Analysis of climate commitments of key countries and opportunities for business in the run-up to the negotiations in Paris

1. CRITICAL THINKING AT THE CRITICAL TIME™ FTI Consulting • 1
The first global climate talks took place in 1995, and since then numerous climate change targets
have been set. However, since then global emissions have doubled, we seem to be left with empty
promises. Governments have been back-sliding on any realistic plans to meet agreed targets. The
climate clock is ticking and with just four months until COP21, even Prince Charles and the Pope are
getting involved, with the former calling for the end of fossil fuel subsidies, and the latter issuing a
rare encyclical on global warming. Former Mexican President, Felipe Calderon recently stated that “If
you allow the private sector to take actions and make profits, we can move faster than through
Government actions”. So what can we expect from the Paris summit, and how is the business
community getting involved? What challenges and opportunities will the transition to a low-carbon
economy create for business? With this Energy Flash, FTI Consulting continues its series of analysis
and commentary on the climate negotiations 1 and the impact for the business community which will
include contributions from our experts around the world.
COP21 is bringing climate to the main stage in Paris later this year (or so claim the media
– a global UN sponsored poll actually rates climate change last in a list of concerns that
includes education, healthcare, jobs, governance and many more). France itself, the host
of the climate conference, wants to be an example in terms of energy transition and was
a central part of François Hollande's presidential campaign in 2012. Several months ago,
Hollande promised to put an end to export credits for the construction of coal power
stations - but the plan risks being cancelled to protect jobs at French energy giant Alstom,
which gave cause for complaint by NGOs regarding the sincerity of the Hollande’s
promises. Germany’s decision to scrap the idea to raise emissions charges for older,
coal-fired power stations, also illustrates that keeping climate pledges is not that easy
when facing today’s industrial reality. However, climate protection is an increasingly
critical issue for business which also provides numerous opportunities.
1 See also our Energy Flash on the climate negotiations in Lima, December 2014
Energy Flash - All (low-carbon) roads
take business to Paris #COP21 July 2015
Larisa Pircalabelu is
Senior Consultant and
Arne Koeppel is Head of
Research in FTI
Consulting’s Public Affairs
team in Brussels.

2. All (low-carbon) roads take business to Paris #COP21
CRITICAL THINKING AT THE CRITICAL TIME™ FTI Consulting • 2
Business forecast for COP21
For business it is crucial to understand how far countries are
prepared to go with their climate commitments. Countries across the
world committed to create a new international climate agreement by
the conclusion of the UN Framework Convention on Climate Change
(UNFCCC) Conference of the Parties (COP21) in Paris in December
2015. In preparation, countries have agreed to publicly outline what
post-2020 climate actions they intend to take under a new
international agreement, known as their Intended Nationally
Determined Contributions (INDCs). The INDCs will signal whether the
world is on track towards a low-carbon, climate-resilient future and
show if countries are doing their part in combatting climate change.
What we are now witnessing is a "co-responding"
effort from both the public and private sector,
responding to the reality that green growth and a
wider understanding of what is wealth, is the growth-
engine of the future. (UN's climate change chief,
Christiana Figueres)
According to the UNFCCC INDC portal, only 18 countries have so far
sent their contributions, ~9% of the 196 parties expected to do so.
Media, on the other hand, have reported that to-date 46 countries
have submitted commitments, and have created optimism that a
deal could be reached in Paris. These reports, it is argued, might be
too optimistic and the INDCs so far do not come close to what is
needed to limit the global temperature rise to 2°C by 2050.
However, many more pledges are expected before the October 2015
deadline. Moreover, remaining countries will likely follow the example
set by others (e.g. China) and work with businesses to ensure their
targets will be met. These collaborations will offer even more
opportunities for businesses today and for years to come.
Businesses and governments have understood that they depend on
each other to implement climate change actions. China recently
pledged to reduce the carbon intensity of its economy by 60-65%,
peak its emissions and generate a
fifth of its electricity from
renewable sources by 2030.
These provide tremendous
business opportunities and the
country has managed to submit
such ambitious objectives only by
engaging with large companies
such as the Pacific Gas & Electric Company (PG&E) and Honeywell
on energy efficiency. Furthermore, as a world leader in renewable
investments and with plans to further strengthen deployment, China
is likely to become a huge worldwide centre for innovation.
Another example is the G7 ambition to phase out the use of fossil
fuels by the end of this century. The G7 leaders also agreed on a
fund for climate protection in developing countries, which is expected
to amount to $100bn in public and private contributions. Concerning
renewables, they pledged to replicate the German Energiewende in
Africa. This is supported by financing initiatives for low carbon
sources such as such as the ‘Apollo programme’ and the doubling of
renewable financing by the Gates Foundation. Governments are
signalling a clear win for business by engaging them into the overall
plans - and consumers are also starting to demand environmentally
friendly goods and services. This is a safe bet for companies and
some first movers have included climate change and investment in
low carbon technologies into their long-term strategies and
commitments (e.g. IKEA’s €1bn future investment in a green
revolution, Google’s creative transformation of an old coal plant in
Alabama into a clean energy powered centre).
What do investors need?
What we are expecting in Paris is not a governmental agreement but
an agreement between international investors, business leaders,
communities and governments. As expressed by the UN’s Secretary
General Ban Ki-moon the INDCs represent a “floor, not a ceiling”, a
beginning of a process which needs to be properly designed and
provide a framework that enhances economic, social and
environmental action. Although slightly behind time, world leaders
realise that the business community has the biggest potential to
contribute to the emissions’ shortfall. But what does business need
to drive innovation, bring substantial shift to a low-carbon future, all
while providing jobs and growth? One factor that would help is
stability – a long-term policy and financial framework which will allow
business to deliver on the transition to a decarbonized economy.
Businesses need to be certain that governments stick to their
promises to substantially act on climate change and not make
repeated amendments to regulatory and financial frameworks.
Earlier this year, the Business Climate Summit in Paris showcased
the potential of businesses to fight climate change, but also what
else businesses are asking from governments: to be more involved in
defining their role and to create an appropriate context for their
operations from changing challenges into opportunities for green
growth. The open letter by 43 CEOs at the Spring meeting of the
World Bank and the IMF, urging for concrete and ambitious climate
action, demonstrates the wish of many businesses to drive the
climate agenda. To get this right will be critical in order to ensure that
fighting climate change also works to the advantage of business.
Looking at some of the (un)official submissions
We have already looked at China
which, together with its ambitious
use of renewables, is planning a
major reforestation campaign and a
national cap-and-trade system. Its
climate goals are more ambitious
than those of the US, who
announced its goal together with
Brazil earlier in June. Both countries
promised that they would work
together towards a strong Paris deal.
Although Brazil has not officially
submitted its pledge, civil society
recommends a 35% reduction on

3. All (low-carbon) roads take business to Paris #COP21
CRITICAL THINKING AT THE CRITICAL TIME™ FTI Consulting • 3
2010 levels, while the official US contribution refers to 26-28%
reduction on 1990 levels. That would double the renewable share in
Brazil and triple it in the US. Brazil also pledged to reforest 30M
acres of the Amazon and crack down on illegal deforestation.
The US has also committed to cooperating with India. Despite India
not having submitted an INDC, nor any detailed plans yet, Prime
Minister Modi agreed with President Obama to expand clean energy
investment throughout India. Experts say that India is expected to
focus on strong wind and solar energy targets. India also has a
national hydrogen energy roadmap, which draws important
worldwide investments with some coming from European players.
Australia is expected to submit
similar targets as Canada, i.e. up
to 30% reduction based on 2005
levels. But Australia’s Prime
Minister stated that their
contribution is due to be submitted
in August and it will make a strong
pledge, unlike other countries that made “all these airy-fairy
promises that never come to nothing”.
The EU plans to reduce emissions
by 40% of 1990 levels by 2030,
meaning doubling its rate of
decarbonisation. This will be
achieved with (re)new(ed) climate
policies, regulations and
investments. The central role of
the EU’s emission trading system (ETS) was reaffirmed with the
European Commission publication of the “summer package” of
energy and climate change policies in July 2015. The package’s
introduction of the Innovation Fund aims to unlock investments in
breakthrough technologies and support businesses which adopt
innovative approaches to their operations. Critics on the one hand
claim the proposal does not go far enough and on the other hand
many industrial players fear that the new ETS will put their
competitiveness at risk. The outcome of COP21 will play an
important role in defining a middle ground between these positions.
Despite these comments and with only 10 official negotiating
meetings left before the Paris
deal, Miguel Arias Cañete, the
European commissioner for
climate action and energy said
he was 85% confident that a
historic deal on global warming
would be reached.
The most recent INDC came from
Japan, another of the world’s five largest greenhouse gas emitters.
The pledge to reduce emissions by 26% of 2013 levels by 2030 is
based on the government’s power generation plan for 2030. This
aims to reduce reliance on nuclear power (from 30% to 20-22%)
following the 2011 Fukushima disaster. Renewable energy targets
are currently 22-24% of the mix, liquefied natural gas at 27% and
coal at 26%. Japan has also included its business community in
developing this plan – the 10 main electricity power companies
together with 25 other firms confirmed that they had voluntarily
agreed to set a goal of curbing CO2 emissions per 1 kilowatt of power
by 35% of 2013 levels to around 0.37 kg in 2030.
Russia has also submitted its contribution based on 1990 levels and
has pledged to reduce emissions by
25–30% by 2030. With an early
submission in April 2015, Russia
stipulates that it reserves the right to
a final decision on its INDC depending
on the outcome of the Paris talks and
the contributions made by the other
parties throughout the year.
COP21 ou pas COP21 for business?
Two thirds of what we need to achieve a global cap of 2°C by 2030
has already been committed to by 3 parties of UNFCCC – EU, China
and US; leaving for the other parties only the final third to complete if
the big three reach their targets. It is up to these three parties to set
an example (individually or even together). They can do this by
shaping the right policy, regulatory and financial framework for
business communities to operate in, catching-up with science to
ensure that innovation and competitiveness is being kept.
And when speaking about innovation, the industrial Internet
(automation in manufacturing) is a promising new technology and
China has become the world’s largest investor in smart grids before
the US and it has its own newly founded Internet of Things
Technology Institute, a $160M state owned entity. As illustrated in a
2013 report by Carbon War Room, the automation technologies can
reduce carbon emissions by billions of tons, “perhaps even enough
to set our ecosystem back on track”.
Overall, as former US Vice-President Al Gore recently stated, the
investment signal provided by the upcoming Paris deal will likely
unleash a new wave of investment in clean tech and beyond, and it
is now the moment for business communities to speak up, claim the
right frameworks and seize the opportunity.
Companies that ignore climate change will feel the business and
reputational impact. Those that have already identified what lies
ahead and are incorporating this into their long-term strategies will
not only be able to ride out the storm, but could rise above it.
Larisa Pircalabelu
+32 2 289 0951
larisa.pircalabelu@fticonsulting.com
Arne Koeppel
+32 2 289 0939
arne.koeppel@fticonsulting.com
About FTI Consulting
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centres throughout the world, work closely with clients to anticipate, illuminate and overcome complex business challenges in areas
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