carbon power generation technologies, such as solar power, is proving challenging. Supporting economic deployment, including strengthening of the supply chain (domestically as well as internationally) and the creation of appropriate financial structures and regulatory incentives would help investors build confidence. For other types of technologies, such as carbon capture and storage (CCS), public acceptance and support are crucial, as is commercial collaboration between power generators, pipeline opera- tors and oil and gas companies. Major coal-dependent developed countries are more likely to be effective

“There’s a lot of technology available today to make a dramatic impact on energy efficiency and also to begin to provide a significant quantity of low- carbon energy.”

Tony Hayward, Group Chief Executive, BP

Full commercialization of new low-carbon technologies will be crucial to sustained emission reductions.

drivers to scale up the deployment of CCS and could benefit from collaboration and knowledge sharing.

In the transport sector, technological improvement in the production of biofuel and the electrification of per- sonal transport is critical. Building the infrastructure and the capacity for mass production and deployment is also vital to the success of new transport technology, especially electric vehicles. However, in the short to medium-term, improvements in vehicle efficiency and engine technologies provide the biggest opportunity for carbon reductions.

Urban planning and the built environment also present opportunities for technology to reduce emissions. In the construction sector, for example, the lack of regulatory incentives in a conservative industry limits active measures from the private sector to lower its carbon footprint.

This working group was developed and organized by Combat Climate Change. For more information, please go to www.combatclimatechange.org or contact Jesse Fahnestock at jesse.fahnestock@vattenfall.com.

“Carbon markets are very good at driving existing technologies into business processes, but not really good at all at driving pre-commercial or breakthrough technologies. Carbon markets don’t have the time horizon for that .”

Samuel A. DiPiazza, Jr., Chief Executive

Officer, PricewaterhouseCoopers Interna-

tional

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Summary report

Recommendations to policymakers

Continue to incentivize businesses through markets.

Business needs a clear, directional signal that the market for emissions reductions will continue to grow globally.

Transport

• Deploy vehicle efficiency standards and incentives, or regulations to reduce vehicles on the road. This would especially help to promote carbon reduction.

• Promote incentives that encourage behavioral changes. Improved traffic flow or more fuel-efficient driving behavior are examples of behavioral changes that could deliver significant efficiency savings quickly.

• Invest in infrastructure to promote low-carbon vehicles such as electric vehicles over the longer term.

Power generation

• Allow countries to incentivize and ‘pull’ technologies to the market that are appropriate to their resources and circumstances.

• Advance global partnerships that ‘push’ the development of the underlying, non-applied scientific knowledge. This will help businesses launch context-and technology-specific commercial ap- plications.

• Promote economies of scale. At the national level, governments need to help businesses achieve economies of scale, perhaps through public-private partnerships that pool private capital, share risk, and offer seed funding.

On Sunday 24 May 2009, Alstom Power, Duke Energy, and Vattenfall hosted a roundtable discussion on the vision and strategy needed to decarbonize power generation. The session was attended by some 20 high-level business executives, senior government officials and leading experts. Discussions focused on how business and governments can work together to bring forward the investment and technology development needed to meet the climate challenge.

CEOs at the roundtable expressed concern that even if current policies are successfully implemented this will result in just half the emissions reductions necessary to reaching the 450ppm target. Therefore a step change is urgently needed in the global policy framework. One of the most important outcomes from COP15 should be agreement that emissions will be priced according to their environmental impact. Key messages from the roundtable include:

• Decarbonising power generation is essential to meeting emissions goals in 2050 and will make a large contribution in 2030.

• Confidence in the direction of travel and the stability of the regulatory framework is required to catalyze the necessary private sector investments.

• Long term visibility of the development in the carbon price is critical. The carbon price must rise to a level consistent with the need to incentivise long-term investments.

• Costs of low-carbon technologies can only be driven down through research, development and deployment. Additional measures will be needed to supplement a carbon price and overcome barriers specific to each technology.

• Regulation benefits industry by providing a consistent approach and level playing field, and is needed to drive investment to ensure the most cost-effective abatement long-term. Suitable areas for regulatory intervention include efficiency standards – both on the demand-side and at the source of generation; CCS for coal-fired power plants; smart grid; sectoral approaches, etc.

Power sector calls for political leadership

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Technology diffusion and collaboration

Discussions in this working group focused on the barriers to deployment of clean technologies and how they may be overcome. Increasing technology diffusion requires an improvement in the enabling frameworks as well as capacity building. Indeed, it is common practice for businesses to adapt technologies to specific markets and ensure there are capabilities in place to use the technologies. For example, wind turbines are often adapted to make them simpler and easy to operate.

Technologies are diverse and sectors have different needs. However, participants at the Summit agreed on a common challenge: diverse standards, national codes, laws and practices in different regions, create multiple strands of compliance needs, and limit the benefits of economies of scale that would foster the rapid diffusion of existing solutions.

Technology collaboration is essential to producing the transformational change required; collaboration involves establishing a dialogue between government, sectors and international organizations. The EU is leading the climate change transformation, which can help others learn from their experiences. Emerging econo-

“Don’t discount the ability of develop- ing countries to innovate.”

Steve Lennon, Managing Director, Corporate Services, Eskom

mies are developing low-carbon development strategies, but the diffusion of low-carbon technologies is slow and often met with multiple barriers, such as a lack of absorptive capacity and political and economic signals to encourage widespread deployment.

Collaboration between the private sector, government, and multi- lateral institutions to deploy clean technologies is critical to achiev- ing the necessary speed and scale.

Recommendations to policymakers

Power generation

• Involve the private sector in the development of technological needs assessment in developing countries.

• Increase capacity building in developing countries, including education, training, and exchange of information and best practice, with other developing countries.

• Enhance transparency and involvement of business stakeholders, NGOs and academic institutions.

Industry

• Create integrated policies that facilitate collaboration between sectors, companies, and NGOs.

• Create long-term policy frameworks and incentives for the development and use of new technologies.

• Streamline and harmonize standards to ensure alignment of national and international best prac-

tices and standards, and create level playing fields.

• Provide incentives for early action, including appropriate accreditation for any early action to deploy alternative technology ahead of schedules, or indeed ahead of legislation.

Buildings

• Provide integrated policies that will foster sys- temic and solution approaches, e.g. by promoting life cycle assessments of building and building materials to understand energy usage throughout the asset life.

• Promote use of innovative building materials or improvements in design through market incentives and regulations.

• Improve building codes and policies directed to retrofitting building stocks.

• Improve building information and management systems, e.g. intelligent energy metering.

Collaboration can help overcome some of the barriers to technology diffusion. Opportunities for cooperation exist not only among carbon intensive sectors (e.g. CCS demonstration) but also within the wider economy.

Solution providers such as ICT and biotechnology, for example, can contribute significantly to emission reductions by collaborating with other industries.

This working group was developed and organized by the World Business Council for Sustainable Development.

For more information, please go to www.wbcsd.org or contact Matthew Bateson at bateson@wbcsd.org.

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Summary report

Energy efficiency

Demographic change is a key factor in tackling emissions growth. Although developing countries typically have lower carbon emissions per capita compared to developed countries, their rapidly rising populations mean that they are expected to represent 8 out of the 9 billion global population by 2050. These countries are also urbanizing quickly, so energy efficient systems (whether in relation to power generation, the built environment, public infrastructure, consumer products, or transportation) need to be in place to ensure that the increased population can achieve high living standards without compromising efforts to tackle climate change.

Improving energy efficiency can help deliver a significant proportion of the emissions reduction required – a 34% reduction in global carbon emissions by some estimates. Importantly, undertaking measures to improve energy efficiency can often deliver the most immediate and cost-effective emissions reductions, compared with other carbon mitigation efforts. However, they are often neglected in global negotiations.

The current economic downturn presents an opportunity to catalyze and accelerate ongoing energy efficiency efforts, given the immediate cost savings that can be captured. The objectives of economic growth, job creation, climate mitigation, and energy efficiency, are well aligned. While there are technological and financing barriers to implementing energy efficiency measures, the more difficult challenge is changing behavior at the micro-level.

Participants agreed that cities present major emission reductions opportunities. Their higher density (relative to rural areas) means that resources and infrastructure can be shared across a wider population base. For developing countries, where new cities are being built and are growing apace, opportunities to ensure that energy efficiency is integrated in city planning.

At the individual level, simple behavioral changes will help reduce energy consumption, but these require raised awareness and commitment.

This working group was developed and organized by Combat Climate Change. For more information, please go to www.combatclimatechange.org or contact Jesse Fahnestock at jesse.fahnestock@vattenfall.com

Recommendations to policymakers

• Focus political attention on energy efficiency to get business engaged in reducing emissions, even in the short-term.

• At an international level, clear and transparent efficiency standards, and support for the labeling of the energy efficiency of products, will stimulate behavioral changes in consumers and companies.

• At a national level, placing energy efficiency at the core of federal or state climate change action plans will help governments and business approach the problem together at scale.

• Encourage change by engaging with key partners, e.g. city governments, whose policies and partnerships with the private sector can be major levers for improving efficiency economy- wide.

• Accelerate the use of transformative technologies that offer immediate efficiency gains (e.g.

ICT and biotechnology) to harvest emissions reductions in the short and medium term.

“We need clear and ambitious targets to put energy efficiency at the top of the agenda.”

Markus Reckling, Executive Vice President Corporate Development, Deutsche Post

The current economic downturn presents an opportunity to cata-

lyze and accelerate energy efficiency efforts, given the immediate

cost savings that can be captured.

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Forestry and terrestrial carbon

Stabilizing CO2 concentrations at 450 ppmv requires a reduction in global emissions by 17GT by 2020 from the business-as-usual scenario. A vital contribution to this reduction could come from the forestry sector and land use change – up to 50% of total carbon reduction. How- ever, ‘Reducing Emissions from Deforestation and forest Degradation’ (REDD) has not been prioritized in previ- ous global climate negotiations, or in the Kyoto Protocol.

The impacts of deforestation are two-fold: firstly, carbon is transferred from the living components of the planet to the atmosphere, and secondly, this transfer causes a disruption in the role of forests as carbon sinks.

The paradigm shift to a focus on tackling climate change through sustainable management of terrestrial carbon is reflected in the recently-released draft of the post-2012 negotiation text under the UNFCCC. Key principles of effective management include supporting sustainable development in both forest-rich and forest-poor countries, and supporting governments to establish property rights and preserve human rights of indigenous people living in affected areas, while recog- nizing the importance of investments.

There are many actors and players in the landscape of land use management, including governments, agricultural sectors, the forestry sector, and local residents.

Although REDD has moved to the centre of negotiations, developing countries are still hesitant to form any agreements. The incentives for developing countries need to be credible and reflect a market for ecosystem services which includes REDD. This is especially important for countries that rely on agricultural crops (e.g.

palm oil, sugar cane) and timber which contributes to deforestation, through incentivizing sustainable management of land use. The rise of biofuel as an energy source also contributes to increased production of crops such as sugar cane.

Carbon markets can go some way towards providing the necessary financing, through putting a price on forest carbon. However, the carbon market will not be the sole solution, so other forms of innovative financing solutions need to be considered. Effective monitoring systems also need to be put in place. A global coordination institution (possibly formed from an overlay of existing institutions) could also act as the focus point and lead driver of global efforts. Active consideration of the welfare of local residents whose livelihoods depend on forests will help build support at a local level.

This working group was developed and organized by the Copenhagen Climate Council. For more information, please go to www.copenhagenclimatecouncil.com or write to us at ccc@copenhagenclimatecouncil.com.

Recommendations to policymakers

• Robust mechanisms to achieve meaningful reductions in emissions from deforestation and land use must be included in a global climate deal. Terrestrial carbon should be included as a core dimension to addressing climate change.

• Global leaders need to create a new institution or strengthen existing institutions to lead and enable coordinated efforts across countries. This would include supporting public-private partnerships and financing mechanisms in exchange for environmental service.

• Transparent and effective Measurement, Re- porting and Verification (MRV) is essential for forestry credits and their distribution.

“Forestry and a pathway to terrestrial carbon has to be included in COP15. It can’t be optional.”

Rob Morrison, Chairman, CLSA Asia- Pacific Markets

Robust mechanisms to achieve meaningful reductions in emissions

from deforestation and land use must be included in a global climate

deal.

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Summary report

Adapting to climate

change through strategic planning and collaboration

A political deal will not be possible in Copenhagen if adaptation is not adequately dealt with, including financing mechanisms for adaptation measures, particularly for the most vulnerable countries.

Adaptation is also an important issue for business.

Participants at the Summit emphasized that companies will not be sustainable if they do not consider the effect that climate change will have on their long-term investments, assets and value chains. Successful leaders must be prepared to manage their businesses under risks and uncertainty; however, the level of uncertainty related to climate impacts and risks can be significantly reduced through a better understanding of climate science and thus make it easier for businesses to plan and adapt.

So far, the negotiations on adaptation have remained at the political level, in particular on the allocation and distribution of funds. Participants at the Summit suggested that governments should engage with business to ensure the most effective use of funds for implementation of adaptation measures.

Increasingly, whole sectors and geographies may be exposed to severe climate impacts. For example, the agricultural sector is facing the possibility that crop yields could halve between now and 2020. Participants agreed that adaptation measures, practices and investments need to be scaled up significantly, and that public- private partnerships may be the most effective vehicle.

Existing public-private partnerships need to move from being community-based to larger schemes that create economies of scale. Effective partnerships in other sectors may set a useful example.

This working group was developed and organized by the World Business Council for Sustainable Development.

For more information, please go to www.wbcsd.org or contact Matthew Bateson at bateson@wbcsd.org.

Recommendations to policymakers

• Engage in research to improve climate modeling and reduce the uncertainty of future climate impacts. Sharing of information on local climate modeling, led by governments and supported by local business knowledge, could help in the planning and development of adaptation measures.

• An effective adaptation funding mechanism is necessary. It must be flexible, scalable, and ap- plicable at local, regional, and national levels.

• Develop or innovate financing mechanisms for public-private partnerships, e.g. a decentralized systems that support smaller financial groups (similar to microfinance models), which in turn provides funding for adaptation solutions. The key to successful partnerships will be to build infrastructure, knowledge and development capacity to improve the management of long-term climate impacts.

“Adaptation is the elephant in the room on climate change.”

Steve Lennon, Managing Director, Corpo-

rate Services, Eskom

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Measuring and

communicating progress

The Bali Action Plan call for mitigation activities that can be measured, reported, and verified (MRV), is mirrored in the private sector’s call for greater clarification and standardization of rules on climate change disclosure.

Corporate reporting and measuring systems are developing rapidly but would benefit significantly from clarification and standardization so as to improve results for both providers and users of information. Cities, public sector, and other organizations, with climate strategies are adopting similar practices and facing similar challenges. These predominantly voluntary disclosures are welcome and vital responses by business and others to the demand for solutions to the threats posed by climate change.

The Greenhouse Gas (GHG) Protocol establishes a firm foundation for measurement of GHG emissions. How- ever, while the GHG Protocol and other monitoring and

Recommendation to policymakers

• Support a global reporting model which includes business, governments, consumers, and investors to help create the framework for MRV and communication. Given the existing disparate efforts, this may mean that a global model would begin as a collection of regional measurement and reporting models. Any such system would need to ensure consistency, comparability, and reliability, between sectors and geographies.

• Promote long term policy clarity and certain- ty, which would help with business planning and integration of actions on climate change into business strategies and allow effective long-term planning.

“What gets measured gets managed.

Getting the facts right facilitates a focus on the business-critical risks and opportunities related to climate change. Managers and investors alike need better tools for measuring car- bon footprints and to be able to quan- tify the outcomes of carbon reduction strategies.”

Lise Kingo, Executive Vice President and Chief of Staffs, Novo Nordisk

Standardization in carbon disclosure will help decision-making among business, governments, consumers, and investors.

Principles for a global reporting standard

A uniform and transparent global reporting standard is required that:

• Reduces complexity and provides the clarity that will enable business to integrate climate change considerations into their strategies and long-term planning;

• Produces disclosures that are consistent, comparable and reliable across sectors and geographies;

• Satisfies the information needs of government, business, investors and consumers;

• Creates the common language for reporting that is necessary for linking and harmonizing schemes; and

• Provides the clarity and rigor that is necessary for compliance, assurance and en- forcement and that is compatible with the implementation of policies under discussion through the UN Framework Convention on Climate Change negotiations.

On 25 May 2009, the Climate Disclosure Stand- ards Board released a draft Reporting Frame- work for public consultation that seeks to achieve these objectives.

reporting schemes allow various methods to be used for boundary setting, emissions measurement, target setting and performance tracking, disclosures can vary in quality, quantity and relevance. The resulting lack of consistency and comparability is inconsistent with the global and shared nature of climate change, prevents the effective use of information by markets and stakeholders and discourages disclosure – companies and others are uncertain about what they should report and how any disclosure will be used.

This working group was organized by UN Global Com- pact. For more information, please go to www.unglobal- compact.org or contact Lila Karbassi at karbassi@un.org

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Summary report

Value chain

There is significant opportunity to accelerate and deepen action to combat climate change by focusing on comprehensive approaches to value chains. These build on existing business models that can enable effective action across national borders, promote innovation, and capture opportunities for efficiency. Supply chains in most businesses are currently managed for cost, time and quality, and exclude parameters such as impacts on climate, water, and waste. Furthermore, existing policies that relate to supply chain management have covered standards for labor, factories, and poverty alleviation at source.

The complex interactions between stakeholders imply that partnerships and cooperation along entire value chains may be necessary. For example, cellulosic etha- nol (a form of biomass composed primarily of inedible plant fibers such as grass, stalks and straw) has the potential to provide enough biofuel to replace 25% of road transport in the US and EU. However, to capture this opportunity would require engagement of the entire value chain, including farming, biomass collection, refineries, and engine design. The lack of support from any one partner could be enough to ‘block’ progress in this area.

Participants suggested that gaining visibility for climate change and greenhouse gas emissions would require improved measurement and monitoring, better technology, stronger partnerships with suppliers and customers, and greater understanding of consumer needs.

Participants at the Summit recognized that a global

agreement should include measures to incorporate

Recommendations to policymakers

• Establish a transparent international standard for greenhouse gas measurement of products and services across value chains.

Any standard needs to be simple, consistent, but unrestrictive, for example setting mini- mum standards and common measurement methods.

• Increase the quality and information available to the public, including providing education to and increasing awareness of consumers, businesses and students.

• When considering the adoption of low-carbon innovations, include focus on disseminating these technologies along supply chains and consider the complex interactions between different stakeholders along each chain.

Focus areas for business

• Redesign value chain strategies to emphasize a collaborative approach to the development of new processes, products, and services.

• Support the development of cross-industry measurement standards that will cover whole value chains, including downstream and end- of-life.

• Provide more transparency to consumers, and increase engagement and education with consumers and citizens about steps they can take to reduce climate impacts of consumption.

The networked nature of business operations means that effective action to reduce climate impacts will require working through the dense value chains upon which all companies and consumers rely.

“We [...] have a carbon imprint of cirka 3 million tons […] out of a total supply chain that we influence of 300 mil- lion tons – nearly a factor of 100 more.

And it is very clear to us that we are a pivotal part of that supply chain to drive changes far bigger than what we can save in our own shop.”

Paul Polman, Chief Executive Officer, Unilever

value chain approaches and that this will greatly improve the likelihood of meeting targets set by the agreement.

This working group was developed and organized by Business for Social Responsibility. For more information, please go to www.bsr.org or contact Aron Cramer at acramer@bsr.org.

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