Published in ENDS Report (Issue 415, p48), in August 2009.

Climate change poses a systemic risk for humanity, one where a failure causes a cascade of contingent failures which lead to a collapse of a whole system. In this case, that system is the global economy. By analogy with a very large bank in the global financial system, a stable climate is an environmental component of the global economy that is too big to be allowed to fail.

We now have a precise indicator of what would constitute failure. At the meeting of the Major Economies Forum in L’Aquila, Italy, the leaders of the world’s largest economies accepted the scientific advice that “the increase in global average temperature above preindustrial levels ought not to exceed 2°C”. In effect, they defined for the first time the threshold of dangerous climate change.

This sets a clear goal for Copenhagen in December, the 15th Conference of the Parties to the UN Framework Convention on Climate Change. The bargain struck at this meeting must be sufficiently ambitious and inclusive as to set the world on a path to the low-carbon economy needed to keep the rise in global temperatures below 2°C.

Climate change is not just another environmental problem. Its location at the centre of a nexus of key resource issues that underpin the robustness of the global economy puts into play the current and future prosperity and security of the whole global community. Furthermore, there are two characteristics of climate change that set it apart from other problems facing governments.

First, policy failure is not an option. Governments typically learn by doing. Policy measures are adopted, monitored for effectiveness, reviewed to take account of changing circumstances and revised as necessary. An economic or political goal not achieved today can be pursued again tomorrow.

The long lifetime of carbon dioxide in the atmosphere – centuries – means we are committed, irrevocably and indefinitely, to whatever climate is generated by the carbon burden in the atmosphere at the moment of stabilisation. If we fail to stabilise greenhouse gas at a level compatible with staying below 2°C we cannot try again to achieve this goal.

Second, action must be taken within a limited timeframe. The build-up of atmospheric carbon is cumulative and in effect irreversible. Climate scientists are confident that for there to be a reasonable chance of keeping the rise in global average temperatures below 2°C, greenhouse gases should not rise beyond 450 parts per million of CO2 equivalent. To remain within this boundary, global carbon emissions must peak during 2015-2020 and then decline.

Thus not only must climate policy meet a precisely specified goal, it must do so within a clearly defined window of opportunity or it will have failed anyway. In other words, arriving at the necessary emissions profile too late is equivalent to not arriving at all.

Climate change, whether climate policy succeeds or fails, will transform the landscape of risk and opportunity for business everywhere. Businesses seeking, whether openly or slyly, to impede progress at Copenhagen, need to be careful. They may get what they wish for but discover that a world in which direct climate risks are compounded by climate policy uncertainty is worse for business than effective action.

Policy success means building a carbon-neutral global energy system by the mid-century, a significant reduction in tropical deforestation and a total transformation of agriculture and water management. This will entail a massive change in public and private investment patterns from business-as-usual.

Policy failure will compound other resource stresses. A changing climate acts as a stress multiplier. Fundamental to a prosperous, secure and equitable world is the provision of reliable and affordable access to food, water and energy for all 6.5 billion people now on the planet and for the extra 2.5 billion that will be added by the middle of this century.

Unmanaged climate change, by altering the variability of precipitation, extreme weather events and other impacts, will greatly increase the cost and difficulty of dealing with the already pervasive stresses of meeting this challenge.

Climate policy failure puts at risk the global framework of policies and institutions that have been central to the considerable advances in human welfare made over half a century. This framework is already under stress from the collapse of confidence in the global financial system and the subsequent economic slump.

There is an increased risk that, as the public lose confidence in their governments to deliver prosperity and security, support for a multilateral, rules-based global system rooted in progressive trade liberalisation will diminish. Unmanaged climate change, undermining food, water and energy security, threatens the social and political stability within countries on which this international effort depends.

Climate policy thus stands at the apex of a geopolitical fulcrum. On one side lies the continuing development of a multilateral global system that has consistently improved human welfare for more than 50 years. On the other lies a return to a mercantilist and nationalist past that cannot, in any case, support the aspirations of a world of nine billion people. This makes climate policy success an imperative, not an option, if business is to continue to operate in a world with manageable risks.

For all its frequently expressed frustration with too much interference, business relies on government to maintain the fundamental conditions under which investment generates returns. Climate policy failure threatens those conditions.

The auguries for success at Copenhagen are not good. Some years ago, the founder of the Institute for European Environmental Policy, Konrad von Moltke, a descendant of the famous German field marshal, pointed out that climate change may be a problem too difficult for governments to solve. Unless there is a stronger and more coherent voice from the business world over the next four months, he may turn out to have been right.