Building a strong climate deal

Posted by Nick Molho on 15th December 2014
First published in: The Economist


While disappointing in many respects, the outcome of the climate change talks in Lima means there is still enough momentum for a strong deal to be agreed in Paris in December 2015. But this will only happen if a coalition of businesses, civil society organisations and governments puts its weight behind such a deal, argues Nick Molho, executive director at the Aldersgate Group.  

Despite a promising start, it can be tempted to view the outcomes of the climate change talks in Lima as disappointing.  They failed to provide us with the assurance that world leaders will agree a global deal in Paris in 2015 that will be strong enough to prevent the worst impacts of climate change. And many of the tough decisions on carbon cut commitments and financial support to developing countries have been pushed back to 2015.

However, the concluding agreement, brokered by the hard work of the Peruvian delegation, has done enough to mean that a strong climate agreement in Paris is still on the cards. While far from perfect, it sets out a series of milestones in 2015 by when countries have to submit their pledges to cut carbon emissions. Importantly, it also requires the UN ahead of the Paris summit in December 2015 to consider whether all pledges put together will be sufficient to prevent dangerous levels of climate change. This can then be used as a tool to increase ambition during the final negotiations. 

Despite fears to the contrary, the Lima agreement still acknowledges the importance of providing financial support to help developing countries mitigate and adapt to climate change, and recognises that countries should commit to emission cuts that are in line with their level of economic development.   

But as we approach 2015, it is clear that a fair and strong climate change deal in Paris will only happen if a wide coalition of interests puts its full weight behind it. With businesses having a key role to play, it seems fit to restate the business case for climate action, beyond just the environmental benefits of doing so. Three key points are striking here.

First, the world economy has a lot to lose from the impacts that unmitigated climate change will have on our infrastructure and commodity prices such as food and water. For this reason, the UK’s Royal Society urged global financial systems in November 2014 to put more focus on incorporating the impacts of extreme weather events when assessing the economic viability of infrastructure or businesses.  

Second, there is growing evidence that building an efficient and low-carbon economy is in itself an economically desirable thing to do. In the context of the UK, a recent report by Cambridge Econometrics showed that meeting the UK’s carbon targets out to 2030 would result in net macro-economic benefits in terms of GDP growth, levels of employment and average household income compared to a situation where little is done to reduce the UK’s emissions.

Similar conclusions were made at the global level by the New Climate Economy Report, which argued that countries at all levels of income have the opportunity to build lasting economic growth whilst avoiding the significant economic risks of unchecked climate change.  Of course, making a transition to an efficient and low-carbon economy comes with a wide range of challenges, from minimising the cost of new policies on low income households to supporting the energy-intensive sectors in making the transition to a low-carbon economy. But all of these challenges can be addressed through smart policies.  

Third, low-carbon policies can also deliver positive social outcomes. By reducing emissions from fossil fuels for example, low-carbon policies can lead to significant improvements in health and reduced healthcare expenditure for governments. The New Climate Economy Report found that “in the 15 countries with the highest greenhouse gas emissions, the damage to health from poor air quality, largely associated with the burning of fossil fuels, is valued at an average of over 4% of GDP”.    

The time has come for businesses to speak louder and in much bigger numbers in favour of strong action on climate change, and to add their full weight to the efforts from civil society organisations and progressive governments. The economic, social and environmental imperative of avoiding the worst impacts of climate change warrants such an unprecedented global coalition.