Every year, the UN convenes the world's governments at a Conference of the Parties (COP) to discuss how they should tackle climate change.
Recent meetings have seen limited progress, partly because this is a cyclical issue and the talks are influenced by political cycles. However, the lack of progress also reflects sharp divisions between industrialised nations that historically have produced most of the greenhouse gases that cause climate change, and developing nations that are hardest hit by climate change, but less able to tackle it.
The chances of success are higher this year because all signatories to the United Nations Framework Convention on Climate Change (UNFCCC) have already agreed to sign up to a binding deal by 2015 to reduce their emissions.
What's more, the political landscape has changed. Previous talks have failed partly because the US and China – the world’s two biggest emitters of greenhouse gases – have resisted making commitments. However, last year the US announced it would cut emissions by up to 28 per cent below 2005 levels by 2025, and China has said its emissions would peak by 2030.
At the same time, the cost of emission-reducing technologies has fallen dramatically, and as the number of renewable energy projects has grown, investors have become more comfortable with financing them. New forms of financing have emerged, such as green bonds, yieldcos and crowd funding.
Before the conference talks begin, countries will pledge the minimum level of carbon reductions they are prepared to contribute. In Paris, these commitments are expected to become binding under international law. This means they must be translated into national law through measures such as emissions trading systems, carbon taxes and requirements for renewable energy and energy efficiency.
These pledges alone will not be enough to keep global average temperature rises below 2°C, which most climate scientists say we must do if we are to avoid potentially catastrophic climate change impacts. However if a deal is agreed in Paris, it will act as a foundation for more ambitious measures in the future. China, the US and the EU have all left the door open to further reductions, meaning that restrictions on emissions could well be tightened as the impacts of climate change become more apparent.
High-carbon activities would be more costly and businesses would face tighter regulation, carbon pricing and more stringent targets for emissions cutting. There will also be opportunities. The case for becoming a low-carbon business will be stronger than ever, and so our clients will need to position themselves to profit from the growth of the low-carbon and sustainable economy.
However, given that any deal is unlikely to be enough to avert serious climate change effects, businesses must still plan for resilience to impacts such as water scarcity, extreme weather and social instability.
KPMG is clear that climate change is happening and that urgent action is needed to tackle it now. The evidence is not in doubt. Governments around the world, with help from business and civil society, must work to decouple carbon emissions from economic growth, and move the world towards a low-carbon economy.
One of the most important measures is to put a price on carbon, because sending the right market signals prompts change. KPMG has signed the Carbon Price Communiqué that calls for a clear, transparent and robust price on carbon and forms part of the World Bank's carbon pricing initiative. This is part of the process of driving private finance towards investments that are both low-carbon and climate resilient. Such a process needs clear policy signals with a long-term horizon and new financial tools such as green bonds to support low-carbon growth.
Our Sustainability Services professionals around the world spend over one million hours every year helping hundreds of KPMG member firms' clients improve their environmental and social performance. This includes supporting them in measuring, reducing and reporting their carbon emissions.
KPMG also advocates for business support for climate action through initiatives like the World Business Council for Sustainable Development. In terms of our own operations, our Global Green Initiative has significantly reduced the amount of energy member firms use and how much KPMG professionals travel. In the process, we have saved millions of dollars.