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Working for a low-carbon and energy efficient economy 4 Global Energy is the fuel for growth, an essential requirement for economic and social development. Björn Stigson President of the World Business Council for Sustainable Development B y 2050 the world’s demand for energy could double as populations rise and developing countries expand their economies and increase the standard of living of their people. Unchecked, an increased demand for energy will create an increase in greenhouse gas emissions. This is why action on climate change is now a priority for governments around the globe. Walk around any big city and it is easy to see that cement is one of the things that underpins modern life. In 1959, about one-third of the world’s people lived in cities. By mid-2008 more than 3.3 billion people – half the world’s population – had packed up and moved into town. Towering buildings, gleaming glass and steel, traffic noise, neon signs, and the hustle and bustle of a mass of humanity: love them or loathe them, cities are a sign of our times. According to the latest UN Habitat report, three million people have moved into cities every week for the past 20 years in the developing world alone. All these people have to live somewhere, in something. Around the globe, more and more dwellings, schools, hospitals, workplaces and roads are built to accommodate this influx, often using cement or cement products. Concrete is second only to water in total volumes consumed annually by society. Any increase in demand for it has therefore significant consequences for energy consumption and the world’s greenhouse gas emissions. There are consequences, too, for energy consumption as buildings are responsible for up to 40% of energy use in most countries, and that demand for energy is soaring as construction continues, especially in countries such as China and India where building to meet population needs proceeds, even in financially difficult times. Energy as a key indicator for human development How we produce and use energy will be a key part of how we deal with the world’s changing climate. Energy is the fuel for growth, an essential requirement for economic and social development. Energy is essential to fuel industry, power infrastructure and to connect goods and services to markets. Communities need it for basic services such as heating, lighting and cooking fuel. There is no doubt that some of the world’s people have too little of it, and that others waste far too much of it. Access to energy is a key indicator of human development. One billion people living in developed regions consume half of the world’s energy supply. In contrast, 1.6 billion of the world’s poorest people have no access to electricity. It is not surprising that these people should aspire to better lives, and we 5 will need to be able to handle the increased demand for energy. At the World Economic Forum in Davos this year, the UN Secretary-General, Ban Ki-moon, told the assembled leaders of government and global business that climate change threatened all our goals for social development and progress, but on the other hand, it also presented us with a gilt-edged opportunity. I would agree. “By tackling climate change head-on we can solve many of our current troubles, including the threat of global recession,” Mr Ban said. “We stand at a crossroads. It is important that we realise we have a choice. We can choose short-sighted unilateralism and business as usual. Or we can grasp global cooperation and partnership on a scale never seen before. Today – he also explained - with the economic downturn and climate change, the stakes for companies have never been higher. But for businesses with vision, the rewards are equally high. The green economy is low-carbon and energy efficient. It creates jobs. Investment in sustainable technologies will turn today’s crisis into tomorrow’s sustainable growth.” China’s Premier Wen Jiabao also addressed the Davos gathering. He said his government would be increasing spending over the next two years to help alleviate the effects of the financial crisis. “The investment will mainly go to government-subsidised housing projects, projects concerning the well-being of rural residents, railway construction and other infrastructural projects, environmental protection projects and post-earthquake recovery and reconstruction.” China already uses half the world’s cement and, along with the United States, is the biggest emitter of carbon dioxide and biggest user of coal. Mr Wen’s remarks are an indication that those consumption levels are likely to continue. Low-carbon energy strategies If we are serious about finding a solution to the world’s climate problem, then we must significantly lessen the consequences of fossil fuel use and find ways to deal with our greenhouse gas emissions. To do this, we need to maximise our energy efficiency, develop low-carbon energy sources and deploy breakthrough technologies such as carbon capture and storage. At the World Business Council for Sustainable Development we work with some 200 of the world’s leading companies on finding economically responsible, equitable ways to sustainable development. These companies – and many others around the world – are facing challenging financial times. Nevertheless, they fully understand that any climate solution will require major investments from them. “ One billion people living in developed regions consume half of the world’s energy supply. In contrast, 1.6 billion of the world’s poorest people have no access to electricity. These people aspire to better lives and we need to be able to handle an increased demand for energy. 6 Investment in sustainable technologies will turn today’s crisis into tomorrow’s growth. The lion’s share of the investments in developing and deploying low-carbon technologies will fall to business. The United Nations Framework Convention on Climate Change (UNFCCC) has suggested that most of the financial flows to support the investment to address climate change will come from the private sector. In the energy sector alone, the International Energy Agency (IEA) has estimated that additional investments of US $ 45 trillion will need to be invested in the global electricity system up to 2050 to halve global greenhouse gas emissions and make it low-carbon. A new climate agreement is needed But what business lacks at the moment is clarity. It has the expertise, strategic thinking, innovative mindset and some of the investment capital that will be needed, but what it doesn’t have yet is the international framework into which it can invest with confidence post-2012. This is why it is important that a new global climate agreement, one that provides a framework for how countries deal with their carbon emissions, is reached in Copenhagen in December. WBCSD member companies will be at the forefront of the technological research, development and deployment that will be needed if the world is to shift to low-carbon energy sources. These companies tell us that more needs to be done to encourage investment on the kind of scale that will be necessary. Energy efficiency is widely accepted as the most cost-effective way to mitigate climate change. The IEA says energy efficiency accounts for half of the potential to halve carbon dioxide emissions in the decades ahead. Energy efficiency reduces energy costs, alleviates energy dependency, decreases vulnerability to energy prices and reduces greenhouse gas emissions. There should be a major global effort to expand the role of energy efficiency to make sure that we get as much out of its potential as we can. How to support new technologies Many of the technologies needed to address climate change are available. But what we lack is the funding necessary for big demonstration projects that precede the widespread deployment of that technology. Here policymakers and governments can help. We need to establish public-private partnerships so that governments, R&D institutions, business and end-users of technology can work together to organise, fund, define, develop and demonstrate technologies as expeditiously as possible. And existing financial mechanisms will need to be maintained, streamlined or expanded so that we move towards a truly global carbon market. One additional mechanism that business believes should be encouraged is sectoral agreements. These would be satellites to the global agreement and should focus on activities that cut emissions and support technology and financing within specific sectors. The focus should be on either efficiency improvements or emission reduction, or indirectly through such actions as investing in specialised low-carbon technology for future use. These kinds of projects could help developing countries by introducing new infrastructure and technologies, and at the same time building the skills and competences needed to get full benefit from them. The Cement Sustainability Initiative The WBCSD has valuable experience of sectoral approaches. The Cement Sustainability Initiative (CSI) is a voluntary programme of the world’s leading cement companies, which, since its beginning in 1999, has focused on the industry’s major sustainability challenges. This is exactly the kind of large-scale project that we see as having a place within a new global climate agreement. In 2002, CEOs from some of the world’s largest cement producers pledged to take action in areas such as climate protection, employee health and safety, the use of alternative fuels and raw materials, managing land use impacts and managing other (non-carbon) emissions. Since then, there have been consistent reductions in emissions intensity, that is, in reducing carbon dioxide emissions per tonne of cement produced. Between 1990 and 2006, all CSI members reduced their emissions intensity by an average of 12%. The encouraging progress made by members in measuring, reporting and mitigating carbon dioxide and other emissions is only possible because of four key building blocks developed by the CSI. These are: a common measuring and reporting protocol, external assurance of emission reports, a global database of plantspecific energy and emissions performance and company-set emissions reduction targets. Data has now been collected and analysed from 1990, 2000, 2005 and 2006. In that time it is clear that cement production and accompanying carbon dioxide emissions have increased, particularly as developing countries have built much-needed infrastructure, including housing, roads, hospitals and schools for their growing economies and populations. We know that 80% of future carbon dioxide emissions from the cement sector will come from developing economies. But what is equally clear is that carbon dioxide emissions have not been increasing anywhere near as much as cement production, and this is because of the improvements that have been made in the emissions intensity of the cement making process. In 2006 there were only 661kg of carbon dioxide produced with each tonne of cementitious product, compared to 752kg in 1990. Different policy options for the world It is clear that the world will need a variety of policy options to make the big changes demanded by climate change. The CSI is both a project designed to look at broad sustainable development requirements for the sector and a project which looks specifically at sector needs in relation to climate change solution. This could help pave the way toward a broader global framework for climate protection by providing transparent emissions data, tools for implementation and consistency of mitigation opportunities. It is important that any sectoral approach is set within the UNFCCC framework and that it is compatible with existing and future mechanisms. Verified emissions data should be used to track compliance, there should be provision to adjust or review objectives over time, and developing and developed countries must be involved. The eco-efficiencies achieved by the CSI have done much to show that sector-based approaches could prove a valuable weapon in our fight against climate change. We will need all the weapons we have. Business understands that we are all in this together and wants to get on with working, planning and investing for the future. The world can move to a lowcarbon economy, but it will require a great deal of working together in Copenhagen and elsewhere. Business is ready to be part of the solution. ■ 7 Today, with the economic downturn and climate change, the stakes for companies have never been higher. But for businesses with vision, the rewards are equally high. The green economy is low-carbon and energy efficient. Moreover it creates jobs. About the WBCSD T he World Business Council for Sustainable Development (WBCSD) is a unique, CEO-led, global association of some 200 companies dealing exclusively with business and sustainable development. The Council provides a platform for companies to explore sustainable development, share knowledge, experiences and best practices, and to advocate business positions on these issues in a variety of forums, working with governments and non-governmental and intergovernmental organisations. www.wbcsd.org