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Tip of the iceberg

Atkins | 04 Dec 2008 | Comments

According to Jonathon Porritt, founder director of Forum for the Future, the pace of change towards a working carbon economy is glacial and UK businesses are in danger of missing the boat. So how can we speed things up?

Are there business opportunities in a low-carbon economy?

People need to understand the scale of what needs to happen over the next 40 years. We’re going to have to maintain prosperity for people – a population of nine billion globally by 2050 – but do it with a fraction of the environmental damage that we’re currently causing. And, in particular, we’re going to have to reduce CO2 emissions by around 80 per cent.

I honestly don’t believe that many people in the UK business community understand the scale of that transformation. It is completely mind-boggling and has an impact on every facet of the economy, from infrastructure through to services. I’m a huge believer that if the UK can establish a real market lead in low-carbon technologies, it will be worth billions of pounds over time.

Are UK businesses in danger of being out-paced in this?

I’m very nervous that we’ll lose this competitive space. There was a time, for example, when the UK was actually a world leader in wind technology. Due to a lack of any serious vision on the part of successive governments, those gains dwindled, then disappeared into the ether. Now, we have very few wind energy businesses of our own to speak of, and many of those have moved to countries such as Denmark and Germany, where thriving, multi-billion euro businesses have developed since.

It would be very sad to see the UK go through that same process again. We currently have a real lead in many areas, including tidal and wave power. We also have huge expertise in the professional services and financial services sectors on things like environmental impact assessments, sustainability methodologies and low-carbon accounting processes. If we don’t take maximum advantage of that lead, we’ll only have ourselves to blame.

Just to emphasise the point, look at what’s happening at the moment in the US and in China, two improbable champions of a low-carbon future. We’re seeing a complete turnaround in the thinking of US businesses and an invisible, but nonetheless incredibly significant, shift in focus of the Chinese government on low-carbon technologies. Between them, these two countries could command the lion’s share of the environmental technologies market in the next 10 years.

Is there a risk the economic downturn will take focus away from carbon policies?

Yes, there’s no doubt about it. Periods of economic downturn or recession lead to a slower pace of economic activity, which translates directly into reduced emissions or polluting activity. I think we’re already beginning to see some signs of that. So there’s a chance that politicians could take their eye off the ball, mistakenly thinking that we’re making more progress than we actually are.

I think everybody recognises now that the era of cheap oil and cheap energy has gone forever. From a commercial sector perspective – and something Atkins has stressed very hard in its contributions to this debate – the emphasis now needs to be even tighter, and harder, on energy efficiency in terms of cost reduction and competitiveness. That simultaneously drives reductions in CO2. If anything, the case for doing something is even stronger at a time of recession than during a time of plenty.

Are carbon markets recession proof?

The only real market, in terms of a real rather than virtual price, is the European Emissions Trading Scheme (ETS). The latest figures for traded carbon in 2007 indicated another substantial growth in volumes, with every indication that total figures in 2008 will be even bigger.

If we are hit by a depression, carbon prices will come down and that will be reflected in the usual supply and demand pressures inside the ETS. The enthusiasm of countries such as the US and Australia, and the interest shown by China in carbon trading, will be diminished, as the priority becomes regaining conventional economic growth. It would be folly to say that carbon markets are completely robust against the economic cycle. But they are certainly holding up well so far.

Where is the UK government going with its thinking on the carbon economy?

The UK approach has always been strong on the principles of addressing climate change. The problem comes with implementation. Whether you look at sustainable development in Government process, or policies aimed at changing people’s behaviour, more still needs to be done. The key thing here is getting the right mix of policies, and that’s something politicians of all persuasions are still wrestling with.

What’s the outlook for carbon budgeting?

It’s a mish-mash at the moment. Everybody’s hoping that when the report by the Committee on Climate Change comes out, it won’t focus only on targets, but also on carbon budgets and how they ought to be set. The hope is there will be some serious methodological rigour inside that report, or at least some strong recommendations on how that might be sorted out.

It sounds geeky, but without real attention to the metrics, to shared practice across sectors, to learning from what other people have done – without all of that, it’s very difficult to see how we can accelerate the pace of change. And the pace of change at the moment is glacial. Without the right systems, metrics, methodologies, audit processes and so on, this issue won’t get any traction inside for-profit enterprises. They have to look after jobs, dividends, competitiveness and productivity.

Is the UK meeting its emissions targets?

The UK is one of the countries that is expected to meet its formal Kyoto targets, and that is encouraging. As I write there’s further reason to be hopeful because the forthcoming Climate Change Bill should, for the first time, take into account aviation and shipping as part of the new emissions goals. It’s still not painting the full picture though as we aren’t counting the pollution being caused indirectly by us importing products from other countries. So, although the UK is showing leadership, its footprint is still not being fully measured.

Are there lessons we can learn from the rest of the world?

Although this is a challenge for everybody, some of the Scandinavian countries are on downward trajectories in terms of their emissions that are really very impressive. Germany has also made major inroads into its CO2 emissions, especially by ramping-up investments in renewables of every kind. It has also massively accelerated investments in housing efficiency – not just new-build, which is the easy bit, but existing housing stock, which is more difficult. Germany has embarked on a huge programme to bring all of its housing up to minimum levels of energy efficiency over the next few years.

I think that we need to take lessons from these countries as and when we can, because we can’t pretend that we’re completely on top of this yet. We still have a long way to go.

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