Yesterday, we saw The Investor Agenda call on government to step up with more comprehensive commitments to meeting Paris Accord climate change targets. The World Economic Forum’s CEO Alliance for Climate Change also issued a similar call for action. The CEO Alliance represents roughly 400 of the top 2000 publicly traded global companies. The letter, signed by 78 of the CEOs participating in this group, called on governments to deliver policy changes including:
- Publish new NDCs, aligned to a 1.5C target, and halving emissions by 2030.
- Commit to net-zero by 2050, with roadmaps to get there.
- Ensure that developed countries meet and exceed their $100B commitment to support developing countries mitigate and adapt to climate change.
- Develop broadly accepted carbon pricing mechanisms, with escalating carbon prices to drive the transition.
- Compel all business to establish credible decarbonization targets, and fully disclose all emissions.
- Eliminate fossil fuel subsidies, and cut tariffs on green goods.
- Boost R&D spending.
- Invest in climate adaptation. This means resilient cities and infrastructure.
- Create and implement sector-specific incentives for power, transport, buildings and cities, industry, land and agriculture, and finance.
It encompasses the same policy actions as the Investor Agenda open letter, and then takes them a step further asking government to provide incentives and R&D as well.
Both the Investor Agenda letter, and the CEO group letter ask for the elimination of fossil fuel subsidies, and for synchronized carbon pricing mechanisms to be introduced. What would this do?
- Direct fossil fuel consumption subsidies are substantial, according to the IEA, at about $320B annually. The incentives and R&D asked for could be funded by the elimination of these subsidies.
- Similarly, carbon pricing mechanisms send a signal to markets that low-carbon investments will be valuable and also create incentives for companies to be more efficient. Carbon pricing has momentum. According to the World Bank’s 2020 State of Carbon Pricing report, there are now 61 carbon pricing initiatives scheduled or implemented, and to-date some 14,500 projects registered. One challenge for business is the diversity of models. 30 of these initiatives are carbon taxes and 31 are carbon exchange trading systems.
Taken together, these two open letters are a strong endorsement by business. Rather than fight climate change efforts and regulation by government, they are calling for public/private partnerships to make progress more quickly.