Businesses give Copenhagen cautious welcome

Environmental NGOs may have greeted the Copenhagen Accord with near universal condemnation, but business leaders today offered a more nuanced response, criticising the lack of binding emission targets but insisting the agreement featured a number of positive aspects.

Business leaders and investment analysts said that the final deal would not give them the clear insight into the future direction of green legislation and the development of the carbon market that they had been hoping for.

But there was optimism that the agreement, which represented the first time both industrialised and emerging economies have formally recognised the need for temperature increases to be kept below two degrees, further strengthened the case for investment in low carbon technologies and business models.

Abyd Karmali, head of emissions trading at Bank of America Merrill Lynch, told Reuters that the deal sent a positive signal to investors. "The implications for investment flows is very clear, we're irreversibly on a low-carbon path," he said.

Craig Bennett, Co-Director of Corporate Leaders' Group on Climate Change, struck a similarly upbeat note. "The business community will, I’m sure, welcome the fact that the world’s major economies have, for the first time, made commitments to curb emissions and this provides a clear signal that the sensible money is in low-carbon," he said, adding that further certainty would be delivered next month when industrialised and emerging economies formally publish emission targets and mitigation plans.

However, he added that governments needed to now accelerate negotiations and deliver the legally binding treaty that businesses require to scale up low carbon investments. "We’re not done yet - nothing like," he said. "The position of the Corporate Leaders’ Group and the 950 companies from over 60 countries that signed The Copenhagen Communiqué is that a legally binding deal is needed as a matter of urgency to provide business with the confidence it needs to invest in specific low-carbon technologies and infrastructure."

His comments were echoed by Mark Kenber, international policy director at business think tank The Climate Group, who agreed that the accord represented a good start that needed to be followed by more detailed commitments.

Others signalled that with the talks at times on the brink collapse, green businesses would be happy to see any sort of agreement reached.

"After all the problems of the last two weeks, it's a great relief to get a deal at all out of Copenhagen," said Richard Gledhill, head of climate change at consultancy giant PricewaterhouseCoopers. "It's clearly not the deal that would have been hoped for… but it's a clear statement of political commitment that will underpin policy and regulation in the major economies which are central to climate action."

He added that while businesses would have liked to have seen more regulatory certainty, the compromise deal would not derail the large number of businesses already pursuing low carbon growth strategies.

"Businesses haven't been waiting for the outcome of Copenhagen to take action on climate change," he observed. "Many that we have spoken to, including energy companies, retailers and chemicals companies, are taking steps to improve energy efficiency and reduce carbon emissions. It's simply a matter of good housekeeping. At a time when businesses are struggling with low margins, energy management is becoming more critical."

However, some business groups gave the Copenhagen Accord a more downbeat welcome. Richard Lambert, director-general of the CBI, said the deal represented "missed opportunity, and a disappointing conclusion to two years of negotiations ", adding that "business needs a clearer sense of direction if it is to make the enormous investments needed to shift towards a low-carbon economy".

Meanwhile, carbon traders were similarly split over the implications of the deal.

Merrill Lynch's Karmali said that the support for forestry projects included in the accord would serve to create new financial instruments that would play a role in the carbon market, but he expressed frustration at the failure to finalise proposed reforms to the UN's Clean Development Mechanism carbon offsetting scheme.

The price of EU Allowances for December 2010 fell eight per cent during the first half hour of trading this morning to a six month low of €12.40, but subsequently recovered a little.

"The lack of a political framework is seen as bearish because a lot of hedge funds and financial institutions had pinned their hopes on quite a significant and important alternative to other commodities markets," Jean-Francois Cauvet at Paris-based COER2, told Reuters.

But speaking to BusinessGreen.com, Stig Scholset, senior analyst at research firm Point Carbon, predicted the price of carbon would stabilise. "The carbon market in Europe will not be hugely affected by Copenhagen," he said. " The EU emissions targets will run until 2020 regardless of any international deal. Over the past two weeks the price of carbon has fallen by over a Euro as the market priced in that a change in the EU targets was increasingly unlikely. It may fall a bit further, but it will not collapse to zero."

At the same time there was growing optimism that the Copenhagen Accord would pave the way for the Senate to approve the proposed US climate bill early next year, providing a huge boost to the global carbon market by introducing a US-wide emissions cap-and-trade scheme.