THE 21st session of the Conference of the Parties (COP) to the UN Framework Convention on Climate Change (UNFCCC), taking place from Nov 30 to Dec 11 in Paris this year, will be significant if successful.

For the first time in over 20 years of UNFCCC negotiations, a COP has a concrete aim of achieving a more comprehensive legally binding and universal agreement on climate, to keep global warming below two degrees Celsius. This is a figure most climate scientists cite as a minimum necessary to reduce the potential of catastrophic climate change.

The potential new deal at this year's COP 21 will go far beyond the last agreement - the Kyoto Protocol adopted in Japan in 1997 - in terms of scope. It seeks to get more countries on board with commitments to reduce greenhouse gases (GHG) emissions based on individual national circumstances, to engage private sector participation, and to go beyond mitigation to adaptation by promoting behavioural change.

Previous rounds of COP meetings have seen limited progress, partly because global warming is cyclical and talks are influenced by political cycles that are short term relative to the long-term effects of climate change.

The lack of progress also reflects sharp divisions between industrialised nations that historically have emitted most of the greenhouse gases that cause climate change, and developing nations that are hardest hit by climate change, but are less able to tackle it.

The chances of success appear higher this year because most signatories to the UNFCCC have already agreed to sign up to a binding deal by 2015 to reduce their emissions.

What's more is that 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.

At the same time, the cost of GHG 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, such as green bonds, yieldcos and crowdfunding, have emerged.

About 150 countries have already submitted individual commitments to mitigate GHG emissions and some have indicated plans on adaptation, which are submitted in the form of Intended Nationally Determined Contributions (INDC) that will see implementation initiated around 2020, a deadline to be agreed in Paris.

China has committed to 60-65 per cent reduction in intensity (emissions per unit of gross domestic product or GDP) in 2030 from 2005 levels; India has committed to 33-35 per cent reduction in intensity over the same period, and the US has committed to 26-28 per cent reduction in 2025 from 2005.

In its INDC, Singapore has indicated its intention to reduce its Emissions Intensity by 36 per cent from 2005 levels by year 2030, and stabilise GHG emissions with the aim of peaking around 2030, relying on higher levels of energy efficiency, including the deployment of best-in-class technologies.

With all these positive developments, there are hopes that an international deal will be signed. If so, the commitments from the various countries are expected to become binding under international law. These commitments must then be translated into national law through measures such as emissions trading systems, carbon taxes and requirements for renewable energy and energy efficiency.

However, it is not a perfect picture. There are still concerns that INDC-committed GHG reductions alone will not be enough to keep global average temperature increases below two degrees Celsius.

Furthermore, the resources and infrastructure - trained human talents who understand the complex issue, the most appropriate technology and funding - necessary to rapidly mobilise and start implementing INDC commitments by end-2020 are not immediately available. Time is needed for countries and organisations to make sure they have all these support in place.

 

Cautious optimism

That said, a deal signed in Paris is expected to act as a stepping stone to more ambitious measures and resource commitments in the future.

China, the US and the European Union have all given indication that they are leaving the door open to further reductions in their domestic actions, meaning that restrictions on emissions could well be tightened as the impact of climate change becomes more apparent.

If COP 21 results in a successful deal, high-carbon activities would become more costly. Businesses will also face tighter regulation and more stringent targets for emissions cutting.

To remain viable in this new environment, businesses must improve productivity and efficiency through innovation and smart deployment of low-carbon technologies and sustainable project financing options. In Singapore, for example, businesses in the financial sector and those with local and international manufacturing facilities - our major GDP contributors - are still lagging behind when it comes to investing in these key areas.

New opportunities also abound. The case for becoming a low-carbon business is stronger than ever and companies can position themselves to innovate and profit from the growth of a low-carbon and sustainable economy. Any productivity increases will also have a direct impact on prices and customer satisfaction. Committing to lower-carbon, more environmentally friendly activities might also boost branding.

More importantly, given that any deal is unlikely to be enough to avert serious climate change effects on businesses that are exposed to it, businesses must still plan for adaptation and resilience to challenges such as raw material sourcing, water scarcity, as well as extreme weather impact on facilities, infrastructure and social instability.

Climate change is a real threat and global governments will increasingly work to decouple emissions from economic growth. It is crucial that businesses act now to evaluate their strategies and operations to ensure they are not left behind on this journey.

The article is contributed by Mr Tham Sai Choy, Chairman of KPMG Asia Pacific and Managing Partner at KPMG in Singapore. The views expressed are his own.