Climate Change: A Strategy for Voluntary Business Action

The issue of potential global climate change is one of the most pressing on the international environmental agenda. For Canada, the issue is particularly important given the energy-intensive nature of our economy and our reliance on energy and other resource products as a major contributor to national wealth. Its impact goes beyond environmental considerations and has implications for Canada’s trade and economic interests. The 150 chief executives who make up the Business Council on National Issues (BCNI) believe that business must take a leading role in formulating policies and actions that will meet Canada’s international commitments with respect to the release of greenhouse gases.

We believe that a voluntary industry program must form a cornerstone of Canada’s national action plan on climate change. We are convinced that regulation alone is not the answer to address an issue that has such widespread implications for business and consumers. A voluntary program offers flexibility to industry to develop lower cost options and explore the potential for innovative new technologies. We believe that it will be the most effective route to achieve both Canada’s environmental and economic objectives.

For these reasons, we support the voluntary challenge issued by the federal and provincial governments, and we will participate in the development of an effective voluntary program. The BCNI’s Task Force on the Environment has prepared the attached proposal as a contribution to this process. We are circulating it widely among governments, industry associations, and other interested parties in the expectation that it can act as the framework for a national industry initiative on climate change. We recognize that the voluntary program will succeed only with the widespread support among key stakeholders. A signal by the chief executives of Canada’s leading companies that they are prepared to include climate change goals as part of their corporate objectives is an important first step in this process.

We welcome comments on the attached document, and look forward to working with other committed stakeholders in forging policies and actions that will meet Canada’s long term objectives on global climate change.

Introduction

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Although considerable attention has been given to the issue of global climate change, it is still poorly understood, and the relevant science will take several more years to develop. Nonetheless, Canada and other like-minded countries have agreed on a precautionary approach, since potential impacts could be significant. Canada is a signatory to the United Nations Framework Convention on Climate Change, and our country commitment, stated in the Green Plan, is stabilization of greenhouse gas emissions at 1990 levels by the year 2000. The Liberal “Red Book” suggests that Canada’s aim for a 20 per cent reduction in carbon dioxide emissions by the year 2005. Current projections suggest that emissions greenhouse gases in the year 2000 will be at least 11 per cent above the stabilization target. At a recent joint meeting of the Council of Energy Ministers (CEM) and the Canadian Council of Ministers of the Environment (CCME), ministers reiterated the stabilization target, but also indicated that they would explore “sustainable options to achieve further progress in reducing emissions by 2005.”

This has important implications for Canada, as both a major producer of fossil fuels, and a country whose industrial structure, to a significant extent, has been built upon energy-intensive industries. Industry has already done much to reduce its consumption of energy since the oil price shocks of the 1970s. Further reductions of greenhouse gas emissions will be difficult, particularly as the economic cycle turns up and many of our resource industries increase production to meet new demand. From a global perspective, Canada is only 2 per cent of the problem. Excessively stringent domestic measures would have little effect on the global problem but could seriously impair the competitive position of Canadian industry. Given Canada’s reliance on trade, it is important that our actions be consistent with those of our trading partners. For Canada, climate change is as much about trade and economic development as it is about the environment.

In pursuit of Canada’s objectives, the Climate Change Task Group (a task force made up of representatives of federal and provincial governments, industry and environmental groups) is currently at work on a national action plan on climate change. The action plan will be considered by federal and provincial ministers of environment and energy on November 8, 1994. The choice of potential measures which may be included in the action plan is varied, ranging from voluntary measures to prescriptive regulations and costly new taxes. Some regulations may be necessary, for example, building code changes developed with industry. Canada’s primary objective should be a balanced mix of instruments that meet both Canada’s environmental and economic objectives. One of the best ways of doing so is to give maximum scope to a voluntary program by Canadian industry.

The Voluntary Challenge Program

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In September 1994, CCME and CEM Ministers issued a challenge to Canadian business. In a letter to some 250 chief executives, they invited them to develop company action plans that would contribute to the achievement of Canada’s objectives. Response to the challenge has been very positive, and the BCNI and major sector associations have indicated their support.

Governments recognize that the challenge of climate change is beyond the pale of a simple regulatory scheme, and will require high levels of cooperation and commitment from a vast array of players. A voluntary program would have considerable advantages over either regulations or new taxes. A voluntary program is a significant component of the climate change action plan adopted by our major trading partner, the United States. For Canada to choose a different course could have a negative impact upon our competitive position. A voluntary program would lead to the lowest cost solutions and allow industry the flexibility to adopt the most effective measures that also contribute to competitiveness. For governments, a voluntary program offers a more timely and lower cost response than complex regulations, greater likelihood of maintaining jobs and economic growth, and builds a more cooperative environment for addressing Canada’s commitments.

PRINCIPLES

If a voluntary challenge program by industry is to be the cornerstone of Canada’s national action plan on climate change, there are a number of key principles which must underpin it:

• The target of the voluntary challenge program should relate to an overall national and international goal of stabilization involving all greenhouse gases. This should provide maximum flexibility of actions to be taken and a comprehensive approach — all gases, all sources, all sinks, and all locations, both domestic and international — while promoting the objectives of the program.
• Coordinated federal/provincial actions and support are essential.
• The emphasis should be on cost-effective measures, while awaiting further scientific developments, with due consideration of economic factors, and ensuring consistency with actions of our major trading partners.
• Measures taken to achieve climate change goals must be consistent with other public policy objectives — trade and competitiveness; and economic growth and job creation being key among them.
• The program will have to recognize that business growth, new demand for products/services, geography, energy intensive/energy mix, and financial and technical resources vary among companies and sectors, and that as a consequence the particular actions taken and the results may vary.
• Particular firms or sectors cannot be asked to commit specified reductions in advance. Some firms and sectors will achieve reduction or stabilization, while others might slow the rate of increase in greenhouse gas emissions.
• A common framework should be developed internationally for measurement of emissions and reduction goals. Measures such as greenhouse gases produced per unit of output will have to be considered along with total emission levels.
• The program should provide appropriate incentives for the development of cost-effective new technologies, and for activities that could achieve reductions at lower cost in other countries. The latter would include government recognition of joint implementation projects.
• The program should build on and enhance existing programs related to energy efficiency, as measured by energy consumption per unit of output.
• Attention must continue to be paid to other commitments under the Framework Convention on Climate Change — developing the science, adapting to climate change, building public understanding, etc.

THE PROCESS
Major steps in the development of the voluntary challenge program would include:

• A framework for voluntary initiatives developed and agreed upon.
• A challenge issued to industry by the federal government, with manifest support of provincial governments.
• Support in principle by BCNI, major sector associations and individual companies.
• Release of the national action plan with the voluntary challenge program as a key component.
• Development of participants’ objectives and action plans for greenhouse gas emissions.
• Establishment of a registry of voluntary initiatives.
• Voluntary company self-monitoring and self-reporting.
• Establishment of an office (perhaps in the private sector) to oversee the registry and to report annually to federal and provincial governments on progress.
• After a specified period (perhaps two years), governments would assess progress in meeting both economic and environmental objectives, and decide whether revised strategies are needed.

ELEMENTS OF THE CHALLENGE PROGRAM
The program would challenge companies to set goals for greenhouse gas emissions and design action plans to achieve them.

• Company and sector goals could take the form of:
  • net reductions of greenhouse gas emissions
  • net stabilization of greenhouse gas emissions
  • reductions in the rate of growth of emissions
  • reductions in energy used per unit of output
  • commitment to take specific actions or expenditures, without targets
  • actions to sequester carbon
  • co-ordinated with goals for economic growth

• Individual company actions could take the form of:
  • setting goals for their contribution to the voluntary challenge program
  • action plans and list of specific initiatives
  • systems of monitoring and internal accountability
  • annual report on activities and achievements
  • periodic review of progress, and assessment whether further actions are necessary
  • possible memoranda of understanding between government and individual companies

• Companies should assess a broad range of actions:
  • energy conservation and efficiency improvement
  • all operations — plant, building, purchasing, vehicle fleet, etc.
  • mix of energy sources
  • R&D and technology development
  • carbon dioxide recovery/sequestration
  • reduction of other greenhouse gases, such as methane and nitrous oxides
  • work with customers and suppliers
  • domestic and international opportunities
  • public education
  • growth of the enterprise

A registry of voluntary initiatives would be established to monitor implementation of the program:

• Companies could report annually on their programs and emission reductions
• One comprehensive national registry recording commitments and actions by all sectors could be established
• The registry and reporting would be voluntary and administratively simple
• The registry would include joint implementation activities undertaken internationally
• Reporting will have to balance the need for verification and accessibility with the need for administrative simplicity and protection of confidential and propriety information
  

ROLE OF GOVERNMENT
The program should recognize a supportive but somewhat modified role for governments:

• Agreement and support of the voluntary approach by all levels of government is essential
• Allow for a broadly-based market response — decentralized decision — making in business
• Provide for a voluntary, flexible, comprehensive approach
• Provide incentive for innovation
• Avoid prescriptive regulations
• Remove or reduce regulatory, institutional, economic or informational barriers to effective industry and consumer action
• Ensure that the international agenda supports Canada’s comprehensive national interests
• Governments can lead by example — all government facilities should meet climate change objectives
• Ensure a single national registry and a national approach on reporting, monitoring and evaluation
• Targeted research to better understand the science of potential global climate change
• Review greenhouse emissions from non-industrial uses (e.g. agriculture, landfill, etc.)
• Target consumers, through education and other means, to ensure their contribution to national goal
• Support for fuel substitution and more efficient energy use
  
  
  

Conclusion

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The voluntary challenge initiative has considerable potential to contribute to achieving Canada’s climate change goals in a more cost-effective manner and in a way that is consistent with Canada’s economic objectives. It allows companies and industries to develop action plans tailored to their particular circumstances, but also provides for periodic re-assessment of the adequacy measures in reaching agreed objectives. However, it will require sustained commitment from business and consumers, and broad support among governments and other key stakeholders to make it a reality.