There’s less than a month before policymakers gather in Copenhagen to hammer out a post-Kyoto agreement on climate change. Things don’t look good. Since the last big get-together in Bali two years ago, negotiations have crawled to an almost standstill. And after talk of all countries signing up to binding reductions in carbon emissions, politicians have backpedalled. For most, Copenhagen is now just another step towards a new climate change treaty.
So how will this affect business? A key figure to focus on is $150 billion. That’s the amount of investment developing countries will need each year by 2020 to tackle climate change, according to the European Union. Under proposals still being worked out, money would come from both (mostly Western) public coffers and the private sector (tentatively under an expanded version of the Clean Development Mechanism that provides economic incentives for companies to invest in emerging economies). Billions more will be spent in developed countries to cut carbon output.
If countries agree to the $150 billion goal, it could open up new opportunities for business. For one, existing plans for renewable energy generation in emerging economies, particularly in China and India, may get a shot in the arm. But the money wouldn’t just focus on green energy. Agriculture, water management, and energy efficiency — to name a few — could also fall under the financial program. Ancillary industries, such as project management and carbon reporting, may similarly become sought after services.
For sure, issues still remain. At a G-20 summit in Scotland on Nov. 7, leaders failed to agree who should finance climate change investment. The sticking point: should developed countries, especially the U.S. and Europe, pick up most of the tab, or should emerging giants, like China and India, also put money on the table? Other issues relate to how much cash should come from public sources (and whether that money is new support, or just taken from other budgets)? And how would the private sector guarantee investment if a post-Kyoto agreement isn’t in place?
Answers to these questions are needed before any money is doled out. But with expectations of a wide-ranging agreement at Copenhagen fading by the minute, politicians will want some good news to come out of the summit. That could make investing $150 billion a year in developing countries a high priority.