What British business wants from Copenhagen

The Sunday Times convened a panel of captains of industry to discover their opinions on the climate change summit

Three weeks from now the world’s eyes will be on Copenhagen. Ministers from 192 countries — and 20,000 hangers-on — will converge on the Danish capital for what is billed as the most important event yet in the drive to fight climate change.
They aim to produce a successor to the 1997 Kyoto treaty. If all goes well, the new agreement should create a consensus on how to tackle global warming, set concrete targets on curbing greenhouse gas emissions for rich and poor nations, and deliver a mechanism to raise and distribute the billions needed to develop alternatives to fossil fuels.
The political obstacles to progress are daunting. No matter what the outcome, however, the Copenhagen event will have serious repercussions for business. Kyoto set the climate-change ball rolling. Next month’s summit will accelerate the pace of change, placing greater burdens on British companies but also creating new opportunities.
To take stock ahead of the summit, The Sunday Times brought together 11 top business people, including the chief executives of some of Britain’s biggest companies.

Their views provide an insight into how environmental issues are shaping the future of business, not only through more regulation, but through changes in consumer behaviour, which is in many cases running ahead of businesses’ and governments’ own appetite for change.
Our panel provided some alarming food for thought for the delegates going to Copenhagen, and for the British government in particular. They think the UK will miss its current, legally binding climate-change targets, and that much of the government’s education and advertising on the subject is ill-advised — it risks alienating the public and producing the opposite effect to that intended. But they also want the government to do much more — to remove some of the disincentives to green behaviour and to foster the kind of technology UK plc will need if it is to prosper from the upheaval that will be triggered by the move to a low-carbon economy.
Members of our panel
1: David Smith, chief executive of Jaguar Land Rover The Midlands luxury-car maker employs 15,000 people in the UK. The group is working on a range of new hybrid cars, and has completed a prototype low-emission limousine.
2: Peter Long, chief executive of Tui Travel This is one of the world’s biggest travel companies, taking 30m people on holiday each year. Tui’s airline is a European launch customer for the Boeing 787, a new plane that will use 20% less fuel than current models.
3: Samir Brikho, chief executive of Amec This diversified engineering group provides services to oil and gas firms as well as renewable-energy groups. It will be the main contractor on the first new nuclear power stations to be built in Britain.
4: David Owens, chief executive of Thames Water Thames is the country’s biggest water company. It provides drinking water to 8.5m people and takes the waste water of 13.6m.
5: Francis Salway, chief executive of Land Securities The company is one of Britain’s biggest landlords. It owns and manages more than 2.7m square metres of property, including City office blocks and out-of-town retail centres.
6: Tessa Laws, corporate law partner at Rosenblatt Solicitors Laws has overseen the development and funding of a number of clean energy companies. She was behind the funding of Cyprus’s first wind farm and the stock-market flotation of New Britain Palm Oil and Clean Energy Brazil.
7: Tim Stone, chairman of the Global Infrastructure & Projects Group at KPMG Stone is a leading expert on public-private projects. At present he has been seconded to the government to act as a part-time senior adviser on new nuclear plants.
8: Simon Thomas, chief executive and co-founder of Trucost Trucost is a provider of environmental and economic data and specialises in advising companies and governments on what to do about green issues.
9: Andrew Torrance, chief executive of Allianz Insurance Besides his role at the insurance giant, Torrance is also the chairman of Climate Wise, a global group of insurers that looks at how to cut the risks of climate change.
10: Ian Cheshire, chief executive of Kingfisher The company is one of the biggest DIY retailers in Europe and Asia. Cheshire was one of a group of businessmen who broke with CBI policy and came out against construction of a third runway at Heathrow.
11: Bruce Huber managing director of clean technology at Jefferies International The bank is one of the leading advisers on mergers and fundraising in the clean-technology sector.
Will the UK meet its 2020 target to cut carbon-dioxide emissions by 34%? Put your hand up if you think it will.
(No hands go up.)
David Owens of Thames Water: As a country we won’t get there, but individual companies and organisations will.
Samir Brikho of Amec: Technology won’t get us there. Even if we do get the first new nuclear stations on time, that won’t make a big difference to the 2020 target. It’s not enough. If we get carbon capture on coal, that won’t change it either, or electric cars. There isn’t a breakthrough in technology that is going to get us there.
The only thing left for us to do is to cut down our consumption and improve the efficiency of existing technology. It’s in our hands. At the same time we can help to develop the technology we will need, whether it is nuclear, carbon capture, offshore wind farms, tidal energy, you name it. The 34% is achievable if we focus on conservation. We don’t need to wait until 2020 to get there.
What did the Kyoto treaty mean for your business?
Ian Cheshire of Kingfisher: It didn’t directly affect us, but it raised awareness of climate change. It triggered a process between the public, government and media that was self-reinforcing.
Tim Stone of KPMG: Kyoto was an awareness-raising exercise. There was no thinking about what the long-term cost to the economy would be.
And what do you expect from Copenhagen?
Andrew Torrance of Allianz: It is crucial we get some agreed world view on what level of carbon reductions we are shooting at, and over what periods. It’s only once you have that consensus view that you can talk about how you are going to tackle it.
One thing we have specifically called for is for each country to have an adaptation plan — a scheme for how they will deal with the consequences of climate change. I think there is a good chance that will come out.
Simon Thomas of Trucost: Everyone is talking about how Copenhagen isn’t going to come up with an agreement and America isn’t even going to arrive there with the right bargaining chips. But it’s like the Montreal Protocol, the international agreement that was made to cure the hole in the ozone layer. It took two years after the protocol was signed for someone to work out how to do it. It was actually Margaret Thatcher who put the bones on it and came up with the hard targets. I think Copenhagen will lead to a global cap-and-trade system for carbon by 2012.
Brikho: There are five things on the agenda for Copenhagen, but carbon trading isn’t one of them. That means while we in business are hoping that this discussion will answer many of the questions we want answered, unfortunately they will not even be discussing these points.
Bruce Huber of Jefferies International: At some point we are going to have to put a price on carbon. It may not be at Copenhagen this year and it may not happen for five or ten years, but there will be a price.
Cheshire: There is a sense that if we don’t get [a deal at] Copenhagen, we are all dead, but Copenhagen isn’t the be-all and end-all. Sure, it’s important. There are lots of other topics that are more important. Going back to the example of Kyoto, it was important, but it wasn’t the only thing.
Francis Salway of Land Securities: The danger of Copenhagen is all these enormous targets, and that it takes the focus off some quick and easy wins. We can take out 20%-30% of our buildings’ carbon emissions pretty easily — things like changing the heating controls to a degree warmer in summer and one degree colder in winter. In WH Smith’s new headquarters I am told you need to wear a jumper in winter — that proves the case.
Owens: Talking about quick wins, the quickest and easiest way to cut water consumption is to fit water meters. Many of my customers are completely indifferent about using more water because it doesn’t affect the price they pay.
Salway: All you need is a change in building regulations. If you are doing something to your house that costs a certain amount, you have to fit a water meter. People are spending £10,000 on a conservatory: a water meter is nothing.
Are your customers demanding more from you on environmental issues?
Peter Long of Tui Travel: There is a group of customers that is looking to us to be responsible. We have a programme that we offer — carbon offset of part of the emissions of your flight — and one-third of our passengers are taking part.
Cheshire: Customers don’t understand the concept of a tonne of carbon dioxide, or even carbon footprints. You get a total blank. What we find resonates much more is the general concept of sustainability — that we are using three planets worth of resources but last time we looked we had only one planet. That really engages people. They don’t like finger-wagging — people beating them up or telling them they have to change their lifestyles. They like to be positive, to be told there are things they can do.
This year we have seen an explosion in sales of grow-your-own products — it is something positive and tangible people can do. Another example is pig arks — shelters for domestic pigs. It is the most extraordinary niche product you can think of, but sales have taken off.
Salway: For the first time our tenants are choosing buildings based on the carbon footprint. For us it’s a risk issue, not a return one. With an environmentally friendly building we have much more chance of getting an occupier — not because the lower energy costs appeal to the tenant, but because they want to be able to recruit the best young graduates. It’s a swing factor when it comes to getting the top talent.
London is leading the way. We cannot let all the car parking spaces in our latest developments, because of the congestion charge. In a recent one we had 200 bicycle spaces and 40 for cars, and we are converting the car spaces to bike spaces. In our latest one we will have no car spaces at all. If other cities followed the lead of London, you would get a huge shift in consumer behaviour and in carbon emissions.
Owens: We have 8.5m customers for drinking water and 13.6m for waste water. They still think this stuff is free; it drops from the sky. We deliver one tonne of water to every person every week — and of course a fraction of that is for drinking. The rest goes down the drain — this wonderful, carbon-intensive water that we have treated and pumped all round. And the public uses seven times as much energy on our water — heating it, for example — than we do in supplying it to them. So demand management is the key.
We are targeting kids in school — getting them to tell mum and dad to switch the tap off when cleaning their teeth, to fill the dishwasher properly.
Tessa Laws of Rosenblatt: My children seem to know about turning off the taps, but not about recycling or turning off the lights. The education isn’t there, whether it be at school or elsewhere. There are no incentives to go out and learn about what’s going on. We need to put pressure on government to do something about that. We have been trying to get companies to talk about what they need to do. They don’t want to know unless they are forced into a situation where pricing comes into play or they are going to get fined.
Long: In our industry it’s hard to see where the price point is at which people stop flying. Despite all the taxes the government has put on aviation, it hasn’t happened yet.
Air passenger duty [the UK levy on airline passengers that went up this week] has nothing to do with carbon emissions. It’s just a tax. What I’m concerned about is getting layered with taxes — the duty, the EU emissions trading scheme from 2012, a global trading scheme. If you want airlines to invest in new technology, you need to have an economically viable industry first.
Is the UK well-placed to develop and profit from green technology? Does the government need to intervene?
David Smith of Jaguar Land Rover: My worry as a UK manufacturer is the state of the UK supply chain. We have great scientists and our universities are really good on developing this technology but not at commercialising it. Jaguar Land Rover is spending £800m on environmental investments over the next five years and nearly all of that is going to go to non-UK firms because we simply don’t have the firms making this technology.
Batteries [for hybrid and electric vehicles] are an example. There is nobody in the UK producing lithium-ion batteries at the moment. They are being heavily subsidised by America, Germany and other countries. The hybrid drivetrains that cars will use are going to be built in Germany and France. There is nobody in Britain doing this.
Thomas: Governments are there to produce a level playing field, not to choose the technologies.
Smith: I would like some technologies to be available in the UK so we have more choice. The government will have to help, or else it won’t happen.
Huber: Germany, and increasingly China, are on the front foot in creating jobs around these industries. It concerns me, living here in Britain, with a vibrant financial market, to see a government that’s not forward-looking. We will probably lose share in the land grab to innovate and thrive. We have terrific engineers, technology, talent, but we are very much on the back foot.
The Germans began back in 1999 with some very forward-looking policies on electricity feed-in tariffs that supported consumer behaviour. They created a whole new industry with solar power that had a whole set of knock-on effects.
China will own the solar industry over the next five years. They have the industrial incentives and consumer incentives to develop and innovate. It will drive job creation as well as meeting the needs of a greener planet.
Thomas: We talk about the Germans subsidising their solar industry. We haven’t talked about the Germans withdrawing the subsidy, which collapsed that market. The same thing happened in Spain.
For an economist it’s really offensive to have to subsidise something in the first place. If conventional technology had to pay for its externalities, which you could make it do, then clean technology would have a level playing field.
Owens: I don’t think the government appreciates the consequences of its indecision. You need to set targets. In the competitive world, in our world, you certainly need some clarity, leadership, guidance and joined-up thinking between government and regulation.
Cheshire: I have been trying to get government to talk about taking Vat off a whole range of energy-efficiency goods and greener products. I think that would actually play fine with the public but it’s just a question of doing it.
Salway: There is an analogy for this. In Victorian times capitalists exploited labour. Today consumer society is exploiting the environment. The Victorians tackled labour exploitation first with private attempts to improve working conditions, and then government got behind it and legislated. We are in a similar situation. Pricing at the moment isn’t working. Government will have to intervene.
What threat does climate change pose to your business?
Owens: Sooner or later there is going to be another big flood, sooner or later there is going to be another big drought. What happened since the last big flood? Nothing. There’s been a government report.
Let me give you a prime example. We have a key piece of infrastructure, a water treatment works, on the Thames at Hampton. We need to build a wall round it to stop the river getting at it. One of our regulators has said if you build that wall, you will have to buy this piece of land over here because of the displaced water. And this is one of the most expensive areas in Britain.
Torrance: That’s a great example. In the floods of 2007 we were in danger of losing a lot of key infrastructure. All the climate modelling points to more severe weather. The insurance industry will be looking a lot harder at the flood risk on individual properties, and we will make underwriting decisions based on that. Insurance deals with the unforseeable, and if it’s forseeable that your property is going to flood every five years, you won’t get cover.
Stone: On infrastructure, we have spent the past 50 years pouring depreciation down the toilet. There is a complete neglect of infrastructure.
Owens: There is a complete neglect of infrastructure — we are blessed and cursed by the Victorian era. This is all coming home to roost. Someone needs to pay to refresh this ageing infrastructure, to adapt it to climate change, and unfortunately that will ultimately be customers. There has to be a political acceptance of that.
Cheshire: That raises the problem of democratic government. Those are very unfortunate messages to send to voters.
Smith: It doesn’t work over a political cycle of four or five years.
Cheshire: Exactly. There is a disconnect. How much can you get all this to happen through the current system of government? I’m not calling for a benign autocracy, but there needs to be some bipartisan thing where the two sides agree that certain things have to happen. One of the surprising things I find is how terrified politicians are of this stuff. The timidity about going anywhere near the voters with this is extraordinary.
Stone: The consequences for society as a whole are enormous. If we manage to meet the 2050 goal of an 89% reduction in carbon-dioxide emissions, we will have decarbonised the whole of transport, except for aircraft, all power generation, had some radical energy-efficiency savings, and God knows what we will have done to coal and steel and big industries. We will have fixed 14m houses that needed cladding on the outside and replaced all the heating with heat pumps. It is a monumental challenge. At the moment we don’t have the mandate to do it.
Thomas: The Climate Change Act 2008 [the piece of legislation that set the targets] was a good move, because it set binding targets that went beyond the life of a parliament. But what you really need is an independent climate-change bank in the way we have the Bank of England, because a lot of this is politically unachievable.
It’s the West v the rest over emission cuts
The Treaty of Versailles. The end of the cold war. The formation of the European Union. None of the triumphs of the 20th century was achieved in 14 days. However, next month, that’s exactly how long world leaders will have to agree a plan to stop global warming.
The United Nations Copenhagen summit faces considerable political hurdles. The overriding one is the stand-off between the industrialised nations, whose emission levels were capped under the 1997 Kyoto Protocol, and the developing economies, which were exempt.
The former want the latter to set firm targets to cut their emissions but nations such as China — the world’s biggest producer of greenhouse gases — want developed countries to commit themselves to higher carbon cuts first, since their industrialisation caused the climate change.
European Union nations say they are prepared to raise their targets but only if developing countries sign up to firm reductions at Copenhagen. So far, neither side has blinked.
“What we’re telling developing countries is ‘don’t do as we did, do as we say’,” Ed Miliband, the environment secretary, recently told the environmental audit committee.
The UK has made a commitment to slash a third of its emissions by 2020. The combined offer from developed countries with targets in place would cut emissions 15% by 2020 — half the level scientists say is needed to avoid dangerous temperature rises.
The big unknown is America, which pulled out of Kyoto under the Bush administration. President Barack Obama’s climate-change legislation, which calls for a modest cut in the nation’s emissions, is unlikely to become law before Copenhagen, so America won’t be bringing any firm commitments to the table.
Money is the other big barrier. The EU is willing to give developing nations €100 billion (£90 billion) a year to help grow their economies using low-carbon methods but the total cost is likely to be twice that amount. The world’s other wealthy nations have yet to open their coffers.