Four International Business Leaders Call for Credit Crunch-Style Response to Global Warming

The reaction to the credit crisis shows us that an internationally coordinated, bold response to a global challenge is possible. By providing trillions of dollars to financial institutions in a matter of weeks, governments moved quickly and decisively to restore order to financial markets. The threat of climate change requires equally bold action across an even broader range of sectors and countries.

Faced with the prospect of a prolonged economic downturn, some governments may think it prudent to back away from stated commitments to reduce greenhouse gas emissions; on the contrary, it is vital to send a clear signal that carbon regulation is here to stay.

Climate change is a long-term problem requiring a long-term response. Why is it so critical to act now? First, delaying the point when countries reduce emissions will result in higher atmospheric greenhouse concentrations and greater climate and economic impacts. Secondly, there is an inevitable time lag between finalizing any international climate agreement and its effective implementation. Finally, capital investment decisions are being made today that will have implications for decades to come.

The International Energy Agency estimates that just within the next eight years, an additional 800 gigawatts of power generating capacity, equivalent to the total built in Europe since 1945, will be commissioned globally. Investors need longer-term certainty about the targets, incentives, and the regulatory context of these investments. Therefore, it is vital that a common vision for the future is agreed upon to steer choices over the coming years and decades. An agreement reached at the United Nations climate change meeting in Copenhagen in 2009 will need to clearly define the level of global commitment  to if we hope to start building a a low-carbon economy within the next five to 10 years.

What is needed is a combination of internationally coordinated measures that can be tailored for national circumstances, including well-regulated carbon markets, effective government regulations, and large-scale, direct government investment leveraging private sector engagement. Building on the European Union's Emission Trading Scheme and other cap and trade programs planned in the United States, South East Asia, and Australia, an effective global carbon market will link national and regional schemes and have broader coverage of more sectors in more countries.

Governments should also complement market-based measures with non-market regulations, such as cost-effective, carbon-based standards on fuel and energy efficiency in transport and homes. Government investment, through public-private partnerships, is also required to support the development and early-stage demonstration and deployment of technologies to reduce GHG emissions, such as carbon capture and storage.

The credit crunch provides both the example and the opportunity to take decisive action now to cure our planet's twin ills – the economy and climate change.

Samuel A. DiPiazza Jr. is CEO of PricewaterhouseCoopers International Ltd, James E. Rogers is CEO of Duke Energy, Anders Eldrup is CEO of DONG Energy, and Rob Morrison is Chairman of CLSA Asia-Pacific Markets

Click here to read DiPiazza Jr., Rogers, Eldrup, and Morrison's "Tackling Emissions Growth: The Role of Markets and Government Regulation," released today by the Copenhagen Climate Council.