Carbon Governance, Climate Change and Business Transformation

Adam Bumpus, James Tansey, Blas Luis Pérez Henríquez, Chukwumerije Okereke

• Publisher: Taylor & Francis
• Year: 2014
• Print ISBN: 9781138205178
• eBook ISBN: 9781135067854
• Edition: 1
• Topic: Economics
• Subtopic: Sustainability in Business
• Index: Economics

Transformation to a low carbon economy is a central tenet to any discussion on the solutions to the complex challenges of climate change and energy security. Despite advances in policy, carbon management and continuing development of clean technology, fundamental business transformation has not occurred because of multiple political, economic, social and organisational issues.

Carbon Governance, Climate Change and Business Transformation is based on leading academic and industry input, and three international workshops focused on low carbon transformation in leading climate policy jurisdictions (Canada, USA and the UK) under the international Carbon Governance Project (CGP) banner. The book pulls insights from this innovative collaborative network to identify the policy combinations needed to create transformative change. It explores fundamental questions about how governments and the private sector conceptualize the problem of climate change, the conditions under which business transformation can genuinely take place and key policy and business innovations needed.

Broadly, the book is based on emerging theories of multi-levelled, multi-actor carbon governance, and applies these ideas to the real world implications for tackling climate change through business transformation. Conceptually and empirically, this book stimulates both academic discussion and practical business models for low carbon transformation.

1 Carbon governance, climate change and business transformation

Adam G. Bumpus

Blas L. Pérez Henríquez

Chukwumerije Okereke

James Tansey

DOI: 10.4324/9780203375327-1

Carbon governance and a profitable low carbon future

Business, carbon and transformation

Climate change is one of the most salient and pressing global public policy issues today and it has become a regular agenda item in the boardroom. Increasingly, investors, corporate leaders and entrepreneurs are making decisions about how to best engage with the new reality of a global climate that is changing at a pace that is unprecedented in human history. In seeking solutions, they are asking: What are the drivers of low carbon business transformation? What is the experience of leading climate jurisdictions around the world? How can this be emulated and what are the implications for business? The management literature is slowly emerging that shows how corporate action is enabling low carbon investments and how entrepreneurs, investors and corporate leaders are articulating a compelling business case for low carbon business transformation. This book challenges orthodoxies in business and environmental policy to explore opportunities beyond classic trade-offs between environmental protection and economic development.

The more immediate forces driving this case for transformation includes the need for compliance with current regulatory schemes, pressure from investors seeking disclosure on emissions, and demand for greater legitimacy and trust from consumers. Regulatory schemes are emerging all over the world, including emissions trading systems in Europe and California, carbon taxes in Canada, and implicit prices on carbon in China and Korea (Hepburn, 2010; Pérez Henríquez, 2013). Standards and reporting platforms are emerging to create incentives for business to reduce its impact: from investors, controlling US$78 trillion of capital, who are asking companies to openly disclose their emissions through the Carbon Disclosure Project (CDP), to star rating systems to help consumers identify corporate climate leaders. Of the global 500 largest companies, 81 per cent now respond voluntarily, each year by reporting their emissions to the CDP (CDP, 2012). Civil society, investors and incoming legislation are making companies increasingly aware that low carbon corporate action is a fundamental necessity. In response, companies are setting targets that reduce emissions, provide low carbon products and drive change up and down supply and value chains. Climate change and awareness of low carbon business risks and opportunities are well and truly on the agenda.

Despite this effort, however, greenhouse gas (GHG) emissions continue to grow apace. Fossil fuel based energy production was the highest in history in 2011, generating 31.6 Gigatons (Gt) of carbon dioxide (CO₂), a 3.2 per cent increase over 2010 (which in itself was 5 per cent above the previous record year in 2008) (IEA, 2012). The largest global recession for over half a century has undermined the urgency for implementing climate action and it appears that meaningful efforts to reduce emissions at a rate that is consistent with attaining a ‘safe climate’ have lost momentum. The policy process and business’ climate actions do not reflect the sense of urgency to stabilize emissions as communicated by the scientific community (IPCC, 2007).

In order to stimulate public policy and business initiatives on climate change that go beyond the current incremental effort, it is vital to ask: What are the opportunities for meaningful innovation to take advantage of the new ‘green industrial revolution’ that is needed in order to create productive, low carbon economies in the 21st century and beyond? How are leading climate jurisdictions around the world responding to this challenge and the lessons that can be gleaned from these experiments?

In a bid to explore these and related questions, the co-editors organized three multi-stakeholder workshops involving academics, policymakers and industry players in three leading climate policy jurisdictions (British Columbia (BC), Canada; California, USA; the UK) during 2011 and 2012. With specific focus on roles of innovation, capital and carbon policy, the Carbon Governance Project (CGP) explored current business and governance models, as well as the future responses needed to enhance opportunities for economic growth while enabling a low carbon future. The central question was: How do we create transformative business strategies in uncertain policy landscapes? Within this remit, the workshops explored fundamental questions about how governments and the private sector conceptualize the problem of climate change, the conditions under which business transformation can genuinely take place and the key policy and business innovations needed.

The chapters in this book are based on outputs from workshop discussions, and insights from leading low carbon business practitioners. In addition there are also new insights from primary research on business responses and innovations to climate legislations.

The book draws on cutting edge academic and policy research to explore the current frontiers in the development of the conceptual and practical requirements deemed critical for fundamental business transformation to a low carbon future. The intention is that the book will help to extend the debate from education on climate responses to innovation in transformation. Both jurisdiction-specific issues and cross-jurisdictional aspects of low carbon governance will highlight commonalities and differences, including best practices, across jurisdictions: the book localizes theory on carbon governance, and internationalizes ‘local’ climate issues in BC, the UK and California.

The book addresses three major issues:

• Creating change: What are the structural, political, economic, organizational and behavioural factors that enable or disable low carbon transformation? What are examples of cases where these factors have catalysed or constrained change? How do we create a culture of low carbon innovation?
• Policy and business: What are the push–pull relations between policy and business that leverage climate action in the leading jurisdictions on climate change (e.g. financing new energy, overcoming technological, capital and cultural barriers)?
• Creating a profitable future: Under what conditions can business transform to low carbon within uncertain landscapes of policy? How are mutually facilitative conditions created in the time frames needed?

We hope to provide a timely intervention drawing low carbon experts together to provide ‘big picture’ ideas for private sector climate governance. From a comparative perspective, the book explores effective methodologies for corporate climate change research, informs theoretical discussions on the role of the corporation in energy and low carbon choices, and provides academic, business and policy relevant output.

Carbon governance and the CGP Workshops

There is an increasing appreciation that innovation for climate change can only be found through ideas and actions involving actors across multiple sectors – government, business, civil society – and at a multitude of levels – local, provincial, national and international (Okereke et al., 2009, 2012; Biermann, 2010). Multilevel climate governance, as this concept is called, represents a departure from emphasis on climate actions by government authorities in the context of the international climate agreements. Carbon governance describes the multi-actor, multi-level steering of carbon emissions reduction climate adaptation and related transactions (Jagers and Stripple, 2003). A particularly important feature of multi-level climate governance is the role of business both within and across political jurisdictions. First, businesses have huge material impact: the carbon emissions of some businesses outstrip those of states. Second, they command enormous financial and technological power, which are critical for driving capital investment and innovation on low carbon technologies. Third, given their high level of transnational mobility they act as an important conduit for technology diffusion across the world. Fourth, businesses are often very central in terms of the actual ‘on-the-ground’ implementation of climate polices. At the same time, given their role as engines for growth, businesses possess vital structural power, which they can also use to impede radical climate action. Given the uncertainty about binding international climate policy, multi-levelled, multi-actor governance of carbon will be a central component for tackling climate change and achieving a transition to a low carbon future. Key to this is the role of business in responding to regulation and driving low carbon transformation beyond government policy.

While the potential role of business in climate response is widely appreciated, much of the conversation about the actual contributions of business to low carbon transition remains unhelpfully polarized between those that emphasize the positive contributions of business on the one hand, and those that tend to dismiss these actions as mere ‘greenwashing’ on the other. This polarization has made it difficult to have a balanced and inclusive conversation about what exactly business is contributing and how the opportunities for scaling up positive actions can be encouraged. The CGP was based, therefore, on the conviction of the need for inclusive co-evolution of policies and action between business and government actors. Climate change is not just about regulation of negative behaviours, but a combination of regulation and policies to incentivize engagement and innovation. At the same time, businesses need to see themselves as global citizens that have responsibilities in helping to find solutions to climate change.

The CGP workshops were designed to analyse the conditions under which low carbon economy futures can be achieved through effective and scalable business transformation and the policy combinations needed to create transformative change. Going beyond carbon accounting and best practices, the workshops explored fundamental questions about how the private sector conceptualizes the problem of climate change, the conditions under which business transformation can genuinely take place, the role of governance risk and the key policy and business innovations needed. The CGP asked (i) how international business is responding to constantly shifting and uncertain climate policy, (ii) how regions are capitalizing on expertise and exporting best practice, and (iii) how the corporation is innovating (or not) in light of the climate change problem

The CGP workshops, held in three climate policy-leading jurisdictions – UK (Oxford), California (San Francisco) and BC (Vancouver) – aimed to explore how leadership can be embraced and directed to harness the power of private sector action on climate change. Key individuals from business, government and academia were invited to share their opinions, take part in structured discussion and scenario building and present their solutions for creating low carbon governance. Ideas from each workshop were transferred from one jurisdiction to another. These workshops highlighted key areas of the debate: responding to regulation (as focus in Oxford); innovation and creating low carbon vision and opportunities (focus in Vancouver); and the importance of regulatory structures and the availability of capital (discussed in Berkeley).

Climate jurisdictions

Although clearly not the only jurisdictions taking action (as highlighted in Wiseman and Edwards’ chapter), the three jurisdictions chosen for this project represent leading examples of climate policy and innovation on climate change issues. These jurisdictions (national and sub-national) decided to take significant action in spite of the deadlock at the level of international negotiations. Political and economic cycles may threaten to dismantle or delay their programmes. However, as the risk and dangers of catastrophic climate change become more evident, the policy lessons from these experiences can contribute towards the enhancement of carbon governance around world. There is value in profiling these areas, compiling best practice and building an understanding of productive low carbon regulation and policies that foster innovation. At the same time, there is also a need to explore why, even in these leading areas, full transformation is not in full swing. Through university networks of the University of California Berkeley’s Centre for Environmental Public Policy at the Goldman School, University of BC’s ISIS at the Sauder School of Business and Oxford’s Smith School for Enterprise and the Environment, the editors were able to bring together excellent contributors and practitioners in low carbon transformation in these key jurisdictions. The ideas that emerged from this project are described more fully in the following chapters. The following three sections are summaries that illustrate some of the key themes resonating with current policy and participants in the specific locations.

The United Kingdom

The United Kingdom has taken a strong leadership position on climate change from a policy driver perspective. In 2008, the UK passed the Climate Change Act, which requires the country to cut GHG emissions by 80 per cent compared to 1990 levels by 2050. The act is legally binding, making the UK the first country to have a climate change act that is written into legislation rather than being dictated by the ephemeral policy of the four-year political cycle. According to the Act, successive governments in power are obliged to meet their climate obligations or they can be taken to court. Furthermore, the Climate Change Act requires the government to set three five-year carbon budgets at a time to ensure that the country is making adequate progress toward its goals. The fact that the government must be thinking 15 years ahead helps to give a form of certainty to the market. Another step taken in 2008 was to combine the departments focused on energy and the environment into the new Department of Energy and Climate Change (DECC). Previously, the two departments had at times pulled in opposite directions; by integrating them, the government hoped to present a more united front during international climate negotiations (Vidal and Jowit, 2008).

David Cameron, Prime Minister of the UK and leader of the Conservative party, promised that the coalition with the Liberal Democrats would create the ‘greenest government ever’ (Harris, 2010). Taking advantage of the fact that the UK is an island, significant investment has helped develop offshore wind farms, and emerging tidal and wave technology, to help provide renewable capacity for the UK energy grid. The UK aims to be a world leader in these tidal technologies, competing with South Korea which recently opened a tidal farm to supply electricity to half a million homes (Harvey, 2012).

However, despite these bold and innovative steps, there remain abiding tensions in the UK’s climate governance landscape. Beginn...

Table of contents

• Cover
• Half Title Page
• Half Title Page
• Title Page
• Copyright Page
• Contents
• List of figures
• List of tables
• List of contributors
• Acknowledgements
• 1 Carbon governance, climate change and business transformation
• 2 What does a post-peak carbon economy look like?
• 3 The problem of climate change: challenges and opportunities in carbon governance
• 4 Business as low carbon transformation driver?
• 5 Low carbon transition in British Columbia, Canada
• 6 Establishing the ‘campus as a living laboratory’: University of British Columbia experience
• 7 The political and economic selection of technology: Southeast False Creek Neighbourhood Energy Utility
• 8 Governing carbon through the European Union Emissions Trading System: opportunities, pitfalls and future prospects
• 9 The UK low carbon energy transition: prospects and challenges
• 10 California’s climate policy and the development of clean energy systems institutional foundations
• 11 Cleantech capital in California
• 12 Post-carbon economy transition strategies: road maps, roadblocks and theories of transformational change
• 13 Conclusion: carbon governance, business transformation and climate change
• Index