The reaction to the credit crisis has shown 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, in a collective manner, to intervene in an attempt to restore order to the markets. The threat of climate change requires equally bold action across an even broader range of sectors and countries. However, faced by the prospect of a prolonged economic downturn, there is a risk of some countries backing away, even from existing less ambitious commitments to reduce greenhouse gas emissions.

Unlike the credit crisis, 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 below 1990 levels 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 visibility about the targets, incentives and the regulatory context of these investments. Therefore, it will be vital that a common vision for the future is agreed to steer choices over the coming years and decades. An agreement in Copenhagen will need to state clearly the level of ambition to start to build a low-carbon economy in the next five to ten years.

What is needed is a combination of internationally co-ordinated measures which can be tailored for national circumstances. This includes:

• Well-regulated carbon markets. Building on the European Scheme and other cap and trade programs planned in the United States, South East Asia, and Australasia, carbon markets need to be broader (i.e., include more sectors and countries), better linked, and more ambitious in terms of setting deeper, longer-term emissions cuts;
• Effective government regulation. Governments should complement market measures with non-market regulations, such as stricter standards on fuel and energy efficiency in transport and homes, and encourage more sustainable practices;
• Large-scale, direct government investment. More direct government investment, through public-private partnerships, is required to support the development and early-stage demonstration and deployment of clean technology, such as carbon capture and storage.