From the UN to the Market

Globe and Dollar Sign, Economy and Climate Change Concept
Globe and Dollar Sign, Economy and Climate Change Concept

We have a climate agreement. Now, the business world has to come with the good solutions.

After years of intense negotiations, the world agreed this weekend on a new climate agreement in Paris. 186 countries signed on the papers describing how every country shall bring down their greenhouse gas emissions. In addition every country has agreed that their goals must be more ambitious than until now. The agreement is the best so far, and better than most dared to believe.

At the same time -- the agreement alone does not save the world. If we carry out every action of the agreement, the temperature will still rise by more than two degrees. It is thus important to remember that the agreement does not prevent anyone from doing more. On the contrary -- it is a clear positive signal for investors in renewables, essentially guaranteeing a future market for their technology. Countries, companies and individuals can take their own initiatives and go beyond what the agreement imposes on us.

It provides opportunities for courageous politicians to make it simple and easy for businesses to invest, grow and earn money on climate friendly products. During the climate summit in Copenhagen in 2009,the focus was mainly on how we must live differently for a better climate. In Paris, the focus is on how to invest properly for the climate and create value and jobs at the same time.

Now the main players are no longer the negotiators, but the investors. Now we are talking about climate policy as business opportunities and millions of green jobs. It has a far greater chance of success. The battle has moved from the closed rooms with politicians to the boardrooms. From the UN to the market. From polishing texts to changing technology. From negotiations on concepts to creating alternative energy.

When we were campaigning in the 1980s, I remember that the cell phone was too heavy to carry without a car. When I wrote a book in the 1990s, I had to go to a specialized computer magazine to find useful information about the new word Internet. It is less than ten years ago that Steve Jobs gave his famous press conference and introduced the mobile phone as a handheld computer with Internet access. In 2020, almost all adults in the world can connect to the net from their smartphone. Technological change can go at breakneck speed. The best solutions spread in record time to the planet's most remote areas. But environmental markets have always been driven by courageous politicians.

A lot of good things are happening already. China drives down the price of solar power at a pace no one thought possible. Morocco is to build the world's largest solar power plant, India has opened the first solar-powered airport. Uruguay, Costa Rica and Nicaragua have today or in the near future only renewable energy. Google invests heavily in renewables. Unilever conducts sustainability test for all parts of the company. American businesses have given climate promises to Obama. In California, Tesla founder Elon Musk is building a battery factory that can help us store energy far more efficiently.

Where I work, in OECD, we now reform the system of aid so that it also can be suitable for private investment. World aid is below one hundredth of that private investments are. It makes sense to use aid to drive greener investments in developing countries. We also work with the World Economic Forum in Geneva for more environmentally friendly private investments in developing countries. The goal is to get the highest possible good business deals at the table.

To really drive climate realignment to scale, we must remember that environmental markets are fundamentally different from many other markets. They are created by politicians. They are regulated to fit the climate. One does not need regulations in order for Apple and Samsung to increase their sophisticated mobile phones. But it was government regulations which abolished most of the pollution in the rich countries. European countries have enjoyed tremendous economic growth in recent decades, in parallel, almost all emissions have decreased. Politicians have regulated the market away from sulphur, nitrogen and CFC gases which destroy the ozone layer through subsidies and taxes, bans and quota systems. Now we need politicians who roll up their sleeves and disconnect damaging to the climate and economic progress in the same way.

It is the regulation of the most advanced markets that drive the technology we need. That is precisely why the German energy transition is important. And therefore the policies of the U.S. and China matter the most. It is generally more economical and technologically profitable to be in the lead than coming after. The human costs of restructuring are also usually greatest on waiting and postponing.

We celebrated in Paris when the agreement was signed. Not without reason. It is the best deal for now. It is a victory for the UN, and a proof that the world is able to gather under US and Chinese leadership. Now it's up to the brave politicians in every country to facilitate investments and new technologies through pricing and regulations. Only by involving the business community, we can avoid making the world more than two degrees warmer.