Ricardo Villela Marino - Chief Executive Officer, Latin America, Banco Itaú SA, Brazil

Shaping the post-crisis agenda

Banco Itau

I was stunned by the statement at the very beginning of the Stern Review on the Economics of Climate Change: “Climate change is the greatest and widest-ranging market failure ever seen”. Indeed, if the market has created the problem, it has, consequently, to solve it.

However, markets alone cannot do everything as we have been learning in the current financial crisis, the last instance of market failure. They do need the State, that is, governments acting individually or collectively, through international cooperation. Any effective solution to the global warming threat depends on persuading individuals and businesses to switch away from high-carbon goods and services and invest in low-carbon alternatives.

This requires a binding commitment to limit emissions to quantifiable goals on the part of all the significant polluters and to encourage emissions reductions wherever they are cheapest, thus creating a new market on the cost difference. A common global carbon price with assurances that the price will not collapse in the future will create sizable new markets in low-carbon energy technologies and other low-carbon goods and services worth at least US$500bn per year by 2050 and possibly much more.

This is the reason why strong action to reduce emissions will prove the best pro-growth strategy for the longer term. Creating price signals for new low-carbon markets and technologies is the best guarantee that there will be no need to choose between mitigating climate change and promoting growth and development for all.

As we move beyond the Kyoto Protocol, hopefully towards a better Copenhagen agreement in December 2009, we must agree on much more stringent goals. We also need to bring aboard all the 15 major polluters that account for 80% or more of the problem. This means not only the United States (US), the European Union, Japan, the other developed economies, but Russia, China, India, Brazil, Indonesia, Mexico, and South Africa as well.

The problem is that the large emerging economies fear their catching-up process might be jeopardised if they accept obligations for a problem that they did not create in the first place. In order to persuade them, it is essential the main culprits – the US first and foremost among them – set an example of agreeing to ambitious gas emission goals and show a generous willingness to help the less advanced countries with technology and resources.

Brazil can play a key role as a facilitator and intermediary between the industrial and the developing countries as it did in the 1992 Rio Summit and in the adoption of the Clean Development Mechanism in Kyoto. Neither a nuclear nor a military power, Brazil is a true environmental power. Five reasons qualify Brazil to play a proactive and enlightened role in the search for a solution to global warming: the largest tropical rain forest in the Amazon, the richest reservoirs of fresh water and biodiversity in the world, a relatively clean energy matrix as compared to coal-dependent China and India and the longest and most successful experience with green fuels.

The generation of leaders that is now retiring from world affairs succeeded in avoiding the danger of a nuclear confrontation during the Cold War, certainly the closest mankind has ever come to the possibility of a collective suicide. I see as a central duty of the generation of leaders to which I belong to decisively come to terms with climate change, the second time in history when self-destruction has become possible. Through international cooperation in limiting gas emissions and in developing clean technologies we can save life in the planet and, at the same time, open a new era for a long-lasting and more balanced economic prosperity for everybody.

Ricardo Villela Marino - Chief Executive Officer, Latin America, Banco Itaú SA, Brazil

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