Combating climate change

The overriding environmental challenge of our time is climate change. The problem originates from the emission of greenhouse gases, primarily carbon dioxide, mainly from the transport and energy sectors. If humanity fails to come to terms with this problem, we will be forced to make dramatic changes in the way we live our lives, but above all, it will radically affect the lives of our children and grandchildren.

Studies show that an acceptable temperature increase and long-term temperature stability could be achieved at a concentration of 550 ppm of carbon dioxide equivalents in the atmosphere. But we have to respect that this is the current wisdom; it may very well be necessary to revise this target downward.

Whatever the level, it is very clear that we must drastically reduce the current level of total emissions. If, in a hundred years’ time, the per capita emissions, including those of the developing countries, should be equalized at the same time as temperature stability is achieved, then a dramatic reduction in emissions from fossil fuels is required. The challenge is, however, not only a long-term one. It is urgent that we start acting now. At the same time, we must also ensure that the measures taken do not lead to unnecessary costs. The most pressing need is to create a credible, stable, and predictable long-term framework defining how reductions will be achieved.

We have to realize that there is no such thing as a handful of simple short-term solutions; we have to realize that handling the issue on a global scale will take time. Combating climate change must and will be a part of everyday life all over the globe. Climate change is a global issue that has to be handled at the global level; solutions and initiatives are needed for both local and global growth.

We must do all we can to set the correct price on emissions, and the pricing must be as global as possible. The only possible way to do this is to make use of market forces; that is, a global system for emissions trading must develop. The price for emissions has to be global. Otherwise, we will see a lot of second-best solutions and the comparative advantages will not be exploited.

Emissions trading in Europe as it is conducted today is limited in many respects. Getting a majority of the world to participate in an emissions trading system is therefore vital. The disputes surrounding the Kyoto Protocol must become a thing of the past. The U.S. and the EU have a responsibility, as the regions that release most emissions of carbon dioxide, to show joint leadership.

The climate change issue has been compared with the issue of free trade. Free trade has developed gradually since the end of World War II and has still not reached a state of full openness. The same goes for the climate change issue: We are still in the initial stages of dealing with a major problem to which solutions will be developed gradually over the next few decades. We can easily identify threats, but we can also see opportunities, and without being overly optimistic, surely we will see most of the latter given that wise political decisions are made.

An issue of outstanding importance is the future role of the international business community. It is high time for the international business community to rethink the entire climate change issue. We, as business leaders, must play a central and very active role in setting up the basic rules and regulations.

The business community has unique knowledge that must be taken into account when the rules and regulations are established. Business and industry can contribute important experience and know-how. Handling climate change purely or mainly in terms of "red tape" will be extremely expensive—high costs and poor results are to be expected. Instead of being pulled by society, we should be pushing, and in a positive way integrate climate issues into the world of markets and trade on a global scale.

On the political level, Europe and the U.S. have diverged. This is not a sustainable situation and there is great need for a transatlantic dialogue. This responsibility lies primarily with the political system, but the business community has a vital role to play in contributing to such a dialogue. All company executives, but primarily those on either side of the Atlantic, must commit themselves to working for a global emissions trading system. Industry should unite to facilitate joint political leadership, first of all from Europe and the U.S., on this issue.

Lars G. Josefsson is president and CEO of Vattenfall AB, Europe’s fourth-largest power generator. This commentary is based on a statement given by Josefsson at the Ministerial Dialogue Meeting of the 14th session of the U.N. Commission on Sustainable Development.