* Climate threat grabs attention after storms and drought
* Obama speech hot talking-point at World Economic Forum
* But business cautious on investment as governments stall
By Ben Hirschler
DAVOS, Switzerland, Jan 25 Climate change is
back on the global agenda, with debate in the corridors at Davos
given fresh impetus by U.S. President Barack Obama and U.N.
Secretary-General Ban Ki-moon both highlighting it as top
priority this week.
Yet business leaders are still struggling to find the
economic incentives to change current practices.
The World Economic Forum (WEF) has not held back in its own
assessment of the dangers, with former Mexican president Felipe
Calderon warning of "a climate crisis with potentially
devastating impacts on the global economy".
Christine Lagarde, managing director of the International
Monetary Fund, summed it up for any Davos doubters: "Unless we
take action on climate change, future generations will be
roasted, toasted, fried and grilled."
There is a disconnect, however, between increasing evidence
of extreme weather - from Superstorm Sandy in the United States
in October to record heat in Australia this month - and the
limited response from politicians and businesses.
In some cases the clash is stark, as highlighted on Friday
when Greenpeace activists shut down a Shell gas station
near the WEF meeting in protest at oil drilling in the Arctic
that is made easier by a warmer world.
Many companies tout the opportunities presented by a shift
to a low-carbon economy, yet the reality is that the continuing
economic crisis has discouraged businesses and governments from
developing a truly long-term view.
The rapid growth in shale gas - a greener alternative to
coal when it is burned, although not when it leaks into the
atmosphere - has also made renewables comparatively less
attractive, adding to the challenge.
LACK OF URGENCY
The result is that while global investment in renewables is
rising, the world still needs to spend $700 billion each year to
curb its addiction to fossil fuels, according to a study issued
by the WEF this week.
"There is a clear lack of urgency in the climate debate,"
said Greenpeace Executive Director Kumi Naidoo. "Big business is
holding us back."
Business, in turn, complains that the failure of governments
to provide a clear regulatory framework limits its ability to
plan for the future.
After past failures, governments aim to work out a new U.N.
plan to address climate change in 2015 but it will only enter
into force from 2020.
"Climate change is a long-term issue and it is not clear how
it is going to play out or what the returns are going to be,"
said PricewaterhouseCoopers International Chairman Dennis Nally.
"So CEOs have to measure how this investment stacks up vis a
vis other opportunities that can generate clearer returns."
In practice, only a quarter of CEOs surveyed by PwC said
they planned to raise investment in climate risks as cash is
rationed and allocated to projects with the most obvious
near-term commercial returns.
That doesn't mean CEOs are not worried, according Fred
Krupp, president of the Environmental Defense Fund, who said
virtually every corporation was affected to some degree.
"There was mostly silence on climate change for the last two
years at Davos," Krupp said. "But that has changed. The U.S.
drought, especially, has grabbed people's attention here in
Davos because that has had a real effect on prices."
Also chiming with business leaders is Obama's argument that
the United States cannot afford economically to fall behind in a
global clean energy race dominated by countries like China,
South Korea and Germany.
"The U.S. has to be among the leaders in this global
discussion, so it is a positive development," Andrew Liveris,
CEO of Dow Chemical, said of Obama's inauguration
speech, in which he made climate change a priority for his
RECORD LOW CARBON PRICES
U.N. chief Ban Ki-moon came to Davos with a similar message,
saying he was very encouraged by Obama's speech, while warning
that climate change was approaching "much, much faster than one
For investors, however, the climate issue remains hard to
assess, as shown when the price of European permits to emit
carbon fell this week to a new low below 3 euros a tonne,
providing minimal incentive for industry to change behaviour.
Analysts estimate prices need to be between 20 and 50 euros
to make utilities switch to lower-carbon generation.
The question is, when might that carbon risk turn and start
to undermine the value of companies heavily reliant on fossil
The International Energy Agency warned last month that the
world will burn around 1.2 billion more tonnes of coal per year
by 2017 than it does today - equal to the current coal
consumption of Russia and the United States combined.
And an analysis by Ecofys for Greenpeace, presented at
Davos, found that just 14 carbon-intensive projects worldwide
are set to increase global CO2 emissions by 20 percent, or 6
gigatonnes. They range from coal expansion in Asia to the tar
sands of Canada.
When completed, these projects promise to lock in
"catastrophic" global warming, according to Greenpeace.