Jeremy Warner: Davos makes running on climate change

World Economic Forum: Gates shorts the dollar - China defiant on renminbi - UK in buoyant mood

Here in Davos, with temperatures at minus 10, the surrounding peaks covered with freshly fallen powder and the air as clear as finest crystal, it's hard to think of climate change as possibly the greatest danger to our planet and the billions of humans that inhabit it.

Here in Davos, with temperatures at minus 10, the surrounding peaks covered with freshly fallen powder and the air as clear as finest crystal, it's hard to think of climate change as possibly the greatest danger to our planet and the billions of humans that inhabit it.

Yet global warming is one of this year's big topics of debate for the World Economic Forum annual meeting in this Swiss Alpine resort, and despite mounting scientific evidence that it may already be too late to halt and correct the build-up of greenhouse gases, there appears to be some cause for optimism.

In Britain, the Confederation of British Industry has been critical of the Europeanwide emissions trading scheme which has just come into force, and of the growing raft of "green" regulation that business is having to contend with.

Up to a point this is a perfectly right and proper response, particularly if the Government is engaging in its old practice of gold plating the legislation that's coming out of Europe, or agreeing to unduly onerous emissions quotas, to the disadvantage of British business. There's an issue of competitiveness here.

But judging by the sessions and workshops here in Davos, the CBI may be a little out of touch with its members on this. What's being introduced under Kyoto and the European emissions trading scheme is, in fact, the bare minimum. The consequent tax being assigned to carbon emissions is so low as to be hardly worth imposing at all.

To say there is an appetite among business leaders for something harsher is putting it too strongly, but there is certainly a resignation to the likelihood of a considerably more constrained future on carbon emissions. Indeed, the company that fails to plan for this is likely to be at a big competitive disadvantage five years from now. In extremis, it simply won't be allowed to trade, or the cost of doing so will be too onerous to cope with.

The world is still a long way from producing a fair and equitable system for capping and reducing carbon emissions. Tony Blair has made progress a priority for his chairmanship of the G8 this year, and indeed some of the ideas that came out of the brainstorming sessions and workshops here will feed directly into the G8 process. None the less, it will be like rolling a large rock uphill.

The continued absence from the negotiating table of the United States and China only highlights the main objection to multilateral efforts to find solutions, which is that if the two 10-tonne gorillas of energy consumption aren't doing it, then we only cut our own throats by engaging. India, the other big development story on the world stage today, has likewise said that until it has caught up with the West economically, emission controls are something to be confined to the already developed world.

Even on this front, however, there's reason for hope. Many US states are independently of the administration introducing their own Kyoto-style emissions trading systems, while here in Davos the Republican senator John McCain says his own Kyoto-style bill stands a relatively good chance of becoming US law next year, regardless of what President Bush wants. In China too, relatively tough constraints on fuel consumption are being introduced.

Still, until a way can be found of bringing America and the developing world on board, all attempts to control emissions are little more than spitting against the wind.

Tony Blair perhaps put it best in his speech to the WEF when he said that if America wants the rest of the world to be part of the agenda it has set, then it must be part of their agenda too. Mr Blair has been an incredibly loyal ally of Mr Bush, almost slavishly so, and at a considerable political cost to himself. As Britain assumes chairmanship of the G8, determined to use that stage finally to do something about climate change and Africa, it's time to call in the debt. Mr Bush listens to the British Prime Minister and is influenced by his views. Mr Blair apologises often enough for Mr Bush who, to use a Bushism, he regards as much misunderestimated. If ever there was a time for payback, this is it.

American policymakers are one thing, but consumers, wherever they are based or however green they pretend to be, are the larger part of the mischief. In the end, they will always buy on price. Nor is anyone going to vote for those who ask them to give up their cars or way of life to help save the planet.

Regrettably, climate change is a classic example of market failure. There is no market mechanism, until it is too late, which will self-correct the problem. The solutions have to be imposed from the top down.

Yet governments cannot be relied upon to do it properly unless properly instructed, which is why it is so important that business not only engages but leads the way. Climate change is not just a business cost, but also, to the forward-looking CEO, a business opportunity to develop new technologies and new markets.

Noticeably absent this year are any heavyweight representatives of the US administration, or indeed US business, other than the ever-present Bill Gates, who in any case is here more to pursue his philanthropic agenda than his business activities. This is seen by some as further evidence of American disengagement from the rest of the world. Why get beaten up for Iraq by the international community in Davos when you don't need to? But there is perhaps a more obvious explanation. Mr Bush has just been sworn back into office and his State of the Union address is yet to come. For those in the administration who value their jobs, this is not the time to go swanning off to the ski slopes of Europe. The same applies to business leaders and elected representatives. You never know what the President is going to do when your back is turned. For the rich, powerful and influential of America, this is a time of collective paranoia. Until the President is settled back in, Africa and climate change can go take a hike.

The absence of Americans is more than made up for by a veritable platoon of Brits: four cabinet ministers, including the Prime Minister and Chancellor, and a record number of CEOs. These included Davos veterans such as Sir Martin Sorrell of WPP, and the WEF newcomers John Ritblat of British Land, Vodafone's Arun Sarin, Charles Allen of ITV, and Matt Barrett of Barclays, now an honorary Brit despite his Canadian passport.

The mood at the now traditional British lunch was one of upbeat buoyancy and optimism. There's a self-confidence there which I've not noticed before, a feeling of genuine renaissance. The Davos crowd may not be entirely representative, but this is a business community that seems finally at ease with itself and confident in its future.

In the past 25 years, Britain has been transformed from an industrial to a service-based economy, putting us in the vanguard of economic development, perhaps even more so than the US. We are now reaping the benefits. British rates of productivity may still be poor compared with the US and Europe, but we seem to be getting at least something right. Let's hope the cabinet ministers got the message.

On to a night-cap with Bill Gates, who much to everyone's relief wants, for a change, to talk about his business and not Africa. The thoughts of Mr Gates used to be a dominant topic here but that all disappeared with the internet bubble. Yet the truth is that the transforming power of the information age is only just beginning to become apparent. What's going on now is much more exciting in terms of reliability and applications than what was happening at the peak of the boom. Just as we exaggerated its potential back then, we may now be underestimating it. Mr Gates is happier with things that way, for it allows him more time to plan, think and respond.

So how come he missed search engines? That was a mistake, admits Mr Gates, accounted for by the fact that Microsoft had contracted out search engine technology to a third party, which was never going to give a state-of-the-art experience. Mr Gates seems not in the least bit ashamed by this omission and he believes there's plenty of time to catch up on Google's lead.

In Mr Gates' view, the search engine industry is still at its embryonic stage of development. A few years from now, you'll be able to type in an address, and the technology will fly you via video through the city and show you what the traffic is like along the way. Searches will become more defined, specific and intelligent. No wonder the chief executive of Google, Eric Schmidt, who Microsoft had invited along for the party, was taking notes.

Everyone's got a view on the currency markets here in Davos, but that's never any guarantee of enlightenment. Mr Gates thinks the dollar has still got further to fall. He's worried about the world's biggest reserve currency having so much debt, so he's short of it. George Soros, a regular at these meetings, naturally has his opinion but he's not saying what it is because he fears it might influence the markets. I'm not sure he's right about this. Gone are the days when the pronouncements of Mr Soros would move currency markets.

Still, Mr Soros was prepared to give a broad brush view. What's pushing the euro up against the dollar is that it is now seen as an alternative reserve currency. This is very dangerous, according to Mr Soros, because it is driving the euro to unsustainably high levels.

And the renminbi, whose dollar peg is thought by many to be the cause of the present distortions in world trade and currency markets? Don't tell the Chinese what to do about the renminbi, say the Chinese Vice-Premier Huang Ju and Li Ruogu, the deputy governor of China's central bank, the People's Bank of China. The idea that China is creating an imbalance in currency markets is "totally wrong". China is "not willing or able" to correct these imbalances. As for moving to a more flexible exchange rate system, there is no timetable for this. The Chinese penchant for inscrutability is thus confirmed.