Section 4How can policies find support?Conflicting policies can become perverse incentives thatreward the status quo over more environmentally-friendlybehaviour. In the US, the Environmental Law Instituteestimates that fossils fuels received approximately USD 70billion in direct spending and tax relief in the period from2002 through to 2008. During the same period, traditionalrenewable fuels received about USD 12 billion, and thecontroversial fuel corn ethanol received just under USD17 billion. 10 Outside of the Organisation <strong>for</strong> EconomicCo-operation & Development (OECD) countries, Chineseincentives <strong>for</strong> renewable energy, particularly wind and solarpower, have fostered a rapid build-up in capacity, yet alongwith Russia and India, China remains one of the world’slargest subsidisers of fossil fuels. 11Business leaders bear some responsibility <strong>for</strong> thecontradictions. Generally, they will seek exceptions,promote competition between governments, and protectthe status quo when it benefits their stakeholders. Businessexecutives do, however, strongly support the consistentimplementation of environmental policies across regions andover the long term. Particularly as operations spread acrossborders, legal differences often create more disadvantagesthan advantages.Chris Lenon, Global Tax Director at Rio Tinto explains, “Weapply our standards on a global basis and we stick to thesestandards. That’s a decision that the Group has taken…. Wewant there to be one measure of what a tonne of carbon is“We apply our standards on a global basis and we stickto these standards. That’s a decision that the Grouphas taken…. We want there to be one measure of whata tonne of carbon is because that way it will be easierto comply and to operate on a global basis on a levelplaying field.”Chris Lenon, Global Tax Director,Rio Tintobecause that way it will be easier to comply and to operate ona global basis on a level playing field. We seek certainty andconsistency. Our fundamental issue is that our investmentsare very long-term investments, so if you can’t predict whata potentially significant cost is going to be, over the life of aproject, it’s difficult to evaluate any project.”A lack of coordination within and between governmentscreates uncertainty about long-term investments and otherbusiness decisions that could be affected by environmentalpolicies. Clearing the uncertainty is critical <strong>for</strong> the transitionto a low carbon economy. The utilities sector, <strong>for</strong> example,needs to plan investment in cleaner generation and muchneededpower infrastructure on time-scales of up to a decadeor more.10Adenkike Adeyeye, James Barrett, Jordan Diamond, Lisa Goldman, John Pendergrass and Daniel Schramm, “Estimating US Government Subsidies to Energy Sources: 2002-2008,” Environmental Law Institute, September 200911The Economist, “A long game,” 5-11 December 2009. International Energy Agency, “World Outlook: 2008 Edition”24 <strong>Appetite</strong> <strong>for</strong> <strong>change</strong>. PricewaterhouseCoopers.
pwc.com/appetite<strong>for</strong><strong>change</strong>Sixty two per cent of business executives, however, believetheir governments have not created clear economic signalsabout environmental issues. Fifty seven per cent feel theirgovernments do not have consistent, long-term taxes andregulations (see fig. 14 on page 23). For example, althoughincentives are popular in theory, 62 per cent of businesseshave difficulty understanding what incentives exist (see fig. 13on page 21). When they do discover relevant incentives, 55per cent of business executives are discouraged from actuallyapplying by the perceived administrative burden. With theseexperiences in mind, it is not surprising that 71 per cent ofexecutives believe that existing incentives do not <strong>change</strong>environmental behaviour.Businesses want clear long-term investment signalsand input into the <strong>for</strong>mulation of direction and derivativepolicies. Ninety six per cent of the survey respondents agreethat an important element of an effective global climate<strong>change</strong> deal is sending a clear long-term signal that supportsinvestment in low carbon technology (see fig. 6 on page 15).Incentives remain the favoured way of sending such a signal(see fig. 2 on page 9) despite the difficulties businesseshave with existing incentives (see fig. 13 on page 21). Eightysix per cent of Spanish executives believe there should betax incentives <strong>for</strong> becoming carbon neutral, <strong>for</strong> example,even though the stop-and-start implementation of recentsubsidies has created a volatile solar power market (see fig.15 opposite).Figure 15Should the tax system include incentives to become carbon neutral?Total (%)UKFranceGermanySpainSwedenNetherlandsCzech RepublicCanadaUSARussiaBrazilChinaIndiaSouth AfricaAustralia23 6736 508 8624 648643 5343 467 6828 6228 529024 7210 8810 8427 6348 45Depends on extent of incentivesVery/fairly good ideaWhat do you think of the idea that the tax system, as it applies to companies,should include incentives <strong>for</strong> companies to become carbon neutral, to encourageenvironmentally-beneficial activity in the business community? Base: Total (654)Businesses want clear long-terminvestment signals and input intothe <strong>for</strong>mulation of those signals andderivative policies.<strong>Appetite</strong> <strong>for</strong> <strong>change</strong>. PricewaterhouseCoopers. 25