COP21 Business update: Companies urge now for carbon pricing as coal is still a big issue

UNFCC COP21 Paris 2015As the Paris COP21 is rapidly getting close to its conclusion, one thing is becoming clearer than ever: the role that businesses will play. The role of  the global finance world has in order to get to a substantial change, is crucial.

Basically, it is unlikely that an effective agreement will be possible without a meaningful resolution to the “question of finance”. Many actions were already taken and financial institutions say they are determined this time to deliver concrete actions to reduce greenhouse gas emissions. Let’s try to analyse how thing are going and what still the main open questions may be around the meeting rooms of the north-eastern suburb of Paris.

Climate changes and business

The World Bank last Monday declared that 26 financial institutions from developing and developed countries signed the voluntary “Principles to Mainstream Climate Action within Financial Institutions”, pledging to integrate climate considerations into their investment portfolio.

These principles lay out a clear “pathway for financial institutions to integrate climate change into their operations” with the aim to deliver “more sustainable, short and long term results, both developmentally and financially”, as stressed by Rachel Kyte, World Bank Group Vice President and Special Envoy for Climate Change.

Norway’s commitment

On the same day, Norwegian Prime Minister Erna Solberg announced plans to scale up Norway’s commitments to the Green Climate Fund. Speaking at the Paris climate conference, Prime Minister Solberg stressed the importance of climate finance and Norway’s support for the Fund.

“The Green Climate Fund is now ready for business. I am pleased to announce today that Norway will significantly increase its contributions”, she stated. “If the Fund secures verified emission reductions from deforestation and forest degradation in developing countries, we will double our contribution by 2020,” she then added.

A Green Bank Network

Like the Green Climate Fund, which opened its initial resource mobilization in October 2014, another institution gathered the attention of both media and the delegates that are working in Paris, the so-called “Green Bank Network”. Green banks basically are public entities which are created to partner and work closely with the private sector to increase clean energy investment and bring renewable energy financing into the mainstream. On December 7, six green banks and two nonprofit groups announced they are formally establishing a Network to enlarge their possibilities to bring funds to the green sector, something that has been seen as a major breakthrough as it has never been done before.

India and France’s pledge for solar energy

Moreover, a few days ago, India and France launched an International Solar Alliance to boost solar energy in developing countries. The initiative, which was launched on 30 November by Indian Prime Minister Narendera Modi and French President Francois Hollande, includes now 120 countries.

UN Secretary-General Ban Ki-moon, who attended the launch, said it must send a clear enough signal to investors to encourage the scaling up of solar and other renewable forms of energy and urged all the governments meeting in Paris to work in a spirit of cooperation and compromise to conclude an effective agreement.

Coal and the developing countries

But although the atmosphere around the temporary town of pavilions and stands in Le Bourget, Paris, is quite optimistic, some big questions are still open, or probably just one which is still the biggest. Despite many efforts and complex discussion, coal still represents the main source to generate robust economic growth and try to carry millions of people away from poverty in developing countries. All efforts to make those countries use carbon-free sources of energy must take into keen consideration that. Carbon is the key, once again.

Introducing carbon pricing

What businesses are currently discussing and asking for as a first action toward this problem is carbon pricing. Indeed the question is an old one, and it is quite simple. The idea is to make investments on low-carbon or carbon-free technologies more attractive by putting a cost on carbon use to be paid at the source. It’s basically shifting the costs to the source of the pollution, encouraging polluters to reduce emissions and invest in clean energy and low-carbon growth.

Now the introduction of a framework for favouring global carbon pricing through a system of permits, would ensure that emissions are cut with less government interference, many business players are reportedly saying, in a truly efficient way. A COP21 side event held on December 5 was focused entirely on that delicate matter. “Putting a price on carbon is essential for success in the international response to climate change”, said participants in an official statement.

“A necessary thing”

What carbon-pricing backers believe is that without a price, to be set by recognizing the damaging effects of emitting greenhouse gases, efforts to address climate change “will be inefficient and likely too slow to avoid its worst effects”, as the statement reports. Pricing carbon is “not the only thing, but a necessary thing,” underscored Ms. Kyte from the World Bank Group, involved also on the carbon pricing side. “We have to take carbon pollution out of our growth model,” she continued.

A greater space for business

All in all, after many concrete actions and the efforts Paris COP21 brought together, as described above, it seems that only a real shared plan will deliver concrete moves to tackle climate changes. So besides the fact that carbon may be the biggest problem we have, finding a common plan seems to be quite a knot as well.

In that scenario, businesses claim they haven’t had enough space in the UN-sponsored talks in Paris, where governments dominated the scene. “We need to have a greater say in this process,” Norine Kennedy, from the US Council for International Business, told the Financial Times.

Market-generated solutions

Indeed COP21 has been a huge “market place” of different interests and voices, where more than 180 countries are currently publishing climate action plans. The need of a market-inspired solution and the involvement of businesses are slowly becoming important aspects that should be considered not only toward concrete moves but also for future major events on climate changes.

“Top-down” government plans, which are always painful and complex, will only partially bring good results, both for the economy and for the planet. In the green “market place” there is always though the strong will to preserve the economic development.

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