Low Carbon Competitive Advantage post 2012» by mmw12015

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									« Low Carbon Competitive Advantage post 2012 »

                                           Björn Stigson
                                      President of the WBCSD

World Business Council for
                                   Voluntary Carbon Market Forum
Su st ain ab l e Devel op m en t
                                          Taipei, 3 December 2007
                                   Voluntary Carbon Market Forum, Taipei, 3 December
                                                                                       1
                                                                                       1
WBCSD Members, Scale – Statistics



Coalition of 200 leading companies
  Market capitalization: USD 7 trillion
  Total turnover: USD 5.5 trillion
  Total member company employees:13 million
  Global outreach
        3 billion consumers per day buy a product or
        service from a WBCSD member company




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 Geographic Overview of WBCSD Members




                                                                     Europe-EU
                                                                     North America (incl. Mexico)
                                                                     Asia (Japan & South Korea)
Asia                                EU 67
other 10                                                             Asia - Other
                                                                     Europe - Other
                                                                     Latin America
 Japan & South                                                       Central & Eastern Europe
 Korea 32
                                                                     Oceania
                                                                     Africa
             North America
                                                                     Middle East
             (incl. Mexico) 49




EU, NA and Japan & Korea : 77%
Regional Network: a counterbalance
                                                                                                    3
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WBCSD Members in Taiwan




   CPC Taiwan




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Membership by Sector


                                                           Utilities & Power
   WBCSD Sectors                                                                       20
                                                           Mining & Metals             16
                                                           Oil & Gas                   18
                                                           Consumer Goods              16
                                                           Chemicals (13)              15
                                                           Forestry & Paper products   13
                                                           Auto                        12
                                                           Banks & Insurance           10
                                                                                       13
                                                           Cement
                                                                                       12
                                                           Services
                                                                                        8
                                                           Food & Beverages
                                                                                        8
                                                           IT & Telecoms                8
                                                           Tires                        7
                                                           Construction                 8
                                                           Engineering                  4
                                                           Healthcare                   3
                                                           Water Services               2
                                                           Media                        2
                                                           Retail                       1
                                                           Airlines
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                WBCSD Regional Network



        The Excel                           NHO-Norway
    Partnership Canada                   Danisch CSBD         Vernadsky Foundation Russia
                                                         BCSD Czech Republic
                                         BCSD UK
   CGLI USA/Canada                                          BCSD Hungary
                                       Econsense Germany                           BCSD Mongolia
                                          EPE France BCSD Austria
                                        FE-BCSD Spain BCSD Croatia                               Keidanren Japan
        US BCSD                                                      BCSD Kazakhstan
                                                           BCSD Turkey
                                     BCSD Portugal                                        BCSD Korea
                                                APEQUE
                                                            AEEC                 BCSD China
                                                 Algeria          BCSD Pakistan                  BCSD Taiwan
BCSD Mexico                                                 Egypt
                                                                               CII        BEC Hong Kong
                 BCSD Honduras
BCSD Guatemala
                  UNIRSE-Nicaragua                                               BCSD India                   PBE Philippines
BCSD El Salvador
                   AED Costa Rica                                                                   BCSD Thailand
  IntegraRSE Panama                                                                      BCSD
                       BCSD Venezuela
        BCSD Colombia                                                                   Sri Lanka     BCSD Malaysia
       BCSD Ecuador
                                  BCSD Brazil
              Perú 2021
                          BCSD Bolivia
                                                               BCSD Zimbabwe
                          BCSD Paraguay
                                                                                                               BCA
                                                                FEMA Mozambique
                                DERES Uruguay                                                                  Australia
                                                            NBI South Africa
              AcciónRSE
                                  BCSD Argentina                                                               BCSD New Zealand
                Chile


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A World Increasingly Shaped by SD Issues



                 Governance


      Economy                        Environment




                   Social Structure




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What are the Drivers / Forces behind
SD?

« The Top 4 »                                 « Others »
  Globalization                                   Ecosystems
  China and India                                 Demographics
  Energy & Climate                                Urbanization
  Land use                                        Poverty alleviation,
                                                  especially in Africa
                                                  Trust and
                                                  transparency
                                                  Media
                                                  Financial Markets

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Energy & Climate – The Context


Public opinion is at « a tipping point »

A growing sense of urgency in society

Consequence:
    Push on governments to show leadership
    and take actions




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Views of Global Warming


                                       Until we are sure that it is really a problem, we
                                       should not take any steps that would have
                                       economic costs



                                        … should be addressed, but its effects will be
                                       gradual, so we can deal with the problem
                                       gradually by taking steps that are low in cost



                                       … a serious and pressing problem. We
                                       should begin taking steps now even if this
                                       involves significant costs




                                                   Source: Chicago Council on Global Affairs
                                                   & WorldPublicOpinion.org                    10
      Voluntary Carbon Market Forum, Taipei, 3 December
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Climate Change



National business initiatives / declarations on
climate change
  USCAP, US Climate Action Program
  ERT, European Round Table
  Canada, Canadian Council of Chief Executives
  Brazil , multi-stakeholder coalition like USCAP
  Australian Business and Climate Group



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 WBCSD Energy and Climate Trilogy



Facts and Trends to 2050


Pathways to 2050


Policy Directions to 2050



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                      Energy & Climate - Dilemmas




                                                                                Source: IEA,
Some regions need to                                                             WEO 2006
speed up investment to
prevent the ‘lights going                                                              13
                            Voluntary Carbon Market Forum, Taipei, 3 December
out’                                                                                    13
       Energy & Climate - Dilemmas

       Total Primary Energy Demand in %
                                                      2004               2030

Coal                                                     25                25
Gas                                         81           21       81       23
Oil                                                      35                33

Nuclear                                                  6                  5
Hydro                                                    2                  2
Biomass & Waste                                        10.5                10
Other Renewables                                        0.5                 2
                                                                  Source: IEA
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                Size and lifetime matter !!
The rate of technological
                                                                Buildings 45+++ years
change is closely related to
the lifetime of the relevant
capital stock and equipment
                                                                                 Hydro 75+ years



                                                               Coal power 45+ years


                                   Nuclear 30 – 60 years



                       Gas turbines 25+ years


         Motor vehicles 12 – 20 years


    5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 ++

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Agenda Influencing Reports



IPCC Fourth Assessment Report (FAR)



IEA, World Energy Outlook 2007


Stern Review


                                                            16
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  Agenda Influencing Reports

Key Messages
 Climate change via human influence is happening.
 The consequences will require adaptation by society

 Need to stabilize carbon concentration at
 450-550 ppm, i.e. not go above + 2o- 3o .

 This means
 – 50% emission reductions globally by 2050
 – 60 - 80% for industrialized countries

 Urgent actions are needed.
 We are at 430 ppm today
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The World in 2050


What does a society look like that emits
 60-80% less GHG emissions in 2050?
« Different »
  Major impacts on lifestyles, consumption patterns
  and infrastructure are likely
How will societies be able to change to this
degree?
Who will get a political mandate to « inflict
pain » on your voters?

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 Agenda Influencing Reports

Main Actions
 Long term target
 Energy efficiency (demand site management)
 Technology development and deployment
 A price on carbon
 Low carbon energy sources including
 revival of nuclear and big hydro
 CCS for the emissions we cannot avoid
 Avoiding deforestation

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         Technology & Policies

Technology   Policies             “Horses for courses”
                                    Simplifying red tape for planning and
                                    permitting for mature technologies like big
                                    hydro and nuclear
                                    Product standards for appliances and cars
                                    Building codes
                                    Subsidies for fast market penetration of
                                    renewable energy to get these to scale and
                                    reduce costs
                                    Sharing of R&D costs between
                                    governments and business for new
                                    technologies (like CCS or nuclear)
                                    Risk guarantees for new major technologies
                                    nuclear IV and CCS

                                                                            20
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Key International Processes



         UNFCCC
               COP 13, Bali December 4-14


         G8 Gleneagles Plan of Action
             Japan, G8 Chair in 2008

         Others?
             US Major Economies Initiative
             AP6

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5 Main Economies


 US, EU, Japan, China and India

 They represent
   GDP – 80% of global GDP
   Population – 60% of the world’s population
   Major coal reserves




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US

Focus
   Economic growth
   Energy security
   Technology solutions
   No binding emission caps
Beliefs
   Developing countries must help to reduce
   emissions
   Environmental technologies are a growth
   opportunity

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                                                               23
EU

Focus
   Emission reductions, even at the expense of
   economic growth
   Binding emission caps
   “Energy, climate and competition”
   Role of industry sectors
Beliefs
   EU has a moral responsibility to lead
   Environmental technologies are a growth
   opportunity

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Japan


Focus
   Energy efficiency – “Global No 1”
   Voluntary agreements with industry
   No domestic cap and trade
   Energy security
Beliefs
   Environmental technologies are a growth
   opportunity



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China and India


Focus
   Economic growth to alleviate poverty
   Energy access
   Energy security
   Energy efficiency
Beliefs
   Industrial countries must lead and pay for their
   “legacy of historic emissions”


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 5 Main Economies

What do they think?
  Climate change and economic development
  cannot be separated
  Energy demand will grow
   • Actions: Energy efficiency
  Concerns for energy security
  They will use their coal – clean coal technologies
  needed
  Urgency to act on climate change?
   • “You first” mentality
  Burden sharing?

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  WBCSD Work Program




       Water
  EE in Buildings                                                           Value Chain
   Forest Prod.
      Mining                                                                Eco Patents
      Cement                                                                 Commons
      Mobility
Electricity Utilities
    Chemicals
       Tires




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 WBCSD Energy and Climate Trilogy



Facts and Trends to 2050


Pathways to 2050


Policy Directions to 2050



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          Our Energy System


      Oil              Biomass            Gas                 Coal                   Nuclear                Renewables
                                                Primary Energy
                                                                                               Power
                      Direct combustion                                                        Generation
Liquids               Industry and
                      Manufacturing
                                                              Energy
             Energy




                                                                                                   Energy
                                                Final Energy


  Mobility                                                                                                    Buildings




                                                Consumer
                                                Choices
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                                                                                                                           30
         Options for Change – Enabling
         Technologies
Emission reduction (CO2 / unit energy)




A further shift   Nuclear                 Renewables                 Bio-products   Carbon capture
to natural gas    power                                                             and storage



Energy conservation and efficiency (energy / unit GDP)




Mass              Road                    Buildings                  Low energy     Doing things
transportation    transport                                          appliances     differently



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 Energy Efficiency


IEA:
1 USD invested in reduced energy demand
will save 2.2 USD in energy supply capacity


Energy efficiency targets
    EU - 20% by 2020
    China - 20% in 5 years up to 2010




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Energy Intensity – Energy GDP




  Japan                                         1.0
  EU                                            1.6
  US                                            3.0
  China                                         9.0




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                                                      Emission Reductions Start at the
                                                      National/Sectoral Level
                               A. Opportunity Wedges (National)                 B. National/Sectoral Goals & Targets               C. National Policies
                               (Developed Country Example)
                                                                                                                                   Buildings – adopt new country building
                   1000                                                                                                            standards, design awareness

                                                                                                                                   Industry – Sectoral agreements, emissions
CO2 Emissions, MT per annum




                                                                            Efficiency     Buildings                               trading, technology standards
                              800                                                          Industry       xx % p.a.
                                                                                                                                   Domestic – carbon labeling, increased
                                                                                           Domestic       through to 20xx          product standards (e.g. standby energy)

                              600                                                                                                  Renewable Energy – renewables targets.
                                                                            Power      Renewables xx MW p.a. by 20xx               CCS – funding for infrastructure, tax cuts
                                                                            Generation CCS        xx tonnes CO2 p.a.               on capital investments, price signals for
                              400                                                                                                  carbon via emissions trading

                                                                                                                                   Biofuels – targets, support for
                                                                            Mobility       Bio-fuels      xx litres p.a. by 20xx manufacturing, CO labeling
                              200      National CO2                                        Efficiency     xx mpg by 20xx                             2

                                                                                           Choice         Hybrid / Diesel uptake Vehicle Efficiency - support technology,
                                       trajectory                                                         Mass transit           incentives, sectoral agreements

                                0                                                                                                  Mobility Choice - consumer incentives,
                                                                                                                                   promote public/private partnerships for
                                2005                               2050                                                            transport networks

                                 Target                Mobility - Fuels
                                 Vehicle Efficiency    Mobility Choice
                                 Renewable Power       CCS
                                 Buildings             Industry
                                 Domestic              Other Actions



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                                                                         Progressive Build-Up from National
                                                                         Programs
                                                              A global GHG market remains an important goal of the revised
Carbon Emissions, GT per annum




                                                              international framework. But it is constructed bottom-up through a
                                                              linkage framework, rather than a “big-bang” creation from the top.
                                                                                                              Structured multi-
                                                                                                              national cement
                                                                                                                                                                                         s




                                                                                     Emissions, tonnes CO2
                                                                                                              sectoral initiative.                                                  sion




                                                                                                                                       Emissions, tonnes CO2
                                                                                                                                                                                emis




                                                                                     per tonne of cement
                                                                                                                                                                          ration profile
                                                                                                                    t indus
                                                                                                                            try                                        ene usual
                                                                                                             Cemen as usual pro
                                                                                                                                file                               er g
                                                                                                                                                               Pow ess as
                                 Emissions, tonnes CO2




                                                                                                             B usiness                                          Bus
                                                                                                                                                                   in    Renewables /
                                                                                                                   Energy efficiency




                                                                                                                                                                                              Emissions, tonnes CO2
                                                                               ns
                                                                       emissio                                                                                           CCS wedge                                                       ns
                                                                y wide        file                                                                                                                                                 issio profile
                                                         Econom as usual pro                                      Best available                                                                                             rt em      al
                                                         Busine
                                                               ss                                                                                                                                                         spo as usu
                                                                                                                                                                      Net emissions                                   Tran ess
                12                                              Economy wide ETS                                  technology
                                                                                                                                                                                                                       Bus
                                                                                                                                                                                                                          in
                                                                                                                                                                                                                                 Bio-fuel
                                                                                                                                                                                                                                           wedge
                                                             Net emissions                                                                                                                                                  Net emissions



                10


                8


                6
                                                                                                                                                                                              Progressive build-up from
                                                                                                                                                                                              national programs
                4


                2
                                                                                                                                                                                                                                                   35
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                                                                     2010                                     2020                                             2030                          2040                                                   35
                                                                                                                                                                                                                                                    35
                                                                                                                                                                                                                                                   2050
                   Framework Comparison
          Kyoto – 2008-2012
             Agenda                                              WBCSD Revised Framework
Top down reduction obligations                                Bottom-up – National / sector policies and
                                                              commitments

Short term (5 year) compliance obligation                     Longer term (50 year emissions trajectory)


Allocation of a reduction obligation – equitable National opportunities and policies aligned with
allocation difficult to achieve politically      energy security and climate change priorities

Least cost compliance – not enough certainty for              Technology development and deployment focus
large investments in new technologies

Emissions market                                              Deeper engagement of capital markets and greater
                                                              influence over allocation of capital driven by a wide
                                                              range of policies and a broad based emissions
                                                              market.
Targets – tons reduced relative to a baseline                 Targets still in terms of carbon reductions – but
                                                              aligned to specific actions with GHG benefits – e.g.
                                                              XX MW of wind power by 20XX.


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   Five “Mega Trends” in our Energy System



      Oil              Biomass            Gas                 Coal                   Nuclear                Renewables
                                                Primary Energy
                                                                                               Power
                      Direct combustion                                                        Generation
Liquids               Industry and
                      Manufacturing
                                                              Energy
             Energy




                                                                                                   Energy
                                                Final Energy


  Mobility                                                                                                    Buildings




                                                Consumer
                                                Choices
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                                                                                                                           37
     Power Generation – What is Needed?


Key directions
  Decarbonization
  GHG emissions management
  Energy efficiency improvements
  Electricity as a preferred domestic and commercial final energy
  source

Key technologies
  Renewables
  Nuclear power
  Clean coal technology – including carbon capture and storage
  (CCS)
  Natural gas

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         Mobility – What is Needed ?
Key directions . . .
Involve fuel producers, vehicle makers and the consumer
  New more efficient vehicles
  Broadening the range and type of fuels
  Changing the way we use mobility

Key technologies . . .
  Hybrids and plug-in hybrids (drive trains and batteries)
  2nd generation biofuels, synthetic diesels, electricity
  Integrated public / private transport mechanisms
  Hydrogen
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       Industry & Manufacturing – What is
       Needed?

Key directions . . .
  Energy efficiency measures
  Breakthrough low-GHG manufacturing technologies
  Rapid deployment of best available technology

Sectoral Approach . . .
Many different policies already exist, but a sector based
initiative offers scope for wide coverage and inclusiveness.
  Expansion of the CDM/JI to recognise whole sectors as
  a “project”.
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          Buildings – What is Needed ?

Key directions . . .
   Energy standards and codes for
   buildings, appliances and lighting.
   Education programmes for
   operators and occupiers.
   Transparency and awareness.
   Focus on building materials
   and their lifecycle emissions.
   Innovation in building design.




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       Consumer Choice – What is Needed?


Key directions
  Increased consumer awareness and
  understanding of the energy/ carbon issue
  Robust programs to encourage energy
  efficiency targeted at consumers
  Attribute a value to carbon, which allows
  consumers to recognize its cost throughout
  product and service life cycle
  Market conditions that influence the
  consciousness of consumers



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                   Voluntary Carbon Market Forum, Taipei, 3 December
                                                                        42
 Climate Change


« Rough ride » for the next 25-50 years

The transformation to a more sustainable
energy future will mean winners and losers

Climate Change is becoming a core
business issue with strategic and financial
implications


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                                                              43
Montreal: The End of the Kyoto Protocol Cycle


Kyoto : Caps, timetables and mechanisms

Main achievements:
   Creation of and experience with GHG
   markets – offsets and ET
   Abatement through market mechanisms -
   CDM
   Lessons learned
   Price on GHG for governments and
   business

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      Carbon Market Overview
Figures based on IETA/World Bank Market Report 2007

                                                             2005        2006
                                                            Value        Value     Change
                                                            MUS$         MUS$        %
Allowances
EU ETS                                                          7'908     24'357     308%
NSW                                                                59        225     381%
CCX                                                                 3         38    1267%
UK-ETS                                                              1         na
Sub total                                                       7'971     24'640     309%
Project-based transactions
Primary CDM                                                    2'417       4'813     199%
Secondary CDM                                                    221         444     201%
JI                                                                68         141     207%
Other Compliance                                                 187          79      42%
Sub total                                                      2'894       5'477     189%
Total                                                         10'864      30'098     277%
                                                                                            45
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                    Who is Buying in the CDM Market?


                     Other & Unsp.
    Other Europe                                                                           Other Europe
                          3%
        12%                          EU Private Sector 75% of demand                           10%
                                                                                                         Other & Unsp.
                                                                                                              7%


 UK                                                                                                              Japan
 15%                                                                                                              7%

                                                          UK
                                                                                                                Netherlands
                                                         50%
                                                     Japan                                                           4%
                                                      46%                                                        Europe-Baltic
Spain                                                                                                                  Sea
 7%                                                                                                                    3%
                                                                                                               Austria
                                                                                                                3%
  Europe-Baltic
      Sea                                                                                                  Spain
      9%           Netherlands                                                                              6%
                                                                                               Italy
                       8%
                                                                                               10%

          Jan. 2005 to Dec. 2005                                     Jan. 2006 to Dec. 2006
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                                                                                         Source: IETA/World Bank Market Report
                 Who is Selling in the CDM Market?


                                                                                                             500




                                                           primary CDM annual volumes transacted (MtCO 2e)
                                   India                                                                            Other & Unsp.
                                    12%                                                                      400    Africa
                                                                                                                    R. of Latin America
                                                                                                                    Brazil
                                           R. of Asia                                                               R. of Asia
                                               7%                                                            300    India
                                                                                                                    China

                                             Africa
China                                         3%
 61%                                                                                                         200

                                           Other & Unsp.
                                                7%
                                          Brazil                                                             100
                                            4%
                                  R. of Latin
                                   America
                                                                                                              0
                                      6%
                                                                                                                   2002     2003      2004   2005   2006




                          2006
        Jan. 2006 to Dec.Voluntary Carbon Market Forum, Taipei, 3 December                                                                                 47
                                                                                                                                                            47
          CDM Leverage for Cleantech


                                                                                                   Investment for CDM activites,
Cumulative CDM deals =                                                                                per year of commitment
US$ 7.8 billion                                                                               16

US$ ~2.7 billion for clean




                                                 Investment amount (US$blln, current value)
                                                                                              14
energy (current prices)                                                                             Other
$1 carbon =~$8 invested for                                                                   12
                                                                                                    EE+Fuel s.
                                                                                                    Other Renewables
clean energy                                                                                        Biomass
                                                                                              10    Wind
US$ 16 billion leveraged for                                                                        Hydro
clean energy in developing                                                                     8
countries since 2002
                                                                                               6
US$100 billion invested for
clean tech globally in 2006                                                                    4


                                                                                               2


                                                                                               0
                                                                                                    2002   2003        2004   2005   2006

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How do We See the World Evolving?


Major questions face the carbon market
   Will there be a second commitment round
   of the Kyoto Protocol, or a similar agreement?
   Will the US join the global carbon market?
   Will major developing world emitters take
   on a different role?
   Prospects for movement on this in Bali?




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                                                             49
Realizing the full Potential of Market-Based
Opportunities




Most actions by government, whether labelled
as “market-based” or not, fall on commercial
actors to implement who take an economic,
market-based approach to achieving
obligations and reaping rewards.

Key word is “investment” – most emission
reductions require additional investment that is
based on economic decision making in a
market-driven context.


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                                                               50
Realizing the Full Potential of Market-Based
Opportunities




 Investors and market participants need
 predictability and certainty in order to plan
 new investments in lower carbon and
 higher efficiency technologies.




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Our Common Future?


« We are in this together »
  No part of society can create a sustainable
  future on its own

 We need new platforms for interactions between
 governments and business on global issues




                                                             52
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                                                              52
 Our Common Future?



“The stakes are going up” on SD
 SD is becoming a competitive issue
 Growing tensions inside the business
 community




                                                             53
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“ Business cannot succeed in a
        society that fails“


 WBCSD
 Sustainability Through the Market 2001




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Thank you!

								
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