In an important step forward, the business voice was included in discussions at the Major Economies Meeting in Honolulu, Hawaii at the end of January, where the WBCSD presented the business case for climate action.
The US-led talks brought together the United Nations and the 17 major economies responsible for about 80% of the world's emissions. It was aimed at improving understanding of how to reach agreement to replace the Kyoto Protocol in 2013 — the Bali Action Plan.
The main stumbling blocks on the road towards a global agreement remain: Who's carbon is it that is building up in the atmosphere and who is responsible for what actions in the future?The priority for the developing countries is poverty alleviation via economic growth fuelled by increased electricity consumption, not their contribution to global climate change.
However, industrialized country actions on climate change, including a price of carbon, risk moving jobs and investments to developing countries with lower environmental standards.
And governments are far removed from the realities of what it takes to do business in either developing or industrialized countries: they have a limited understanding of how business works and what is involved in investment decisions. For example, an issue that figured quite prominently in the discussions in Hawaii was that of technology cooperation. Enlisting business support for this will be crucial as governments do not "own" the intellectual capital associated with technology and therefore are not in a position to transfer it. However, government investment, particularly in research and development for new, clean technology, will be vital.
This shows just how necessary it is for business to be part of any package aimed at tackling climate change. The biggest contribution it can make is by leveraging its expertise in those areas where it functions best: business is the major source of innovation, technology and capital needed to achieve a sustainable world.
Sector approaches are key to tackling the issues: they entail looking at different industries and their impacts in terms of climate change and then tailoring climate change policies to the different industry sectors and their technologies. Different sectors have varying impacts and therefore require a raft of different policy and framework mechanisms.
Interest is growing in industry-by-industry approaches because they offer an efficient way to reduce emissions, and at the same time they may be a potentially effective tool to engage developing economies.
There is also a need to explore synergies between the different sectors and their value chains to ensure that gains made by one sector are not negated by other sectors.
The discussions were constructive, if not headline grabbing. "President Bush made very clear that the United States is prepared to enter into an international agreement that includes binding commitments as long as the other major economies are prepared to do so as well," said Jim Connaughton, chairman of the White House Council on Environmental Quality. He stressed that such an agreement could only be effective if action is taken together. China seems willing to discuss this, while India, and to some extent Brazil, is negative. India is insisting on a "per capita" view on rights to emissions.
Again, any solutions must also make business sense. To crown it all, governments and business must work in closer collaboration — without a greater understanding of each other's roles and responsibilities, they can not even begin to appreciate each other's limitations, a challenge that can only be addressed by working together.
Their next opportunities lie in the resumption of the UN climate change talks in March, and the next Major Emitters Meeting in France in April. Will they seize them?