Companies urged to address carbon challenge
UNCERTAINTY over future carbon trading policy could leave companies exposed if they do not implement flexible strategies now to address the carbon challenge, according to a report released this week by global management consultants Arthur D. Little.
Emissions trading has been described as the most economically efficient way to force carbon emission cuts, but the new report warns that uncertainty about the nature and scope of post-2012 global carbon trading policy has left businesses under-prepared for developing future carbon strategies that will leverage next-generation emissions trading opportunities.
The report, ‘Carbon Futures’, urges businesses across industry to take decisive action now to address their future carbon trading and emission reduction, or risk being caught unprepared and on the back foot when the next generation of regulation and legislation takes effect.
While emissions trading is regulated by a tapestry of inter-governmental regulation and policy mechanisms, global industries currently operate under three specific UN-mandated mechanisms for carbon trading, all of which are currently under review by the UN Framework Convention on Climate Change, and will be updated for implementation in 2012.
Proposed changes to the current emissions trading infrastructure most likely to affect businesses include: widening of the criteria for awarding carbon credits; the offer funding options for carbon capture and storage programmes; development of industry-specific schemes and reduction targets; and the introduction of new emissions caps for developing markets and adjustment of those for developed markets.
‘There are two critical areas of uncertainty post-2012. One is whether it will be possible to reach any sort of full international agreement on emissions trading, and more importantly, if such an agreement is reached, whether the mechanisms put in place will be robust,’ said David Lyon, a leader of Arthur D. Little’s Global Carbon Advisory Services.
‘Many investors are adopting a ‘wait-and-see’ approach to investment, which is dangerous for several reasons. One reason is technologies can take years to implement, and another is that agreements can take a long time to reach any sort of conclusion. The decisions made today will affect a company’s carbon position for many years to come, and this is why we focus on the importance of building an infrastructure that stretches well beyond 2012.’
Other key issues the report urges businesses to consider are the dynamics of the carbon debate specific to particular industry sectors, the availability of clean technology, and whether there is scope to pass future carbon reduction costs on to customers.
‘The ‘carbon winners’ of tomorrow will need to develop strategies, processes and organizational structures that integrate carbon trading into their overall business goals today,’ said Mr Lyon.
