 Welcome to this debate on the return of carbon markets coming to you live from Davos where the World Economic Forum annual meeting 2017 is still in session. Joining me to take this dynamic conversation further, we have Lord Stern, who is president of the British Academy of the United Kingdom, Catherine McKenna, Minister of Environment and Climate Change of Canada, Jose Manuel Antra Canales, who is the chairman and chief executive officer of Asiana Spain, Douglas L. Peterson, president and chief executive officer of S&P Global USA, and Eric Olson, the CEO of LaFage Olson. Thank you all very much for joining me. For what promises to be a spirited discussion given that carbon pricing and climate change can be a somewhat polarized discussion point, and of course it is a huge focus here at the World Economic Forum. And I think the best way to start is to get you all to give me a sense of the conversations that have taken place here at the forum and where we are as of today on carbon prices. Lord Stern, let me open to you, sir. Let's start by reminding ourselves why we would want a carbon price at all. Well, markets allocate resources reasonably well, usually better than bureaucrats, but only if they signal the costs associated with activities. Admitting carbon imposes real costs, big costs. We risk through climate change, flooding of Bangladesh, threats to my own hometown in London, the advance of the Sahara into northern Nigeria and droughts in Ethiopia. These are the kinds of threats, big damage that comes from emitting carbon dioxide and greenhouse gases. So markets without prices are not giving the right signals. Indeed, we're subsidizing damaging activity by letting people do it for nothing. And that is causing deep, deep problems for future generations. And indeed, a lot of the effects are with us now. So that's why it's a good idea. How much? Well, we had a good discussion with leading CEOs yesterday and we asked them what sort of prices would lead to really serious changes in behavior as a kind that would let us deliver on the Paris Agreement on climate change of just over a year ago for 2020, 2025, 2030. 60% of them said over $40 a tonne of CO2, 2020, over 70% said over $40 a tonne for 2030. So let's call it $50 as a kind of rough ballpark of where they were. Where consensus is pretty much sitting right now. Yeah, about what would change. How much money do you get? What would cause emissions abatement? Exactly. On a significant level, perhaps associated with climate change. Change behavior. Lord Stone, let me bring in Minister McKenna here. Give us your viewpoint as to where we stand. Obviously, you've been instrumental of COP21, COP22 and Marrikesh. And here at the World Economic Forum, as I said earlier, climate change taking center stage. Well, I mean, it's amazing to be here and having this conversation. This conversation is now mainstreamed. When we say putting a price on carbon, I say price pollution. That's really worked well in Canada because people, Canadians understand the impacts of climate change. They understand they're real. And that we have to put a price on it if we're going to change behavior. But just here at the World Economic Forum, I think you can see clearly that the Paris Agreement was a signal to the markets. And now the conversation is not limited to NGOs, to governments. It's far beyond that. It's now the business sector, financial institutions. I've had so many bilaterals with businesses and companies who are saying, yes, we actually have an internal price on carbon. People don't know that. Many companies, good companies who are looking at how do they find opportunities, but also how do they manage risk, have an internal price on carbon. And there's a conversation about, OK, let's move forward. Let's get on with it. And let's do what we need to do, which is build a better future for our kids. I have three children, so I worry about this a lot. But I also see this as a huge opportunity. And that's why Canada has stepped up. Pricing pollution is a way to actually prepare our economy to make it more attractive for investors. I've actually had so many companies come to us and say, you know, we really like what's going on in Canada because you're providing certainty to the market. You're saying, you know, we are going to price pollution. You're also taking other measures like investing in innovation, looking for opportunities, and we're certainly open to investment. And we recognize it's not just an obligation, but there's a huge opportunity. And that's a conversation here. And I'm really glad to see that it's moved beyond the NGO community. It's moved beyond the usual suspect that now the business community is stepping up, recognizing this is the direction we need to go. Let me throw the cat among the pigeons here, Jose, and bring you in. How do we prevent this from continuing as a perceived elitist conversation and bring it down to beyond business now, but to the man on the ground? That's a very good point. I think I've been discussing this issue because it hits my business very directly. I'm a renewable energy developer in Africa, among other places. And really, this discussion is a, it has been to date an elitist discussion. And we need to, we need to break that. I mean, this is, we're talking about the reality of what's going to happen in the next 10. In fact, last year was the hottest year in history again. Frankly speaking, I think we need to bring ambassadors that people trust, that the people trust. We are not very well trusted, to be totally honest. I mean, we are the elite. We are the leaders, you name it. But the fact is that we are not that well trusted among the people. And in many occasions, we have, maybe not you, but we have difficulty explaining these things to your politician. You're very good at it, but we're not, we're not so good, we're not so good. So I think we need to bring ambassadors. We need to bring people who the people trust. We need to bring people who are completely out of our business and who we dedicate the time to explain this issue. And they are the conveyors of the information and they are the trust, creating entities, bodies, people who will bring the people behind us. Otherwise, it's going to be very difficult. Let's bring you in, Eric, in terms of LeFage Halsam. And the fact that you are the second largest CO2 emitter globally, I'm sorry to have to put that on the table at the beginning of the conversation, but you are making up for it and you have put targets in place to reduce those emissions. In fact, you're looking at reducing emissions by some 40% per ton of cement by 2020. Ambitious targets? 2030. 2030. Let me not bring you forward 10 years. We're trying to fast-track everything in this room. Talk to me about why you believe that this is so important in terms of reducing emissions. Well, this is crucially important for all the reasons that were mentioned before. This is a planet issue. And we're all in this, not just an elite circle in this. But we've got to get it right. And what I'm very encouraged by coming out of Paris, we have the right momentum and we have real engagement. I spend a lot of time talking to other businesses, talking to our clients, to our customers, other industry participants. And there's real engagement in getting this right and moving forward. But there's things that we have to progress on. We have to move forward with a carbon price that incents the right behavior. We can, as a cement industry, you mentioned that the cement industry generates a fair amount of CO2. It's a natural part of the process of producing cement. We have the capability to reduce that. We also have the capability to produce and construct buildings in a much more energy-efficient way. And what we need to do is focus on making that happen with the right price on carbon and doing it in a way that incents the right behavior. And the point that was made before, this isn't just a small group that needs to make this happen. This affects the whole planet. And we need to engage a much broader discussion in this and the way governments behave and the way governments purchase things. And then I'm confident we can make a real difference. Why have emissions trading desks across investment banks repeatedly closed down, battled to get the momentum going? Because obviously, if we're going to get carbon markets working, we've got to learn from the past mistakes and say, what were those failures and why? The financial markets have intended to begin to trade carbon over the years. But carbon pricing, as we've heard, is variable. If you look at the different trading schemes and cap and trade schemes around the world, the price goes all the way from $1 to $133. It's hard to have a global market or even have a liquid market when you have so many different pricing schemes, so many different approaches. We are here at Davos. I have been able to attend various climate sessions talking about the overall issues. One of the themes that really struck with me is that carbon is not like many other products. It's not produced and consumed in the same geographic area. It could be produced to one place, but the impact, the consumption, so to speak, goes into the air and it becomes a global issue, which is one of the reasons we need to have global solutions. We were here, some of us just came from a financial task force that was put in place by the FSB, which was another opportunity to bring people together in Davos. This brings together people from financial services, regulators from information companies, from producers to talk about standardized ways to report on climate disclosure. And this is also one of the opportunities that we have. So instead of having $1 and $133, how do you make that a market? How can you start seeing the disclosure and the different systems converge to have a true market in the $50, $45 range that we heard from Nick? So ladies and gentlemen, this broadcast in itself is one step further to achieving our objective. We are broadcasting to the African continent, 48 countries across sub-Saharan Africa. So Lord Stone, and I want us to take a step back because you are all experts. You're all involved in the situation. And we've got to bring everybody else with us into this conversation. We have to understand the basics. Why should somebody in Africa, which is where I'm from, who doesn't have access to energy, care about climate change? And that's what we've got. So Lord Stone, you spoke about the fact that your home would disappear. London would be affected. Could we just go do a round robin of those visual impacts, of what is going to happen if climate change continues and the earth warms, and we're trying to obviously keep global warming below two degrees. That's the objective. And that's to prevent sea level rising. I mean, in a very basic way. What happens? Give me the most impactful message for the man on the ground in terms of reaching that person who's got to understand about climate change. Let me give examples from Africa where my very first applied project as a young academic economist was on tea in Kenya in 1969. Tea depends enormously on steady rainfall to give steady growth so you can pluck it and get a steady income. And tea goes through the factories in a steady way. Otherwise, the other thing falls apart. We don't know what would happen to the rainfall in Kisi and Nyeri in Kenya, big tea growing areas. I've worked a lot in Ethiopia over the years. Droughts in Ethiopia come and go. But what we can be confident of is that those kinds of variations, those kinds of risks I've given drought in Ethiopia. I've given the rainfall in Kenya. Those kinds of risks are very big. We can't be precise exactly how they might change, but we can be pretty confident that we're going to get very big changes in many places which disrupt people's lives, disrupt their livelihoods. This is serious, big stuff that affects everybody. Now, the emissions come from everywhere. Now, well over half the world's GDP now comes from emerging markets and developing countries. We should celebrate that. That's past progress. But that means that they emit a lot as well. And so we're hit around the world by these effects, wherever we are, and we're all responsible for emitting. Now, the richer people emit more, but it involves all of us. So it's industrialization. It's growth as we know it that is having this impact on the global environment. Minister McKenna. Well, I mean, I think we all need to care. But if you're in Africa, we just know that the impacts of climate change are felt most acutely right now by people who are the most vulnerable. Many African countries who are already seen the impacts of climate change. And sometimes it's this futuristic thing. Year after year, records are being broken. Once again, NASA said 2016, hottest year on record. And there are states that are literally going under water. We know that women are disproportionately impacted by climate change. They're often the ones that are going out looking for water when you have severe weather events. They're often the most vulnerable, trying to take care of their children. Let me give you one example. I was in COP 22 in Morocco. And I witnessed this conversation that almost had me in tears. It was one of our Inuit leaders. The Arctic in Canada is literally melting. And it's not an inconvenience. It's actually totally disrupting ways of life. We've Inuit hunters who have hunted on the land for decades who are actually going through the ice and dying because they can no longer tell the weather. They can no longer forecast how thick the ice is. They've always been able to do this using traditional knowledge. But the conversation was between an Inuit leader and with a leader from a small island state. And so the Inuit leader said, let me get this right. My homeland is melting. And it's literally causing your homeland to go under water. This is what we are talking about. We are all interconnected and these actions. And we have to be let's be frank about it. It's the most developed countries who have been responsible to the largest of 100 megacities that are responsible for 60% of 17 emissions. For the impact we're seeing now. So we need to step up. But everyone needs to be working together. And what's also great, the conversation here, you have the Chinese stepping up. You had the president Xi coming in. And saying, you know what? We are going to take serious action on climate change. They are starting a carbon market this year. I mean, think about that. That is the largest emitter, second largest economy in the world stepping up and taking this action. So I'm very hopeful. Is it a complicated topic? Yes. But do we need to price what we don't want? Do we need to actually take action to price pollution? Yes, absolutely we do. And that will have an impact because companies will change the decisions. And that's exactly the point that I want to bring in Jose. Companies will change their behavior. That's the price that we're trying to establish. And that's going to be the focus of the rest of this conversation. Bringing carbon markets back and the price which will create emissions abatement. So let's be clear about that. We've established why we need this. We could spend 10 days, 20 days, et cetera, et cetera. But it is going to impact everybody on the ground. This is your business. Doing things right. It is important to differentiate two sides of the world. The world where they need more energy, new energy, that is the new generation capacity markets. And the world where, which is us, the Western world, the more developed world, where we need to replace capacity. The good news is renewables are now the cheapest source of generation capacity, of electricity. So in those places where they need new energy, which is Africa, for example, all the new capacity, all the capacity is new. There, the capacity to install renewable energy does the trick. It is non-emitting. And even without a carbon price, we would be more efficient and cheaper than conventional energy sources. But in the developing world, you do have fossil fuel subsidies that we also need to contend with. That's definitely another question that needs to be solved. But for new energy, we are okay. The more they eliminate those fossil fuel subsidies, the better and the quicker the whole change will be. The problem is here, where there has to be a very high price for us to become, to replace all those stranded assets, to replace the industry, to replace the high intensity consumption in energy industries. That is where the difficulty, and that's where the price has to be high. So I would say there is different prices depending on the place that we have to, but the good news is that we're there. Eric, a lot of companies are taking the initiative of the private sector and bringing in their own internal pricing carbon policies in order to prepare themselves for climate change. Is that what people should, as a matter of course, be doing? Otherwise they're gonna find themselves completely exposed? Absolutely, and we're one who uses an internal price of carbon and we actually publish an integrated profit and loss statement taking account all the different impacts of our business overall. And we're a strong supporter of the financial standards task force, which is putting together standards on how we can actually report consistently around the world on carbon impact and climate impact. But what I would like to come back to just for a second, if I could, we've mentioned the topic of carbon pricing very well. It's an important topic because the technology and innovation potential of the planet and of companies like the Farge Wholesome exist to significantly reduce the impact. We can make zero CO2 buildings. We can do that, but people are not building them today because the right targets and incentives are not in place overall. And it's a shame. We've got this tremendous issue face in the planet. 40% of CO2 is generated out of buildings in the course of the life of buildings, 40%. And we can make zero CO2 buildings. We have the solution is in our hands and we just need to get our policies, our public procurement policies and the right carbon price set in a way that doesn't distort trade and we can really do this. So that's a really interesting point though because there's a lot of focus on, we need to get a price on pollution right. And it has to happen right now and it has to be high enough. I mean, we have to also be realistic. I'm a politician, you know, you could put a really, really high price and then maybe I'd be voted out of office, right? So I think you have to be realistic. You have to send signals, but you need other measures. So I think procurement. Let me just pick up on that because I know that you've seen pressures, particularly from one of your premiers saying that you're gonna drive the energy companies into the ground with a carbon tax. I mean, that's the extent of the pushback that you're getting. And so that's just wrong. So first of all, let's talk about how we managed to do this in Canada because I actually think it's an important model. We went around the country and we took the time to listen to Canadians. That was really, really important. We had town halls across the country. We had online feedback. I did round tables. We did it with everyday Canadians who never knew about, you know, they don't spend all their time thinking about carbon price. I don't think they knew what it was. So this is bringing us back to the outside of the conversation where we say bring it down to ground level. But you know what? That everyone cares about a good future for their kids. They also care about a strong economy. So this is that, you know, when you had the conversation, actually you saw that it shifted. That people started saying, yeah, you know what? Pricing pollution, what we don't want makes sense. But we also brought in, so that was getting broad support by Canadians. We did polling, not us, but external groups did polling. And they found that Canadians supported putting a price on carbon pollution. So that was an amazing step that even knew what we were talking about. But we also worked extraordinarily closely with business because I think this is important. If you're gonna do something that's gonna be very significant, maybe one of the most significant changes that we've made, policy changes that we'll have made in Canada, you need to make sure you're being smart about it. So we sat down with energy companies and they supported us. And so- I think let's leave it there in terms of saying, Minister McKenna, do you have the energy companies across the board on your side? Well, I don't know about across the board. I think we have broad support. We have companies that have signed up to our Carbon Pricing Leadership Coalition. And now they're part of the conversation in designing it because you have to be smart. We have business leaders here. You have to be smart how you design it. Okay, we've ignited. Thank you. We've ignited the conversation. Yes. That's very clear that we're talking about a real growth story here. Sustainable infrastructure. By that, we mean buildings and transport and energy. That is done in a different way is what this is all about. And this is investment opportunity. And this is gonna boost demand in the short and medium term. It sets off a tremendous story of innovation and discovery. I mean, in Joe Day's business, the creativity has been incredible. You know, the price of a solar panel has come down by at least a factor of 10 in the last 10 years. We're seeing amazing technical progress as a result of the policy moves in this kind of direction. It's the growth story in the shorter run as we build these things in different ways. It's the growth story in the medium run. And it's the only growth story on offer in the longer run because if we make an attempt at high carbon growth in the longer run, we do such damage to the environment. This is the growth story. We have to be very clear about that. Exactly. I do remember Lord Stern, the world bank saying, you know, get behind the arc of climate change because there is money to be made. Exactly your point. Let's bring you in, Douglas. It's a better life to be made. A life to be made. Do you want cities where you can move and breathe or not? Definitely want cities where you can move and breathe. Isn't that a good idea? 4,000 people in China die every day from air pollution if we start putting the stats around the table. Douglas. And then let's look at it from the point of view of investors, especially institutional investors, and even importantly, more importantly, pension funds, which pension funds around the globe are investing for the same people that they're trying to protect their health. Investors are also entering this conversation. They want disclosure. They want information that's consistent and clear. What do they worry about? They worry about a return. They worry about a very long-term focus. But with that long-term focus, they worry about risk. And one of the most important risks, which is starting to get factored into the equation of investments, is climate risk. Are there places? We talked about some of the things we've seen here at the World Economic Forum. There were some graphics earlier this week that I went to that show many parts of the world are going to become flooded. They're going to go underwater. If you're an insurance company or a pension fund and you have that really long-term view, do you want to be investing in property or ports or airports that 20, 30, 40 years from now could be underwater, could be unusable land? So this is another very important dynamic. It's the investor view. The investors have started to take notice and they're asking questions. Let me add to that. In May 2016, Douglas S&P came up and said, if banks don't prepare themselves for climate change, this you know well, considering it's your company, they stand the risk of being downgraded. And no CFO wants to go to the board and say, sorry, pension funds aren't going to invest in me because we're no longer sustainable. Eric? Absolutely. And we need to be able to tell our story very well as well. And that's some of the great work done by the financial reporting task force around climate is going to help us in that way. Because we have to be able to articulate our message and our story to our investors. And in the end, the investors want to be able to invest in sustainable businesses. But they don't, in the way the world reports right now, they don't really know what's what. And they can't make a sound risk-based judgment and invest accordingly. And that's where we need to progress. And there's great progress being made. And as a CEO, right here in Davos of HSBC, Stuart Gulliver said, we need that reporting to be mandatory, not just voluntary. Because we need to see it everywhere. We, risks are managed much better if people are honest about what the risks are. The federal law introduced into Canada towards the end of last year. Lessons learned. Well, so I should say our climate plan is a very broad-based plan. So it's not just about pricing. I think you need a whole range of different tools in your toolbox. But we have said, by 2018, every province has to have a price in place. It has to start at $10. It has to go up. There'll be a review mechanism. And in Canada, actually, we provided flexibility. So we have, through the leadership of four provinces, they already put a price on pollution. We have a cap-and-trade system linked with California and Ontario and Quebec. And BC and Alberta have taken a different approach. They put a direct price on pollution. And but what we've said as the federal government is that provinces keep the revenues. You keep the revenues. And within the broad framework, we said you decide what you're going to do with them. So you can decide you're going to invest in innovation. You're going to invest in clean tech. Or you could do what British Columbia has done and just give them the money right back to consumers. And so some people say, well, why would you do that? How does that make any sense if you give the money back? The signal is there to business consumers on the front end. So when you make a decision, you will pay more. If you pollute more, you'll pay less if you pollute less. So you can make those decisions, but then you will get the money back at the end through the tax system. But I think there's different ways of approaching it. And it's interesting with the revenue-neutral carbon tax. You have the incoming Secretary of State in the United States. He said, I support revenue-neutral carbon tax. So we've now, this conversation actually has become much more mainstream. But I would say it's really. And he said, stay at the Paris table as well. And the US. Yeah, and he said that it was important to stay at the Paris agreement. We still need to talk about the inauguration of Donald Trump, which happens the 20th. That is tomorrow, if I'm correct. And this is a man that environmentalists and climatologists are very cautious about. Lord Stern, you have been quoted as saying that actually it's not as bad as environmentalists may think. Is that correct? You sound as though that doesn't hold true. That doesn't sound like perfect reporting, but then that's quite normal. What I have said is that he has emphasized the importance of infrastructure in stimulating growth. Yes. And we assume, I think it's reasonable, that he would have in mind infrastructure which was modern, clean, smart, and resilient. I mean, why would you want infrastructure that was outdated, dirty, not so smart, and fragile? That doesn't make a lot of sense. Can we put this debate? Yes, Douglas. You've got to start. One point I'd like to make about the United States with, first of all, we heard about this incoming Secretary of State's view. But more importantly, the private sector is already undertaking such transformational change to the way they generate energy, the way they build buildings, the way that they think about automobiles. There are movements taking place across the entire country about what sort of car should you be buying? What are the emissions coming from the autos? There's information that's more transparent, more clear, all the time. Even if there was not a clear commitment coming from Washington, the ball is already rolling, and it's moving faster all the time. I totally agree with this. This idea, once again, it goes back to when you have 195 countries coming together and saying, we're taking action on climate change, the market is going to react. And that's what you've seen companies are saying, we need to move in this direction. So you had over 300 US companies write a letter to President Obama, President-elect Trump, saying you should hold the course on the Paris Agreement. It's important to be at the table. And also, climate action makes business sense. And this is certainly, I think, where there's real opportunity. We're doing this because we think it's the right thing to do, but we think that there's a business case getting back to infrastructure investment. I want to put that to bed. Let's not dwell on the US president-elect still today. Let's talk about, because there are two issues that I want to resolve by the end of the panel. And we've got 25 minutes to do that. The one is the carbon price that causes emissions abatement. Now, let's go back to the $10 a tonne that you've put on the cards in terms of the federal law and that you're saying by 2018, $20.22, $50 a tonne. But you are going to have a review commission. The Stern-Stiglitz Commission on Carbon Pricing, you are going to deliver your findings at the IMF World Bank. That's in April. But I'm going to ask for a sneak preview as we build this conversation around the carbon price. We were asked by the Carbon Price Leadership Coalition to do this work, Joe Stiglitz, an old friend and myself. And we are responding basically to the question, what kind of prices could lead to delivery on the Paris Agreement, which is, of course, of December of 2015, which set the target of holding temperature increases to well below two degrees centigrade. That means really over the next 20 years, reducing worldwide emissions, $50 billion, 50 billion tons of CO2 equivalent, by at least 20% or so. So that's a big reduction in a world economy which will grow strongly in the next 20 years, probably double. So will that extra economy look just like the old one that we have, in which case we've lost completely any chance of two degrees? Or would it be radically different? And indeed, will we change the existing economy to really cut down the emissions by 20% at the same time as the world economy doubles? Now, the answer to that question is yes, you can. And we can see how to do it. And it's the kinds of actions that the business people on this panel are taking are going to do that. But the price that we need to induce that radical change has to be substantial. It has to be substantial. Now, the business people yesterday, as I said, 70% of them for 2030 said it must be over $40. So way above $40. That's what the agreement from Douglas said. You have agreement from Eric? No, my point is I think it should be much higher than that. What? Because, well, my guess, somewhere between $50 and $100. And then you'd get really strong reaction. It can rise over time. You don't have to go there instantly as long as people know it's coming. And that's why the Canadians, as usual, have played it a sensible way under this government, have played it a sensible way, and planned for it to rise. But I think you've got to see it going up to $50 or $100 over the next 15 years or so. There needs to be, approximately in the energy industry, $75 trillion of investment over the next 24 years. This is a study of 2015 or 2016. So we're already one year, we're short one year already, so that's, that is about $3.2 trillion a year. The actual investment pace that we have now is below $2 trillion, it's about $1.8 trillion a year. So we have to increase by 60% in order to reach the 450, the below 2-degree objective in infrastructure. We're in a hurry, right? We're in a huge hurry. So when we discuss what is the price, if we need to achieve that level, we need to put the highest price possible and the capital will flow. And let me tell you one thing which is very important. Those countries that do it first are going to be the ones attracting the investment first. So are you in this $50 to $100 per ton arena? I am. Eric, let's just say you're running a completely different company now. Just for a moment. Do you know something I don't know? Hypothetically speaking, you're running a company that is not making a profit. And you are unilaterally told that you now have to put a tax on carbon. How are you going to respond? Well, first of all, I support the idea completely because what we need to do is we need to change the basis of competition to innovation and reducing CO2. It's very simple. We just got to unleash the power of creativity of companies to compete on reducing their carbon impact and coming up with new innovations. And to do that, yes, you need a high price of carbon to be able to do it. The tricky part of the story, and it's very tricky, is to not distort trade in the process and just bring investment to the lowest regulated part of the world and then bring in imports. So we need to be very smart about bringing trade policy together with climate policy. It's the only way to make this work. And we haven't made enough progress yet in this area. I mean, I totally agree with that. And that's why we've been very mindful of sectors that are exposed to the trade with other countries. And I think that's really important, something we're looking at, government procurement. We should be making sure that we look for companies that are actually taking the steps that they need to to reduce their emissions. But I think often the focus, because I have to do a lot of sales on this, often the focus is how much is this going to cost? But it's the cost of not acting. And I'm not even talking about the cost of we're all going to be living in a planet that's unhabitable. I'm not talking about that cost. I'm talking about the cost of not innovating and not actually having these huge game-changing technologies. And this is really the point. So the reason that we had business sign on is that they want to do exactly what Eric has said. They want to reduce emissions. And it's the most efficient way. Economists will show that. Very boring that economists do modeling on this, but it's just true. We're really interesting people. You actually, Nick, are pretty interesting. But it's also about innovating. And this is the really exciting part of this. If you are a company, take a company that is carbon intensive, like the Fires Wholeson, they actually are figuring out, OK, how do we innovate internally? How do we become more efficient? How do we use less of the resources? So that's a really important piece. 100%. And I back you 100%, just so that I am aligned. I know as a journalist I'm not necessarily supposed to be aligned. But I am. But I am saying that the difficulty is, and we'll put it to bed because we can't debate it here, but a company that is not making a profit, given the short-term investment nature of the investment community, those CEOs are boxing very, very in a very tight corner. And climate change may not be at the top of the priority if you're going to have to lay off thousands and thousands of people in the short term. Let's move on from that. I still want to come back. This is job-creating. This is job-creating. It is. I agreed. Yes. I have a point about the carbon markets as they develop and the price level. We believe the price is in the $40 to $50 range. Now, if you really want to start getting the incentives, there's another side of the equation that we. And you want it going up, right? And it should be going up. But one thing I'd like to mention, we haven't talked about is offsets. And one of the things about offsets is today it's kind of a squishy subject. It's very hard to verify. There are ways to start verifying the offsets. And the higher the price goes, the more precise, the more clear, the more verifiable offsets become. Offsets are things like forestry or eliminating methane that's coming out of mines or things like that. There are ways to have farms that are able to pick up the offsets. But right now, the offsets is a squishy side of it. But it's a very valuable side and something we also need to talk about. But the higher the price goes, the more clearly definable, verifiable the offsets become. So, Price, can we just settle for the sake of this discussion on the $50 a ton as a starting point? I know we've got that. And going upwards. And going upwards. Are you happy everybody around the table? In a gradual pace there, so we can plan according to. And mindful of different sectors. Just to point out what Canada has done has shown real leadership. And I think the Canadian model of what they're doing is important for the planet because they're taking a bold initiative in Canada and we need to make it work. Is this going to be a model? It could potentially be a model for many other countries around the globe. So we need to really support and help Canada make this successful. Predictability, as Eric was underlying, is so important. These are long run investments. You've got to have a clear idea of where things are going. Now, government by government can't promise long way into the future. And that's why you need such strong business and civil society support. Because ultimately, that's what will drive the stability. Emissions trading systems, where in the world are the best carbon markets? Because that's what we need to emulate. Let me start with one which has been in place now for four or five years. It's California. California is a closed border. It has a relationship with Quebec. Also, Ontario. Ontario is joining. And California has set up a system. It's a complex system. It covers industry and anybody's in the carbon intensive businesses. There is a target in industries which are emitters are given a specific 90% allowance of what they've been producing. The rest, they have to go out and buy and trade. So it's the cap model where they're allowed, without having to pay for it, the allowance. And then they have to trade if they want to go above their 90%. They have to go out and buy the credits or trade for the credits. The system has been in place now that it's starting to work. If somebody wants to import electricity, let's say, into California, and it's coming from Nevada, from a solar plant, there's no additional price added to it. If it's coming from a coal plant, there's going to be an additional price added into that border. They also have offset programs that have been developed. The system, it's verifiable. It has rules based. And it has special targets and caps. It is working. It's off to a start. It's one of the markets I would take a look at. And actually, just to add to that, because Quebec is part of this market, Ontario is joining. But I was just in Mexico. Mexico is also looking at joining on. You have other states that are joining on. So I think you need innovation, too. So you can say, right, it would be great if we all started at the same place. We all just had a price, and it was around the world, the same rules. But sometimes that's not the way life is going to go. And so you have to go with what's there. And I think that that's a very interesting model. We certainly want to see that succeed, because I think there's real opportunities for different countries and different states to move forward. And that's a great thing. And the United States, actually, you're seeing a ton of action at the state level. We've seen that on another file, but hydro, clean hydro from Canada. But Mexico is a good point that Minister McKenna is making. Mexico, we've been discussing the carbon trading systems in developed economies. But in developing economies, although Mexico is not developing, it's a new energy country. It's attracted incredible amount of capital. Incredible amount of capital. Their auctions for renewables have been the most successful, the biggest competition, the cheapest prices. So this putting up these systems really is a magnet for capital. So that's something. Let me turn the question around. I can give you an example of one that hasn't worked very well, and that's the European emissions trading scheme. But actually, the reason it hasn't worked very well is simple. They just gave away too many permits. Now, I'm a professor at the LSE, but you don't have to be a professor at the LSE to work out that if you give away too many permits, the price is going to be too low. And that is something that was very easily correctable. And I think it's very easily correctable now. And that's something that we should do in Europe and do it very quickly. So what do you need? So kick-stop. You need political leadership on this? You need political leadership, absolutely. All right. Well, I'll be rounding, making some phone calls. Please, please. And for the moment, please remember that the UK is still in the European Union. Well, I'm glad the two of you can resolve that situation. Jump in, because the history of the ETS in Europe is an important topic. And I would agree with you, that's not the model we want to follow. And I think what California and Quebec is a much better model to follow. But an important difference is the fact of a no-border adjustment in Europe. But it didn't matter that much, because the price of carbon was so low, because it was over-allocated. So basically, a flaw in the system, as you said, brought the price of carbon down to a very low level. But it was correctable. It was correctable, everybody. But it was correctable. But what I'm saying is, if it was higher, the critical piece that California did, which was not done in Europe, was to make sure that we were not making European industry uncompetitive. And that's the other side of the story, which was never a critical topic, because the first part was badly implemented. Doug, I guess you wanted to add that. We shouldn't overdo it. It's a modest part of cost for the big bulk of industry. What I like here is that we can fix it. We're probably not going to fix it on this stage. But we've got a conversation going here. So Douglas, you want to make a point? I want to make another point about this isn't necessarily carbon markets, but there are other areas where emission standards are bringing down carbon emissions. And as an example is the automotive industry, which has now very clear standards of miles per gallon. You see the ability to measure. If you went here to the display, they showed us some of the examples of smart energy and how different automobiles, what is their energy efficiency, whether they are hybrid. In fact, right now, the most efficient cars are still gasoline-powered cars. But they have engines that are so efficient, they're getting 50 miles a gallon. And they're doing it today, and they're going even higher. And that's a market that, if you look at the emissions per capita, they are decreasing. And these are also some of the things we've been talking about Africa. Electric engines are much more efficient. Electric engines, but also hybrid engines. And if you go to Africa, these are some of the things that Africa is seeing. Don't even worry about the old technologies. Go straight to the best technologies. They're more efficient. In many cases, they're even cheaper. And you're going to leapfrog over the emissions. Well, I think you've brought us to what we've established a market that isn't working. We've established a market that is working. My point there was that I always think that if you've got something that's working, then scale, scale, scale. Get that global story going and really drive. Because as you've all made the point, we don't have time on this agenda. The last part of the equation is what to do with the revenue. And here we need some standardization, because people are going to collect these taxes. What needs to be done with it? I'm going to start, Jose, with you. And we'll go around the table in concluding comments. So don't rush. We've got 10 minutes till close of the session. 10 minutes to spend the revenue. 10 minutes to spend the revenue. I'm sure sitting around this table could all spend the revenue in one minute. Jose. There are many, many players. Spending is something that's very easy. But there's one single issue that I think needs to be addressed, which is R&D. R&D, in all circumstances, has been helped. There has been subsidies to R&D, but only very basic research. The putting up of a big $100 million plant of a new technology is a very risky, very, very risky project. And the private sector is reluctant to do that. I think there should be a lot of that money put into this new ideas that need to be tested in reality and that cost a lot of money so that the private sector is more reluctant. So I think that'd be a great use of capital. Minister McKenna. I mean, it's a little more complicated in Canada, because as we say, we've said to provinces, fill your votes. You do what you think you should do with the revenue. And we have different models of what they use the revenue for. I think the broader point is, of course, you need to be investing in innovation. So we're certainly doing this at the federal government level. Innovation in greening. Yeah, green, clean renewables. However you want to clean power, whatever you want to talk, however you want to describe it. And we're part of Mission Innovation. This was the brainchild of Bill Gates. The price of admission was governments had to double their investment in clean innovation. And we've certainly done that. We're creating the Canada Infrastructure Bank, where we're going to leverage private sector financing. So we're putting in money for green infrastructure, historic investments in green infrastructure, but we want to leverage this. And so what we have a big idea in Canada used to be about having a train across Canada. Now it's about having a clean electricity grid across Canada. We have provinces that are on coal. We've brought in, we're phasing out coal by 2030 in Canada, but we need solutions. So that's a real opportunity. That's going to create good jobs by linking up provinces that have renewables that have hydro with provinces that don't. And so it's a short-term benefit because there's going to be jobs in building this infrastructure, long-term benefit, clean power, and that's how we see we're also going to attract, we're going to attract industry to Canada. So I mean, it's all a good news story, but you have to be thoughtful about it. So you shouldn't just think about the revenues from carbon pricing. I think you need to think across the board. What are you doing? How are you creating the right incentives? How are you dealing with very expensive, often upfront costs, but with huge long-term benefits? And I think there's real opportunities for government to be smart about that. Eric. Yeah, certainly we need to take part of that revenue and invest in innovation. And not big, white elephant, massive projects, but smartly incenting lots of good ideas as broad-based as we possibly can. And the second thing we need to do with that money is invest in sustainable building. We can build sustainably, but you know what? It's going to cost more. It's going to cost more upfront, but with a $50 price of carbon, it'll cost you a lot less in the long-term. But we need governments to be able to get over that hurdle and invest in sustainable building. The technologies exist. One of the main focuses of our company is to focus and develop sustainable solutions for sustainable building and do that. I would love to develop this market as you're talking. I think it's a tremendous opportunity. It's one of the biggest opportunities for Lafarge Wholesome in that. But we need governments taking some of this revenue and investing heavily in sustainable construction. I think the key there, and I want to come back to Minister McKenna, government is coming over this hurdle. You know, speed of execution. Is that something that we can expect? Well, I mean, I think if you want to show leadership, yes, but you have to bring it. You have to bring your citizens on board. But you have to talk about, you know, you're seeing the impacts and climate change. We are seeing the impacts in Canada. It's not just in the Arctic. We're having severe droughts, which is impacting on farmers across our country. Prince Edward Island is like a small island state. It's literally shrinking. You know, we see huge flooding. So once you start talking like that, Canadians really said, yes, this is a concern. This is a risk for us. And then we said, but there's a huge opportunity. And so when you make the case, I mean, you are ultimately, I'm responsible to those who elected me. So I have to make sure that they understand what we're doing is sensible and that we're working together. And I think the point, and what is so great about this discussion, is it's about everyone working together. We're working with indigenous leaders. We're working with labor. We're working with business. We're working with environmentalists. We're working with Canadians. And then you are able to make these decisions, which actually are kind of no-brainers, you know, if you're really being smart about things, that they take leadership. And under your leadership, Canada is clearly coming together. Are you seeing that leadership from your peer group in governments globally? Well, I mean, look, you know, I think people are surprised. I'm not as surprised because I've seen it over the last year, but China is really stepping up. I was in China in December. It's all hands on deck there. I mean, partly because it's very difficult to breathe. And so citizens are demanding change, but also because China recognizes that this is the right thing to do. This is gonna create economic growth. And it's an opportunity for them. And so I see key countries that are stepping up in different parts of the world. Not everyone is, but 195 countries came together with the Paris Agreement. I don't think you can underestimate that. I mean, you can kind of say, oh, well, that was last year. For the first time ever, actually agreeing that everyone has to own this. Everyone has to have their own plan. Everyone has to take action. And they need support. So the developed countries need to support developing countries. The Paris Agreement being ratified by 109 of those. Yes, in record time. Is it more? 127, 109 when I did my research. And coming into force years before anyone ever expected. I mean, it's a huge success. And now we need to implement that. From where we have Lawrence Tugiana, who's one of the key architects of the Paris Agreement in the back row over there. We do. So would you like to, sorry, ma'am, would you like to contribute to our conversation? Lawrence Tugiana. We'll get a mic through to you right now. Ma'am, if I could just hold you for one second. Just for the broadcast purposes, we're gonna get you a microphone right now. There we go. Thank you, and thank you, Nick, anyway, for your... I think the discussion on carbon pricing has made enormous progress. It's no more an ideological discussion on is there one price or several price? Or carbon markets or carbon prices versus policy measures? That's over. That's a big, big, and good new. The second element is we have now the ideas that we have to think long-term. I was participating with some of you in the fascinating discussion with Mark Conny this morning that even the FSB's financial regulators are thinking and asking companies to look at the long-term, their plans to begin to measure risk. So we are in a totally different thinking atmosphere. That's why I think we hope that Joe and Nick will produce very strong result on sort of a rational, pragmatic approach on carbon pricing. I think we have to now revise and incentivize a discussion to understand the policy measures that the government has to put in place to give you the signals. And if I just one minute say, we all have to compare the vision 2050 pathways. Thank you, Catherine, to have been in Marrakesh together with Akima to launch this platform where on the long-term scenarios that companies like Ryu, businesses and cities and government would compare. We have to compare notes to help the carbon pricing to be right. The odds to be on that from the carbon pricing leadership coalition. Thank you very much. We've got two minutes to the end of the debate. One minute to use, one minute to Lord Stern, Douglas. Well, first of all, this conversation has shown that there is a wide-ranging idea as wide-ranging opportunities. As the windfalls come in, they should be invested in R&D and innovation, looking at different systems. There is also something I started with, which is the ability to have sustainable societies and sustainable communities. I also believe some of that should be invested in the future, in pension systems, in ways that as people live cleaner, longer lives, they can also live healthy, long lives and be prosperous. Final word to you, Lord Stern. This is a huge opportunity to live our lives in a much more positive, strong, cleaner, stronger growth, more inclusive growth way. That means you've got to get the incentives right. That whole discussion has been about that through the price of carbon. But we also have to invest in innovation and the infrastructure that allows this. A much better grid distribution system means that you can have solar where it's sunny, wind where it's windy, you connect them up. So this really makes things happen. This creates this very attractive future and I'm with Eric and the others on innovation. We have to, we can move quickly, we have been moving quickly on the creativity discovery. We've got to move still more quickly. Finally, the politics. People have to want this to come together. So some kind of return may be part of the story. It won't be standardized or vary one place to the other. Thank you very much to our esteemed panel. It's been a great discussion. Thank you very much to our audience joining us from across Africa on this discussion on the return of carbon markets. Coming to you live from Davos, where the World Economic Forum 2017 annual meeting is currently in session. Thank you very much.