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CONTENTSExecutive Summary........................................................1

I. Introduction................................................................ 2

II. The Role of the Paris Agreement in Shaping

Short- and Long-Term Policy Signals............................5

III. The Business Opportunity.........................................8

IV. The Way Forward: Private Sector Leadership...........13

Conclusion..................................................................17

Annex I: Feasibility.......................................................18

Endnotes......................................................................22

Working Papers contain preliminary research, analysis, findings, and recommendations. They are circulated to stimulate timely discussion and critical feedback and to influence ongoing debate on emerging issues. Most working papers are eventually published in another form and their content may be revised.

Suggested Citation: Morgan, J., K. Levin, and Jiawei Song, with J.P. Osornio. “Driving Transformative Change: The Role of the Private Sector in Advancing Short-Term and Long-Term Signals in the Paris Climate Agreement.” Working Paper. Washington DC: World Resources Institute. Available online at: http://www.wri.org/driving-transformative-change

DRIVING TRANSFORMATIVE CHANGE: THE ROLE OF THE PRIVATE SECTOR IN ADVANCING SHORT-TERM AND LONG-TERM SIGNALS IN THE PARIS CLIMATE AGREEMENT JENNIFER MORGAN, KELLY LEVIN, AND JIAWEI SONG WITH CONTRIBUTING AUTHOR: JUAN PABLO OSORNIO

EXECUTIVE SUMMARYThe risks and opportunities involved in addressing climate change are becoming better understood in cabinet and board meetings around the world. This is leading to an increase in both the number and ambition of countries’ climate action plans and a shift from high- to low-carbon investments in corporate supply chains. The private sector is also taking more aggressive climate actions than before, such as the adoption of emissions reduction targets, programs to improve energy efficiency, and fuel switch-ing to renewable energy sources. However, the pace and scale of these changes are not yet enough to avoid serious disruption in the decades to come. Indeed, there is a risk that the current incremental approach of our transition to a low-carbon economy is camouflaging the scale of emissions reductions that is necessary, and lulling society into the belief that we are taking sufficient action. Rapid and transformational solutions will either be embraced or forced upon us.

In this context, businesses will need to consider whether they want to be disrupted and left behind, or be the disruptors who take proactive actions to grow into the change and benefit from new opportunities. Investors will increasingly seek out those companies that are taking the latter approach. Literature shows that companies’ engage-ment and action on climate change is becoming a defining factor in their business performance, affecting the flow of investment.1

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For the international community as a whole, the question is whether it will make the changes required to trans-form our approach to the challenge now, proactively, or whether it will take the more painful route of doing too little now and facing the prospect of abrupt, costly, and risky change later.

The clarity and predictability of future changes will be fundamental in avoiding the disruptive pathway. Cur-rently there is no “north star” or clear policy signal coming collectively from governments to the private sector or to citizens about the change that can be expected in the coming decades. Experience shows that short-term and long-term policy signals are critical to catalyzing action and shifting investment patterns, whether toward a dif-ferent form of energy or a different type of food product. Empirical examples also indicate that it is in the private sector’s best interest to support the development of clear and predictable policy signals.

The upcoming negotiations in Paris provide an opportunity to secure such policy signals. In the case of short-term signals, the Paris Agreement can include a mechanism for regular strengthening of country commitments, for example every five years. These commitments can also be guided by a long-term policy signal, or an agreed upon goal, that provides direction for the scale and rate of emissions reductions.

While the outcomes of the Paris negotiations are relevant to all countries, cities, and citizens, this paper focuses on those elements of the Paris Agreement that are of specific relevance to the private sector and its potential role in incorporating rational and clear signals in the agreement. The paper is organized as follows. Section I provides a brief summary of the current scientific literature on the consequences of delaying climate action. Section II describes the role of the Paris Agreement in providing adequate short- and long-term signals that can drive the transformation to a low-carbon economy. Section III describes why short- and long-term signals are in the private sector’s best interest. Section IV concludes with a description of what role the private sector can play, includ-ing (1) shaping policy outcomes in the Paris Agreement to secure strong short- and long-term policy signals, and (2) taking steps internally that are consistent with the changes that governments should be making—adopting short- and long-term internal targets consistent with a phase out of emissions. The Annex includes a short literature review of the feasibility of an accelerated pace of change.

I. INTRODUCTION A fragmented but positive shift is underway in the world’s economies, from a traditional low efficiency, resource intensive, and high-carbon model of economic develop-ment, to higher efficiency and cleaner modes of opera-tion. This shift is visible in the energy sector, where a number of governments, companies, and other actors are identifying the financial, health, and environmental risks of carbon-intensive fossil fuel sources, such as coal, and making efforts to shift to renewable energy sources. It is visible in the agriculture sector, where some companies are attempting to move away from extensive land-clearing practices. It is visible in cities around the world that are scaling up public transportation infrastructure in order to reduce dangerously high levels of air pollution and grid-locked traffic. And, not least, the shift is visible in compa-nies that are adopting internal emissions reduction targets to prepare for a future low-carbon world, and generating savings as they do so.2 Many people are looking for a dif-ferent, higher quality of life that provides stability for their businesses, their countries, and their families.

There are a number of reasons why this incremental shift is underway, including the high health costs of air pollu-tion, the interest in greater energy security, and diminish-ing land resources due to deforestation and inefficient agricultural practices. There is also a growing under-standing of the risks of climate change. At the same time, experience with more efficient, clean, and productive ways of conducting business and advancing economic develop-ment has grown. Renewable energy prices are dropping around the world, with solar and wind costing less than coal and gas in some markets.3 There have also been some improvements in land and water management that have led to more efficient practices in communities, reversing land degradation and boosting annual income and food yields.4 Advances in material science and digitalization are increasing the efficiency of product use.5 These factors, combined with the fact that US$90 trillion will be invested in infrastructure in the coming 15 years,6 offer tremendous opportunities to those who are ready to grasp them and who are looking for alternative development pathways that avoid the resource intensive, high-carbon pathway.

While this incremental positive shift is important and begins to address many of today’s challenges, adequately addressing the issue of climate change will require much greater effort. Climate change poses unique problems to

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society. In 2014 alone, the United States experienced eight extreme weather events, each one costing society over $1 billion.7 Coastal populations around the world are increas-ingly vulnerable to flooding.8 There have been rapid increases in food and cereal prices after climate extremes in key producing regions.9 These impacts and associated damages will most likely not continue in a linear fashion, but will accelerate around the world, hitting the poorest and least developed countries hardest. In the absence of efforts beyond those already in place, according to the Intergovernmental Panel on Climate Change (IPCC), the global average surface temperature is projected to be 3.7–4.8°C above pre-industrial levels by 2100.10 This level of warming would bring disastrous impacts.

The science tells us that we need nothing short of a transformation of our energy, industrial, and transpor-tation systems, land practices, economic systems, and behavior. The timeline and trajectory of this transforma-tion will determine the extent to which risks and costs are minimized and whether or not we can avoid the worst impacts of climate change. To date, the pace and scale of change we have witnessed is not commensurate with that required to address the problem. The solutions exist and low-carbon technologies are being deployed, but their deployment has been too slow and piecemeal. However, it is still possible to reduce the damages from climate change to people, national economies, and ecosystems and to achieve the transformative development pathway that is needed.

Our current slow and fragmented shift can induce a sense of false security, a belief that the world is addressing the problem. In reality, incrementalism now means more radical shifts are required later. The choice that govern-mental and private sector decision-makers face is whether to continue with the incremental pace of change, and endure abrupt economic, societal, and political changes in the decades ahead, or to adopt a more steady transforma-tional pace of change that can avoid tremendous economic and human costs in the near- and long-term future. Box 1 summarizes the emissions reductions that will be required and the consequences of delay.

The rational choice is clear—a steady transition that draws on the best of human ingenuity, while avoiding high costs and risks, must be the way forward for society. There are many factors that will make that steady, transformational pathway possible for governments and businesses around

the world. It is clearly technically feasible (see Annex I). However, it requires signals now, both short-term and long-term, if the costs and risks of transformation are to be minimized, existing technologies are to be more widely deployed, and investment in technology research and development is to be accelerated.11

A set of clear and predictable global and national policy signals is needed. Policy signals provide direction for both the scale and rate of change and, if strong enough, can provide predictability and certainty for low-carbon invest-ment and increased commitments. Short-term signals can provide direction for governments and investors over a short time period, for example, five to ten years, regard-ing when further commitments are needed. In the context of the climate negotiations, a short-term policy signal would be provided if governments agreed on a process by which countries would submit commitments on a regular schedule, for example, every five years, increasing their ambition with each subsequent commitment. Long-term signals convey a globally shared vision, over a timespan of more than one decade, for tackling climate change. They can guide the direction of short-term commitments and future decision-making and determine emissions path-ways toward a low-carbon future. In the context of the negotiations, a long-term signal could be provided if coun-tries collectively agreed on a certain percentage of emis-sions reductions that must be achieved by mid-century, the timing of a phase out of emissions, decarbonization of the economy, and/or the timing for peaking of emissions globally.

The upcoming meeting in Paris in December 2015, the culmination of years of negotiations, offers a tremendous opportunity. The world will gather to agree on an interna-tional climate agreement. At these negotiations, countries will decide on a new form of international cooperation, a new international legal agreement to address climate change. Along with a range of other important linked issues, such as how to support developing countries to build resilience to the impacts of climate change and shift to a lower-carbon economy, is the question of what short- and long-term signals the agreement will provide to investors, business, governments, and the public. The way the world answers this question—whether adequate policy signals will foster a deliberate, transformational path, or whether they will be absent, thus condemning the world to abrupt changes later, with greater costs and risks—will affect billions of people around the world.

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The international community has adopted a goal that the average global temperature should not rise above 2°C relative to preindustrial temperatures. According to the UN Environment Programme’s Emissions Gap Report, for there to be a likely chance of meeting the 2°C target, annual global emissions in 2020 should be no more than 44 gigatonnes of carbon dioxide equivalent (GtCO

2e). Global emissions should

also peak by 2020 in order to stay on a least-cost pathway that has a likely (≥ 66%) chance of limiting warming to 2°C. In 2025, global emissions should be no more than 40 GtCO

2e

on average and should drop to 35 GtCO2e by

2030. By 2050, annual global emissions levels should fall to 22 GtCO

2e in order to have a likely

chance of keeping warming within the 2°C limit. (Annual global emissions in 2010 were roughly 50 GtCO

2e.a)

The IPCC Fifth Assessment Report finds that, if we are to have a likely chance of limiting warming to 2°C, GHG emissions should be zero or below zero by 2100, requiring a phase out of greenhouse gas emissions. CO

2 emissions

should be zero or below zero by 2070.b

The more we delay necessary reductions,

the greater the need for rapid reductions in subsequent decades. This will involve greater risks of economic and environmental disruption, as carbon-intensive technologies are needed to be suddenly displaced, but many have been locked in for years ahead, and unproven technologies are introduced to achieve negative emissions. Delay will also increase the risks of higher temperatures, which would lead to higher adaptation costs and challenges.c

Stated in terms of greenhouse gas emissions, the choice is as follows: the global community can ensure that emissions levels are below 50 GtCO

2e

by 2030 and maintain an annual reduction rate of about 3 percent for the next two decades (steady transition), or it can allow emissions to grow to more than 55 GtCO

2e by 2030 and try to achieve

an annual reduction rate of around 6 percent thereafter for the next two decades. Reductions are rare in history; the only cases of decline were associated with the collapse of the Soviet Union or certain cases of policy intervention in France and Sweden.d Delaying action until 2030 will give us only a 50:50 chance of limiting warming to 2°C, whereas concerted action now will reduce the risks of delay, as well as the risks of

overshooting the 2°C target, and also allows us to realize the co-benefits of mitigation.e

Figure 1, drawn from UNEP, outlines the choices. In Example A, action is delayed and thus emissions need to be reduced sharply in future years. In Example B, action is taken earlier to reduce emissions, which allows for higher emissions in the second half of the century (because the carbon budget has not been used up as quickly as in Example A). Example C demonstrates the consequences of continued delay and, therefore, increasingly radical shifts needed to bring emissions down (requiring significant negative emissions, which are not proven at scale). The IPCC states that delay is far more costly than a systematic transition.f

With climate change, delaying decisions does not simply mean that benefits are delayed. Delay can lead to lock-in of carbon-intensive technologies and behavior that can lead to overshooting of temperature targets. Also, it is not an option to put off reductions since some portion of carbon dioxide stays in the atmosphere for thousands of years,g as build up continues.

Box 1 | Required Emissions Reductions and the Consequences of Delay

Notes:a. On average among modeling runs.b. Negative emissions could be realized through carbon dioxide removal (CDR) technologies. The report notes significant risks associated with CDR, such as the availability of land for bioenergy with carbon capture and storage (BECCS), the difficulty of storing such significant amounts of carbon, and the lack of BECCS plants that have been built and tested at scale.c. Clarke, L. et al. 2014. “Assessing Transformation Pathways. In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.” Cambridge and New York: Cambridge University Press. Available at: http://www.ipcc.ch/pdf/assessment-report/ar5/wg3/ipcc_wg3_ar5_chapter6.pdf d. Clarke, L. et al. 2014 e. UNEP. 2014. “The Emissions Gap Report 2014.” Nairobi: United Nations Environment Programme (UNEP). Available at: http://www.unep.org/publications/ebooks/emissionsgapreport2014/portals/50268/pdf/EGR2014_LOWRES.pdff. Clarke, L. et al. 2014.g. U.S. Environmental Protection Agency. 2014. “Climate change indicators in the United States, 2014.” Third edition. Washington, D.C.: EPA 430-R-14-004.Available at: http://www3.epa.gov/climatechange/pdfs/climateindicators-full-2014.pdf

The private sector can play a large role in shaping this outcome, and should be interested in doing so, given the significant potential benefits. For example, such signals can lower the risks and costs of investment, reduce future compliance costs, offer returns on investment and savings, and provide opportunities for new products and markets. In addition, companies’ engagement and action on climate change are becoming defining factors in business perfor-mance, affecting the flow of investment.12

While the outcomes of the Paris negotiations are relevant to all countries, cities, and citizens, this paper focuses specifically on the critical role that the private sector can play in advocating for short- and long-term policy signals in the Paris Agreement and why it is in their interest to play such a role.

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II. THE ROLE OF THE PARIS AGREEMENT IN SHAPING SHORT- AND LONG-TERM POLICY SIGNALSNegotiations are underway for a new international legal agreement on climate change under the United Nations Framework Convention on Climate Change (UNFCCC), which will be completed in December 2015 in Paris. A number of elements of the agreement are relevant to both the pace and the orderliness of the transition to a low-carbon future. There are two major elements in particu-lar—short-term cycles of commitments and the adoption of a long-term goal—that are under negotiation and, depending on their design, have great promise for provid-ing adequate short- and long-term policy signals.

Regarding short-term policy signals, the agreement can include a signal (for example, in the form of an agreed process or mechanism) for regular strengthening of com-mitments, which would be a significant departure from the current regime. All countries are now in the process of tabling their national commitments, known as intended nationally determined contributions (INDCs), for 2025 or 2030. These commitments indicate the level of effort and ambition each country is willing and able to take in the near term. They will include emissions reduction targets as well as policies and measures in the various sectors, and they are the foundation of the new Paris Agreement.

It remains to be seen how the commitments should be updated and strengthened. In other words, what regular short-term signals should the agreement provide to ensure steady progress along an emissions reductions pathway?

Coupled with short-term policy signals, the agreement can provide a long-term policy signal. In 2010, countries agreed to keep the global average temperature increase below 2°C in comparison to pre-industrial levels in order to fulfill the objective of the Convention, which is to avert dangerous climate change. While this is a vitally important long-term policy signal, it is not the most effective one, because the 2°C goal is challenging to translate into daily economic and business decision-making. This under-mines the ability of the signal to drive transformative change. Therefore, countries are now negotiating a clearer, additional long-term signal that will provide a means of operationalizing the 2°C goal as well as ways to measure progress toward that goal. A number of possible fram-ings for an objective have been put forward by countries, including a carbon-neutrality goal,13 a global decarboniza-tion goal,14 percentage reduction goals,15 a limit on the amount of fossil fuels that can be used before the 2°C threshold is crossed,16 or a phase out of GHGs to net zero within a certain timeframe, for example, mid-century.17

The inclusion of a long-term signal, combined with short-term improvement cycles, in the Paris Agreement would provide the predictability and clarity that can drive more transformational and thus predictable change. Indeed, the

Figure 1 | The Implications of Delayed Emissions Reductions

Source: UNEP Emissions Gap Report 2014

2100

0

2100

0

2100

0Annu

al g

loba

l tot

al C

O 2 em

issi

ons

Date

Example A Example B Example C

start emissions level

net negative CO

2 emissions

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Agreement for Climate Transformation 2015 (ACT 2015) has presented ideas for how the complete agreement could function, based on research and stakeholder convenings in 15 countries around the world.18 Short-term cycles of increased ambition undertaken by every country, coupled with a long-term signal, should be complemented by a support cycle for developing countries (although the issue of support is outside the scope of this paper) so that they have the capacity, technology, and finance to enable them to make a steady and equitable transition.

The question is whether the world will grasp this opportunity and create a transformational Paris Agreement that avoids the disruptive high risk, high cost pathway by including short- and long-term signals that catalyze the much greater pace and scale of change needed to address climate change. The business opportunities are tremendous and facilitate leapfrogging beyond past practices and improving human well-being, particularly in developing countries.

Below, we explore the options regarding short- and long-term signals under the agreement.

Short-term SignalsDifficult political situations can result in putting off tough decisions. Even in the face of overwhelming evidence about the risks of significant—or even catastrophic—consequences of inaction, we tend to make decisions that disregard this information and reflect very short time horizons.19 Indeed, it is the tendency of our political institutions to make decisions that give greater weight to society’s immediate policy interests and delay required behavioral changes. It is, therefore, critical that the agreement include signals provided by a mechanism that creates a regular schedule of strengthening mitigation commitments. A long-term signal alone will not provide the certainty for limiting warming—because temperature is related to cumulative carbon dioxide emissions20—or the short-term clarity needed to avoid very steep annual reduction rates of emissions in the future.

It will be important to consider the timing of innovation cycles when making decisions about the appropriate timeframe for short-term signals. There is a vast literature on this matter.21 Addressing climate change will require research, development, and deployment of many types of technologies. Some technologies will require more time to go through the technology lifecycle (e.g. related to infrastructure) while others will innovate and change on

an annual basis.22 There are, of course, many reasons to encourage more rapid or shorter timeframes for innovation.

While an international climate agreement has limited ability to influence innovation pathways, one function of the agreement is to accelerate the pace of change.23 Within the negotiating text for the Paris Agreement, the main area of debate concerns the length of the upcoming and future commitment or target periods. While some countries are advocating for a ten-year cycle of improvement, many are noting that a five-year cycle would be more appropriate, because factors are changing so rapidly, both in the economy and in the climate, and that only a five-year signal will work to influence short-term business decisions.24 One could potentially combine a five-year target in the agreement with a ten-year indicative target if countries wish to have another signal in between five years and the long-term goal, but including only a ten-year target will not capture the opportunities that innovation will bring.

Five-year cycles of commitments would allow countries to respond to advances in technology and thereby benefit from the best available mitigation and adaptation practices. Much technological innovation occurs over short timeframes. If governments have to wait ten years to respond, their signals will be ineffective and behind the times. A five-year review can send timely signals to companies and innovators, allowing governments to take advantage of and to catalyze new technological developments more regularly.25 By creating national moments on a shorter timeframe, a five-year cycle would avoid locking in low-ambition commitments for a longer period (e.g. for ten years).26 Changes in scientific understanding regarding the risks of climate change can also change quickly, and there should be an opportunity for policymakers to change course accordingly, and not have to wait for a moment ten years in the future to adjust rates of emissions reductions.

Long-term SignalThe ultimate objective of the UN Framework Convention on Climate Change is as follows: “To achieve, in accordance with the relevant provisions of the Convention, stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. Such a level should be achieved within a timeframe sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened, and to enable economic

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turning point, and send a loud and clear signal to citizens and the private sector that the transformation of the global economy is inevitable, beneficial, and already underway.”32

There are a number of proposals on the table in the nego-tiations33 that further specify the 2°C goal. The proposals vary, including goals for the timing of an emissions peak, economic decarbonization, and phase out of carbon diox-ide or GHGs to net zero, as well as others (see Box 4).

The impacts of warming to date have been widespread, affecting both natural and human systems on all continents and across the oceans.a The world faces increasingly dangerous climate-change impacts with every additional degree of warming. At warming levels greater than 2°C, we are expected to see:b

▪ Roughly 0.79 meters (2.6 feet) of sea level rise above 1980–99 levels by the end of the century

▪ Average annual runoff decreasing 20–40 percent in the Danube, Mississippi, Amazon, and Murray-Darling river basins

▪ Average annual runoff increasing about 20 percent in the Nile and Ganges river basins

▪ Forest fires almost doubling by 2050 in Amazonia with 1.5°C to 2°C temperature increases above pre-industrial levels

▪ The risk of crossing thresholds (tipping points) in Earth’s systems (e.g. West Antarctic ice sheet disintegration and Amazon dieback) increases

▪ The frequency of bleaching events exceeds the ability of coral reefs to recover

▪ A high risk of abrupt and irreversible changes to ecosystems like forests, which would lead to “substantial additional climate change” (e.g. trees sequester significant amounts of carbon dioxide that could be abruptly released to the atmosphere)c

Notes:a. IPCC. 2014. “Summary for policymakers. In: Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of theIntergovernmental Panel on Climate Change.” Cambridge and New York: Cambridge University Press. Available at: http://ipcc-wg2.gov/AR5/images/uploads/WG2AR5_SPM_FINAL.pdfb. For more information, see the World Bank, “Climate Change.” Available at: http://www.worldbank.org/en/topic/climatechangec. IPCC. 2014.

Box 2 | The Impacts of a 2°C Worlddevelopment to proceed in a sustainable manner.”27 This objective has guided negotiations since 1992 and still holds great political weight for countries. It emphasizes that the pace of change must occur rapidly enough to avoid food shortages and ecosystem disruption and other impacts affecting sustainable development. In 2010, at the Cancun Conference of the Parties, countries decided to define this objective further, agreeing to keep the global average temperature below 2°C in comparison with pre-industrial levels, with a possibility of revising this goal to 1.5°C after a scientific review, given the risks associated with even 2°C of warming (see Box 2).28

The 2°C goal has been a guiding post for many, and it is the measure by which UNEP and independent think tanks assess whether the UNFCCC goal is being achieved. It has also been used to estimate the gap that exists between the global temperature expected to result from the implemen-tation of Parties’ emissions reductions commitments and the 2°C goal.29 While it is immensely useful to keep this target in mind, it is a challenging goal to operationalize. What does this mean for countries, companies, investors, cities, citizens? Box 3 provides a brief summary of recent climate science findings regarding necessary long-term emissions reductions that are consistent with a likely chance of limiting warming to 2°C.

Further specifying the long-term goal is now a central question under negotiation and a topic of debate among ministers and heads of state. In June 2015, the G7 committed to a decarbonization of the global economy over the course of this century, which includes “the long-term objective of applying effective policies and actions throughout the global economy, such as carbon market-based and regulatory instruments.” The G7 called on other countries “…to join us, to incentivize investments towards low-carbon growth opportunities.”30 The G7 communiqué was followed by the German-Brazilian statement in September, which included language to provide some support and differentiation for developing countries.31

More recently, the Leaders’ Working Lunch on Climate Change, held at the United Nations in New York on 27 September 2015, addressed this issue. The summary language stated that: “A Paris agreement will need to articulate a comprehensive long-term vision of a world freed of poverty through the social and economic oppor-tunities created by the transition to a low-emission and climate resilient future… A Paris agreement must be a

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While there are differences among approaches, they all require a similar transformation from carbon-intensive to low-carbon goods and processes. Decarbonization can be achieved in two major ways: displacing high-carbon content fuels with low-carbon content fuels, and reducing energy requirements per unit of GDP.34

In the lead-up to Paris, it will be important for countries and stakeholders to consider the most important characteristics of a long-term signal that is designed to send the clearest signal possible. Potential criteria include clarity of the end goal, clarity of timing, the nature of the goal (a collective goal or specific national goals), as well as the equity of the goal(s). If the signal is to be effective, it will need to be complemented by the right incentives and support for countries to act, especially for developing countries who may need additional resources to make the transition to a low-carbon economy.

III. THE BUSINESS OPPORTUNITYThe creation of short- and long-term policy signals in the agreement is imperative if society is to transform in a more orderly fashion rather than make delayed and abrupt changes that can lead to significant risks and costs. Businesses can play active roles in making possible the transition to a low-carbon future, by both reducing GHG emissions and developing and bringing to market the necessary technologies and solutions. Clear and predict-able policy signals from the international community, and from national governments implementing the agreement, provide essential direction for decision-making on assets, investments, and business strategies.35 They create a busi-ness environment with more predictability and strengthen the confidence of the private sector, allowing businesses to reap significant benefits.

The influence of short-term and long-term signals on busi-nesses’ activities is difficult to discern in the literature.36

However, the following case studies (Boxes 5–9) illustrate the promise of policy signals that have already contributed to better practices and motivated change. It should be noted that the majority of case studies describe the results of domestic policy signals as opposed to international policy signals. Nonetheless, given the patterns emerging in various country contexts, it can be inferred that such benefits and results would only be strengthened if strong signals were provided by an international agreement, which would level the playing field for businesses in all countries. Also, any policy signal provided by the interna-tional agreement will have to be implemented domesti-cally. Below we describe some of the benefits that policy signals can provide to the private sector:

▪ INCREASING SAVINGS: Climate change can increase business costs in the form of higher prices for energy and raw materials, higher rates of taxation, and potential upstream and downstream supply-chain disruptions.37 In this context, policy signals that incentivize a transition to a low-carbon economy can help companies generate savings. For example, companies can adopt clean energy technologies or green their supply chains more easily with the support of clear and predictable policies, thereby improving energy efficiency and reducing costs in operations, buildings, and facilities management.38 Also, policy signals that motivate companies to increase their use of renewable energy sources can lead to fewer GHG emissions and lower costs given an eventual price on carbon, which can offer savings to businesses in the

The science regarding the timing of a phase out of GHG emissions consistent with the 2°C goal has recently advanced. For example, the IPCC’s Fifth Assessment Report finds that in the majority of scenarios predicting GHG concentrations between 430 and 480 ppm CO

2e by 2100 (concentrations

consistent with a likely chance of limiting warming to 2°C) greenhouse gas emissions are brought to zero or are negative by 2100. Further, power generation and industrial CO

2 emissions

are brought to zero in about 2070 in RCP 2.6 (which provides a likely chance of limiting warming to 2°C).a To achieve a greater probability of staying below 2°C, the timeframe for phasing out emissions to zero is shorter.

The UNEP Emissions Gap Report 2014 more specifically calls for global carbon neutrality (CO

2 only) between 2055 and 2070

and total greenhouse gas emissions (all GHGs) shrinking to net zerob between 2080 and 2100.c

Notes:a. Levine, M. et al. 2007. “Residential and commercial buildings. In: Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change.” Cambridge and New York: Cambridge University Press. Available at: http://www.ipcc.ch/pdf/assessment-report/ar4/wg3/ar4-wg3-chapter6.pdfb. Net zero takes into account sinks, carbon capture and storage, and negative emissions to balance out any emissions.c. UNEP. 2014. “The Emissions Gap Report 2014.” Nairobi: United Nations Environment Programme (UNEP). Available at: http://www.unep.org/publications/ebooks/emissionsgapreport2014/portals/50268/pdf/EGR2014_LOWRES.pdf

Box 3 | Long-term Emissions Reductions Necessary for a Likely Chance of Limiting Warming to 2°C

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Box 4 | Who Supports a Phase out Goal and What are they Calling For?

Various Parties have proposed different versions of how a long-term goal could be formulated. Three options were discussed in the Ad Hoc Working Group on the Durban Platform. First, there are proposals to peak global and domestic GHG emissions then reduce net emissions to zero by 2050, with dif-ferent timeframes for developed and develop-ing countries.a Second, there are proposals to include a science-based, long-term, zero emission sustainable development pathway to reduce emissions/stabilize GHG concentra-tions by a certain amount by a certain year.b Third, there are proposals that involve keeping future emissions within the global emissions budget that is consistent with the goal of limiting temperature rise below 1.5 °C, and distributing the budget among countries, based on their historical responsibility, ecological footprint, level of development, and capacity.c

Currently, around 130 countries support the inclusion of a long-term mitigation goal in the Paris Agreement.d From France and Germany’s Joint Statement,e to the G7 communiqué,f to the Germany-Brazil Joint Statement,g countries

have emphasized the need for deep cuts in GHG emissions and the decarbonization of the global economy. The Joint Presidential State-ment on Climate Change issued by the United States and China, the world’s two biggest economies, and biggest emitters, showed their willingness to increase ambition over time and helped to build support for short-term cycles of commitments with greater ambition in the Paris Agreement.h In addition, the European Union urged net emissions levels near zero, or below, in 2100,i and 44 members of the Alli-ance of Small Island States and 48 of the Least Developed Countries also expressed their support for a long-term goal, and proposed net zero emissions and/or full decarbonization by 2050.j Several Latin American and Caribbean countries showed their willingness to set a low carbon target and to achieve carbon neutrality by mid-century to stay below 2ºC.k

Support for a long-term goal reaches beyond governments. For example, at the 2015 Busi-ness and Climate Summit, business networks representing 6.5 million companies in more than 130 countries requested governments

to take collective action on reaching net zero emissions over the course of this century.l The B Team leaders,m the CEOs of some of the world’s largest companies, have supported a goal to phase out GHGs to zero by 2050 in order to have a higher probability of staying below 2°C, and called upon businesses to match this ambition. Through the Institutional Investor Group on Climate Change, more than 100 investment companies urged countries to support a long-term carbon emissions goal under the UNFCCC, and the submission of short- to medium-term national emissions pledges and country level action plans.n The Interfaith Summit, representing more than 50 faith and religious leaders from 20 coun-tries has also called for a phase out of fossil fuels by mid-century.o The long-term goal is one of the top priorities for many civil-society advocates for the Paris Agreement. The Climate Action Network, a network with more than 850 member organizations in 100+ countries, is calling for phasing out fossil fuel emissions and phasing in 100 percent renewable energy by 2050.p

Notes:a. UNFCCC. 2015. “Scenario Note on the Tenth Part of the Second Session of the Ad Hoc Working Group on the Durban Platform for Enhanced Action.” Available at: http://unfccc.int/resource/docs/2015/adp2/eng/4infnot.pdfb. UNFCCC. 2015 c. UNFCCC. 2015 d. Allen, P. et al. 2015. “Who’s Getting Ready for Zero: A Report on the State of Play of Zero Carbon Modelling.” The Center for Alternative Technology and Track 0. Available at: http://track0.org/works/whos-getting-ready-for-zero-full-report/e. France and Germany. 2015. “Petersberg Dialogue Call for Climate Action - Joint Statement from Angela Merkel and François Hollande.” Available at: http://www.diplomatie.gouv.fr/en/french-foreign-policy/climate/events/article/petersberg-dialogue-call-forf. G7. 2015. “G7 Leaders’ Declaration.” Available at: https://www.whitehouse.gov/the-press-office/2015/06/08/g-7-leaders-declarationg. Brazil and Germany. 2015. “Brazilian-and-German Joint Statement on Climate Change.” Available at: http://www.itamaraty.gov.br/index.php?option=com_content&view=article&id=10945:brazilian-german-joint-statement-on-climate-change&catid=578:press-releases&lang=en&Itemid=333h. The White House. 2015. “FACT SHEET: The United States and China Issue Joint Presidential Statement on Climate Change with New Domestic Policy Commitments and a Common Vision for an Ambitious Global Climate Agreement in Paris.” Available at: https://www.whitehouse.gov/the-press-office/2015/09/25/fact-sheet-united-states-and-china-issue-joint-presidential-statementi. Track 0. 2015. “August Briefing on Countries Supporting the Long-term Decarbonisation Goal.” Available at: http://www.theroadthroughparis.org/sites/www.theroadthroughparis.org/files/documents/Track%29_August%20briefing%20of%20countries%20supporting%20LTG%20.pdfj. Track 0. 2015.k. Track 0. 2015.l. Allen, P. et al. 2015. m. BP Global. 2015. “Oil and Gas Majors Call for Carbon Pricing.” Available at: http://www.bp.com/en/global/corporate/press/press-releases/oil-and-gas-majors-call-for-carbon-pricing.htmln. Sir Richard Branson, Arianna Huffington, Dr. Mo Ibrahim, Guilherme Leal, Strive Masiyiwa, Blake Mycoskie, François-Henri Pinault, Paul Polman, Ratan Tata, Zhang Yue, Professor Muhammad Yunus and Jochen Zeitz alongside Mary Robinson and Dr. Gro Harlem Brundtland as Honorary Leaders of The B Team.o. Climate CEOs. 2015. “Open Letter from Global CEOs to World Leaders Urging Concrete Climate Action: CEO-led Initiative to Create A Fertile Ground for a Responsible and Global Climate Deal in Paris 2015.” Available at: https://medium.com/@ClimateCEOs/open-letter-from-global-ceos-to-world-leaders-urging-concrete-climate-action-e4b12689cddfp. Climate Action Network. 2015. “Non-Paper: Options for A Long-term Mitigation Goal in the Paris Accord.” Available at: http://www.climatenetwork.org/sites/default/files/can_non-paper_long-term_mitigation_goal_in_the_paris_accord_august_2015.docx.pdf

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Raytheon, a technology and innovation company specializing in defense and homeland security, has participated in the Climate Leaders program initiated by the US EPA since 2002. The company set an internal climate goal to cut its carbon emissions by 33 percent between 2002 and 2009.a Raytheon exceeded its target at the end of 2008 and set a new goal for the period 2008–2015. The company invested in projects such as “high efficiency lighting; variable speed drives for motors, pumps and fans; premium-efficiency motors; and state-of-the-art automated energy management and control systems.”b The company saved more than $100 million between 2002 and 2012, while reducing energy use by 19 percent.c

Catalyst Paper, western North America’s largest mechanical paper producer, pursued a target of reducing its GHG emis-sions by 70 percent by 2010 from a 1990 baseline. It was one of the most aggressive emissions reduction targets in the private sector.d The company applied three major strategies to achieve the goal, including fuel switching, energy efficiency, and recy-cling initiatives. Between 2002 and 2005, the company saved $5 million in electricity costs through efficiency, and $13 million through reducing the use of fossil fuels by 46 percent.e Through these measures, Catalyst brought to market its Catalyst Cooled manufactured GHG-neutral paper and its lighter basis-weight paper, allowing the company to competitively differentiate itself from the interchangeable commodities market.f

Although both companies adopted voluntary goals, as opposed to being driven by strong short- and long-term policy signals, they gained significant savings, suggesting a potential scale-up of benefits in the presence of strong policy signals.

Notes:a. U.S. Environmental Protection Agency. 2010. “Clearing the Air: Raytheon is Passionate about Going Green.” Available at: http://www.epa.gov/climateleadership/documents/x03epa_040610.pdfb. Raytheon. 2008. “Raytheon Company Corporate Responsibility Report 2008.” Available at: http://media.corporate-ir.net/media_files/irol/84/84193/CRR_09/HTML/pdfs/energy_and_the_environment.pdfc. CDP and World Wildlife Fund. 2013. “The 3% Solution: Driving Profits Through Carbon Reduction.” Available at: https://c402277.ssl.cf1.rackcdn.com/publications/575/files/original/The_3_Percent_Solution_-_June_10.pdf?1371151781d. World Wildlife Fund. 2014. “Climate Savers Factsheet: Catalyzing Change for the Better in the Paper Industry.” Available at: http://climatesavers.org/wp-content/uploads/2015/01/Catalyst-_-Factsheet_APPROVAL_002.pdfe. World Wildlife Fund. 2014.f. World Wildlife Fund Canada. 2014. “Rethink Business: How Addressing Climate Change Can Improve the Bottom Line-Learnings From WWF Climate Saver Companies.” Available at: http://www.catalystpaper.com/sites/default/files/reports/wwf-canada_climatesavers.pdf

Box 5 | U.S. Companies Realized Significant Savings from Taking Action on Climate

longer term. Lastly, predictable policy signals and successful mitigation of the effects of climate change can help avoid costly disruptions, such as interrupted supply chains or spikes in commodity prices. See Box 5 for an example of U.S. companies realizing savings from taking action on climate change.

▪ LOWERING THE RISKS OF INVESTMENT: Clear and predict-able policy signals help reduce business risks created by policy uncertainty. If designed correctly, policy signals can also help create a favorable global busi-ness environment through a combination of legal frameworks and market mechanisms39 that lower the risks of low-carbon investment. In addition, busi-nesses have already incurred costs related to extreme weather events and other changes in the climate.40 Therefore, long-term signals are in the interest of the private sector because they can motivate collective climate actions from all sectors to reduce longer-term investment risks caused by climate change. See Box 6 for an example of business and investor support of the U.S. Clean Power Plan.

▪ PROVIDING OPPORTUNITIES FOR NEW PRODUCTS, MARKETS, AND INNOVATION: Policies that might be implemented to meet a long-term goal, such as carbon pricing or tax credits, could guide the flow of investment to the clean energy sector, which is more aligned with the future low-carbon economy. Such policies can also help unlock investment in infrastructure,41 enabling the scale-up of low-carbon businesses. Third Generation Environmentalism (E3G) estimated that new climate policies may lead to approximately €3 trillion ($3.42 trillion USD) in additional investment in low-carbon markets worldwide by 2030.42 A recent report on global trends in renewable energy investment observed an increase of 17 percent, to $270 billion, in clean energy investments globally between 2013 and 2014, with a rapid expansion of investment flowing into new markets in developing countries.43 In these circumstances, consumers might become more aware of climate change, thereby increasing demand for more environmentally friendly products.44 By attracting investment and shaping market demand, a long-term goal can provide companies with profitable opportunities for new low-carbon products and markets, and technology innovation. See Box 7 for an example of how short-term policies promoted opportunities for renewable energy generation in India.

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Box 6 | Businesses and Investors Sent Letters in Support of the U.S. Clean Power Plan

In July 2015, 364 companies and investors sent letters in support of the U.S. Environmen-tal Protection Agency’s Clean Power Plan to 29 governors in the United States. The Clean Power Plan requires emissions reductions from existing electric power plants and sets targets for each state by 2030, but allows

states flexibility in how to achieve their targets. The letter states that “clean energy solutions are cost-effective and innovative ways to drive investment and reduce greenhouse-gas emissions. Increasingly, businesses rely on renewable energy and energy-efficiency solutions to cut costs and improve corporation

performance.” The letter includes signatories from Fortune 500 leaders as well as small local companies and it represents the largest group of signatories to support the Clean Power Plan.a

▪ SECURING INVESTMENT IN RESEARCH, DEVELOPMENT, AND DEPLOYMENT OF LOW-CARBON TECHNOLOGIES: Policy signals may be coupled with increased public sector funds for research, development, and deployment (RD&D) of low-carbon technologies. At the same time, clear policy signals, especially long-term signals, can help increase the demand for low-carbon products and services and give businesses a better sense of predictability in demand. In this context, more busi-

ness investment in RD&D of low-carbon technologies will be attracted by the potential profits of successful developments.45

▪ CATALYZING LONG-TERM STRATEGIC THINKING: A long-term signal in particular can provide a clear signpost to guide strategy and decisions, forcing companies to think long term about necessary transitions and road-maps for achieving them.46

Box 7 | Short-term Policies Promoted Renewable Energy Generation in India

Between 2003 and 2013, India successfully adopted a series of policies and mechanisms to promote investment in, demand for, and supply of renewable energy. New institutions were created, such as the Ministry for New and Renewable Energy (MNRE) and the National Action Plan on Climate Change (NAPCC). Targets for various renewable energy sources were embedded in each cycle of India’s Five-Year Plans and formed the basis for annual goal setting. A series of policies was launched to support the development of each source of renewable energy.a They included the National Solar Mission, as well as supporting policies

and mechanisms for industry, including exemptions on import duties, tax conces-sions, generation-based incentives, renewable purchase obligations, and tradable Renewable Energy Certificates (REC).

As a result, installed power generation capacity from renewable energy sources expanded to more than 30 GW of grid-connected instal-lations and 1 GW of off-grid installations in 2014, among which the installed capacity from solar power increased from 2 MW in 2002 to more than 2 GW in 2012.b Manufacturing of wind energy systems grew dramatically in

India, with Suzlon emerging as one of the big-gest wind energy companies internationally.c The improved investment and regulatory environment in India provided Suzlon with opportunities to expand its business to the solar power sector in 2014.d The market, and demand, for renewable energy also increased very quickly. For example, more than 70MW of solar capacity have been accredited and 26MW were registered under the tradable Renewable Energy Certificates (REC) scheme.e In addition, renewable energy sources became more cost competitive, with wind energy being almost at grid parity with conventional energy.f

Notes:a. International Partnership on Mitigation and MRV. 2014. “Developing Renewable Energy Targets and Supporting Strategies.” Available at: http://mitigationpartnership.net/gpa/developing-renewable energy-targets-and-supporting-strategiesb. International Partnership on Mitigation and MRV. 2014.c. International Partnership on Mitigation and MRV. 2014.d. Chadha, Mridul. 2014. “India’s Largest Wind Energy Company Set To Enter Solar Power Sector.” Available at: http://cleantechnica.com/2014/12/19/suzlon-energy-india-largest-wind-energy-company-solar/e. International Partnership on Mitigation and MRV. 2014.f. International Partnership on Mitigation and MRV. 2014.

Notes:a. Ceres. 2015. “365 Companies and Investors Announce Support for EPA’s Clean Power Plan: Send letters to 29 Governors Urging ‘Timely’ Adoption of State Implementation Plans.” Available at: http://www.ceres.org/press/press-releases/365-companies-and-investors-announce-support-for-epa2019s-clean-power-plan

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Box 9 | China Enhanced the Energy Efficiency of Industry through a Ten-Year National Program

Box 8 | A Ten-Year National Energy Plan Helped Vietnam Build Capacity for Sustainable Development

Between 2006 and 2015, China implemented a national energy efficiency program that was targeted at the top energy consuming companies. These companies are required to develop energy saving and conservation plans, adopt energy estimation and management systems, and report regularly on their energy use.a The program first targeted the top 1,000

enterprises, and achieved energy savings of 156 million tons of coal equivalent (tce) in the first three-and-a-half years, and was later expanded to the top 10,000 enterprises in various sectors.b With three years remaining, more than 70 percent of the 250 million tce energy saving target had been achieved by 2012.c The government policy signal helped

remove institutional and technical barriers for implementing low-carbon activities and allowed these climate actions to yield a larger return on investment. More companies were motivated to internalize the targets and make investments and operational decisions that are more aligned with the future low-carbon economy.d

Between 2006 and 2015, Vietnam imple-mented its first comprehensive national energy efficiency plan, the Vietnam Energy Efficiency Program (VNEEP), to improve energy efficiency and conservation across all sectors of the country’s economy. The program achieved energy savings of 3–5 percent between 2006 and 2010 and a further 5–8 percent between 2011 and 2015.

The ten-year program helped the country build capacity for sustainable development.a First, as a number of workshops, trainings, and exhibitions were offered to energy manage-ment authorities and key enterprises, entities enhanced their capacity to implement energy efficiency and conservation activities.b Second, classes in schools and public campaigns were launched to disseminate knowledge of energy efficiency and conservation, raising public awareness of sustainable development.c

Third, access to financial sources was improved. Various financial facilities were established to improve investment in activities related to energy efficiency and conservation. The program also helped attract funding from international investors.d Fourth, a uniform policy, legal, and regulatory framework system was established,e enabling the long-term transition to a low-carbon economy.

▪ LEVELING THE PLAYING FIELD: Clear and predictable policy signals can level the playing field and increase fairness during the transition to a low-carbon economy. In the absence of policy signals, there are situations in which taking carbon action may create short-term competitive disadvantage because of increased upfront costs. Therefore, it is critical to establish long-term policy signals that incentivize

Notes:a. International Partnership on Mitigation and MRV. 2015. “Implementation of Viet Nam’s comprehensive national energy efficiency program targeting all sectors of the economy.” Available at: http://mitigationpartnership.net/gpa/implementing-national-energy-efficiency-programmeb. International Partnership on Mitigation and MRV. 2015.c. International Partnership on Mitigation and MRV. 2015.d. International Partnership on Mitigation and MRV. 2015.e. International Partnership on Mitigation and MRV. 2015.

Notes:a. International Partnership on Mitigation and MRV. 2015. “The Top-10,000 programme: a national energy conservation policy targeting the top energy-consuming enterprises and entities.” Available at: http://mitigationpartnership.net/gpa/implementing-national-energy-efficiency-programme-0b. International Partnership on Mitigation and MRV. 2015.c. International Partnership on Mitigation and MRV. 2015.d. International Partnership on Mitigation and MRV. 2015.

comparable actions across the economy or within sectors to minimize negative impacts on business competitiveness. It is also important to build a shared measuring, reporting, and verification framework that provides transparency and a means to evaluate fairness.47 Leveling the playing field can be relevant to international trade, energy subsidies, and sectoral policies, among others.

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▪ ENHANCING LEARNING WITHIN OR ACROSS SECTORS: If well designed, the policies to implement long-term goals should be accompanied by capacity building programs to help scale up climate action plans. They can include trainings (see Box 8) and remove barriers for implementation (see Box 9). The long-term goal can also galvanize initiatives and networks, such as the We Mean Business Coalition, Climate and Clean Air Coalition, and Business for Social Responsibility,48 to exchange best practices, share resources, and build mutual support.49 In addition, a global accounting and reporting framework will allow organizations not only to manage those climate action initiatives against internal climate targets but also to benchmark their efforts against those of their competitors.50

IV. THE WAY FORWARD: PRIVATE SECTOR LEADERSHIPThe private sector can play two primary roles in helping facilitate the transition to a low-carbon economy in the lead-up to the Paris Agreement.

First, the private sector should actively inform policymak-ing by advocating to national governments in favor of adopting short- and long-term climate signals in the Paris Agreement. Active participation in the policymaking pro-

Box 10 | Businesses in Brazil Sought to Influence the UN Conference on Sustainable Development

In 2012, more than 100 Brazilian organizations, including large global companies, worked with Instituto Ethos to put together a proposal to influence the negotiations of the UN Conference on Sustainable Development (Rio+20). In doing so, they called for participating countries to commit to “pricing carbon and the creation of an internal carbon market,” because they saw the benefits of a price on carbon.a

Notes:a. UN Global Compact. 2013. “Guide for Responsible Corporate Engagement in Climate Policy: A Caring for Climate Report.” Available at:http://www.wri.org/sites/default/files/guide_for_responsible_corporate_engagement_in_climate_policy.pdf

Box 11 | The Private Sector Played an Active Role in Program Design in Chile

Between 2012 and 2015, Chile implemented a national carbon-management program (PNGCa) to help both public and private sector entities calculate and monitor their GHG emis-sions and identify mitigation and adaptation opportunities. The program set a precedent for the country by including consultations with the private sector in many decisions related to the initiative. Many significant Chilean firms voluntarily measured and reported their carbon footprint, driven by internal demands for sustainability and efforts related to environ-

mental and corporate social responsibility.b In this context, the government initiated several low-carbon programs, and recognized the need to standardize the carbon footprint estimation tools, monitoring protocols, and reporting tools.c During the process, stakeholders from the private sector collaborated closely with the Ministry of Environment in the design of the program, for example, with regard to institutional arrangements and the selection of monitoring, reporting, and verification tools.d The program was beneficial for businesses

because it provided clear timelines and incen-tives, as well as management tools, which were essential for those companies with voluntary commitments to evaluate the risks and benefits of taking climate action. This participatory approach was well accepted among stakehold-ers in the private sector, and the policy has been able to create effective incentives for the involvement of the private sector in the initia-tive and more generally in policymaking for low-carbon development.e

Notes:a. Programa Nacional de Gestión del Carbonob. International Partnership on Mitigation and MRV. 2015. “Development of the national carbon management programme (Programa Nacional de Gestión del Carbono) for the estimation of GHG emissions, monitoring of carbon footprints and identification of mitigation opportunities by public and private sector entities.” Available at: http://mitigationpartnership.net/gpa/developing-public-private-carbon-management-programmec. International Partnership on Mitigation and MRV. 2015.d. International Partnership on Mitigation and MRV. 2015.e. International Partnership on Mitigation and MRV. 2015.

cess can demonstrate to governments the strong support of their business constituencies and can allow companies to have some control over the outcome. Companies can identify opportunities to engage and influence policy. They can consider the implications of policy options, align their positions with their actions on climate change, and report on corporate policy positions, influences, and outcomes.51 See Box 10, 11, and 12 for examples of how businesses have

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engaged in various policymaking processes. Companies that have made low-carbon goods and services a business priority have a particular interest in seeing that the energy transition is mandated by governments around the world, because it will stimulate their markets and give them an edge over less well-prepared competitors.

Second, the private sector should adopt short- and long-term internal targets, consistent with the climate science, that lead to a phase out of GHG emissions. See Box 13 for more information on science-based targets.

Box 12 | EU Businesses Get Involved in Climate Policy

The Prince of Wales’ Corporate Leaders Group on Climate Change brings European and multinational companies together to “communicate the support of businesses for the EU to move to a low-carbon society…” The group makes public comments on climate policy and has urged decision makers to take action. It has also engaged with other industry groups in informing policymaking on climate change and seizing opportunities that are important to their businesses.a

Notes:a. UN Global Compact. 2013. “Guide for Responsible Corporate Engagement in Climate Policy: A Caring for Climate Report.” Available at: http://www.wri.org/sites/default/files/guide_for_responsible_corporate_engagement_in_climate_policy.pdf

Adopting internal targets brings significant benefits to the private sector. Internal targets can:

▪ LEAD TO SIGNIFICANT EMISSIONS REDUCTIONS. According to the 3% Solution analysis conducted by WWF/CDP/McKinsey, companies with ambitious GHG reduction targets deliver larger emissions reductions with higher financial returns than companies without such targets. 52

▪ BOOST FINANCIAL RETURNS ON INVESTMENT. The financial returns from climate action have expanded, especially because renewable-energy sources have become more cost-competitive with traditional energy resources, creating considerable profits for investors.53 Currently, the returns on low-carbon investments (for example, those that reduce GHG emissions) are now, on average, larger than those on overall capital expenditures. This was found to be the case for 79 percent of U.S. companies in the S&P 500 that report to the Carbon Disclosure Project (CDP).54 In the longer term, experience gained in taking climate action, in terms of production processes, technologies, and knowledge, can be applied to future projects and drive up financial profits.55 Moreover, CDP found that companies with internal emissions reduction targets are achieving a better financial return on low-carbon investment relative to their peers.56 The 3% Solution Analysis identified a similar trend, finding that companies with internal targets

Box 13 | The Objectives of the Science-Based Targets Initiative

Science-Based Targets is a joint initiative co-launched by the Carbon Disclosure Project (CDP), the UN Global Compact, the World Resources Institute (WRI), and World Wildlife Fund (WWF). The purpose is to incentivize companies to increase the level of ambition on climate actions, to adopt “science-based targets,” that is, targets that are aligned with a level of decarbonization consistent with limit-ing warming to below 2°C compared to pre-industrial temperatures, and to act as a positive influence in the Paris negotiations.a

Under the initiative, a new GHG emissions reduction target setting methodology and tool were developed—the Sectoral Decarboniza-tion Approach (SDA) and the related SDA Calculation Tool and Target-Setting Manual—which help companies design, evaluate, and implement science-based emissions reduction targets.b To galvanize the adoption of science-based targets, the initiative recently released the Mind the Science Report, highlighting the rationale of science-based targets, and began design of an online Climate Data Explorer

(CAIT) Business Target Tracker that allows companies to track the processes toward science-based reduction levels.c Other ongo-ing activities such as the “Call to Action and Corporate Engagement” are also designed to facilitate companies’ action on climate change.

See more information on http://sciencebasedtargets.org/

Notes:a. Science Based Targets. 2015. “Science Based Targets Initiative.” Available at: http://sciencebasedtargets.org/wp-content/uploads/2015/05/Science-Based-Targets-initiative-overview.pdfb. Science Based Targets. 2015c. Science Based Targets. 2015

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Box 14 | Marks & Spencer’s Climate Actions Contributed to Staff Motivation and Brand Enhancement

Marks & Spencer (M&S), a major UK retailer, implemented a five-year climate-action plan called “Plan A” between 2007 and 2012. The plan aimed to achieve carbon neutrality, zero landfill waste, and sustainable sourcing of products.a After reaching its major pledge of becoming carbon neutral in all its UK stores, the company introduced 100 new commit-ments in Plan A 2020.b The upfront costs of Plan A were paid back in two years, as the

company increased savings through initia-tives on climate change and waste reduction. According to M&S’s business case study on Plan A, this initiative contributed to staff motivation and brand enhancement.c In inter-views and surveys conducted internally, Plan A was often listed as one critical reason why candidates wanted to join M&S; it was also cited as a significant contributor to employee satisfaction.d In addition, Plan A differenti-

ated M&S from other retailers, attracted more customers into the company’s stores,e and demonstrated the accountability of M&S to its stakeholders.f The company also received posi-tive media coverage of its efforts to improve sustainability. The company suggests that Plan A may been a key boost for the M&S brand and awards have supported this idea.g,h

Notes:a. Ernst & Young. 2010. “The Business Response to Climate Change: Choosing the Right Path.” Available at: https://www2.eycom.ch/publications/items/other/2010_cc_right_path/201004_EY_Business_Response_CC_right_path.pdfb. Marks and Spencer. “About Plan A.” Available at: http://corporate.marksandspencer.com/plan-a/our-stories/about-plan-ac. Marks and Spencer. 2012. “The Key Lessons From the Plan A Business Case.” Available at: http://corporate.marksandspencer.com/documents/plan-a-our-approach/key-lessons-from-the-plana-business-case-september2012.pdfd. Marks and Spencer. 2012.e. Ernst & Young. 2010f. Marks and Spencer. 2012. g. 2012 Interbrand Best Retail Brand–M&S placed 2nd in the UK (Plan A highlighted as a driver); Goodbrand 2011 Social Equity Index–M&S placed 3rd and top for the UK; WPP Top Green Brands Index 2011–M&S placed fourth; Kelkoo UK Best Brand Survey 2011–M&S placed third and top for Trust and Environment; Havas Media Meaningful Brands–M&S top UK retailerh. Marks and Spencer. 2012.

secured nine percentage points higher on overall return on investment than their peers without targets.57 Because ambitious targets do not guarantee immediate returns, leveling the playing field through the adoption of strong climate policies, as described above, is essential to fairness.

▪ MANAGE STAKEHOLDER RISKS AND ESTABLISH GOOD CORPORATE IMAGE. Currently, levels of environmental and climate change awareness are higher than ever before.58 A McKinsey study observed that 87 percent of global consumers are concerned about the environmental and social impacts of products they buy. For a company, lack of an internal emissions reduction target may undermine its financial access, generate negative publicity, and increase employee dissatisfaction with the company’s development strategy.59 In contrast, setting targets means being more accountable, enabling differentiation from competitors. Companies can improve their brand image by proactively marketing their climate change strategies.60 In addition, the adoption of targets and

disclosure of how companies manage climate risks can provide confidence to investors, consumers, and other stakeholders.61 See Box 14 for an example of how Marks & Spencer’s climate actions contributed to staff motivation and brand enhancement.

▪ REDUCE FUTURE OPERATIONAL, COMPLIANCE, OR REGULATORY COST. If sufficient information is gathered in the process of setting targets, companies can better understand the impacts of climate change and embed climate scenarios into investment decisions to reduce future costs.62 Adopting ambitious climate goals, including improving energy efficiencies or switching fuel sources, can lower future compliance or regulatory costs63 and, at the same time, help companies take full advantage of tax incentives, subsidies, or stimulus funding.64 In addition, because every year of delay will escalate the cost of addressing climate change, taking early action is a good way to reduce future costs.65

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▪ HELP IDENTIFY OPPORTUNITIES TO MAKE SMART, COST-EFFECTIVE BUSINESS DECISIONS. Compared to the competition, the services or products of companies that have taken early climate actions aligned with the future low-carbon economy are more adapted to, and competitive in, the new low-carbon business environment. In the long term, these companies can maintain or generate competitive advantage over their peers.66 Goldman Sachs predicts that as much

Sprint, a wireless communication company, set and exceeded its GHG reduction goal of 20 percent between 2007 and 2017, achieving a reduction of 29 percent by 2013.a The company increased its energy efficiency by using the Building Automation Systems (BAS) to monitor heating and cooling activities, thereby lowering energy costs, reducing HVAC

and lighting maintenance costs, and increasing worker productivity.b

With an internal goal, the company became more innovative in finding attractive business opportunities and maintaining competitiveness among peers. By replacing multiple networks with a single more energy efficient network, the

company achieved greater energy efficiencies and also enhanced the service and capacity of its network.c In addition, Sprint also expanded the deployment of hydrogen fuel cells, which helped the company keep emissions low and at the same time significantly improve its network resilience with longer back-up power.d

DuPont, a global science and technology company, was one of the first companies to establish a voluntary carbon emissions reduction goal. The company has set a number of emissions reduction goals and has managed to exceed targets ahead of schedule. Between 1994 and 2000, the company set and achieved a 40 percent reduction goal. It revised the goal to achieve a 65 percent reduction by 2010, and then surpassed that target in 2003.a

For DuPont, setting climate goals delivered major energy and cost savings. Since 1990, the company has saved over $6 billion in cumulative energy purchases.b Most importantly, the company differentiated its businesses by embedding sustainability thinking into R&D and product development,c which created profitable products and services for the company. For example, DuPont™ Tyvek® HomeWrap® provides energy-saving

insulation, enabling a reduction of energy use in buildings; DuPont™ Solamet®, Tedlar® and Elvax® produce essential materials for PV solar panels, allowing consumers to convert sunlight directly into electricity.d

Notes:a. U.S. Environmental Protection Agency. 2015. “Sprint Recognized as EPA’s 2015 Climate Leader for Excellence in Greenhouse Gas Management. ” Available at: http://yosemite.epa.gov/opa/admpress.nsf/0/5B0EA469685831E285257DF7005F5683b. U.S. Environmental Protection Agency. 2015.c. WWF. 2013. “Climate Savers Factsheet: Driving Climate Protection Through the Network and Beyond.” Available at: http://climatesavers.org/wp-content/uploads/2015/01/SPRINT_-Factsheet_APPROVAL_0021.pdfd. Goodman, Ann. 2014. “For Sprint, Communication is Core to Climate Resilience.” GreenBiz News. Available at: http://www.greenbiz.com/blog/2014/10/23/sprint-climate-resilience-networks

Notes:a. CDP and World Wildlife Fund. 2013. “The 3% Solution: Driving Profits Through Carbon Reduction.” Available at: https://c402277.ssl.cf1.rackcdn.com/publications/575/files/original/The_3_Percent_Solution_-_June_10.pdf?1371151781b. CDP and World Wildlife Fund. 2013.c. CDP and World Wildlife Fund. 2013.d. DuPont Media Center. 2006. “Ceres Report Ranks DuPont #1 in U.S., #2 Globally on Climate Change.” Available at: http://www2.dupont.com/Media_Center/en_US/news_releases/2006/article20060321c.html

Box 15 | Sprint Identified Profitable Business Opportunities by Adopting a Climate Target

Box 16 | Dupont’s Climate Target Paved the Way for R&D and Product Development

as 15 percent of total cash flow may transfer from the least carbon-efficient organizations to the most. The transfer is even greater in the most carbon-intensive industries, where as much as 60 percent of cash flow may switch hands from the least carbon-efficient organizations to the most.67 See Boxes 16 and 17 for examples of companies that found business opportunities by adopting emissions reduction targets.

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CONCLUSIONIt is not every year—or even every decade—that there exists a political opening to secure the right short- and long-term signals that will help us achieve the transition to a low-carbon future in a manner that is equitable, and involves the least cost and the least disruption possible. The upcoming decisions at the Paris negotiations present an opportunity to put our global community on the right path, providing appropriate short-term signals for investors and innovators as well as a strong long-term signal that guides the phase out of greenhouse gas pollution.

It is now well established that the private sector’s response to climate change will define its performance in the future.68 There are numerous benefits to acting now. And there are many risks involved in adopting a “wait and see” attitude to future governmental actions and their possible consequences. The longer we delay emissions reductions, the more difficult and expensive it will be to limit global warming.

Companies around the world can reap the benefits of a low-carbon future by (1) advocating for strong short- and long-term signals to be adopted in the Paris Agreement, as well as (2) adopting ambitious internal climate targets consistent with climate science. The private sector can play a critical role in defining our global emissions trajectory and determining whether we embrace a steady transformation that avoids the worst impacts of a changing climate.

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ANNEX I: FEASIBILITYVarious scenarios have been developed to model the trans-formation to a low-carbon society. Some of them achieve zero net GHG emissions, and demonstrate the changes that would be required at a sectoral basis. Below, we pro-vide a brief summary of the feasibility of, and options for, driving sectoral emissions pathways that are consistent with deep transformation. Studies make it clear that, while technically feasible, transformation in each sector will occur only with guidance from short- and long-term policy signals, as described below.

It should be noted that the studies’ assessments of neces-sary emissions reductions in each sector depend on the emissions trajectories modeled, including the timing of emissions reductions and whether emissions are phased out completely. They also depend on reductions realized in other sectors; most modeling studies are able to determine the necessary reductions in each sector based on what a cost-effective allocation of emissions reductions would be across all sectors. They also differ in their technological assumptions.69 It is beyond the scope of this paper to pro-vide an overview of all differing assumptions of modeling studies; instead we describe the pathways for decarboniza-tion in each sector.

Energy Supply

The greatest potential for emissions reductions lies in the energy system.70 There are several key opportunities for reducing emissions in the sector, such as increasing renewable energy and nuclear power, energy efficiency gains, and deployment of carbon capture and storage (CCS).71

Different combinations of such mitigation opportuni-ties lead to different emissions reductions pathways. For example, according to one study by Höhne et al., it is possible to phase out GHG emissions by mid-century in one of two ways. Scenarios assume either 100 percent renewable energy by 2050, coupled with efficiency gains; or they assume that renewable energy can be increased to a very high share, but not quite 100 percent, while CCS is deployed at a large scale.72 The Deep Decarbonization Pathways study’s models were able to achieve 85 percent reductions in emissions below 2010 levels by 2050 in the energy supply sector.73 The New Climate Economy report found that significant mitigation is possible in the energy sector through the elimination of fossil fuel subsidies and establishment of a carbon price through taxes.74 The

IPCC’s mitigation scenarios find that for an emissions pathway that is consistent with a likely chance of limiting warming to 2°C, the share of low-carbon electricity supply can be increased to 80 percent by 2050 (from 30 percent today) and fossil fuel power generation without CCS can be phased out almost entirely by the end of the century.75

Constraints facing renewables are related less to their technical potential and more to costs, and demands for electricity and system integration—challenges that vary by location, sector, and technology.76 However, the cost of most renewable energy technologies has already declined and further cost reductions are expected with anticipated technical advances.77

While studies show that it is possible to achieve the neces-sary scale of change, short- and long-term signals will be essential for any of these transitions. Replacing fossil fuel power generation requires time. Most power plants have a lifetime of around three decades.78 A high share of renew-ables will require investments in storage systems.79 Many renewable energy technologies also require direct sup-port, such as feed-in tariffs or renewable energy quotas, or indirect support, such as through carbon prices, if their shares are to increase.80 The longer we delay, the more we risk carbon lock-in in our current systems, larger scale and more costly retrofits, ever greater reliance on advancing all technologies at greater scales (including CCS and nuclear), and overall higher costs.81

Transport

Given current trends in demand for travel, and in the absence of policy interventions, transport-related emis-sions could more than double by 2050 and more than triple by 2100.82 However, there are significant oppor-tunities to reduce emissions in the transportation sec-tor consistent with phasing out emissions and limiting warming to 2°C. Opportunities include the transition to low-carbon fuels, more efficient vehicles and engine performance, modal shifts, and avoided journeys, among others.83 The IPCC notes that technical potential exists right now to substantially reduce emissions per passenger or per tonne kilometer of freight for all modes of transport by 2030 and beyond.84 By 2100, hydrogen and electric-ity could amount to almost a quarter of the share of final energy use in the sector.85 Energy efficiency measures have the largest potential for emissions reductions in the short term; reductions can be achieved through an increase in energy efficiency and performance of 30–50 percent in 2030 with respect to 2010 levels. Modal shifts have the

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potential to reduce GHG intensity by 20–50 percent in 2050 compared to 2010 levels.86

However, the IPCC notes how difficult it will be to reduce transport-related emissions given the growth in passenger and freight activity, which could counteract progress from mitigation achieved through efficiency gains.87 Short- and long-term policy and regulatory signals will be essential. For example, they are necessary for avoiding future lock-in, given the slow turnover of vehicle stock and infrastruc-ture and expanding urban sprawl, and for making prog-ress in the face of increased growth in demand.88 Realizing energy efficiency potential will depend on significant investments by vehicle manufacturers, which will, in turn, require catalyzing incentives and policies.89 It also takes time to change the behavior of consumers, which will be a necessary element of any modal shifts. The IPCC notes that private sector initiatives to decarbonize freight trans-port have started but also need support from policies.

There are other examples of policies working to cata-lyze transformation, such as fuel economy standards that encourage demand for more efficient vehicles, and modal choices enabling a shift to low-carbon modes.90 Given rebound effects that can reduce the CO2 benefits of efficiency improvements, a basket of policies can help stabilize price signals and avoid unintended outcomes.

Industry

Several opportunities exist for mitigation in the industry sector. Höhne et al. find that phasing out GHG emis-sions by mid-century can be achieved through: boosting material efficiency, more than doubling energy efficiency, fuel switching away from fossil fuels, carbon capture and storage, and phasing out of HFCs.91 The IPCC agrees that a multi-prong strategy is required for reducing emissions in the sector; while energy efficiency improvements are not sufficient to achieve a full transformation, additional inter-ventions can assist in reducing emissions (for example, material use efficiency, emissions efficiency (via CCS and fuel-switching), recycling/re-use of materials and prod-ucts, product-service efficiency, and demand reductions).92 Under the Deep Decarbonization Pathways Project scenario, a fully decarbonized electricity supply alone does not get heavy industry onto the phase out pathway,93 but electrification can help achieve lower carbon intensities.

To bring industrial emissions to a level consistent with a likely chance of limiting warming to 2°C, the IPCC notes that the sector’s final energy demand decreases by roughly

20 percent in 2030 and by 30 percent in 2050 from the baseline scenarios in those respective years, and the share of low-carbon energy in final energy supply increases by above 35 percent in 2030 and 50 percent in 2050 from the baseline scenario.94

The energy intensity of industry can be reduced by 25 percent compared to today’s levels through deployment of best available technologies and upgrading and replace-ment of outdated equipment. However, more would have to be done. According to Höhne et al., no technological options exist for about 15 percent of industrial energy use, and therefore innovation programs would have to be developed.95 According to the IPCC, an additional reduc-tion of about 20 percent in energy intensity can be realized through innovation.96

As with the sectors discussed previously, significant investments will be required in industry to avoid the use of less efficient higher emissions technologies, especially in developing countries where there are significant opportu-nities to leapfrog. Short- and long-term policy signals are necessary for driving such investments. But there are sig-nificant co-benefits to mitigation in the sector, including profits resulting from efficiency increases, new business opportunities, and reductions in water and air pollution, and waste.97

Buildings

Many opportunities exist in the building sector to reduce emissions, including increasing energy efficiency through low-energy building codes, building retrofits, and appli-ance labeling.98 As with the industry and transport sectors, as buildings become more efficient in their final energy consumption (for example, through reducing heating/cooling needs) and use more low-carbon energy on site, the impacts of greening of the electricity supply on GHG emissions reduction can be amplified in the sector.

To be consistent with a likely chance of limiting warming to 2°C, and phase out emissions in the long term, the IPCC model assumes that the building sector reduces its final energy demand relative to the baseline by approximately 17 percent in 2030 and by 27 percent in 2050. The sector increases the share of low-carbon energy in its final energy supply to over 35 percent in 2030 and close to 55 percent in 2050.99 Höhne et al. note that, to achieve a phase out of net greenhouse gas emissions by mid-century, all new buildings have net zero or net negative emissions as soon as possible;100 all electric appliances and lighting are at

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least as efficient as those that are currently best in class; and efficient stoves are used to reduce the use of tradi-tional biomass to zero.101

However, as a result of technologies, know-how, and poli-cies in the sector, it is feasible for the sector’s final energy use to stabilize or even decline by mid-century.102 Regula-tory instruments such as building and appliance energy-performance standards, as well as public procurement policies, have proven cost-effective.103

Reductions in the sector can be highly dependent on adequate short- and long-term policy signals, and their absence can also lock in carbon-intensive trajectories in the sector. Buildings and related infrastructure have long lifespans. The IPCC notes, for example, that the large majority of buildings that will exist in 2050 in developed countries already exist. However, high performance retro-fits in such buildings have great mitigation potential. Sig-nificant investments will be made in the future to improve access to and fulfill building energy demand, including the provision of modern energy services and adequate hous-ing. The new construction that is occurring all over the world, and especially in developing countries, should be viewed as an opportunity to advance best-practice tech-nologies rather than a risk that we will continue to lock in a high emissions trajectory.104 Also, lifestyle and behav-ioral changes can reduce energy demand significantly—in developed countries by up to 20 percent in the short-term and by up to 50 percent by mid-century compared with present levels—but this is not easy. Policy and regulatory signals can help foster such behavioral changes, and help encourage leapfrogging of inefficient practices in develop-ing countries.105

The embrace of such signals can pay off. Past experi-ence with efficiency gains, through building codes and targets, voluntary construction standards, and appliance standards, has demonstrated that performance and cost improvements can follow. A quarter to a third of energy-efficiency improvements have been achieved in a cost-effective way.106 Additional benefits can follow, including energy security, health and environmental improvements thanks to reduced air pollution, alleviation of fuel poverty, and reduced energy expenditures, among others.107

Agriculture, forestry, and other land use (AFOLU)

There are two baskets of interventions for reducing emissions in the agriculture, forestry, and other land use (AFOLU) sector. First are supply-side measures, includ-ing sustainable forest management, reduced deforesta-tion, afforestation, land and livestock management, and increasing carbon stocks. Demand-side measures, on the other hand, target demand for products, such as reducing waste in the food supply chain, and dietary changes.108

The sector’s net annual baseline CO2 emissions are pro-jected to decline over time, with net emissions potentially less than half of 2010 levels by mid-century; the sector could possibly be a net sink by 2100.109 There is significant potential for the sector, with a mitigation of 7.18–10.6 GtCO2e/yr in 2030 achievable from supply-side measures alone.110 Among the most cost-effective policies, which could account for a significant portion of the sector’s abatement potential, are measures to reduce emissions from deforestation and forest degradation (REDD+).111 Höhne et al. estimate that, if deforestation were brought to zero, it would reduce GHG emissions by 3 GtCO2 annu-ally. Avoiding tropical forest land-use change and forest degradation could lead to an additional reduction of 2.3 GtCO2.112 Restoring only 12 percent of degraded land could lead to 1–3 GtCO2e of reductions per year, as well as enhance smallholders’ incomes by US$35–40 billion annually and feed 200 million people per year within 15 years.113

Once again, both short- and long-term signals are critical for the full realization of the sector’s mitigation potential. The barriers to mitigation are largely institutional, including lack of tenure and poor governance. They are also related to access to financing, availability of land and water, and poverty.114 These barriers take time to address, as well as steady commitments from the public and private sectors. Without signals that guide policymaking and private sector investments, these barriers may not be fully overcome.

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Table A.1 | Timing of Availability of Improved Low-Carbon Technologies for Deployment at Scale (Assumed in DDPP)

SECTOR TECHNOLOGY STARTING DATE OF DEPLOYMENT AT SCALE

Power

CCS (coal and gas)

Advanced geothermal

Advanced energy storage

IV gen nuclear

2025–2030

2025–2030

2030–2035

2035–2040

Transport

Global availability of long range EVs across all vehicle types

Second generation biofuels

Hydrogen fuel cells

2020–2025

2020–2025

2030–2035

IndustryCCS in industry (close to pure CO2

streams)

Electric boilers and process heaters

2020–2025

2020–2025

Source: Sustainable Development Solutions Network (SDSN) and Institute for Sustainable Development and International Relations (IDDRI). 2014. “Pathways to Deep Decarbonization.”Available at: http://www.iddri.org/Publications/Rapports-and-briefing-papers/DDPP_interim_2014_report.pdf

Research and Development

While there are many opportunities for immediate deploy-ment of sectoral measures, at the same time it will be necessary to increase research and development into new technologies for deployment at scale later. For example, the Deep Decarbonization Pathway Project (DDPP) assumes that the world invests in development and early deployment of technologies that are not yet economically viable.115 Table A.1 illustrates assumptions in the DDPP model regarding the timing of availability of improved low-carbon technologies for deployment at scale.116 Long-

term goals assist in guiding the focus of research and development. For example, in Germany, it is clear that breakthroughs are needed in renewable technologies in order to meet the long-term goal of 80 percent emissions reductions by 2050. Without the guidance provided by long-term goals, it is very likely that research budgets will focus on technologies that are incremental in their effect, rather than transformational.

However, the deployment of such technologies will not happen on its own; it requires both market demand and public policy to correct market failures and support research and development.117

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ENDNOTES1. Ernst & Young. 2010. “The Business Response to Climate Change:

Choosing the Right Path.” Available at: https://www2.eycom.ch/publications/items/other/2010_cc_right_path/201004_EY_Business_Response_CC_right_path.pdf

2. Ernst & Young. 2010.

3. Bianco, N. et al. 2014.”Seeing is Believing: Creating a New Climate Economy in the United States.” The New Climate Economy-The Global Commission on the Economy and Climate. (Online Journal). Available at: http://www.wri.org/sites/default/files/seeingisbelieving_working_paper.pdf

4. New Climate Economy. 2014. “Better Growth, Better Climate: The New Climate Economy Report.” The Global Report, Chapter 3. The New Climate Economy-The Global Commission on the Economy and Climate. Available at: http://2014.newclimateeconomy.report/wp-content/uploads/2014/08/NCE-Global-Report_web.pdf

5. New Climate Economy. 2014.

6. New Climate Economy. 2014.

7. National Center for Environmental Information. 2015. “Billion-Dollar Weather and Climate Disasters: Table of Events.” National Oceanic and Atmospheric Administration. Available at: http://www.ncdc.noaa.gov/billions/events

8. Wong, P.P. et al. 2014. “Coastal systems and low-lying areas. In: Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.” Cambridge and New York: Cambridge University Press: 361–409. Available at: http://www.ipcc.ch/pdf/assessment-report/ar5/wg2/WGIIAR5-Chap5_FINAL.pdf

9. Porter, J.R. et al. 2014. “Food Security and Food Production Systems. In: Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.” Cambridge and New York: Cambridge University Press: 485–533. Available at: http://www.ipcc.ch/pdf/assessment-report/ar5/wg2/WGIIAR5-Chap7_FINAL.pdf

10. With a full range of 2.5–7.8°C when uncertainty is taken into account.

11. For example, according to Höhne et al. assuming a goal to phase out net emissions by 2050, technological options are not yet available to reduce GHG emissions to zero for about 10% of current sources of global emissions (e.g. some industrial processes and in agriculture) and innovation is necessary to develop new technologies.

12. Ernst & Young. 2010.

13. Two Parties, Costa Rica and the Maldives, have pledged a carbon-neutrality goal.

14. Put forward by the German Environment Minister in 2014. Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety, “Hendricks und Ban Ki-moon werben in Abu Dhabi für mehr Engagement im Klimaschutz.” Press Release.

15. G8. 2007. “Growth and Responsibility in the World Economy Summit Declaration.” Presented at G8 Summit 2007. Available at: http://www.g-8.de/Content/EN/Artikel/__g8-summit/anlagen/2007-06-07-gipfeldokument-wirtschaft-eng,templateId=raw,property=publicationFile.pdf/2007-06-07-gipfeldokument-wirtschaft-eng.pdf

16. IPCC. 2014. “Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.” Cambridge and New York: Cambridge University Press. Available at: http://report.mitigation2014.org/report/ipcc_wg3_ar5_full.pdf

17. Gurria, Angdel. 2014. “A Call for Zero Emissions.” World Economic Forum Blog. Available at: https://agenda.weforum.org/2014/01/call-zero-emissions-climate-bailout-ooption/. B Team. 2015. “B Team Calls for Net-Zero Greenhouse-Gas Emissions by 2050.” Available at: http://bteam.org/the-b-team/business-leaders-call-for-net-zero-greenhouse-gas-emissions-by-2050/

18. Morgan, Jennifer and Yamide Dagnet. 2014.“Elements and Ideas for the 2015 Paris Agreement.” Available at: http://www.wri.org/sites/default/files/uploads/ACT_Elements_Ideas_final_web.pdf

19. Levin, Kelly et al. 2012. “Overcoming the Tragedy of Super Wicked Problems: Constraining Our Future Selves to Ameliorate Global Climate Change.” Policy Sciences 45(2): 123–152. Available at: http://link.springer.com/article/10.1007%2Fs11077-012-9151-0

20. Allen, Myles R. et al. 2009. “Warming Caused by Cumulative Carbon Emissions Towards the Trillionth Tonne.” Nature 458(7242): 1163–1166. Available at: http://www.nature.com/nature/journal/v458/n7242/full/nature08019.html. Zickfeld, Kirsten et al. 2009. “Setting Cumulative Emissions Targets to Reduce the Risk of Dangerous Climate Change.” Proceedings of the National Academy of Sciences 106(38): 16129–16134. Available at: http://www.pnas.org/content/106/38/16129.full. Matthews, H. Damon et al. 2009. “The Proportionality of Global Warming to Cumulative Carbon Emissions.” Nature 459(7248): 829–832. Available at: http://www.nature.com/nature/journal/v459/n7248/full/nature08047.html. Meinshausen, Malte et al. 2009. “Greenhouse-gas Emission Targets for Limiting Global Warming to 2°C.” Nature 458(7242): 1158–1162. Available at: http://www.nature.com/nature/journal/v458/n7242/full/nature08017.html

21. Kolstad, Charles et al. 2014. “Social, Economic and Ethical Concepts and Methods. In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.” Cambridge and New York: Available at: http://report.mitigation2014.org/report/ipcc_wg3_ar5_chapter3.pdf

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22. Norman, Donald A. 1998. The Life Cycle of a Technology: Why It Is So Difficult for Large Companies to Innovate” Available at: http://www.nngroup.com/articles-life-cycle-of-a-technology/

23. Morgan, Jennifer and Yamide Dagnet. 2014.“Elements and Ideas for the 2015 Paris Agreement.” Available at: http://www.wri.org/sites/default/files/uploads/ACT_Elements_Ideas_final_web.pdf

24. Cameron, Edward and David Wei. 2015. “Why We Need to Strengthen Climate Commitments Every Five Years.” BSR Blog. Available at: http://www.bsr.org/en/our-insights/blog-view/why-we-need-to-review-climate-commitments-every-five-years

25. Dagnet, Yamide. 2015. “INSIDER: The Case for Establishing Five-Year Cycles in the Paris Climate Agreement.” WRI Blog. Available at: http://www.wri.org/blog/2015/05/insider-case-establishing-five-year-cycles-paris-climate-agreement

26. Greenpeace. 2014. “The five-year commitment period is key to consistent climate action.” Available at: http://www.greenpeace.org/international/Global/international/briefings/climate/COP20/5-Year-commitment-period.pdf

27. United Nations. 1992. “United Nations Framework Convention on Climate Change. Article 2.” Available at: http://unfccc.int/resource/docs/convkp/conveng.pdf

28. UNFCCC. 2011. “Report of the Conference of the Parties on its Sixteenth Session, Held in Cancun from 29 November to 10 December 2010.” Available at: http://unfccc.int/resource/docs/2010/cop16/eng/07a01.pdf

29. UNEP. 2013. “The Emissions Gap Report 2013.” Nairobi: United Nations Environment Programme (UNEP). Available at: http://www.unep.org/pdf/UNEPEmissionsGapReport2013.pdf. UNEP. 2014. “The Emissions Gap Report 2014”. Nairobi: United Nations Environment Programme (UNEP). Available at: http://www.unep.org/publications/ebooks/emissionsgapreport2014/portals/50268/pdf/EGR2014_LOWRES.pdf

30. G7. 2015. “G-7 Leaders’ Declaration.” Available at: https://www.whitehouse.gov/the-press-office/2015/06/08/g-7-leaders-declaration

31. Brazil and Germany. 2015. “Brazilian-and-German Joint Statement on Climate Change.” Available at: http://www.itamaraty.gov.br/index.php?option=com_content&view=article&id=10945:brazilian-german-joint-statement-on-climate-change&catid=578:press-releases&lang=en&Itemid=333

32. Informal Working Lunch on Climate Change. Conclusions of the Chairs. Available at: http://www.un.org/climatechange/wp-content/uploads/2015/09/Key-Messages-Informal-Lunch_FINAL.pdf

33. UNFCCC. 2015. “Scenario Note on the Tenth Part of the Second Session of the Ad Hoc Working Group on the Durban Platform for Enhanced Action.” Available at: http://unfccc.int/resource/docs/2015/adp2/eng/4infnot.pdf

34. Fisher, Brian et al. 2007. “Issues related to mitigation in the long term context. In Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Inter-governmental Panel on Climate Change.” Cambridge and New York: Cambridge University Press. Available at: https://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch3.html

35. World Business Council for Sustainable Development. 2015. “2015 Climate Change Agreement: An Accelerator for Business Actions.” Available at: http://wbcsdservers.org/web/wbcsdfiles/ClimateEnergy/Climate_and_energy_perspectives.pdf

36. In some cases, it is still too early to talk about the impacts of long-term signals. In addition, the literature does not often distinguish between the impacts of short-term or long-term signals on business activities, making it hard to study them separately.

37. Ernst & Young. 2010. “The Business Response to Climate Change: Choosing the Right Path.” Available at: https://www2.eycom.ch/publications/items/other/2010_cc_right_path/201004_EY_Business_Response_CC_right_path.pdf

38. Ernst & Young. 2010.

39. World Business Council for Sustainable Development. 2015.

40. The B Team. 2015. “B Team Calls for Net-Zero Greenhouse-Gas Emissions by 2050.” Available at: http://bteam.org/the-b-team/business-leaders-call-for-net-zero-greenhouse-gas-emissions-by-2050/

41. Track 0. 2015. “The Business Case for Adopting Net Zero.” Available at: http://track0.org/works/the-business-case-for-adopting-net-zero-track-0/

42. E3G. 2010. “Building a Sustainable and Low-Carbon European Recovery: How Moving to a 30 Percent Emissions Target is in the European Interest.” Available at: http://www.e3g.org/docs/E3G_Building_a_Sustainable_and_Low_Carbon_European_Recovery.pdf

43. FS-UNEP Collaborating Center. 2015. “Global Trends in Renewable Energy Investment 2015.” Available at: http://fs-unep-centre.org/publications/global-trends-renewable energy-investment-2015

44. CDP. 2014. “State by State: The Business Response to Climate Change Across America.” Available at: https://www.cdp.net/CDPResults/CDP-state-by-state-report-2014.pdf

45. World Business Council for Sustainable Development. 2015. “2015 Climate Change Agreement: An Accelerator for Business Actions.” Available at: http://wbcsdservers.org/web/wbcsdfiles/ClimateEnergy/Climate_and_energy_perspectives.pdf

46. We Mean Business. 2015.“The Climate Has Changed: Why Bold, Low-Carbon Action Makes Good Business Sense.” Available at: https://www.cdp.net/Documents/we-mean-business-the-climate-has-changed.pdf

47. World Business Council for Sustainable Development. 2015.

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48. BSR. 2015. “Business in a Climate-Constrained World: Creating an Action Agenda for Private sector Leadership on Climate Change.” Available at: http://www.bsr.org/reports/bsr-bccw-creating-action-agenda-private sector-leadership-climate-change.pdf

49. World Business Council for Sustainable Development. 2015.

50. Ernst & Young. 2010. “Action Amid Uncertainty: The Business Response to Climate Change.” Available at: http://www.ey.com/Publication/vwLUAssets/Action_amid_uncertainty_-_The_business_response_to_climate_change/$FILE/EY_Action_amid_uncertainty_-_The_business_response_to_climate_change.pdf

51. UN Global Compact. 2013. “Guide for Responsible Corporate Engagement in Climate Policy: A Caring for Climate Report.” Available at: http://www.wri.org/sites/default/files/guide_for_responsible_corporate_engagement_in_climate_policy.pdf

52. CDP and World Wildlife Fund. 2013. “The 3% Solution: Driving Profits Through Carbon Reduction.” Available at: https://c402277.ssl.cf1.rackcdn.com/publications/575/files/original/The_3_Percent_Solution_-_June_10.pdf?1371151781

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54. CDP and World Wildlife Fund. 2013.

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ABOUT THE AUTHORSJennifer Morgan is the Global Director of the Climate Program at the World Resources Institute. In this capacity, she oversees the Institute’s work on climate change issues and guides WRI strategy in helping countries, governments, and individuals take positive action toward achieving a zero-carbon future. She is responsible for day-to-day management of the 60+ person program, and works closely with the WRI China, India, Brazil and Indonesia offices. In addition, Jennifer is WRI’s lead representative at international climate meetings, including the UNFCCC negotiations.

Kelly Levin is a senior associate with WRI’s major emerging economies objective. She leads WRI’s Measurement and Performance Tracking Project, which builds capacity in developing countries to create and enhance systems that track emissions reductions associated with low-carbon development goals. She closely follows the negotiations under the UN Framework Convention on Climate Change, with a focus on countries’ mitigation commitments and GHG measurement and reporting.

Jiawei Song is a Helms Fellow with the Climate Program at WRI, where she supports research and analysis on various aspects of the long-term climate goal, with a focus on: the scientific basis of and communications implications of various framings of the long-term goal, business engagement and leadership in tackling climate change, countries’ positions in the international climate change negotiations, among other related topics.

Juan Pablo Osornio is a consultant on Climate Strategies and Policies at Ecofys. He focuses on optimizing the transition to a low-carbon economy for companies and developing countries. He is a co-author of the Better Partnerships report (2015) published by Ecofys and CISL on private sector cooperative initiatives.

Copyright 2015 World Resources Institute. This work is licensed under the Creative Commons Attribution 4.0 International License. To view a copy of the license, visit http://creativecommons.org/licenses/by/4.0/

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ACKNOWLEDGMENTSThe authors would like to thank the following individuals for their time and help reviewing the paper or providing editorial and layout support: Pankaj Bhatia, Hyacinth Billings, Peter Boyd, Yamide Dagnet, Rhys Gerholdt, Karl Hausker, Carni Klirs, Laura Malaguzzi Veleri, Emily Matthews, Eliot Metzger, Julie Moretti, Kevin Moss, Elyse Myrans, Joe Thwaites, and David Waskow.

ABOUT WRI World Resources Institute is a global research organization that turns big ideas into action at the nexus of environment, economic opportunity and human well-being.

Our ChallengeNatural resources are at the foundation of economic opportunity and human well-being. But today, we are depleting Earth’s resources at rates that are not sustainable, endangering economies and people’s lives. People depend on clean water, fertile land, healthy forests, and a stable climate. Livable cities and clean energy are essential for a sustainable planet. We must address these urgent, global challenges this decade.

Our VisionWe envision an equitable and prosperous planet driven by the wise manage-ment of natural resources. We aspire to create a world where the actions of government, business, and communities combine to eliminate poverty and sustain the natural environment for all people.

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SCALE ITWe don’t think small. Once tested, we work with partners to adopt and expand our efforts regionally and globally. We engage with decision-makers to carry out our ideas and elevate our impact. We measure success through government and business actions that improve people’s lives and sustain a healthy environment.