Threat or opportunity?

The history of environmental progress is also a history of conflict. Business and industry have been seen as the principal drivers of environmental degradation. Governments have legislated to address these “externalities” by forcing the polluter to pay.
At virtually every step of the way business has initially viewed stricter rules as a straightforward threat and has resisted them. With increasing evidence that regulation in fact has not bankrupted swathes of industry or led to whole sectors going offshore, it has become more difficult for business to cry wolf when new legislation is proposed.
Even so, the current debate over next steps to reduce average CO2 emissions from new cars (see p 11) shows that this old dynamic is still an essential part of environmental politics.
Beneath the surface, however, tectonic plates are shifting – driven by the climate change agenda.
Here is an issue that cannot be addressed by tackling any one industry or one mode of production or one chemical or one product. The challenge of shifting to a low-carbon economy is systemic. You can’t just take out the carbon and carry on as before. Everybody is affected.
The climate debate has thrown up its own examples of the old dynamic. For years,
big US coal and oil interests bankrolled groups arguing that the science of climate change
was far too uncertain to justify spending billions in reducing emissions.
Within the last year, though, the political weather has changed. To oversimplify, the combination of the latest scientific report of the intergovernmental panel on climate change, the Stern report on the economics of climate change and Al Gore’s film An Inconvenient Truth have closed one argument and opened another.
Instead of whether emissions should be cut, the question is now how they can be cut.
Another novel feature of climate change is that it is not just an externality. Rather it poses direct and indirect threats of its own to all sectors of the economy. Many of them are not at all obvious at first sight. To take just one example, electricity firms discovered a potentially costly liability in the form of power lines sagging below safe heights due to higher summer temperatures.
The central point, though, is that the climate change agenda is as much about economic opportunity as it is about threats.
Policy makers are groping their way towards a new vision of environmental policy
that is truly integrated with economic priorities. The EU’s high-level group on competitiveness, energy and the environment has encapsulated this in its latest report (see p 1), which advocates joined-up policies for low-carbon and resource-efficient raw materials use and products.
Business is also waking up to this new reality. A slew of recent reports and surveys has demonstrated that climate change is becoming an integral part of the management agenda for larger companies.
More tellingly still, investors are beginning to engage. Global warming is likely to gradually but powerfully change the economic landscape, investment bank Lehman Brothers stated in a recent report.
Firms that recognise the challenges early – and respond imaginatively and constructively – will create opportunities for themselves and thereby prosper, the report concluded. Those slower to realise what is going on or electing to ignore it will likely do markedly less well.

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