UAE. In a brilliant and impassioned speech in Dubai this week Joe Maria Figueres, the former CEO of the World Economic Forum and the former President of Costa Rica, outlined the business opportunities for Dubai and the Gulf from sustainable development, trading of carbon credits and energy technology.

The UAE’s environment policy is an example for the world to follow, Joe Maria Figueres, the former CEO of the World Economic Forum and the former president of Costa Rica has said.

In his keynote address at the conference on ‘Global Warming and the Role of the Business Community’ yesterday at the Grand Hyatt Hotel in Dubai, Figueres detailed the mechanisms by which carbon dioxide emission is one of the key causes of global warming and 'greenhouse gasses'. The UAE, he said contributed just 2.7% of these emissions as against 30% by the US and 27% by Europe.  

“It’s the duty of the developed nations to show the way. But that, unfortunately, is not happening,” he said. Figueres added that in the current sphere of nations ‘small is beautiful’. No longer is it necessary to be in the orbit of the US or Russia, he said. Today it is an advantage to be small and agile. He congratulated Dubai on its ingrained culture of innovation and clear leadership.

“Today the debate is over – climate change is here. We are injecting 70 billion tons of carbon dioxide into our fragile atmosphere every year,” he added. “2005 was the hottest year on record and in the last 14 years we have seen ten of the hottest years ever recorded.”

Environment protection has to be made a good business opportunity and this is the role of governments, Figueres said, referring to the original talks on the Kyoto Protocol ten years ago where he led the debate with the then US Vice President Al Gore. “There is not enough ‘soft’ money to solve the problem,” he said. “Even though I do believe in the work of NGOs and other organisations.”

In the last ten years 928 studies have been conducted into the subject of climate change and they all agree that CO2 is the main contributor to rising temperatures globally. With a series of graphic maps and videos, Figueres went on to show the effects of different scenarios of rising sea level, on the low-lying population centres of the world such as Shanghai, Kolkata in India, Manhattan in New York and the Netherlands.

Only a small rise in average temperatures has several major effects and of particular concern is the concept of ‘positive reinforcement’, meaning that at certain points in the process of global warming, there are effects that accelerate the change causing unpredictable effects. Examples here are the reduction of the polar ice caps which means that less of the sun’s radiation is reflected away from the atmosphere and the effect of the loss of the arctic tundra and other large tracts of oxygen-producing forests.

Global warming is not a linear process. We have only a ten to 15 year window of opportunity, Figueres said. A very small two-degree Celsius in global temperatures is enough to wipe out 97% of the coral reefs of the world; to lose 53% of the arctic tundra, to reduce Africa crop yield by 15% and with an 18-20 feet rise in sea level, tens of millions of people would be displaced. “In Dubai, major developments such as The Palm and The World would become a scuba diving experience,” he said.

He said he was particularly proud to be in Dubai because the Emirate has three things that the world needs: leadership, action and vision. Dubai has clear leadership to act in the concert of nations. The world needs leadership to move the environmental agenda forward, he said.

Avoiding collision between society and our planet

Held under the patronage of HE Hussain Nasser Lootah, Director General of the Dubai Municipality, the conference provided a vital opportunity for leaders of the local business community to discuss the issues surrounding global climate change and develop potential solutions.

The audience - which included executives from the hosts Dubai Recycling Park, a project of the National Holdings Co, and Dubai Industrial City, as well as sponsors, energy experts and members of the media – was moved by the quantity and quality of data presented to show the signs of climate change.

More and more of the sun’s radiation is not being reflected; it is stopping in the atmosphere and the trends are shown in measurements of carbon dioxide (CO2), which have been taken daily since 1958 from the highest mountain in Hawaii. Whereas CO2 concentration of CO2 in the atmosphere stood at 280 parts per million in 1958, today the figure is 380 PPM and rising fast.

Samples of core ice taken from glaciers is able to show us that the average CO2 concentration from the last 650,000 years is 280 PPM and by referring to the last Ice Age scientists know there is a strong correlation between CO2 in the atmosphere and average temperature. Only four to five years from now CO2 concentration is forecast to rise to 600 PPM (based on current rates of consuming hydrocarbons).

In 1963 Lake Chad in Africa was the sixth largest in the world. Today it no longer exists and the Aral Sea in Russia is also turned into desert. In the Middle East, the Red Sea is diminishing. There are already 14 million acres of lost forest in Northern Canada alone. Brazil in 2004 saw the first-ever hurricane in the South Atlantic Ocean. Japan in 2004 saw a record ten typhoons during its typhoon season. August 2005 saw the devastating effects of Hurricane Katrina; and sea temperatures are continuing to rise in all the five major oceans of the world, disrupting traditional weather and wind systems. Certainly, like the canary in the miner’s cage of the last century, these are the warning signs of disaster.

Business central to the solution

But in the context of business, Figueres said the danger of inaction was real and climate change is a problem for now, not for the future.
 
“We need business to be involved,” he said. There are three factors causing this collision between people and our natural resources: rising population, the technology revolution and our way of thinking. Business has the capability to tackle all three of these factors.

In terms of global population we can note the rise from 250 million in the year one AD, to 500 million in 1492 (the year Columbus discovered America) to 2.3 billion at the end of World War Two, to 6.5 billion in 2006. The forecast global population for 2050 is 9.1 billion, and with the fact that most growth is occurring in developing nations, the developed world will have to adapt its public policy and its systems for migration flows, if it is to maintain economic growth.

Turning to another crucial issue, technology, Figueres said the world has moved to a situation where it using modern technology to carry out traditional tasks (such as agriculture or transportation). It is this social model that is depleting our natural resources.

“The combination of old habits and old technology gives us predictable results. But the combination of old habits and new technology produces unpredictable results,” Figueres said adding that there is existing technology such as hydroponic agriculture, wind and solar energy generation to create the desirable effects.

He added that is necessary to change our way of thinking. And through this process of change, fixing the environment can be made into a tremendous business opportunity. Figueres said it is necessary to counteract some common objections to changing the way we generate and consume energy. Is there disagreement among scientists about the need for new methods? No. Do we have to choose between the economy and the environment? No. Is the problem too big to fix? No.

As examples of how green technologies are having a real impact on the business world we only need to compare the market capitalisation of some of the world’s leading car makers. From April 2000 to February 2005 Toyota saw its market cap rise by 33.4% and during this period the Japanese launched hybrid technology cars and it actually reduced its own energy consumption by 30%, whilst dramatically increasing production. By comparison Honda saw a rise of 24.3%, whilst the less energy-efficient US automakers saw their market cap falling, by 34.9% in the case of GM and by 44.1% for Ford.

“More informed and intelligent consumers want products from countries and companies that are pro-environment,” said Figueres. Today we have choices about how we produce energy and about products. Cars are just one example.

As we know, the Kyoto Treaty was ratified by all the countries present in the talks, with the exception of only the US (the world’s largest polluter) and Australia. Meanwhile scores of US city administrations are individually signing up to many of the Kyoto measures on energy.

“Now we need a second Kyoto agreement,” said Figueres. The results, with the huge reduction in CFC (chloro-fluorocarbon) emissions in just ten years, show what can be achieved with concerted action.

Questioned about some of the simple solutions companies can put into effect, Figueres said: “We can all replace light bulbs with energy-saving ones, recycle waste and water, go for environment-friendly cars, and support alternative energy options. This would be a shining example for all to see.”

Some of the other examples of the first steps for business in the Gulf include steps to recycle more precious water and to look at transport modalities. There are win-wins for business in the equation of the environment. Companies need to start looking at their own strategies and put together an action plan for the next five years. Although the actual measures necessary will vary from sector to sector, every company can become a carbon neutral business.

In a question-and-answer session the topics of carbon offsetting and trading of carbon credits and carbon emissions dominated the discussion. The concept of carbon currency exchange is a method for the developed countries to support reduction of CO2 emissions financially, by offsetting the reductions in other countries for their own (often more efficiently) through new exchanges and financial mechanisms.

The Kyoto Protocol allows countries to use a trading system to help meet the accord's goal of reducing the world's greenhouse gas emissions by an average 5.2% relative to 1990 levels by 2012.

Any country struggling to meet its targets may buy "credits" — essentially the right to emit a certain amount of carbon dioxide — from countries exceeding their reduction targets. Global emissions trading won't start until 2008, but there are schemes in place to test the market system, including a continent-wide one started by Europe in January 2005.

Carbon credits

Each country that has signed on to Kyoto has its own target for slashing CO2 emissions. Countries that cut their emission of greenhouse gases get credits for their efforts: one credit for each tonne of reduced CO2 emissions.

The concept of carbon trading rewards countries that meet their targets and provides financial incentives to others to do so as quickly as possible. Those who overshoot their emission reduction targets can sell surplus credits in the market.

The Kyoto Protocol includes three so-called flexibility mechanisms.

The Kyoto Protocol's clean development mechanism (CDM) allows developed countries to gain emissions credits for financing environmentally friendly projects based in developing countries.

A country can also earn emissions credits through something called joint implementation (JI), which allows a country to benefit by carrying out something like a reforestation project in another industrialised country or "economy in transition."

Carbon trading is the third mechanism. Called emissions trading (ET) in the accord, it allows countries to buy emissions credits from countries that don't need them to stay below their emissions quotas.

Figueres said he is an enthusiastic supporter of the trading of carbon dioxide emissions. Developing nations are usually net ‘fixers’ of carbon and the world needs a mechanism to sell this to the developed countries.

The mechanism also serves as a means to finance development. But he says credit should be based on real energy reductions based on real energy projects. When trading emissions, you should have permanent emissions, and there is a global debate about this.

We all want someone in a factory to reduce emissions, that's good credit. But for a corporation to go to Guatemala and buy a forest and get that to count as a credit? Many experts don’t support that.

How carbon emissions can be traded

Europe has a cap-and-trade scheme where emissions can be traded, but there is a limit to them. A country — or group of countries — caps its carbon emissions at a certain level and then issues permits to firms and industries to emit specified amounts of carbon dioxide over a period of time.

Companies exceeding their targets would earn credits, while those falling below their targets would need to purchase credits to make up the shortfall. Any whose emissions exceed their credits would be fined.

The idea behind carbon trading is that it creates a system of supply and demand: a shortage of credits will drive up the price and give financial incentive for firms to cut their emissions.

The EU Emissions Trading Scheme (ETS) started on Jan.1 2005, creating the world's first multi-country emissions trading system. The EU ETS runs in two phases: 2005-2007 and 2008-2012, the latter timeframe coinciding with the first commitment period of the Kyoto Protocol.

The scheme involves the 25 European Union member states, is mandatory, and is the largest companies-based scheme around. Covering heavy industry and power generation, it includes non-European companies.

Each EU country has to submit national allocation programs to the EU commission. Each country must agree with the EU on an annual national "allocation" of emission levels which should be lower than the existing ones. The federal EU authorities are responsible for enforcement.

In North America, there are voluntary cap-and-trade schemes, such as the Chicago Climate Exchange (CCX) and the Montreal Climate Exchange. The UK also has its own voluntary scheme, for which companies cut their emissions in return for incentive payments.

Though the US government has decided not to ratifiy Kyoto, interest in carbon trading at the regional level is increasing. Members of the Chicago Climate Exchange include the cities of Aspen, Chicago, Oakland.

Creating a carbon trading market

Experts say that in the absence of strict government regulations, this system will never become anything more than a pilot project. Why would firms be involved in a voluntary process if their federal governments haven't imposed limits on them? Because those companies believe that, one day, it will be compulsory, and they want to be ready ahead of time.

The Chicago Climate Exchange (CCX) is North America’s only, and the world’s first, greenhouse gas (GHG) emission registry, reduction and trading system for all six greenhouse gases (GHGs). CCX is a self-regulatory, rules based exchange designed and governed by CCX Members. Members make a voluntary but legally binding commitment to reduce GHG emissions. By the end of Phase One (December 2006) all members will have reduced direct emissions 4% below a baseline period of 1998-2001.Phase Two, which extends the CCX reduction programme to 2010, will require all members to reduce GHG emissions 6% below baseline.

The goals of CCX are to facilitate the transaction of greenhouse gas emissions allowance trading with price; to build the skills and institutions needed to cost-effectively manage greenhouse gas emissions; to facilitate capacity-building in both public and private sector to facilitate greenhouse gas mitigation; to strengthen the intellectual framework required for cost effective and valid greenhouse gas reduction; and to help inform the public debate on managing the risk of global climate change

The development of CCX was initiated through a feasibility study that was funded by the Chicago-based Joyce Foundation in 2000, a leading public policy philanthropy. The grant was administered by Northwestern University’s Kellogg Graduate School of Management and conducted by Environmental Financial Products (EFP). The predecessor to CCX, EFP specialised in developing and trading new environmental, financial and commodity markets. It also designed risk management and hybrid financial instruments that enhance the interrelationships between the capital, commodity and environmental markets. EFP’s principals acted both as agents and advisors in a variety of environmental trades and capital markets transactions. They also authored numerous articles in academic and general interest publications.

The Chicago-Montreal exchanges are certainly a good step, but the federal governments need to be involved. Otherwise, the voluntary systems are ‘tokenism’. The market system doesn't work unless there is a value on carbon, a real cost to emitting it.

Figureres said that he sees potential to develop the clean development mechanism, a part of the Kyoto Protocol, as an opportunity for Dubai. “Everything needs to be framed in the economic sphere,” he said.

It is likely that in the next few years, consumers will be much more willing to support carbon offset charges on their purchases – from airline tickets to autos to household appliances and credit card charges. In at least one market around the world, the US, consumers can already choose to pay a small sum extra per month to use only renewable energy.

Looking for an easier way to make our lives greener, customers can now turn to a ‘carbon calculator’ at the website of the Conservation Fund (conservationfund.org). Here we can learn that the events of our everyday lives, like driving the car, heating or cooling our homes or taking plane trips, produce about 14 tons a year of carbon emissions, or ‘carbon footprint’on average. The Conservation Fund, a US non-profit group can offer to neutralise that amount for US$57, by planting 11 trees in the US, enough to remove 14 tons of carbon dioxide from the atmosphere.

Call them green upgrades: easy ways for consumers to help the environment without changing their behaviour. Such upgrades have been proliferating: Skiers, for example, can spend an extra US$2 at some resorts to offset the pollution produced in a drive to the mountains; the money goes to environmental organisations. On websites like TerraPass.com or CoolDriver.org, drivers can total a car's pollution for a year and direct a corresponding sum to clean-energy projects. Green upgrades appeal to a sense of personal responsibility. The challenge for consumers is to understand exactly what their money goes for, and how much the upgrades or offsets actually help the environment.

Figuereas said that consumers alone are not enough to drive the changes; companies and governments need to listen.

The trading of carbon credits makes sense because some countries can reduce their emissions easier than others. “We need to pick the lowest hanging fruit first, even if individual countries do have responsibility.”

“I come here with a lot of respect for this region - that wants to be at the cutting edge with respect to the environment. But the private and public sectors have to join hands if the world has to effectively fight global warming,” he concluded.

Note: José María Figueres is the former President of Costa Rica and former President of World Economic Forum.

In the international arena, President Figueres has pioneered the linkage between sustainable development and technology in the realms of business, public service and non-profit organisations. He helped create and lead the United Nations Information and Communication Technologies Task Force (ICT) and is the founder of the Costa Rica Foundation for Sustainable Development (Entebbe). In 2000, President Figueres joined the World Economic Forum and became its first CEO in 2003, where he has strengthened global corporate ties to social and governmental sectors by identifying common long-term interests. He currently serves as CEO of the Grupo Felipe IV, based in Madrid, where he continues his commitment to development and technology. He also serves as a board member of the World Resources Institute (WRI) and the Earth Council Geneva and as a senior advisor for Tokyo-based Global Environment Action.

Evidence of his ability to bring together the best of the governmental and non-profit sector with the private sector at an international level is seen in current and previous advisory and board of directors’ positions. Currently he serves on the boards of World Resources Institute (US), Earth Council Geneva (Switzerland), Discovery Channel Global Education Partnership (US), Talal Abu-Ghazaleh Organization (Jordan) and Grupo San Cristobal SAISC (Costa Rica), among others. Together with President Carter he is also an International Advisor at Global Environmental Action (Japan). In addition, Figueres is a member of the Dean’s Alumni Leadership Council at the John F Kennedy School of Government at Harvard University and a founding member of the Club de Madrid. He previously served on the boards of the World Wildlife Fund (WWF), The Stockholm Environment Institute (SEI), and FUNDES Internacional.

See also: www.dubaiindustrialcity.ae and www.nationalprojects.com.kw and www.conservationfund.org and www.josemariafigueres.org

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