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Mar 18, 2010

Lack of clarity on climate regime ‘not good for business’

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ERM senior consultant Simon Clarke and PwC governance and sustainability manager Thabani Mlilo discuss business attitudes to the physical risks of climate change. Video cameraperson: Nicholas Boyd Video editing by: Darlene Creamer
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The Department of Environmental Affairs (DEA) has acceded that the lack of clarity with regard to the international climate change regime was "not good for business".

"The future of the Kyoto Protocol is not clear, hence the future of the clean development mechanism is unclear," Water and Environmental Affairs Minister Buyelwa Sonjica said in a speech, which was read at a conference by her climate change adviser Xolisa Ngwadla.

However, it was also stated that numerous government policies and action plans were in agreement that a shift towards a cleaner ‘green' and low carbon economy in South Africa were inevitable and would have benefits. Thus investment in this area would not be misplaced.

At a national level, the DEA encouraged business to participate in climate change policy creation and governmental processes, as this was a far-reaching issue. The department has indicated that it will release a climate change green paper for public comment by June 2010, while the White Paper on climate change was expected by December 2010.

The release of the document has been delayed, also largely because the national department was hoping for clarity on the international climate change regime from the global climate change conference in Copenhagen in December 2009, although this was not forthcoming.

Commentators from business present at the Merchantec Carbon conference in Bryanston on Thursday indicated that they had not been very thoroughly consulted on the government's climate change plans for the future.

A particular concern was just how South Africa would reduce its greenhouse gas emissions by 34% below the business as usual scenario by 2020. Whether or not this would be further broken down into sectoral targets and what individual companies would be obliged to do in this scenario were questions that business felt should be clearly articulated by government.

Ngwadla said that the green paper on climate change would likely address these issues. He also noted that this document would largely build on work done and documentation produced at the March 2009 Climate Change Summit that was held in Johannesburg.

The national climate change committee was also considering inputs from various stakeholders such as business, civil society and academic institutions.

BUSINESS ACTION ON CLIMATE CHANGE

Environmental Resources Management (ERM) senior consultant Simon Clarke noted that besides the potential regulatory risks and tightening of legislation, which was acting as a driver for business to consider outlining a climate change strategy, there were also physical risks from extreme weather events causing asset damage, as well as competitive and reputational risks for a company.

He added that South African companies had "a way to go" on climate change strategy planning, and a major challenge was the fact that climate change is perceived as a long-term issue, while companies often focused on short-term growth and targets.

"Making the links between the physical impacts and the financial bottom line," was important.

Clarke explained that the physical risks could be related back to financial terms, for example, if an exporter used port terminals and extreme storms cause port closures that meant not exporting products for a certain number of days, which would mean a loss of a certain amount of money.

"Physical risks are something that are starting to become front and centre in the debate," added PricewaterhouseCoopers governance and sustainability manager Thabani Mlilo - noting that insurance companies, for example, were starting to factor it in to operations.

 

Edited by: Mariaan Webb
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