The World Business Council for Sustainable Development (WBCSD) recognizes the urgent need for companies to support development while spurring a move toward a global low-carbon economy, the economy of the future. The latest edition of its magazine Sustain highlights the important links between energy, climate and development. The magazine also includes several article and cases highlighting the role of business in creating economic opportunities through inclusive business initiatives.
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WBCSD Sustain Magazine October 2009 - Energizing development in a changing climate
1. Issue 31 October 2009
Special double issue
Development
Energy
Energy Climate
Climate
Development
In this issue
Planetary shifts:
Energy, climate and
development
Inclusive business:
Profitable business for
successful development
A low-carbon pathway
to development
Technology in the
climate change
negotiations
Developments in
product carbon
footprinting
Sustain issue 31 October 2009 1
3. www.wbcsd.org
Technology in the climate 18 Making the case
change negotiations
Whatever agreement governments
Duke 8
reach in Copenhagen on a new climate
Save-a-watt model
framework, business will be responsible
for delivering the technology solutions.
Pronoca 8
Inclusive business in the agribusiness sector
Washington and Copenhagen 21
The US government has been having a
very hard time developing, out of a nation
EcoSecurities 8
disunited on climate, a united position for
From three-stone fires to a better life
the Copenhagen negotiations.
GDF SUEZ 13
Business solutions to energy poverty
Mobility for development 22
Mobility is essential to economic and
social development. It enables people to
ArcelorMittal 15
access goods, services and information, as
Steel’s contribution to green construction
well as jobs, markets, family and friends.
GE 18
Jenbacher engines turn waste into value
China: Opportunities of limits 24
Due to the size of its market, and, more
importantly, the size of its potential
Vestas 20
future market, China’s government has
Spreading clean energy technology in China
unparalleled opportunities to avoid
locking into a high-carbon future.
Allianz 23
Protecting the poor through microinsurance
Measuring the “win-win” 26
In 2006, some 20 WBCSD companies
began a two-year project to help
Anglo American 25
companies measure their impact
Investing in local enterprise development
on society.
Newmont 30
Supporting local economic growth in Ghana
Developments in product 28
carbon footprinting
Product carbon footprinting is becoming
Coca-Cola 30
one of the core elements of any robust
Innovating distribution
business strategy on climate change.
Philips 30
The economic and ecological benefits of
Energy efficiency in buildings 32
energy-efficient lighting
Unless we transform the building sector
we won’t make the essential transition to
a low-carbon world.
4. Emerging and developing countries
will be the source of the majority of
greenhouse gas (GHG) emissions
in the future. While some people
in many of these countries have
Planetary shifts: income over the last ten years, many
still live on less than US$ 2 a day and
Energy, rely on traditional means of lighting,
heating and transport and have less
capacity to adapt to the negative
aspects of climate change. Energy,
climate climate change and development are
them together we won’t win the battle
against any of them.
and The WBCSD recognizes the urgent
need for companies to support
development development while spurring a
move toward a global low-carbon
economy, the economy of the
future. As people – rich and poor,
in emerging and developed nations
try to develop along low-carbon
lines, the Council’s Development
Focus Area and Energy and Climate
Focus Area are cooperating more
closely and engaging in a number of
Shanghai, China complementary activities.
Energy & Climate Development
For the last 2 years, the Energy & Climate Focus Area
has focused its work around ensuring that the business economic and political power from the traditional base of
voice is heard in the United Nations international climate industrialized countries in Europe, North America and Japan
negotiations. As the main source of innovation and capital, to emerging economies.
business will have an integral role in any transformation to
a low-carbon world. A new climate agreement will require Managing the rapid population growth, urbanization and
international cooperation, partnerships, and clear roles for growing aspirations of the middle class in these countries will
government, business, the consumer and civil society. demand major investments in infrastructure and innovation to
support better living standards while reducing the pressure on
The 2009 publication, Towards a Low-carbon Economy: the world’s ecosystems.
A business contribution to the international energy and climate
debate, provides a business perspective on the key issues The WBCSD believes that the leading companies of the future
under negotiation – mitigation, technology, finance and will be those that align their business goals to address key
adaptation. sustainability challenges. With the appropriate incentives,
business can be a provider of solutions to these challenges and
These elements are at the core of business activity and support the transition to a sustainable pathway to development.
operations. Business innovates, develops and deploys
technology on a daily basis. Finance flows through business The Development Focus Area seeks to create awareness
transactions and projects globally. Businesses are already among business on risks and opportunities in managing key
adapting infrastructure and operations to the impacts of development challenges and advocates business perspectives
2 Sustain issue 31 October 2009
5. climate change. An effective international framework that to policy-makers and other stakeholders on the role of
leverages business engagement and enables business to business in development.
contribute to solutions is essential.
The Focus Area provides various platforms for companies to
The climate negotiations in Copenhagen in December will learn, lead, act and advocate. Through member-led initiatives
mark a watershed in the international negotiations. There is and a regional engagement program, companies promote
a need for governments to reach an agreement on targets business solutions and develop policy messages on topics such
and a framework to guide efforts to meet these targets. as mobility and energy for development. In close collaboration
with its Regional Network partners, the WBCSD also identifies
Beyond Copenhagen, the WBCSD will focus on the and brokers business opportunities such as those being
continued need for business to help design the institutions, implemented through the Council’s Alliance with the SNV
mechanisms, innovative technologies, solutions and tools Netherlands Development Organization in Latin America.
needed to deliver emissions reductions.
To enhance these efforts, the WBCSD has consolidated lessons
One of the key tools will be the Greenhouse Gas learned and best practice in the form of tools. One example
Protocol Corporate Accounting and Reporting Standard, is the recently released Measuring Impact Framework, which
developed by the WBCSD and World Resources Institute. helps companies understand their contribution to society to
The framework gives business and organizations an make better operational and long-term investment decisions
internationally accepted methodology to help quantify and and have better-informed conversations with stakeholders.
report the direct and indirect greenhouse gas emissions
associated with their operations. As an advocate for business, the Focus Area provides business
input into key platforms at the United Nations and multilateral
Two new Greenhouse Gas Protocol standards – focused on development banks.
product-level and corporate-level supply chain emissions –
currently under development will provide a standardized Going forward, the Development Focus Area will continue
methodology to inventory the emissions of products both to be a source of thought leadership on key business and
internally and along a company’s value chains. development issues, with the ultimate aim of defining the role
of business in transitioning to a more inclusive, low-carbon
www.wbcsd.org/web/energy.htm and resource-efficient economy.
www.wbcsd.org/web/development.htm
“Development and climate change are the
central problems of the 21st Century. If the
world fails on either, it will fail on both.
Climate change undermines development.
No deal on climate change which stalls
development will succeed.”
Sir Nicholas Stern, economist and author of the
Stern Review Report on the Economics of Climate Change
“In our increasingly globalized world,
companies are major economic actors
who can play a significant role in areas like
poverty alleviation, climate change, trade
liberalization, supporting good governance,
technology transfer and capacity-building.”
Cynthia Carroll, CEO, Anglo American
Sustain issue 31 October 2009 3
6. Copenhagen
Copenhagen has become
synonymous with an
agreement on climate
and the
change that could result
in far reaching changes
in the way global society
“AFT” of the solution
functions. Solid scientific
evidence shows that
human activities, notably
the way we produce and
use energy, have resulted
in an increase in global
atmospheric concentrations
of greenhouse gases There is ample evidence that we need to do something now to avoid a warming of
more than 2°C, which is the accepted limit to prevent dangerous climate change.
(GHGs) that are linked
Glaciers are melting, heat waves are more frequent in temperate lands, disease
to global warming. The
patterns are changing, crop seasons are being affected – are these not strong
enough signals?
energy continues and
unless we decouple the link The global response has been slow – slow to flag the problem, slow in
between economic growth acknowledging, slow in negotiating and painfully slow in acting on it.
and GHG emissions we will Copenhagen provides a window of opportunity to do something before it is
create a situation that is
consumers are becoming more numerous and more demanding – yet the scientific
irreversible.
consensus is that our global emissions must be reduced at least by 50% from
1990 levels by mid century. This is an ambitious and challenging target, which
will require each of us to play our part. The challenge is that despite action, global
warming will get worse before it gets better – but we must persevere.
Climate change was recognized as an international issue in the late 1980s.
The concerns, fueled by environmental groups, resulted in the United Nations
Framework Convention on Climate Change (UNFCCC) being adopted at the Earth
Summit in Rio in 1992. The Convention, which has almost universal membership,
requires developed countries to report their GHG emissions and carry out national
strategies to reduce them, support developing countries in their efforts and to
carry out adaptive measures. Although the aim is to reduce the GHG emissions
of developed countries to their 1990 levels, there are no binding commitments
and GHG emissions continue to rise. The principles of common and differentiated
responsibilities with developed countries taking the lead and the actions of
developing countries being dependent on developed country financial support
and technology transfer are embedded in the Convention and remain critical
negotiating issues today.
4 Sustain issue 31 October 2009
7. Shortly after the Convention kicked adaptation, technology and finance. factor behind the negotiations – where
in, it became obvious that more This track encompasses all countries, the money will come from and where
drastic measures were necessary as including the US. The second track is will it be directed. This is big money
the global warming phenomenon focused on ensuring a continuation and could trigger big changes.
continued unabated. Hence in 1997 of the Kyoto Protocol and hence
the Kyoto Protocol was adopted. defining further targets for developed Whatever the answer is it will be
The Kyoto Protocol committed 37 business that will need to implement
developed countries and the European US. The negotiations have increased in the solutions by deploying
Community to reduce their GHG intensity and yet at 4 months before technologies, investing in new clean
emissions collectively to an average of Copenhagen it is unclear what form
5% below their 1990 levels between any agreement could take. capacity. Enhanced and interconnected
2008 and 2012. It was an uphill markets will fuel the efforts.
task to get countries to sign on to The key issues remain the same – who
the Kyoto Protocol, despite the fact will play, who will pay and how much. The answers to the climate change
that it contained various financial The world has changed since 1992. dilemma lie in the letters AFT – A for
mechanisms to assist countries in The International Energy Agency (IEA) America and Asia, F for Finance and T
reducing their emissions at the forecasts in its 2008 World Energy for Technology.
lowest possible cost. This was mainly Outlook that China and India will have
because it took time for the financial GDP growth rates of over 6% between America is back in the picture. After
mechanism rules to be decided and 2006-2015. Compare that with the years in the wilderness, the US is again
because the United States, one of the US at just over 2%. The per capita a committed multilateral leader on
chief architects of the Protocol, refused emissions of both China and India are global issues. It needs to deliver on
to sign on. low compared to OECD countries. The climate change at a national level,
major emerging countries have a long commit internationally and spearhead
In 2007 in Bali, at the annual meeting way to go to catch up but they are support for developing countries.
of the members of the UNFCCC, the sprinting. It is critical that they develop
Bali Road Map was launched beginning along low-carbon pathways if the Asian giants need to show their own
a two year process geared at providing planet is to survive. commitment to actions and willingness
an international agreement allowing to join the fight, but they will not do
for a seamless transition to a global Whatever the developed countries so until developed countries fulfill their
agreement building on the Kyoto do to reduce their emissions in the part of the bargain – being serious
about reducing emissions at home
2012. This process, which culminates on global warming unless we reduce and supporting developing countries
at Copenhagen, needs to provide the the rate at which emissions are rising through financing, which will drive
signals to allow a global response that in developing countries. The major technology investments and support
will initiate actions to slow down the developing countries are poised on adaptation. It looks easy: strong targets
rise of global GHG emissions, allowing the brink of becoming premier league by developed countries would create
them to peak in 2020 and then to players and are in a strong position a demand for emissions reductions
further reduce them to 50% of 1990 to transform their economies to low- that would drive investments into
levels by mid-century. carbon pathways. They are growing, clean energy technologies. These
they are investing, they are consuming would occur principally in developing
This will require enormous effort, and they see the opportunities. They countries where many of the low
particularly by developed countries, that are rightly not prepared to limit their hanging fruits lie.
must simultaneously allow for economic own development or emissions unless
growth in developing countries and developed countries fulfill their side of Why does this not happen? It costs
provide assistance to the most vulnerable the bargain. money. It creates a different playing field
countries that bear no responsibility. where the developed and the developing
However, a global deal is essential to The IEA estimates that 1.1 trillion US world are brought closer together. It will
providing a truly global solution. require bold global leadership built on
necessary to bring global emissions trust, vision and the understanding that
So where are we now? Two-track down to 50% of current levels by the world has changed.
negotiations have been laboring on 2050. While some of this investment
since December 2007 – both tracks will bring down emissions in
are working to define a way forward developed countries, the lion’s share
post-2012. The first track defines long- will be more effectively invested in
term cooperative action on mitigation, developing countries. This is the key
Sustain issue 31 October 2009 5
8. Inclusive business:
Profitable business
for successful
development
The notion of inclusive Simply put, inclusive business involves future. Already accounting for more
doing business with low-income than half of the world’s gross domestic
business may be an
populations across companies’ value product, their economic weight is
innovative idea that is
chains, incorporating them in the likely to increase substantially over the
at last ready to achieve supply, production, distribution and coming decades. Inclusive business
ground-breaking results. marketing of goods and services. This helps companies reach these markets,
generates new jobs, income, technical and at the same time can help provide
skills and local capacity. Likewise, poorer the economic growth that is the key to
consumers can benefit from products poverty alleviation.
and services that meet their needs in
affordable ways. “Given that most economic
activity now occurs in developing
The WBCSD and its members have countries, and given that over 90%
been pioneering work on inclusive of population growth will happen
business since the 1990s, and it there, the companies that master
has become a mainstay of the inclusive business will be those
Development Focus Area. who realize great success in the
coming decades,” noted Samuel A.
You will read elsewhere in this issue DiPiazza, Jr., former Global Chairman
about how the Allianz Group is tapping of PricewaterhouseCoopers and
growth opportunities in emerging Chairman of the WBCSD during 2008
economies, aiming to reach 3 million and most of 2009.
clients with micro-insurance products
by the end of 2009. Coca-Cola has WBCSD members believe that
created a vast network of manual globalization can be made more
distribution centers in Africa, generating inclusive and that the leading global
over 12,000 jobs and more than companies of the future will be those
US$ 500 million in annual revenues. that do business in ways that address
Myriad other examples can be found in the world’s major challenges, including
the WBCSD case study library. poverty and inequity. Inclusive business
is one way companies can contribute to
Several technological developments tackling development challenges.
promise to lower the transaction
costs of inclusive business and The Council’s inclusive business work
make it a much bigger business and has centered on communicating
development opportunity. These how companies design, develop and
include the ability to move money by implement inclusive business models
mobile phones, the development of in a wide range of publications, case
“smart cards” for poorer customers, studies, guides and a blog.
and growing access to computers and
connectivity in the developing world. In 2006, the WBCSD adopted a more
aggressive inclusive business strategy
Emerging and developing countries by joining forces with SNV Netherlands
represent the growth markets of the Development Organization to form
6 Sustain issue 31 October 2009
9. the Alliance for Inclusive Business gathering some 80 executives from Emerging and
in Latin America. The Alliance is national and international companies.
active in nine countries where the developing countries
WBCSD has national business partner “The biggest challenge we face is
represent the growth
organizations: Bolivia, Chile, Colombia, to create the ‘snowball effect’ in the
Ecuador, El Salvador, Honduras, business community,” said Salas. markets of the
Nicaragua, Panama and Peru. “We therefore need to move from
‘nice stories’ to real examples of
future.
The Alliance has reached out to 300 value creation. We also need to move
companies in these countries, and has from pilot projects to activities with
generated some 40 inclusive business relevant results. The network will help leading global
The
ideas, now being implemented in
areas such as agriculture, low-income
us promote leading-edge thinking
and to innovate in the ways in which
companies of the
housing, micro-insurance, mobile we communicate our perspectives on future will be those that
banking, forestry and biofuels. The
Inter-American Development Bank has
inclusive business.”
do business in ways
been keen to promote and fund some The WBCSD and SNV are exploring that address the world’s
of these initiatives. how best to build on their successful
work in Latin America, to expand
major challenges,
Many of the ideas generated are the uptake of inclusive business by including poverty
facing hurdles from national business starting activities in Asia, Africa and the
environments and regulatory regimes. Middle East. Projects have begun in and inequity.
The Alliance works with business and Zimbabwe, Mozambique and Vietnam.
other stakeholders at the national
level to identify the critical challenges www.inclusivebusiness.org
and address them in a collaborative
manner. For example, the Alliance’s
collaboration with the Ecuadorian
government has resulted in the
concept of inclusive business being
written into the national public policy
agenda, with a target of creating a
quarter of a million new jobs and a
commitment of some US$ 90 million
in public funds to co-finance projects.
To keep this momentum going, the
Council has been coordinating a
Latin American Network of Inclusive
Business Leaders, led by Roberto Salas,
CEO of the Latin American holding
company GrupoNueva. The network’s
aim is to engage CEOs to champion
the cause of inclusive business to
both their peers and governments:
promoting inclusive business in their
own companies, sharing learning with
others, and contributing to a common,
business-based voice to government
for framework conditions that support
inclusive business practices.
The Council and its Regional Network
partners have convened national-level
meetings in Colombia, Argentina,
Ecuador, Chile, Brazil and Peru,
Sustain issue 31 October 2009 7
10. Duke Energy PRONACA
The save-a-watt model Inclusive
business in the
agribusiness
sector
It is often called “the fifth fuel.” for each kilowatt-hour of electricity
Beyond coal, natural gas, nuclear, consumed. Simply stated, with the save-
and renewable energy lies the a-watt model, the company would be
largely untapped resource of allowed to earn a return on investments
energy efficiency. that help customers save energy.
According to US Department of Energy The save-a-watt model treats investments
in energy efficiency in a way that is similar
to investments in a new generating
even higher in faster-growing regions. As station. This benefits customers, the
such, all five fuels will be needed. company and the environment.
The traditional answer to meeting rising Under the program, Duke Energy
electricity demand has been to increase would earn a rate of return based on
supply – to build more power plants. a percentage of what it would have
However, Duke Energy believes that cost to build and operate a plant to
energy efficiency can play an important produce the amount of electricity that
role in reducing customer demand. the program saves. Under this plan,
all customers will receive a discount,
Because the cleanest power plant is the even if they do not participate in an
one that is never built, Duke Energy efficiency program. Those that actively EcoSecurities
believes energy efficiency should play a participate in the programs will see
key role in reducing greenhouse gases in lower power bills – that more than From three-
the near term. offset the cost to implement the save-
a-watt programs. stone fires to
Utilities have offered demand-side programs
for years – with varied results. In 2007, Duke Energy would be rewarded only a better life
Duke Energy worked with a number of for the energy savings that are actually
stakeholders to develop a different model, realized by customers. Each year, an
called “save-a-watt.” Today it is backed independent auditor would verify
by many consumer and environmental actual energy savings achieved through
groups, and in December 2008, the first energy efficiency programs. This is
of the company’s five state regulatory fundamentally different than the “cost
commissions approved the concept. plus” approach electric utilities have
traditionally used in being compensated
The save-a-watt model is designed to help for investments in energy efficiency.
Duke Energy’s customers save energy –
and money – and still earn a return for The Alliance to Save Energy, the
the company’s investors. Under current American Council for an Energy-Efficient
regulations, utilities make money by Economy, and the Energy Future
earning a return on their investment for Coalition endorse the initiative as “an
physical assets such as power plants, poles innovative and promising new direction
and wires, and by charging customers for the company and its customers.”
8 Sustain issue 31 October 2009
11. “What if we focus on small with a proposal to develop an inclusive The initiative created 234 new jobs and
farmers?” This was the question business model for maize production, many other indirect social benefits. Prior to
that Rodolfo Benitez, Agricultural through which farmers would increase their the project, only 60% of the small farmers
Division Manager of PRONACA productivity, and the company would cover received informal credit and most of them
(Procesadora Nacional de Alimentos more of its demand via local production, were unaware of the high interest rates they
or National Food Processor in thereby lowering production costs. were paying. The small producers gained
English) asked during an executive access to formal credit lines and market
committee meeting. The initial pilot began with 80 small maize rates through PRONACA, which facilitated
producers, and has now grown to 200, the process of opening bank accounts for
PRONACA is one of the largest companies with plans to increase to 650 producers in the small producers at Banco Pichincha. In
in Ecuador, with an annual turnover of more the coming year. The initiative includes a addition, by joining the formal economy
than US$ 500 million, in addition to being training program for the small producers, and having bank accounts, the farmers gain
the country’s leading buyer of yellow maize. coupled with facilitated access to credit and access to social benefits, reduce the time
new technology, the combination of which spent in bank lines and reduce the security
The majority of maize growers in Ecuador allows them to double their productivity risks from carrying large amounts of cash.
are small producers, cultivating up to and to raise their income from US$ 0.63
20 hectares with a productivity level to US$ 2 per capita per day. Interestingly, The project is scheduled to last 3 years
well below the international average. even though the farmers faced an initial and PRONACA is financing nearly half the
Consequently, PRONACA could only meet increase in costs of about 15% incurred costs, while the Multilateral Investment
40% of its maize demand (which totals by these investments, they increased their Fund of the Inter-American Development
some 450,000 tonnes annually) through productivity by one-fifth. Bank covers the other half. Building on its
local production, primarily through commitment to investing in sustainable
medium and large-scale growers, and had The initial results indicated a total volume business models, the company is currently
to import the other 60% at a higher cost. of 7 tonnes produced by local farmers. exploring new opportunities to incorporate
PRONACA regards this as a promising start, small producers of artichoke, rice, palm and
In early 2007, the WBCSD-SNV Alliance for and projects that within the next two years possibly sorghum in its value chain.
Inclusive Business approached PRONACA, they will produce roughly one-tenth of
a member of BCSD Ecuador (CEMDES), their local purchases.
The three-stone fire, centuries digesters to developing countries. to aggregate these carbon credits and sell
old, is a simple cook stove made MFIs can use their long-term local them to the worldwide carbon market.
up of three similarly sized stones presence and client relationships to
placed in a fire. If used inside, the broaden the scope of services they There are numerous ways buyers of
fire produces toxic fumes that can provide to include access to clean energy offsets can invest in these projects;
cause health problems, particularly solutions. Grameen Shakti, the renewable however, a popular option is to
lung disease for the family. If used energy business of the Grameen Bank, purchase emission reductions from
outside, the cook and the fire are has demonstrated that this can be done these micro-scale projects backed
exposed to the elements. successfully. However, due to lack of with an equal number of third-party
expertise and funding there is currently Verified Emission Reductions (VERs).
Improved cook stoves are cleaner, safer more demand for such programs than This provides a win-win situation for
and reduce the amount of time needed there are programs available. sustainable development in developing
to collect fuel wood. But how can poor countries and for companies interested
families in developing countries afford To date, MFIs have not been able to in meeting carbon neutrality goals
such stoves? leverage carbon finance for small scale or enhancing their corporate social
projects due to the high transaction responsibility strategy by using VERs that
EcoSecurities, a leading company in the costs related to the Clean Development have been approved by an established
business of sourcing, developing and Mechanism (CDM). and recognized standard such as the
trading emissions reduction credits, Voluntary Carbon Standard
is working with MicroEnergy Credits In response, EcoSecurities and MEC devised
(MEC) to provide financing for such an innovative approach to help facilitate Investing in the MEC and EcoSecurities
stoves and other cleaner, more efficient carbon finance investment on a micro partnership enables MFIs to benefit
technologies. MEC is a social enterprise scale and enable MFIs to offer clean energy from clean energy investment
dedicated to helping Microfinance solutions to their clients. MEC purchases opportunities within the carbon markets
Institutions (MFIs) provide clean energy carbon credits on a pay-as-you-go basis, and to support sustainable livelihoods
technologies such as improved cook rather than requiring a minimum project in the developing world.
stoves, solar home systems and biogas size. EcoSecurities then uses its expertise
Sustain issue 31 October 2009 9
12. How to make the
Clean Development Mechanism
more effectively tackle
technology transfer
By Marc Stuart and Sonia Medina, EcoSecurities
“Analysis of Technology Transfer in CDM Projects”, UNFCCC, December 2008,
found at www.scidev.net/en/capacity-building/key-documents/reports/.) found
Combating climate change that only slightly more than one-third of CDM projects involve technology transfer
will require the transfer of in the form of equipment or knowledge, mainly from Japan, Germany, France, the
a great deal of technology. UK and the US.
The Kyoto Protocol requires all parties The CDM principal of “additionality” contains the premise that projects that
to cooperate in “the development, reduce emissions are more greenhouse gas friendly than “business as usual”, a
application, diffusion and transfer of premise that would seem to inherently promote technology upgrading. However,
environmentally sound technologies additionality is not based simply upon a technology benchmarking approach, but
that are in the public domain.” It often requires demonstration of intent and financial additionality.
commits developed country parties
to provide financial resources for As we get past the “low-hanging fruit” that characterize the bulk of the initial
technology transfer. This can be CDM projects, finding new pockets of deliverable emissions reductions under the
accomplished by a variety of policy current additionality construct becomes more difficult, especially for dispersed and
mechanisms that reward accelerated smaller GHG interventions.
dissemination of key greenhouse gas
(GHG) management tools: subsidies, Therefore, the Copenhagen agreement needs to provide clear financial incentives
to identify and develop smaller carbon-reduction projects, and technology transfer
and others. However, the elegance and must play a crucial role. Lighting, heating, cooling, transport, process controls and
scale of the carbon market means that other technology interventions are needed to reorient the world to a low-carbon
it is by far the most obvious financial future. Yet none these fits well in the CDM architecture because of their individual
tool to try to harness on a global basis. small size and widely distributed nature.
The Protocol’s Clean Development Consider lighting – it is a key aspect of national development paths, but those
Mechanism (CDM) does not have an paths now lead to far higher emissions. Some 8% of all energy in the US goes to
lighting, and 90%-plus of the energy delivered to incandescent bulbs is wasted as
However, the CDM’s dual role – to heat. Changing the technology around lighting could have dramatic impacts on
achieve cost-effective emissions emissions. How can those potential avoided GHG emissions be used as a financing
reductions (for the benefit of high-cost tool to accomplish this technology change across the world?
industrial nations) and sustainable
development (to benefit the less A series of improvements would need to occur for carbon markets to truly
developed host nations in which CDM encourage technology transfer and sustainable development in rapidly growing
projects occur) – would seem a vehicle economies. With thousands of projects already in the pipeline, the CDM has
for technology transfer. Yet a recent shown the effectiveness and allure of the carbon trading mechanism and has
report from the UNFCCC Registration gathered enormous amount of data that can be used to craft an effective
& Issuance Unit (Seres, Stephen, technology transfer mechanism. For that to occur the world would need to
10 Sustain issue 31 October 2009
13. address the concerns of countries
Several changes are required: like the United States that want
technology transfer coupled with
1. A longer crediting period is protection of intellectual property (IP).
necessary to encourage cutting-
edge technology investment in A significant amount of emissions
larger and longer-term projects reductions can be achieved with
(renewable energy, energy
efficiency, carbon capture and effectively identify and reward
storage). The current discussions accelerated technology deployment in
around 2050 targets are a the appropriate situations are the key
positive sign. to this. Most of these tools and policy
2. Methods to aggregate dispersed recommendations have been identified
emissions reductions should be by the WBCSD in its booklet Power to
promoted to enable developers Change.
of distributed clean technologies
(energy-efficient lighting, smart The WBCSD and business in general
grid IT, transport efficiency, etc.) can help this process by advocating for
to use carbon finance more rational policy shifts that lower barriers
effectively. to rational technology upgrades,
that take into account technology
3. There should be a move innovation cycles, and that provide
away from project-by-project economic incentives to seek out
additionality assessment to a emissions performance throughout the
system that is more focused economy, not just the largest and most
on individual benchmarks obvious assets.
and uses statistical analysis for
evaluating likely performance.
Benchmarking would lower
transaction costs, which would
also make the system more
accessible to smaller projects.
4. Linking the forthcoming US
cap-and-trade market with
the CDM and other future
carbon mechanisms will create
sizeable financial incentives
for companies to invest in
low-carbon and efficiency
technology overseas more
rapidly.
5. A reasonable compromise is
needed between IP protection
for new technologies deployed
and reasonable licensing
agreements that can help
accelerate dissemination across
new markets.
Sustain issue 31 October 2009 11
14. Access to energy is often
described as “the missing
A low-carbon
pathway to
Millennium Development
Goal.” It is one of the key
drivers of economic growth
and an essential element
to progress in meeting
such basic needs as health,
housing, and education.
development
Global energy demand is forecast to increase 40% by 2030, with the majority
Living without coming from developing countries, whose share of greenhouse gas (GHG) emissions
electricity can be people lack access to electricity, and about 2.4 billion people do not have clean and
safe cooking fuels. Current trends suggest that by 2030, electrification rates will not
As the main source of to be spending US$ 5-15 per kilowatt/hour for energy versus 15 cents per kWh for
technological innovation,
and candles for lighting range from 10 billion to 30 billion US dollars.
business has a role
This, combined with the ambitions to reduce global carbon emissions, presents the
to play in helping bring world with the dual challenge of providing access to energy and its accompanying
energy solutions to both development opportunities while shifting to low-carbon energy sources to manage
rural areas where climate change.
access is minimal and Is there a low-carbon path to global development? Much attention is given to
urban areas where technologies that would allow developing countries to “leapfrog” past polluting
technologies such as open fires. Leapfrogging has a precedent in the successful
energy supply can be spread of the cell phone in developing countries, which allowed countries to skip
the building of vast grids of phone lines. Skipping to cleaner, renewable energies
forms the basis of many recommendations around financial and technology
unreliable. transfers at climate negotiations in Copenhagen.
As the main source of technological innovation, business has a role to play in helping
bring energy solutions to both rural areas where access is minimal and urban areas
Electricité de France (EDF), ABB, General Electric (GE), GDF SUEZ and Philips are already
innovating to meet the cooking, lighting and heating needs of thousands of people
around the world.
EDF worked closely with NGOs and government to form the first Rural Energy
Services Company in Mali to provide low-cost electricity through solar home
systems and low-voltage village micro-networks. Philips has launched an affordable
wood cooking stove for Indian consumers, designed to reduce deforestation and
indoor air pollution. ABB joined forces with WWF to engage communities in the
installation of diesel-powered electricity mini-grids in rural Tanzania. In Pakistan,
GE’s Jenbacher biogas engines are powering the country’s first sugarcane biogas
plant, which generates enough power to support more than 50,000 homes.
12 Sustain issue 31 October 2009
15. Barriers remain in making many of replicable energy projects beginning Both Energy Poverty Action and Energy
the energy access solutions profitable, in Africa. One of the core concepts for All rest on the understanding that
scalable and sustainable: high up- of the EPA model is local autonomy, reaching communities without electricity
front costs, capitalizing on the carbon i.e., building the necessary local requires new business models and new
markets, governance and tariff capacity to empower users to manage, policy frameworks. Depending too
structure, local capacity to implement operate and maintain the projects in a much on business to invest in distributed
solutions, and insufficient information- sustainable manner energy schemes in the developing
sharing platforms and collaboration world is unrealistic, given the lack of
at a regional level. Companies cannot The second is Energy for All, an initiative evidence that such investments are
tackle the challenge alone. bringing diverse groups and businesses profitable in the short run. However,
together and hosted by the Asian with the right enabling framework at
The WBCSD is engaged in two Development Bank. Its goal is to provide the international level, and the policy
initiatives that emphasize multi- access to safe, clean, affordable modern incentives, governance structure and
stakeholder collaboration to identify energy to an additional 100 million appropriate technologies at the local
sustainable business models to bridge people in the region by 2015. level, it is possible to bring about massive
the energy divide. change in the provision of energy in
The Asian Development Bank recognizes the developing world and bring clean
The first, Energy Poverty Action, is a a number of successful models for solutions to those that need them most.
joint initiative with the World Economic providing off-grid access to energy in
Forum, the World Energy Council, and Asia including Grameen Shakti’s efforts www.weforum.org/en/initiatives/
several companies, including Vattenfall, to install more than 205,000 solar home
BC Hydro and Eskom. The aim is to systems through rural energy micro-
credit schemes in Bangladesh. The www.adb.org/Clean-Energy/energyforall-
practices to reduce energy poverty by Bank is now looking at the potential for partnership.asp
developing innovative, scalable and replication throughout the region.
natural gas, upstream and downstream. often leading to serious accidents. In the
GDF SUEZ is also helping local communities late 1990s, LYDEC set up an innovative
to access energy through tailor-made partnership with local authorities and
GDF SUEZ
solutions and investment in dedicated communities to provide legal access to a
Business solutions projects to support access to energy for
low-income populations.
safe and reliable electricity supply system.
The electrification program has allowed
to energy poverty more than 30,000 households (amounting
In Brazil, the company inaugurated the São to some 200,000 inhabitants) to connect
Salvador dam in 2009, which will generate to the electricity supply system under a
enough electricity to supply a city of one management approach that uses “street
Energy is a key driver for economic million people. 54% of the 10,000 direct representatives” from the local community
development and social progress, and indirect jobs the project created have to manage and coordinate daily operations
yet access to sustainable energy been filled by local workers and more than and provide technical support to users.
services remains a challenge for low- 10% of the total investment was dedicated The program has been incorporated into
income communities in developing to social and environmental programs,
countries. To reach communities which included relocating displaced poverty where the aim is to connect more
that do not have energy access populations and protecting fauna and flora. than 145,000 households to essential
today, new business models, In Estreito, where the company is building urban services, including water, waste and
supported by appropriate policy a large hydroelectric plant, GDF SUEZ has electricity, by the end of 2009.
frameworks, are needed. committed 130 million Euros to social and
environmental programs, including access GDF SUEZ is integrating energy poverty
GDF SUEZ believes that the private sector to energy, which will be implemented in issues into its sustainable development
has an important role to play in designing collaboration with the local communities. strategy, with a declared ambition to
and delivering innovative solutions to “redefine the relationship between people
bridge the “energy divide” and support a In Morocco, GDF SUEZ has developed an and energy, to make energy a source of
transition to a low-carbon energy future in initiative, through the Group’s subsidiary progress and sustainable development
the developing world. LYDEC, to support electrification in several (energy accessible to as many people as
dozen shantytowns in Casablanca. Prior possible, more reliably, consumed more
The company is active across the entire to the initiative, inhabitants resorted to efficiently, and showing greater respect for
energy value chain, in electricity and illegal leaks and network connections, human beings and their environment).”
Sustain issue 31 October 2009 13
16. Sectoral approaches
a series of carefully developed and
implemented policies and supporting
mechanisms at both national and
international levels would be essential
to managing to enhance sector action.
Bringing these differing sector
perspectives together to develop
climate change a comprehensive proposal on an
international “cooperative sectoral
approach” under the UNFCCC has been
the challenging task of the Sectoral
Approaches Task Force of the WBCSD.
With representatives from a range of
sectors, the WBCSD has developed
The 2007 Bali Action plan introduced the concept of sectors of
a proposal for how such a sectoral
industry playing roles in mitigating climate change, and since approach might function, and specifies
then this idea has rapidly gained momentum. The question the various objectives that it could serve.
that many have since been trying to tackle is: What does this WBCSD companies have suggested that
concept mean, and how would it work in practice? sectoral approaches can be developed
as a new, large-scale tool within the
international framework. It would focus
on establishing activities to support
enhance the implementation of Article 4.1 (c) of the United Nations Framework emissions reductions across countries
Convention on Climate Change (UNFCCC), which says that government parties to and sectors, drawing from incentive and
the UNFCCC shall: support mechanisms provided by the
international framework.
“Promote and cooperate in the development, application and diffusion, including
transfer, of technologies, practices and processes that control, reduce and prevent Individual agreements could be created
anthropogenic emissions of greenhouse gases not controlled by the Montreal through the voluntary participation
Protocol in all relevant sectors, including the energy, transport, industry, agriculture, of countries – developed and
forestry and waste management sectors.” developing – and businesses working
together to achieve emissions
While the proposed function of sectoral approaches appears to be clearly articulated reductions or increase sequestration
in the Bali Action Plan and the Convention, fierce debate related to its objectives, in different sectors through different
what it might entail, and how it may be implemented has taken place since the activities. The details related to the
Bali meetings. Many individual sectors and governments have come forward with specific mechanics are outlined in
different ideas and proposals resulting from a broad interpretation of the concept. the publication Towards a Low-carbon
Economy: A business contribution to the
Some governments have proposed the use of cooperative sectoral approaches international energy & climate debate.
to conduct bottom-up analysis to understand mitigation potential; others have In addition, the WBCSD Cement
suggested the establishment of sector benchmarks and “no-lose”1 targets in Sustainability Initiative has undertaken
developing countries to support sector-specific mitigation actions. Another
suggestion proposed fostering initiatives in R&D, capacity building, and cooperation options for an environmentally effective
on technology under the sectoral cooperation banner. and economically efficient, international
sectoral approach for the cement sector.
This diversity has created some confusion and skepticism among governments and
stakeholders, but it has also fostered an enhanced dialogue between governments Even since the publication of the
and the private sector, and sparked creativity in policy thinking. WBCSD’s proposal in early 2009,
the concept of cooperative sectoral
The WBCSD has used sector projects for many years to analyze sector-specific approaches has seen an evolution. What
climate change and sustainable development challenges, find cost-effective solutions at the time was seen as a framework
through business actions, and propose policy measures to enhance the contribution to foster cooperation between nations
of business to solutions. This work has demonstrated that a “one size fits all” policy on sector-specific mitigation actions
now focuses on unilateral actions within
14 Sustain issue 31 October 2009
17. Cement Sustainability Initiative
on sectoral approaches
ArcelorMittal
The Cement Sustainability Initiative
developed an economic model to Steel’s contribution to green
better understand the impacts of
different carbon policies on emissions construction
reductions, global trade and regional
market shares in the cement sector.
The model compares the emissions
reductions resulting from policies
with different levels of global
coverage and stringency of emissions
goals (such as caps, global emissions
intensity goals, sectoral approaches)
against a scenario in which no In the United States, buildings thickness, a very high-yield strength,
commitments are made. The results account for 38% of CO2 emissions, superior toughness at low temperatures
show that significant reductions can 40% of raw material use, 30% of and outstanding weldability – properties
be achieved with a sectoral approach, waste output and 14% of water that had traditionally been considered
particularly because it offers a way consumption, according to the US incompatible. HISTAR® satisfies the needs
for developing countries to formulate Green Buildings Council. of the construction industry for light and
nationally appropriate, sector- economical structures that meet both
based climate policies that do not ArcelorMittal, the world’s leading steel safety and sustainability criteria.
jeopardize their economic growth. company, with operations in more than
60 countries, strongly believes that steel Substituting HISTAR® steel for standard
For more information see: steels achieves an average weight reduction
construction can lower those percentages
www.wbcsdcement.org/sectoral
all over the world. It is committed to of 32% in steel columns and 19% in
offering a wide range of solutions that will beams. This reduces CO2 emissions by up
developing country sectors. Linking to help to reduce the environmental footprint to 30% during construction by making it
another concept that is articulated in of construction. Steel solutions can make possible to create lighter structures without
the Bali Action Plan, that of “nationally buildings more environmentally friendly, comprising strength or durability. In 2007,
more energy efficient and less costly to more than 50,000 tonnes of HISTAR®
appropriate mitigation actions”, the
operate. Steel is indefinitely recyclable steel were produced by ArcelorMittal,
prevailing view in the negotiations is
without any loss of quality. Water use, representing a savings of 14,000 tonnes of
that of nationally focused “cooperative
waste generation, dust emissions, traffic CO2, or about as much as 4,000 vehicles
sectoral approaches and sector-based
and noise pollution are considerably lower emit annually.
actions.”
when using steel construction techniques.
All of these advantages are especially “HISTAR® is 100% recyclable and made
One government party stated that “for
relevant for construction in urban areas. from recycled steel, and we are proud
developing country parties, domestic
that HISTAR® meets environmental
sectoral efforts may be one option in the
ArcelorMittal has developed a lighter steel requirements and sustainability
that reduces greenhouse gas emissions by
The final verdict will certainly not emerge
up to 30% during construction, benefitting head of Technical Advisory
until meetings in Copenhagen – and
the construction industry, their buildings for ArcelorMittal.
it may not emerge then. But from a
and their clients.
business perspective, the development
HISTAR® steel sections have been used
of an effective future international energy
Working with the Centre de Recherches in several hundred structures throughout
and climate treaty that builds on business
Métallurgiques in Liège, Belgium, the world: high-rise buildings, structures
ArcelorMittal was able to develop an in seismic areas, sport stadiums, bridges,
through sector-based initiatives and stations, car parks and hospitals, as well
innovative “in line” quenching and self-
projects would be a positive outcome. as industrial structures such as large
tempering (QST) process that enables cost-
effective production of a high-strength steel warehouses, factories and power plants.
1 - The concept of “no-lose” targets suggests called HISTAR®. Structures that are being built with
that developing countries take an emission
reduction target within a given sector and HISTAR® steels include the Freedom Tower
receive benefits (potentially in the form of The development of HISTAR® steels allows in New York, the Emirates Tower in Dubai,
credits) if they achieve reductions below the
given target. No penalties are imposed if the ArcelorMittal to produce new structural the Federation Tower in Moscow, and the
target is not met. steels that combine increased product Shanghai World Financial Center in China.
Sustain issue 31 October 2009 15
18. What prospects
for pro-poor
commercial forestry?
Why don’t more of the economic benefits of the forestry industry reach poor
people in forest rich countries?
benefits of commercial forestry. However, we learned through TFD dialogues that
governance is a product of a country’s culture, history, abundance of resources,
etc. and thus it is difficult to change/address quickly. In South Africa, government
mandated land reform created the necessary motivation to work with companies,
so you see a lot of engagement by large companies with communities. In
Indonesia, companies like APRIL are taking a classic approach to community
development through the building of schools and hospitals, and providing
other services that the government is not able to. In Bolivia, the resource is less
abundant and policies don’t favor large forest enterprises, so you see virtually no
big companies. Forestry is almost all managed by indigenous communities or
small-scale forest enterprises. Russia faces different challenges in bringing pro-poor
Interview with Gary commercial forestry back. With the change in government in the early 1990s,
Dunning, The Forests the youth left rural areas for economic opportunities elsewhere leaving very few
Dialogue (TFD) and James people with very traditional lifestyles, relying on pensioners’ income.”
Mayers, International
Institute for Environment James Mayers, Head of Natural Resources at the International Institute for
Environment and Development (IIED), offered “three main barriers to progress:
and Development (IIED)
firstly, the governance structures don’t always reflect reality. Many are based on
the belief that large scale is best yet the countries have more small-scale forestry
enterprises and rarely do they ask how much these enterprises can contribute to
sustainability and poverty reduction. The second is the lack of trickle-down effect,
with local benefits. A lot of money that is destined for government coffers either
doesn’t make it there or doesn’t actually reach the people who need it most.
Thirdly, there is too little reinvestment by companies in community development.”
Mayers added that he had “seen a lot of really good work by companies to
develop outgrower and outproducer schemes as well as joint ventures that
16 Sustain issue 31 October 2009
19. generated useful lessons. What we Dunning pronounced himself “overall REDD (the Reducing Emissions from
see in South Africa is a stick and confident. One positive aspect is the Deforestation and Forest Degradation
carrot situation, with both markets way companies are taking a lead. program being discussed at the
and policies at play. The Black The reality of resourcing timber on climate talks) could also change
Economic Empowerment initiative the ground and the pressure from everything. If the money from
required a lot of companies to invest civil society towards more earth- northern governments intended to
in small scale enterprises, which has and human-friendly products is curb deforestation and degradation
stimulated innovative approaches to pushing companies to address the does not get into the hands of local
development. Something that was ‘development’ issue. Retailers like people in developing countries, then
originally government policy has, Kimberly-Clark are working with REDD will not succeed in mitigating
over the years, become part of core their suppliers in the pulp and paper climate change and supporting
business. The restitution of rights to industry to demonstrate what they sustainable development. Companies
the original landholders has also led are doing in terms of sustainability. have the resources, they just need
companies to address the rights of If companies see they can get a the incentives to create win-win
people dependent on forests more premium in the market by developing opportunities to work with those that
concertedly than in other countries. pro-poor forestry policies, then these need it most.”
Making the links between commercial
forestry and small-scale forestry is
TFD grew out of a series of meetings between
necessary if the industry is going Mayers noted that overcoming
CEOs of the forestry industry and environmental
to play a role in lifting people out these challenges could have huge groups hosted by the World Bank in the late
of poverty. Policies are needed to development potential, adding: “We 1990s. The parties agreed that there was
a need to continue the dialogue and as a
incentivize this but companies can also estimated that small and medium scale result, TFD was created with support from the
take a lead.” forestry enterprises currently add value WBCSD’s Sustainable Forest Products Industry
working group. It has recently hosted a series of
in developing countries to the tune of dialogues on the topic of forestry and poverty in
Dunning agreed that “governments about 130 billion US dollars. Imagine South Africa, Indonesia, Bolivia and Russia.
need to create policies which foster what it would be like if policy actually www.theforestsdialogue.org
or, at least, do not block relationships favored these enterprises and helped www.wbcsd.org/web/sfpi.htm
between companies and communities. them achieve sustainability.”
IIED is a policy research organization that works
Another key factor in overcoming locally and globally to help provide a voice to
some of the barriers is empowering Dunning added that “if the resources vulnerable communities in the policy arena.
Forestry is part of its natural resources research
communities by giving them the stay in government’s control, the agenda, which works with local partners in
training and developing their development potential is suboptimal. Africa, Asia and Latin America on the equitable
and sustainable use of resources with the
capacity to take advantage of the We need more locally controlled purpose of pursuing local ownership and
resources, as well as encouraging the forests. If communities have more management.
entrepreneurial spirit to seek creative control, then companies will want www.iied.org
arrangements with producers.” and need to work with communities.
Asked how confident he was that
commercial forestry stakeholders
could overcome these challenges,
Mayers said he was “optimistic and
pessimistic at the same time. While I
see continued trashing of the resource,
there are some encouraging prospects.
One new measure that has a lot of
potential to improve the situation
is the EU voluntary partnership
agreement with developing countries
to reduce illegal logging. The first
agreement was signed between the
EU and Ghana in September 2008
and commits the EU to only importing
timber from legal sources. This could
improve livelihoods by setting the rules
of the game in a way that helps rural-
based enterprises thrive.”
Sustain issue 31 October 2009 17
20. GE
Technology
Jenbacher engines turn climate
waste into value
negotiations
Customers all over the world are In a sprawling commercial tomato
turning to new ways of capturing greenhouse outside of Amsterdam, the
and using gas to meet their world’s first commercial 24-cylinder gas
energy needs through onsite engine is in operation. The Royal Pride
power generation. Many of Holland project is made possible by two
these customers are using GE’s Jenbacher units, which were installed in a
Whatever agreement governments
Jenbacher gas engines to generate pilot project to demonstrate the engine’s
power reliably while in many cases commercial viability for the horticultural reach in Copenhagen on a new
cutting greenhouse gas emissions. industry. It highlights the increased climate framework, business will
emphasis on combined heat and power be responsible for delivering the
In Australia, the Jenbacher gas engine in Europe as the region increases its focus technology solutions needed and
business has contributed to several on energy efficiency.
consumers will have to contribute
of the country’s largest coal mine
Thousands of miles to the east, Jenbacher
to the transition by changing their
methane projects, including a power
plant commissioned in 2008 operating gas engines are at work in a far different consumer patterns and behavior.
on Jenbacher coal mine methane gas way, using biogas created from chicken
engines. The methane-rich gas coming manure to generate power and heat at
a large chicken farm north of Beijing. The first steps to engage the private
from the mine is used to generate onsite
The plant is the first of its type in China, sector in the international debate were
power at Anglo Coal’s Moranbah North
and could pave the way for similar taken in the 2007 Bali Action Plan,
mine in the state of Queensland, helping
to reduce the amount of greenhouse applications in the future. which stated that the future regime
gas that escapes into the atmosphere. will be informed by “insights from the
Through the capture and use of mine Providing 14,600 MWh of electricity business and research communities and
gas, the Moranbah North project per year, the project is designed to help civil society”. This set a precedent for
will deliver significant environmental reduce suburban electricity shortages. By more open business engagement and
benefits, reducing about 1.5 million using the biogas for power generation consultation over the past two years.
tonnes of CO2 equivalent per year. instead of coal , the new project is
expected to reduce greenhouse gas The Bali Action Plan calls for measurable,
In Mexico, Jenbacher engines are at the emissions by about 95,000 tonnes of reportable and verifiable emissions
heart of a newly expanded landfill gas- CO2 equivalent per year. reduction commitments by developed
to-energy project, hailed by President countries. It also considers, for the first
Felipe Calderón as “a model renewable time, the involvement of developing
energy project” for Latin America. The countries in mitigation efforts through
12 MW project converts gas from the non-binding “nationally appropriate
Simeprode landfill near Monterrey into mitigation actions”, which must be
electricity, which is used to support the supported by financing, capacity
solid waste facility‘s operations as well as building and technology transfer from
Monterrey‘s light-rail system during the developed countries.
day and city street lights at night.
Technology transfer in the climate
negotiations means the development
and transfer of technologies to
18 Sustain issue 31 October 2009
