Friday, February 02, 2007 / In depth - Companies must adapt or die in a changing climate / In depth - Companies must adapt or die in a changing climate
Excerpts :
A middle-of-the-road view is that rising temperatures have already started to alter earth’s climate. Effects will depend on the degree and speed of adaptation of countries, economies and people, and differ by region.
Likely effects include: melting of glaciers and ice caps; higher sea levels; more frequent and violent weather events; and degradation of water resources. Sectors likely to be particularly affected include: utilities; integrated oil and gas; mining and metals; insurance; building and construction; and property.
Such developments will probably evolve over decades. In planning, therefore, companies will regard climate change as the same sort of slow-moving but powerful force as globalisation, technical change and population ageing – forces that slowly but inexorably shape the economic environment.
Climate change may cause the economic environment to alter more suddenly, particularly when government policy responds to the perceived threat. A change in greenhouse gas regulations on utilities, fuel economy standards for vehicles, airline taxes or building regulations can immediately affect companies’ profitability and prospects. They will therefore want, at a minimum, insights not only into how climate change will affect business, but also into how policy is likely to affect it. Not surprisingly, some companies will want to shape that policy.
Most economists would wish to see the price system – the principal mechanism by which resources are allocated in a market economy – at the centre of emissions reduction policy, whether through taxation of carbon or the selling of emission permits. But there is a place for regulations and standards policies also, provided that the resulting implicit cost of abatement is reasonably uniform across sectors and economies and acceptably close to the value of the damage avoided.
We see a greater than 50 per cent likelihood that some sort of global emissions trading system, covering many of the most important sectors, will be in place in five years’ time. But a somewhat motley mixture of policies is likely to continue also.


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