Business leaders urge G8 to break 'Catch 22' on climate change

The build-up to the G8 summit in July has seen increasingly frantic diplomatic efforts to secure progress on the UK presidency's two priorities - climate change and Africa. On climate, at least, Mr Blair returned empty-handed from his visit to the White House in early June.

Leading voices in the international business community are also stepping up the pressure on President Bush and other world leaders.

The heads of 24 major global companies issued a statement demanding a "long-term policy framework that includes all major emitters of greenhouse gases". The group includes major US companies such as HP and Ford (see table). Ironically, the latter's own climate change policies have recently come under fire from Greenpeace (see pp 7-8 ).

The companies are members of a G8 roundtable launched in January at the World Economic Forum's meeting in Davos. Some of their leaders delivered the conclusions to Mr Blair at a two-hour meeting in June.

The companies accept that climate change "poses one of the most significant challenges of the 21st century". They argue that "clear, transparent and consistent price signals over the long term offer the best hope for unleashing needed innovation and competition".

The roundtable calls for "a long-term, market-based policy framework extending to 2030" - preferably a cap and trade system - "that will give investors in climate change mitigation confidence in the long-term value of their investments". Indicative signals extending to 2050 "would also be beneficial".

The statement also calls on Governments to "move expeditiously to adopt climate stabilisation targets that will define the scope and scale of mitigation needed in the years ahead." A growing scientific consensus is pointing towards the need for reductions of up to 50% in global emissions by 2050 (ENDS Report 361, pp 17-21 ).

The roundtable warns that emissions trading schemes have a key role in promoting efficiencies in energy use but "are less likely to stimulate major technological change or breakthrough".

It calls on G8 leaders to ensure "rapid commercialisation" by drawing up performance-based standards for low carbon technology.

Finally, the statement calls on G8 nations to engage with emerging markets - notably China, India, Brazil, South Africa and Mexico - to boost investment in low carbon technologies. It says that the Kyoto Protocol's Clean Development Mechanism "offers significant promise" - but calls for reforms "to streamline the process substantially by the end of 2005."

Environmentalists are concerned that the mounting pressure from business to simplify the CDM may further dent its environmental credibility, particularly on the thorny question of "additionality".

Many of the roundtable's messages are echoed in a letter to the Prime Minister from 13 major companies (see table). The group was brought together by Prince Charles' Business and the Environment Programme in response to Mr Blair's speech on climate change last year (ENDS Report 356, pp 4-5 ).

The letter calls for "a strong policy framework that creates a long-term value for carbon emissions reductions and consistently supports and incentivises the development of new technologies." Without this, the companies "are not able to justify to our boards or investors the necessary high up-front investment in low-carbon R&D, technologies and processes."

The letter calls on the Government to set targets now for the year 2025 for emissions trading and other policies. It argues that with the right framework, up-front costs "can be minimised and the UK's overall competitiveness need not be adversely affected."

The companies call on Mr Blair to break the "Catch 22" in climate policy. "Governments feel limited in their ability to introduce new climate change policy because they fear business resistance," they say, "while companies are unable to scale up investment in low carbon solutions because of the absence of long-term policies."