The Blog

A New Climate Deal?

It feels like the dust has only just settled on September's UN General Assembly and the adoption of the Sustainable Development Goals (SDGs). Here we are though in the midst of the UNFCCC's annual climate circus, its' Conference of the Parties (COP).

It feels like the dust has only just settled on September's UN General Assembly and the adoption of the Sustainable Development Goals (SDGs). Here we are though in the midst of the UNFCCC's annual climate circus, its' Conference of the Parties (COP). An opportunity for politicians and captains of industry to be at their best and agree a course of action that could curb the worst impacts of climate change by limiting the world to a 2 degrees Celsius increase.

I have heard commentators and read articles, however, which have questioned the willingness of world leaders to make the compromise needed to prevent dangerous climate change. The ghost of 2009's COP in Copenhagen which descended into a shambles still lives on with diplomats, cynics and tireless campaigners. I, on the other hand, remain hopeful that Paris will deliver.

The Intended Nationally Determined Contributions (INDC's) that have been submitted by individual countries, signalling their intended commitment to climate change action, provide a foundation for this optimism. It is, in particular though, the Joint Announcement on Climate Change and Clean Energy Cooperation made by the US and China in November last year which has given rise to genuine hope that an agreement in Paris can be reached.

The Impact of Climate Change

A couple of weeks ago a UN report declared that the planet was halfway to the 2 degree limit; half way to dangerous climate change. 2015 is also likely to break new frontiers as being the warmest year on record. A record that was only set in 2014 and a record that had been broken on multiple occasions since the turn of the century.

According to the World Bank, as many as 100 million people could slide into extreme poverty because of climate change. Rising temperatures, which are caused by greenhouse gas emissions, have already led to crop failures, natural disasters, higher food prices and the spread of waterborne diseases, creating poverty and pushing people at risk further into destitution. Even a 2 degree Celsius increase in temperature will ensure the loss of low lying island nations such as Kiribati and the Marshall Islands.

Climate change is happening, it is largely manmade and it will require global collaboration on a scale never before witnessed. These truths are almost universally agreed.

The Politics of Paris

The politics of climate change has meant that progress on reaching a deal has been slow. The division between industrialised and developing nations has created an impasse. Rich industrialised nations that historically have produced most of the greenhouse gases that cause climate change, and the poor or developing nations that are hardest hit by climate change, but least able to tackle it have been struggling to agree on how to finance low carbon growth.

The world has also been looking for leadership from the US and China - the world's two biggest polluters - who have resisted making commitments until now. The US/China Joint Announcement made in November 2014 provided the leadership the COP processes have needed, paving the way for the UNFCCC to hit its target of a binding climate deal by 2015.

Down to Business

According to the World Bank, and to meet the promise of the Copenhagen COP, developing countries need US$100bn invested a year into climate mitigation and adaptation projects by 2020 to ensure we do not exceed the 2 degree limit. If this is looked at alongside the SDGs and the $2.5trn UNCTAD says is needed annually to achieve the Global Goals, huge amounts of finance will be needed. Cash strapped governments will not be able to fund this alone. Collaboration between businesses and government, with the aid of civil society partners, is needed to enact whatever deal comes out of Paris. (In the Climate Extract of the SDG Industry Matrix we have produced with the UN Global Compact we summarise some of the biggest opportunities for six industries.)

The market is responding and economies are beginning to be seen. The cost of emission-reducing technologies has fallen dramatically and the number of renewable energy projects has grown. Investors have become more comfortable with financing projects that have a positive climate change impact and new forms of financing have emerged, such as green bonds (yieldcos) and crowd funding.

It is clear that climate change is happening and that urgent action is needed to tackle it. The evidence is not in doubt. Governments around the world, with help from business and civil society, must work to decouple carbon emissions from economic growth, and move the world towards a low-carbon economy.

Once the politics has been agreed, and work is started to further integrate the climate and poverty agendas, I believe we need a clear price on carbon because sending the right market signals prompts change. I'm proud that KPMG has signed the Carbon Price Communiqué that calls for a clear, transparent and robust price on carbon which forms part of the World Bank's carbon pricing initiative.

I started the year by saying that 2015 gives me hope. We are now at the final hurdle for our Bretton Woods moment and momentum seems to be on our side. I said I had hope and faith in the human beings that make up our political system; the human beings that lead our businesses; and the human beings that campaign tirelessly for a fairer and more environmentally sustainable world. I think that hope will be rewarded.

Next task? Delivering upon the promise 2015 is about to make!