IPCC Report -- Economic Shock Therapy

If you scrutinize the latest scientific studies of climate change, it doesn't take long to realize that we're suffering from a terrible disease -- a case of almost terminal planetary cancer. The symptoms are increasingly scary. Polar ice is disappearing at a staggering speed; thawing permafrost threatens to release massive emissions of methane, kicking global warming into overdrive; and sea levels are surging. We are now frighteningly close to a number of tipping points that are irreversible and potentially catastrophic.

Officially released on Sept. 27, the "Summary for Policy Makers of the Fifth Assessment Report" by the Intergovernmental Panel on Climate Change (IPCC) provides the most comprehensive account yet of what scientists know about these risks. For most of us, it merely confirms what we knew already. But it makes for unsettling reading, nonetheless. Among other findings, this independent assessment -- based on research by hundreds of leading scientists -- concludes that arctic ice is melting faster than previously expected, and that sea levels could rise by a meter by the end of the century. It also warns that temperatures could increase beyond the internationally-agreed warming limit of 2°C, unless we act aggressively to cut carbon emissions.

But will this landmark report jolt the political leaders of the world's largest economies out of their coma, forcing them to get serious about climate change? Or will we miss the narrowing opportunity that still exists to confront these threats? Previous IPCC reports had a powerful impact, galvanizing policymakers to negotiate the 1997 Kyoto Protocol and driving the debate in the run up to the 2009 Copenhagen summit on climate change. Since Copenhagen, governments have focused primarily on the global economic crisis, while the mounting risk of climate change has fallen off the political agenda.

What we urgently need is for governments to commit to huge, long-term reductions in greenhouse gas emissions, and to write these targets into law. Politicians come and go with every election, but an international agreement would provide clarity for decades. The leaders of the G20 nations need to take personal responsibility for providing a clear sense of direction, thereby helping to unleash the private sector's spirit of enterprise.

The truth is that we already possess the technology needed to avoid a 2°C jump in temperature. The business community stands ready to deliver these solutions in critical areas such as transportation and power generation. But policymakers need to provide the right economic framework. For example, hefty subsidies for fossil fuels have distorted the energy market, making it harder for renewables to compete. If carbon were priced fairly, renewable energy would gain much greater traction.

Politicians aren't the only ones who need to act decisively. If I were a CEO, I would read the IPCC report and immediately convene an emergency risk-assessment meeting to discuss its implications for the future of my business. From the U.S. to the Indian subcontinent, we are already witnessing the disastrous impact of extreme weather events. Further climate instability clearly poses a growing risk of disruption and uncertainty for many companies.

Economists rightly warn about the immense financial costs associated with climate change. But for businesses, there are also compelling opportunities for growth. Innovative companies will profit richly by developing products and services that ameliorate these threats. Increasingly, companies will prosper by making sustainability a central component of their corporate strategy. For example, they can cut costs significantly by using energy and water more efficiently. These efforts to act responsibly will not only boost their profits, but will also enhance the value of their corporate brand. By contrast, companies now betting their entire future on "stranded assets" like coal or fossil-fuel technology would be wise to weigh the growing risk of becoming outmoded -- the modern equivalent of stone arrowhead makers at the dawn of the Bronze Age.

One thing is for sure: denial and procrastination are no longer options, whether for governments or the private sector. The new IPCC report concludes that there is 95 percent certainty that human activity -- such as the burning of fossil fuels -- is the primary cause of climate change. If you were 95 percent certain that thieves would break into your home or factory tonight, you wouldn't wait till tomorrow to take precautions. If a vaccine were 95 percent certain to have disastrous side effects, governments wouldn't require years of fruitless discussion before pulling it off the market.

So how much certainty do we need before policymakers wake up and finally face the threat of climate change?