Low-carbon transition will require the creation of radically different new infrastructure and energy systems. We know that most of the investment for this must come from the private sector. The biggest challenge for governments is to realign financial signals so that investment in low carbon solutions is the most attractive choice.
There are various means that governments can use to drive investment patterns, ranging from regulation and choice editing through to subsidies and fiscal incentives. Governments can also intervene directly in the market through large-scale public procurement. These actions can be conducted at national level or under international agreements. However none of them can be conducted effectively without consistent, comparable data on the carbon intensity of companies, products and activities.
In order to send coherent financial signals, governments must prioritise the joint development of the nuts and bolts that allow this to happen – reporting, accounting and assurance. Businesses are not able to use one single standard across their international operations, and investors are not able to easily compare the performance of companies or products. The Carbon Disclosure Project is frequently told by companies and investors that this is a real obstacle to effective action on climate change, and this message was repeated in a recent piece of CDP research, conducted with AEA, on what business needs from government.
Much of the necessary work is already being done by civil society, including by the International Accounting Standards Board, the International Auditing and Assurance Standards Board, the Climate Disclosure Standards Board and others. A strong precedent has been set by the success of international financial reporting standards, although full adoption of these has taken many decades. Governments must act to enable the development of effective international carbon reporting standards to come into use in the much shorter timescale required by climate change.
Kate Levick, Carbon Disclosure project.