Carbon management lies in the clear sightlines of governments, investors, citizens and other stakeholders who are now displaying an unprecedented awareness of the global impact of unchecked climate change. In the US, the regulatory ‘stick’ is poised to drop on companies that recalcitrant about doing their bit, in the form of Waxman-Markey or similar legislation, or through EPA rules primed to impose stiff fines on companies that exceed carbon emissions caps.
In Canada, while the federal government has adopted a ‘wait and see’ approach, hoping to align federal legislation with that of the US, the provinces are showing leadership through measures such as Ontario’s Green Energy Act
or BC’s Carbon Tax
, and through participation in bodies such as the Western Climate Initiative
which has drawn together 12 US states and Quebec, Alberta, BC and Ontario in collaborative activities such as the establishment of a regional emissions trading markets. These jurisdictions appear to have digested the message of the Stern Report
issued back in 2006 that: “if we don’t act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever,” while “the costs of action – reducing greenhouse gas emissions to avoid the worst impacts of climate change – can be limited to around 1% of global GDP each year.”
On the ‘carrot’ side of the equation, a company’s exposure to environmental risk (including regulation) as well as its progress on sustainability is becoming an increasing focus of investor decision making. As Graham Campbell, Associate Director, Energy, Environment and Technology of The Conference Board of Canada
noted in a recent presentation at the TSX on the latest Carbon Disclosure Project (CDP)
findings, “the best performing companies are already engaged in carbon reduction activities that deliver results, and are now incorporating regulation into planning.” This ‘coincidence’ has not been lost on investors. While shareholders are beginning to ask companies for specific proposals to account for their environmental risk, John Kearns, CEO of Northwest Ethical Investments has explained that institutional investors are extending the reach of ethical and environmental portfolios on an record scale: the IIGCC
(Institutional Investors Group on Climate Change), for example, now has 4 trillion Euros under management and is looking to influence the proceedings at Copenhagen. To respond to this new investor criterion, many forward looking companies have begun to view carbon management as a source of business opportunity: in Canada, 97 of the top 200 companies by market capitalization have embarked on voluntary climate change programs and have reported on their efforts to the CDP in the absence of binding regulation.