Industries might Lead in Carbon Reduction

The pact by member countries at the recent G8 summit in Japan to "consider and adopt a goal of achieving at least a 50% reduction of global emissions by 2050" was widely praised as a success. But in truth, the position of the world's richest nations has barely moved from last year, when they agreed to "consider seriously" dividing global emissions. Furthermore, there are no details yet neither on how these cuts should be shared between rich and poor nations, nor on what the baseline for such cuts should be.

The world cannot allow making progress on climate change one word at a time. According to the Intergovernmental Panel on Climate Change, the room for tactic in keeping global temperature increases to 2°C above preindustrial levels—the EU's target—is extremely minimized, not least because global emissions continue to rise.

So action is needed fast. Yet signs are few that global negotiations to plan a post-2012 climate agreement will get a sufficiently robust agreement. True, the U.S. will likely become more involved in the policy process on climate change following November's election. But big developing nations, such as China and India, remain reluctant to carbon-reduction targets—and their resistance would dampen American commitment.

Industrial Initiatives

Another measure pushed by the G8's Japanese hosts, however provides real prospects for swift action to reduce emissions around the world. Rather than targeting whole nations and governments this approach focuses on key industrial sectors that get together and agree on global emissions targets.

The sectoral approach has several advantages. First, industry in many cases is able to respond quicker than governments to the need to cut emissions, both in making decisions and in implementing them.

Second, industry often is in a better position to decide what the most effective mitigation technologies and activities are. And third, the approach provides a number of ways to put together emerging markets. For instance, once a sector agrees on targets, companies can take on the job of facilitating internal technology transfer across national borders. As a result, developing countries can play a major role in slashing emissions without having to sign up to the national targets they so dislike.

Working sector by sector provides a structure for sharing best practices, expertise, and guidance without falling competition regulation. It also helps address the concern among European companies subject to the EU Emissions Trading Scheme that they have costs their competitors elsewhere do not.

Fighting emissions sector by sector creates a more level playing field within industries and across borders. And it discourages "carbon leakage," where businesses move to avoid the expense of complying with regulation—and effectively export their emissions to other countries.

For all these reasons, a sectoral approach to addressing sustainability issues is likely to work better than a system of many different externally imposed controls.