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Friday, April 1, 2005
Kyoto reality

Whether global warming is due to human activity or is simply part of a normal cycle of nature is not so much the point. Few these days disagree with the fact it is nevertheless happening. The latest photographs of Mount Kilimanjaro, for example, reveal a peak without snow, the first time ever. By 2020 it is estimated that its crowning snow and glaciers will have disappeared completely because of global warming.

Paul Skivington, an enterprise-wide risk management specialist at Alexander Forbes Risk Services, however, believes a more interesting discussion point is: why should developing countries bind themselves to limits on emissions when one of the reasons developed countries got to be developed in the first place was the absence of any such restrictions on industrial activity?
In China for example, the level of emission of greenhouse gases per capita is 10 times lower than that of the US. “Therefore it is not difficult to understand why China has not signed any binding emissions targets - both a major opportunity in terms of carbon trading and the desire of the Chinese population to enjoy similar standards of living as the Americans,” he comments.
So why should underdeveloped countries sign and abide by the Kyoto Protocol (said to be the world’s most ‘far-reaching’ environmental treaty, and which came into effect 16th February 2005), if the USA has refused to sign it, and the most populated country in the world, China, has not committed to emission targets?
Be that as it may, Mr Skivington points out that the Kyoto Protocol is a reality and one many South African companies would do well to respect.
“From a risk management point of view it represents a change in the external environment, which can pose risks for the unprepared,” he says. Business cannot claim to have been taken by surprise as it has been a long time in the making. “Companies which trade with many European countries, or are part of European multinationals, may well be forced to adopt standards in place in the country of the Trading partner or Multinational head office, even if we have no emissions standards for greenhouse gases as yet in this country,” he adds.
On the opportunity side of the risk equation, the Protocol should encourage European countries to trade low carbon emission technologies with South Africa, and potentially to trade Carbon credits as well, although SA is not so well positioned in this regard due to the use of coal to generate most of its electricity.
Mr Skivington also says, “We clearly do not want to go back to the visions of early 20th Century when industrial plants belching out smoke were held up as examples of how well a country’s industry was performing. But it is also naive in the extreme to expect people to adopt lifestyles that are going to sacrifice advancement for a lower impact on the environment. Mankind has never in its history done that before, and it is unlikely to start now.
“Realistically Kyoto is just a starting point on the road to sustainable development, but it has to be a win-win situation for all concerned.”

Copyright © Insurance Times and Investments® Vol:18.2 1st April, 2005
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