Essec Business School

At the end of last year, the 20^th meeting of the Conference of the Parties (COP20) of the UN Framework Convention on Climate Change (UNFCCC) took place in Lima, where the representatives of 196 countries reached a very last minute agreement. Some argue this meeting was an important milestone toward a new, universal climate change agreement – one that will hopefully be hashed out at COP 21 in Paris next month. However, other observers have expressed concerns about some of the key decisions agreed on in Peru, and what they’ll mean for a future consensus.

In the lead-up to the conference in Paris, world leaders have touted their desire to reach a ground-breaking agreement that will be ambitious, universal, and binding. However, its precursor, the COP 20 in Lima, can teach us a great deal about the inherent difficulty of reaching these goals.  

I spoke with Marco Chiu at the Regional Service Center for Latin America and the Caribbean of the United Nations Development Program, to discuss the implications of the COP 20 outcomes.[i]

“Universal”

Despite the call for a global, collective and unified response to mitigate greenhouse emissions, views presented at COP 20 conference were far from universal. Critics have pointed in particular to Decision 9 which outlines that each country decides – at national level – its intended contribution toward achieving the stabilization of greenhouse gas emissions. 

In some regards, this makes sense: Latin America, for example, has officially aligned itself with other developing country negotiation blocks such as the G77 plus China block, arguing that it is the Northern, developed countries, which should take the lead in mitigating greenhouse gas emissions.  For Latin America, and in particular for many of the Caribbean States, the top priority is therefore not the reduction of greenhouse gas emissions, but the adaptation to climate change.  This means focusing on actions which help them to cope with and adapt to the climate changes that result from greenhouse gas emissions. 

On the other hand, however, one particular aspect of the agreement to be reached at COP 21 is its global nature, as the expected emissions reduction should come from all parties of the UNFCCC. Therefore, all countries who are signatories of the UNFCCC, and in use of their sovereign capacities are invited to present their contributions, regardless of their level of development or vulnerability against climate change.

“Ambitious”

What do we mean when we talk about “ambitious” climate change goals?  One thing became clear in Lima: quantifying objectives and measuring results is easier said than done. As Marco Chiu explains, this is particularly true where Latin America is concerned. 

As stated in the COP 20 Decision 14, it is left to each country to include (or not) in its intended contribution quantifiable information on the reference point (e.g. base year), time frames and/or periods for implementation, scope and coverage, and methodological aspects related to the estimation and accounting for greenhouse gas emissions. 

Indeed, when consulting the interactive map of pre-2020 emission reduction targets and actions of the UN Framework Convention on Climate Change (UNFCCC), Latin American countries seem to differ widely in their actions and, even more so, in the details describing these actions.  Countries such as Ecuador, Bolivia, Panama and Paraguay do not state any information regarding current or intended actions to adapt to climate changes, while others provide very limited information about the methodologies, sectors affected, time frames, and reference points.  In contrast, countries such as Brazil are more explicit in their action plans and the methods used to achieve their intended emission objectives. 

Brazil has set a specific emission target range followed with a set of actions such as a reduction in deforestation in the Amazon, the restoration of grassland, and an increased use of hydroelectric power plants by 2020.  Brazil’s actions go beyond mitigation and cover also adaptation measures.  Similarly, in Mexico a bill was recently passed creating domestic greenhouse gas emissions caps in certain industries such as the transportation sector, while Costa Rica announced a ‘long-term economy-wide transformational effort to enable carbon-neutrality by 2021’.

Several Latin American countries go beyond the regional adaption strategy without explicitly or officially highlighting their mitigation activities at the UNFCCC level.  Ecuador, for example, has not communicated officially any actions regarding greenhouse gas emissions, while at the same time, the country is changing its energy matrix from currently 50 percent fossil fuels to using mostly hydro power.  In other words, the UNFCCC data (including INDCs) does not reflect current actions which mitigate greenhouse gas emissions in Latin America.  Countries such as Ecuador have engaged in these activities because they make economic sense and less so for visibility.  Considering the relatively small populations of many Latin American countries mitigation activities can be implemented fast and managed well.

“Binding”

The legal nature of the new agreement is not clear in view of many negotiators at the UNFCCC; although it is expected that it will be clarified in Paris. Nevertheless, another element that should be considered is the climate change policy and legal framework being work out at the national level in different LAC countries. The many legal changes and the variety of activities aimed at mitigating greenhouse gas emissions in Latin American countries could potentially challenge many private businesses and the way they have done business in the past.  In particular businesses in greenhouse gas intense industries might have to develop business models which are more energy efficient, use different energy sources, and use fewer raw materials to remain competitive and within domestic legal frameworks.  UNFCCC data might not include all relevant information concerning a Latin American country and its contributions to greenhouse gas emissions.  While many countries are being considered as ‘developing’, governmental activities and legal frameworks addressing greenhouse gas emissions can be sophisticated and at par with those of developed countries.  Plans for domestically regulated carbon trade schemes centrally controlled by local authorities can provide economic incentives for businesses to move away from traditional ‘doing business as usual’ paradigms.  Furthermore, in many Latin American countries there are discussions that could be conducive towards introducing financial incentives in form of tax exemptions or reductions for companies and their efforts to mitigate their greenhouse gas emissions.

Business schools in Latin America and beyond need to address these changes in legal frameworks and national greenhouse gas emission standards in their curricula.  Business schools might want to consider decoupling, alternative energy sourcing, water management, environmental economics, and other environment related aspects as core courses in their curricula - helping future decision makers to conduct business in sustainable and responsible ways.