The Paris climate change agreement gives companies a clear incentive to look closely at how they are positioned for a low-carbon future, business groups have said.
A deal was finally struck at UN COP21 negotiations in the French capital in December. Nearly 200 countries agreed to keep the global average temperature rise to “well below 2˚C above pre-industrial levels” and to “pursue efforts to limit the increase to 1.5˚C”. The agreement also states that emissions should be net zero in the second half of the century. Greenhouse-gas emission reduction pledges made ahead of the talks are predicted to keep the temperature rise to within 2.7˚C, so the parties have agreed to review progress and enhance plans every five years.
Businesses were heavily involved at COP21, showcasing initiatives on issues such as carbon reduction, energy efficiency and deforestation. Ikea and Coca-Cola are among 116 firms that have now pledged to develop targets to reduce emissions in line with the 2˚C objective. The World Resources Institute will be verfiying the companies targets, along with WWF, the CDP and the UN Global Compact.
Eliot Whittington, deputy director of the Prince of Wales Corporate Leaders’ Group (CLG), said businesses were always looking to see what the likelihood of new legislation was and that Paris sent a strong signal. “The agreement will help them be more ambitious than they would have been otherwise,” he said, claiming a couple of companies he had spoken to were already considering tightening their targets. “The end point has been positioned as getting rid of all emissions. This says to businesses they need stronger targets,” he said.
Nick Molho, executive director of the Aldersgate Group, said many of its members had been emboldened by the outcome of COP21. However, many wanted a clearer signal from the UK government on how it would meet its carbon budgets. This would provide firms with the confidence to invest, Molho said, but he warned that future policies on energy subsidies, energy efficiency and low carbon heat and transport were unclear. Clear policy in these areas would be important for businesses that were yet to be fully engaged in climate change mitigation. “If there is a clear plan for the fourth and fifth carbon budget and it is clear that the government intends to meet it, that will spur business,” Molho said.
Whittington agreed that government policies were essential to encourage further action by businesses. “The UK government needs to set out very clearly how plans and policies will achieve its targets. I don’t think that clarity exists at the moment,” he said.
Financial markets react to deal
Barclays has told clients that the COP21 deal will boost the long-term prospects for low-carbon power, while weakening those for fossil fuels.
The bank also highlighted the extra scrutiny of companies’ exposure to climate policies and carbon-pricing after Bank of England governor Mark Carney’s announcement that a taskforce would be established to develop consistent disclosure on these issues.
Barclays added that the Paris deal would give further impetus to growing investor initiatives around portfolio decarbonisation. Stock markets reacted immediately to the deal, with shares in renewable energy firms, such as wind turbine manufacturer Vestas rising, according to Reuters.
Brian Ricketts, general secretary of European coal trade association Euracoal, said in a blog that the fossil fuel industry would be “hated and vilified in the same way that slave traders once were”, and urged members not to acquiesce to the “climate bandwagon”.
