The Copenhagen Accord Major Implications for Business

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by: Sarah Maple
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Date: Wed, 5 May 2010 Time: 5:51 AM
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Major Implications for Business

So, what does The Copenhagen Accord mean for your business? Answer: "An increased strategic approach to operating in a carbon constrained world" This article outlines a few of the major implications that could arise from the Accord itself, as well as changes it could bring over time as it develops and is put into action. The article is based on the analsys done by The Danish KPMG department.

Role and Ambition
The primary implication for business is how to strategically review its role in the whole climate change debate and to decide on it's how ambitious it will be In a transition to a low carbon global economy. Should companies be leading the way in terms of carbon reductions with a focus on market opportunities or should they take a more reactionary approach and await further regulation?

Capacities, Information, and Intelligence
There will be an increasing need for businesses that operate globally to develop better capacities for tracking the various aspects of the Accord: to analyze the specific implications for its operations, and to identify new and innovative revenue opprtunities. The developments that are likely to have the most significant impact on business are the emergence of mitigation processes, changes in investment patterns in response to low-carbon opportunities, border protection adjustments, and carbon constraints. Three other important implications that will require enhanced capacity and further analysis by business are renewable energy investment, shipping, and sustainability reporting. In danish - Revision

Bilateral and Multilateral Trade in a Carbon Constrained World
It is likely that business will need to learn how to operate in a world with a variety of climate change and emission reduction policies. Some examples of the types of policies that business might have to deal with are:
• An import tariff on coal in India
• The over-allocation of free permits to competitors under a cap-and-trade scheme
• A ban on the construction of new coal fired generation plants in developing nations.

A number of global businesses are already building scenario-planning tools that allow them to understand and model the impacts of the combined effect of varying carbon prices, national policies, and levels of border protection.
Understanding and preparing for these scenarios could be a business imperative
— It is anticipated that global finance will view the Copenhagen funds as a $100 billion opportunity to invest in low-carbon technology in carbon-constrained nations, where return on investment would be greatest. This is a race to the top, and businesses that fail to understand this will be left behind.
National governments are currently researching the emission intensity of many types of activities (steel production, cement manufacture, etc.) carried out by rival nations. These types of metrics are considered by some to be building blocks of protectionism in a partially carbon constrained world. It seems obvious that business should be in a position to understand and to influence the debate on carbon based trade barriers as it has significant implications for their investment and long-term growth.

Valuation of Mitigation Actions in Trade
The Accord states that developed nations need to provide mitigation funding and it acknowledges that the current scale of the CDM is insufficient. This opens up debate on how mitigation funding should be secured. An interesting finding from KPMG's research on resource-extractive economies is that certain types of trade could be valued as mitigation actions. The clearest examples that we found were in the trade of liquid natural gas (LNG) (a lower carbon fuel than coal and fuel oil) and a magnetite form of iron ore that delivers overall emissions reductions in steelmaking.
Some countries might consider the supply of these materials as mitigation actions for an entire sector, such as the steel industry. The question is: How would governments develop the accounting framework and test for additionally? The message to business is that they should begin to explore how carbon fl ows can be measured in terms of trade and what might constitute measurable action. This work could be done jointly between governments and industry/business organizations.

Partnerships
The Copenhagen Accord should be viewed as an opportunity to earn revenue from new products and services. The challenge of delivering low-carbon economic development and adaptation will ultimately be met by businesses that work in cross-sector partnerships. For example, a new energy-effi cient production technology for aluminum could be developed through a partnership between a business in a carbon-constrained economy that develops the technology, a bank or finance institution that funds the implementation of the technology in developing nations, and a government department that provides start-up funding, negotiates trade arrangements, and values the mitigation actions as part of its commitment to the Copenhagen Accord.

About the Author

Sarah Maple writing about the Danish KPMG. Artiklen blev først publiceret 21. April 2010. KPMG er en del af det globale KPMG-netværk af revisions- og rådgivningsfirmaer, som primært arbejder med
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