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John Conner, CEO of The Climate Institute, explores the future of Climate Change

Business despises uncertainty. Whether you're BHP Billiton or the corner store, the one tenet on which business relies is a level playing field with predictable conditions. Long term risks have always hovered around the business planning function – geo-political, socio-economic, technological, security – but for the first time there is a long term issue with certainty – climate change and the impending measures to deal with it.

Although there will be complementary and transitional measures such as clean or renewable energy targets, the primary measure will be emissions trading which may begin in 2010.

Although the future carbon price curve is still dependant on greenhouse pollution reduction targets, climate science and economic research has narrowed the range sufficiently to be able to estimate possible impacts on earnings and thus stockmarkets and investment funds.

The challenge for financial institutions is to understand the impacts of emissions trading, as well as other physical impacts, and start to make serious efforts to reflect this future in present day thinking and decisions. This means taking some of the long term data relating to carbon liabilities and reflecting this through the capital chain to today's investment decisions.

The Climate Institute has developed a lifecycle valuation model to do precisely this. One challenge may be that Australia's emissions trading scheme will be isolationist for a short time. Business is already planning how to deal with multiple emissions trading schemes – a fact of life for dual listed companies – but also the integration of those emissions trading schemes at a later date.

Moves afoot in the EU and elsewhere to integrate sustainability through the supply chain indicate the possibility that if a country exports goods made where emissions are not regulated or traded, then the customer countries will tariff goods to even the playing field for goods and services sold on its shores.

So countries that slip behind or attempt to make competitive gain by charging their industries for the greenhouse clean-up at a slower rate than their competitors, will find other nations working to ensure they don't get away with free loading.

Given our precarious position as one of the highest emitting and primary production oriented economies we could be hit hard. Perhaps the most poignant statement from the Stern Report was that "there will be winners and losers". In typical Australian fashion, we must turn this into an opportunity to win. Presently at a company level, we seem to be focusing all our policy efforts on protecting the possible losers rather than encouraging our future winners.

For Australia as a country on the world stage to emerge from this period as a winner in the emerging global clean energy economy, we must focus not just on the beginning of the emissions trading implementation phase but on the end of it. In fact, long term visualisation will become critical in positioning us to emerge from the implementation phase and arriving at the more stable high-growth phase of the carbon market.

It is not enough just to plan. Business and government must behave as if emissions trading has arrived. As the father of all management Peter Drucker said "strategy is useless unless it degenerates into work" and it will be our execution that will determine if Australia emerges from the forthcoming period of regulatory instability in emissions trading as a winner or a loser in the 21st century clean energy economy.

John Conner is CEO of The Climate Institute, an independent group working with community, business and government to drive climate solutions.

*This Talkback is reproduced from Westpac's 2007 Stakeholder Impact Report