Finance ministers must act on climate

30th October 2015


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  • Adaptation ,
  • Mitigation ,
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Author

Sam Jones

Businesses need COP21 to create clear investment signals, argues Eliot Whittington

We now have just one month to go before tens of thousands of people descend on Paris for COP21 - the 21st Conference of Parties to the UN Framework Convention on Climate Change. Negotiators from nearly 200 countries will have two weeks to strike a new global agreement on climate change - one that for the first time ever will include specific commitments to act from almost all nations, not just the developed world.

They will have their work cut out. Last month in Bonn, during the final formal round of talks before COP21, negotiators clashed over accusations that key issues of importance to developing countries have been left out of a proposed negotiating text. These concerns have been addressed in Bonn by adding more options into the text, which is now owned by the parties but will have to be substantially cut down in Paris.

Even more important, over 150 countries have submitted their plans to tackle climate change from a national perspective - known as the Intended Nationally Determined Contributions (INDCs) -covering well over 80% of global emissions. This is a remarkable achievement in itself, which few people would have bet on even a year ago.

An initial analysis of the national pledges' global impact shows that they would lead to a fall in per capita emissions over the coming 15 years. However, they are not ambitious enough to contain global warming to 2°C, the government-endorsed global 'guard rail' that should not be stepped beyond if we want to avoid runaway climate change.

To close the gap and meet the 2°C target, the Paris conference needs to put the world on a path to set and regularly strengthen climate action and to ensure that national commitments are implemented effectively and efficiently.

For this reason, the Prince of Wales's Corporate Leaders Group (CLG), working together with ten other global business organisations (BSR, CDP, CEBDS, Ceres, ECP, the Japan Climate Leaders Partnership, the National Business Initiative, the B Team, the Climate Group, and WBCSD) has written to finance ministers from key countries across the G20 group and the EU urging for their support for a robust deal in Paris.

From a business perspective, we are calling for three fundamental outcomes from COP21:

  • A clear long-term goal for emissions, so the global direction of travel is unequivocally established
  • A regular five year cycle to update and extend national commitments to ensure the direction of travel is credible
  • Clear rules to provide the transparency and accountability required.

Business needs clear investment signals. This requires real engagement from government finance departments. A core aspect of an effective climate agreement is real commitments to provide the flows of publicly funded climate finance required to support global action, even in developing countries that lack adequate resources to finance a low-carbon transition. Well-designed public funds can leverage far greater flows of private finance.

Ultimately, delivering a Paris agreement will require governments to align strategies behind the commitments that have been put forward. Fiscal incentives, which fall firmly in the remit of finance ministers, are essential. The CLG has been a consistent advocate for effectively pricing carbon to drive markets to decarbonise and we are actively involved in the World Bank's Carbon Pricing Leadership coalition which catalyses more government and business action in this area. Reform of fossil fuel subsidies, which represent annually twice as much as investments in clean energy, is an important way to ensure a level playing field for low-carbon technologies and price externalities. The case has been clearly made by the Friends of Fossil Fuel Subsidy Reform, which we support.

This last contribution is essential, because, no matter how big a step forward a new climate deal represents, there will be a huge amount to do to translate the high-level political agreement into real changes in policy structures, investment and business practice.

As UN climate chief Christiana Figueres put it: "An agreement in Paris is not a destination in itself. It's a departing station." Rewiring the global economy, to a new, more resilient, more efficient and decarbonised structure is an ongoing challenge that will require commitment and leadership for years to come, across government ministries, with finance ministers playing a crucial role.

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