Memorandum submitted by the CBI
1. The CBI—with a direct company membership
employing over 4 million and a trade association membership representing
over 6 million of the workforce—is the premier organisation
speaking for business in the UK.
2. The CBI welcomes the opportunity to assist
the inquiry by the Environmental Audit Committee on the international
challenge of climate change.
3. The CBI represents a broad spectrum of
business in the UK, including energy producers, suppliers and
users, manufacturing and financial services—all of whom
are affected by policy decisions on climate change.
INTRODUCTION
4. British business takes the threat of
human-induced climate change seriously and recognises its responsibility,
with other sectors, to help tackle the problem.
5. To-date the emphasis of UK policy has
been very much on a national or EU commitment to climate change.
Macro-economic analysis of the impact of national climate change
policy (in the UK Climate Change Programme and the Energy White
Paper) assumes that the world's leading industrial nations will
act together, but there is very little detail on how government
aims to work towards achieving a concerted international effort
to reduce carbon.
6. Climate change is a truly global problem
and cannot be solved by the UK or the EU alone. In 2000, the UK
contributed only 2%, and the EU-15 14%, of global greenhouse gas
emissions. In contrast, the USA contributed approximately a quarter
of global greenhouse gas emissions. In addition, absolute emissions
are growing rapidly in both industrialised (eg USA) and developing
(eg India and China) countries. Unilateral efforts to reduce emissions
in the UK or EU will serve to increase the costs to business in
the region, while doing little to address the climate change problem
(owing to inevitable displacement of carbon-intensive production
to other regions with less stringent climate change regimes).
7. For example, in 2003 China consumed 1,667
million tonnes of hard coal, thereby emitting some 4,900 million
tonnes of carbon dioxide (CO2). However, the increase of coal
consumption over 2002 was 287 million tonnes, with an increase
in emissions of 840 million tonnes CO2. From 2001 to 2002 the
equivalent was an increase of 219 million tonnes coal consumption
and some 640 million tonnes CO2. In only two years, China's CO2
emissions have increased by nearly 1.5 billion tonnes from coal
consumption alone. By comparison, the EU15 have reduce CO2 emissions
between 2001 and 2002 by 7 million tonnes.
8. A global response, including both industrialised
and developing countries and in particular major greenhouse gas
emitters, is thus essential to address the climate change problem.
The CBI would be reluctant for the UK (or the EU) to take on further
unilateral emissions reduction targets, without securing comparable
action by major EU trade partners.
9. The primary focus of the UK Government
in its upcoming presidency of the G8 and the EU must, therefore,
be to work towards achieving a shared vision for achieving global
action on climate change.
ENGENDERING GLOBAL
ACTION ON
CLIMATE CHANGE
10. The CBI views the Kyoto Protocol as
an important first step towards achieving a global climate change
regime. However, there is a significant amount of distrust of
(and political resistance to) the Kyoto approach to setting emissions
reductions quotas both by industrialised and developing countries.
Consequently, there are serious doubts that attempts to extend
Kyoto style caps and targets beyond 2012 would engage major greenhouse
gas emitters, such as USA, China and India, in a future international
climate change regime.
11. The UK (and the EU) needs to look beyond
the limited range of options offered by the structure of the Kyoto
Protocol. However, it is also important that lessons learned during
the negotiation and implementation of the Kyoto mechanisms and
institutions are not lost.
12. The post-2012 regime should set out
long-term aims necessary to create certainty and encourage investment,
while providing short-term flexibility.
International Emissions Trading
13. In principle, the CBI supports the use
of market-based instruments to achieve emissions reductions and
we believe that emissions trading, if well-designed and well-implemented,
can provide the flexibility needed for business to achieve cost-effective
emissions reductions.
14. The CBI, together with ACBE, was instrumental
in setting up the UK emissions trading scheme and supported the
development of an EU-wide scheme as a first step towards establishing
a global emissions trading scheme.
15. The UNFCCC and Kyoto process has highlighted
that the establishment of any international climate change framework
or regime will inevitably face challenges—politically and
practically. Establishing an international emissions trading scheme
is no different. The following should be taken into account:
— timeframe for implementation—while
climate change is happening and it is imperative that we act quickly,
it is crucial that we set an appropriate timeframe for implementation
of an international scheme, taking into account the complexities
of setting up a fair scheme, which meets environmental, economic
and international competitiveness objectives;
— disparities in knowledge/data—the
EU scheme demonstrated the complexities added owing to different
levels of knowledge and expertise within and between member states
and disparities in data availability. This is likely to be exacerbated
at an international level, with widely different levels of understanding
of the concept and the state of readiness (in terms of legal requirements,
data, registries, expertise etc); and
— responsibility and participation
of different countries—the CBI supports the concept of differentiated
responsibilities, taking into account the different contributions
to the climate change problem, different vulnerabilities and different
capabilities to adapt to or mitigate climate change. The CBI recognises
the need for the UK and EU, with other industrialised countries,
to demonstrate progress towards achieving emissions reductions.
However, there are also enormous variations between developing
or non-Annex I countries in terms of levels of development, economic
wealth and emissions. Consequently, differentiation of developing
countries seems not only necessary, but fair, in the post-2012
international climate change regime.
16. Within this context, the trading system
must ensure that there is comparable effort by industrialised
countries and must seek to engage major emitters either directly
or through complementary initiatives.
17. An international emissions trading
scheme, whatever form it takes, should be guided by the following
key principles developed by business within the forum of the Emissions
Trading Group:
— environmental rationale—the
trading system must be seen by all parties to be achieving a valid
environmental objective;
— economic rationale—the trading
system must be seen by all parties to be more flexible and cost-effective
than other ways of achieving the environmental objective;
— credible—administrative procedures
must be adequate to ensure compliance with climate change goals;
and the system must have appropriate monitoring and verification
procedures;
— simplicity—deviations from
simplicity should only be introduced where and when demonstrably
necessary;
— certainty—in order to inspire
business confidence, encourage innovation and investment, there
must be a high degree of certainty so that business can invest.
This means that allocation must be as far into the future as possible,
the rules simple and permits must be bankable;
— transparency—the system must
be transparent to inspire national and international confidence;
— international competitiveness—there
must be no significant distortion of international competitiveness;
and
— inclusive—the process should
be as inclusive as possible in the longer term.
Supplementary or complementary initiatives
18. In addition to international emissions
trading, a range of complementary or supplementary approaches
may be considered, including:
— Extension of the Kyoto project mechanisms—the
CBI welcomed the adoption of the "linking directive",
which allows credits from clean development mechanism and joint
implementation projects to be used in the EU emissions trading
scheme. We believe this enables more cost-effective emissions
reductions for EU member states, while also ensuring wider participation
in the global climate change regime and enabling the transfer
of technology to developing countries. The extension of the Kyoto
project mechanisms into the post-2012 period should be considered,
but there must be moves to reduce the very high transaction costs
associated with such projects and to simplify administrative and
approval procedures.
— More flexible commitments—greater
flexibility in terms of target-types is likely to lower entry-barriers
and foster learning by doing. Alternative paths that could be
explored include complementary voluntary or binding targets for
sectors and relative targets focusing on emissions efficiency
improvements.
— Technology development and transfer—technology
has a major role to play in the mitigation of climate change and
could be key to increasing the participation of both industrialised
and developing countries in an international climate change regime.
Increased investment in research and development programmes, including
pilot and demonstration projects, is crucial to speeding up technology
development in low-carbon and end-use energy efficiency technologies.
Deployment in the market place is crucial to reduce the costs
of new technology development and policies and measures to encourage
diffusion of new and existing technologies should be considered
alongside any research and development programme.
UK PRESIDENCY OF
THE G8 AND
THE EU
19. The primary focus of the UK Presidency
should be engage the G8 and the EU to develop, through the UNFCCC
negotiations and bilateral/multilateral discussions, a common
vision on internationally agreed global emissions reduction pathways.
20. Key ways of achieving this include:
— develop understanding of scientific
consensus—the UK should focus on developing and communicating
scientific understanding of the scale and nature of the climate
change problem at a political level, rather than revisiting the
significant body of scientific evidence for global warming and
climate change already developed by the IPPC;
— adopt flexible approach—while
it is important the UK (and the EU) put forward proposals, to
engender the collective and political will necessary to address
the climate change problem it is crucial we adopt a flexible approach
in the international negotiations, which considers the range of
different policies and regimes on the table and evaluates their
effectiveness (both in terms of political workability and environmental
impact);
— facilitate technical discussion on
international emissions trading—aim to develop understanding
on how emissions trading could work at an international level,
rather than merely promoting the EU emissions trading scheme as
a model; and
— promote development and uptake of
cleaner energy technologies—the CBI supports the Government's
focus in this area and agrees that there is a need to build international
consensus on how we can speed up the introduction of both existing
and new low carbon technologies.
21. The review of the current EU climate
change strategy provides an opportunity to ensure a cost-effective
programme of policies shared between businesses, individuals and
other sectors and to consider effective migration of policies
beyond the Kyoto period. To deliver a sustainable policy which
delivers real climate change benefits, this should:
— position any future climate change
policy within a global context and ensure it is consistent and
coherent with international agreements at UNFCCC;
— tackle all economic sectors, in particular
those where emissions continue to rise, for example the inclusion
of aviation under the EU emissions trading scheme, and improvements
in domestic energy efficiency, through progress on directives
on energy demand management and energy performance of buildings;
and
— ensure that senior business people
in the UK and EU business communities, particularly in non-energy
intensive companies, are informed of the opportunities for business
engagement on the issue of emissions reduction.
8 November 2004
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