Time to take action

By Andrew Cave - Telegraph.co.uk

To meet the UK's carbon-reduction targets, businesses should start putting plans in place now.

What needs to be done in the next 10 years if the UK is to meet its ambitious target to reduce the nation's carbon emissions by 60pc by 2050? In the final part of our series on British business action on climate change, The Daily Telegraph asked Tom Delay, chief executive of the Carbon Trust, where we go from here.

"I think that the year 2020 is almost more important than 2050 for Britain's carbon-reduction effort," he says. The Carbon Trust chief executive doesn't see this view as being short-termist or as indicating that he is opting for an easier goal than the Government's ambitious 2050 target. Rather, his view is that stretching, visionary targets are only worth having if there is a concrete plan in place to achieve them.

"There is a degree of concern about the targets for 2050, so it is vital that we get on the path that gets us there," he explains. "There are some very big, almost ideological differences to be settled; 2020 is about the time when we will know whether we are on the right track or not, so 2020 as a timeframe is possibly more critical.

"The targets for 2050 are much more of a vision - 2020 will be the real test of whether we can make the cuts that will be needed for 2050 to become a reality. So, the next five to 10 years are going to be enormous in the fight against carbon emissions and global warming."

Delay believes that the UK business community generally now understands that moving to a low-carbon economy is a matter of paramount importance. But he adds: "Business has got to do it now. When I worked in Africa for Shell, I tried to maximise profits for the company but in a way that was sustainable in the long term. I recognised that I had to operate as part of a triangle between companies, investors and government, and that triangle is the same for the effort that has to be made on climate change.

"If we want to create a business model that will mitigate against climate change, we have to get the triangle working. At the moment, it is not working."

What is preventing the triangle from working, says Delay, is that businesses are looking to compete on price and products and it is not clear whether customers have the appetite to pay more for products and services that are environmentally friendly. Governments are unsure how to regulate in this environment and investors won't risk their capital unless they have regulatory certainty.

The solution, he says, has to come from business. Far-sighted businesses can see the potential rewards from taking a lead and delivering what customers want. Companies can take a lead because, unlike governments, they do not have to be re-elected every five years and because they have entrepreneurial flair and a talent for getting things done.

"Governments have still not got the right mindsets to do it," he says, "and businesses have, but they see political risk.

"At the moment, governments are trying to force businesses to do something that some businesses don't necessarily want to do, and consumers are sitting on the fence."

However, if the triangle can work effectively, he says, consumers, motivated by knowledge of the scientific realities of climate change, will become so committed to making a difference that they will be prepared to pay slightly more in some cases for carbon-friendly products.

Businesses will respond by making the investments necessary to deliver these, in return for added profits, and investors will provide the capital because they can see that the regulatory environment is stable enough for them to take calculated business risks.

"The triangle has to start working in the next few years or we are not going to do the things by 2020 that will get us to the targets for 2050," says Delay. "We need to build a shared political will."

This will involve governments, he says, in setting the post-Kyoto political and regulatory environment after 2012, following the framework set by last year's Bali Accord. He also believes it will involve creating a genuine price for carbon - something which Nicholas Stern said in his report on climate change was the biggest failure of the capitalist market system - through more robust cap and trade schemes.

"We have two alternatives," Delay says. "One is that you regulate, but you have to be very confident that you are getting it right, because otherwise you are causing a bigger problem. Or you let the market set the price for carbon.

"In between, there are all kinds of buffers, but what is essential is that you create and regulate a world where there is a price for carbon and companies can make decisions based on that price in the same way that they decide on other costs in their businesses.

"That's the real challenge over the next five to 10 years."