CEO perspectives: first-hand views from business leaders Do you consider that a consensus is building in the business community around carbon EY:pricing on a global level? If so, what factors are driving this change? “Companies acknowledge the process of ongoing climate change … as an increasingly relevant risk for businesses; and the use of market mechanisms, like carbon price, as one of the most effective measures to … decrease global warming. In the last 18 months we have seen a growing number of associations and all sorts of organizations … supporting a price on carbon. It is the biggest expression of shared interest related to climate change that has ever occurred. The main reasons are the business opportunities that may derive from the new environment post COP21.” Some companies feel carbon pricing could threaten their competitiveness. Do you think EY:these are justifiable concerns? “After reading the latest Intergovernmental Panel on Climate Change report, there is no doubt that taking measures on climate is the most reasonable position from the point of view of Jose Manuel Entrecanales managing business risk. Domecq We could talk for years about the need to act on climate change, but without a price signal, we Chairman and CEO will not be able to change consumer behavior or mobilize investment fast enough to reverse the trend in global emissions. I think it is really important to highlight the opportunities that come with Acciona putting a price on carbon. It will serve as a wellspring of innovation and job creation; and it will act as a catalyst for energy efficiency and greater competitiveness …” What lessons are to be drawn from the EU ETS experience? Do you think the “cap and EY:trade” mechanism implemented in Europe is the most effective option for putting a price on carbon? “We’ve learned what should be corrected, and now we are in the position to improve it. Something essential for business is to have a clear and predictable CO price signal: the recently 2 approved Market Stability Reserve (MSR), aims to achieve it and it is certainly another step in the right direction. MSR is a price stabilization tool, which leaves room for the market to operate but prevents its failure, due to too high or too low prices. There are other market mechanisms that can also be effective and efficient.” China recently announced that its national emissions trading scheme would start in 2017. EY:Do you think this announcement will encourage more countries to adopt a clear carbon pricing strategy? ”It is good news. First, China is the world’s largest emitter of greenhouse gases and its efforts to combat climate change can serve as impulse to other countries to implement clear carbon pricing strategies. Also, in the context of COP21 in Paris, the recent US-China agreement and commitment to combat climate change is a significant step forward in future emissions reduction and may facilitate negotiations between “developed” and “developing” countries. We need to engage governments to introduce efficient market mechanisms to climate-proof our economies, and a carbon price is the most efficient way of going about it.” Where do you see the biggest barriers to carbon pricing today? What are your long-term EY:expectations for the creation of a global market for carbon? “The biggest barrier to reduce emissions is lack of will from business decision makers and, most importantly, from policy makers who can implement the appropriate policies that will promote business action. About the global market for carbon … let’s go step by step. Countries will understand that flexibility is a good choice, so linking markets will come naturally. The private sector is increasingly supporting carbon pricing, particularly the financial sector as a risk mitigation or risk assessment measure. But governments and policymakers in general will need to take the steps to generalize adoption.” 14 I Shifting the carbon pricing debate 14 I Shifting the carbon pricing debate