28 october 2009

Tackling Climate Change in the New Political Cycle

by José Manuel Durão Barroso President of the European Commission at the BusinessEurope Conference on Climate Change, Brussels, 28 October 2009

Philippe, ladies and gentlemen,

I'd like to thank the BusinessEurope team for inviting me to speak at this timely and important conference. I'd also like to congratulate them on gathering together such distinguished participants.

I'd also like to thank Philippe for that kind introduction, and for his tough questions which I will try to address in the course of my speech. To answer your first two points straightaway: the strong support of European business for a global agreement on climate change is absolutely essential, and I thank you, Philippe, for underpinning Europe's leadership on this. And one reason why we need that agreement is to give companies the predictability that they need to factor climate policies into their future investment plans.

Climate change, as I have said many times before, is the defining issue of our generation. A quick glance at the programme shows that all the most important bases of this most existential of challenges have been covered today.

Of course that makes it much more difficult for me, in closing this conference, to come up with something that hasn't already been said! So I will stick to what I know best, by sharing with you my own views and ambitions for the future.

The first priority, as the title of this conference suggests, is the Copenhagen Conference in December.

It is important because the science is clear : climate change seems to be happening even faster than the International Panel on Climate Change predicted only two years ago.

So we need an agreement based on the science, that limits average global warming to no more than 2°C. This means global emissions of greenhouse gases will need to peak before 2020, and then, by 2050, fall by at least half of their 1990 levels.

But action at Copenhagen is also important because climate change is a moral and an ethical issue : firstly in a development context, as developing countries are bearing the brunt of climate change, despite having contributed to it the least, and lacking the means to tackle it.

Even today, per capita emissions in the developed world are around 12 metric tonnes per year, compared to 0.8 tonnes in sub-Saharan Africa. And yet seven out of ten natural disasters are now climate related, and more than 20 million people were displaced by such disasters in 2008 alone. By 2020, yields from rain-fed agriculture in some African countries could fall by up to 50%. Our moral responsibility is clear.

Climate change is a moral issue in an inter-generational context as well. We simply have no right to impose the pain and cost of climate change on future generations. Such selfishness would be doubly immoral, because we know it will cost more to sort out the problem, the longer we leave it unsolved.

Finally, Copenhagen is important because it represents a business opportunity : by moving towards a more sustainable economy, we will unleash a surge of innovation and investment in clean technologies and products. New sectors will provide 'green collar' jobs and become sources of sustainable growth for the future.

Take renewable energy, for example, where Europe has committed to doubling its share to 20% by 2020. We think this will generate some €90 billion of additional investment in renewables, and some 700,000 new jobs. It will also reduce our oil and gas import bill by around €45 billion a year by 2020.

There is going to be a lot of healthy low carbon competition in the next couple of decades and European businesses must be ready. Green growth is not just a distant vision. We can do it, and in concrete terms, we are already doing it, now, in Europe. Our emissions per capita are now less than half those of the US - at the same level of output.

Our economy is already moving to a new paradigm, and the economic downturn must be seen as a chance to accelerate moves towards a less carbon intensive economy – not as a reason to slam on the brakes.

Of course, Philippe, and I recognise the validity of your concerns here, carbon leakage is front and centre of our concerns. I am not prepared to see European industry driven from our shores by badly designed or naïve climate change policies. But we have addressed this concern in our climate and energy legislation to most people's satisfaction, and indeed work is now under way in putting this into place.

We can lead the world in moving towards a more sustainable economy while preserving European competitiveness, and we will do it.

Ladies and gentlemen,

Even with such compelling arguments – scientific, moral, and economic – I remain worried about the prospects for a successful conclusion of the Copenhagen Conference. Because despite all the evidence of existing green growth and innovation and paradigm shifts, despite the renewed political commitment at leaders' level that I have seen, for example, in New York, we still need to seal the deal at Copenhagen.

First because globally, we have to avoid a free rider problem. We are all in this together. And while the developed world is responsible for the vast majority of greenhouse gas emissions since the industrial revolution, correctly assigning responsibility for the past doesn’t address the future.

The logic is simple. If the industrialized world reduced its emissions to zero today , and if the developing countries continued with business as usual, we would still reach the dangerous level of 650 parts per million by 2050. So a global deal is needed, even though we – quite rightly - are not asking the same levels of commitment from developing countries.

At this point, perhaps I could address Philippe's question about whether the EU should "stick to its 20% reduction target" or go to 30% emission reductions. First, we have put 30% on the table conditionally – if others contribute in a comparable way. The EU is not going to carry this whole negotiation. We need others to be similarly ambitious, and we have set very clear comparability criteria in taking a final decision. Europe cannot be the only locomotive in this negotiations.

A global deal is also needed because the developed world has to put money on the table in Copenhagen - not just for adaptation to climate change, but to help finance developing countries' mitigation efforts. Our estimate is that by 2020, developing countries will need around €100 billion a year extra to tackle climate change.

Some of this will be financed by developing countries themselves, particularly the advanced emerging economies. The biggest share should come from the carbon market, if we have the courage to set up a robust global cap and trade scheme in the coming decade.

But a substantial amount will need to come in flows of public finance from the developed to the developing world, from around €22 to €50 billion a year by 2020. And the EU will have to be ready to pay its share, including on fast start funding.

So as we enter the last few weeks before the Copenhagen Conference, I will not take my eye off this issue for a second. The stakes are simply too high.

Ladies and gentlemen,

Europe will not stand still, before or after Copenhagen. Even though a deal in December is essential, unilateral action will continue - for the very good reasons I outlined earlier.

We are building on strong foundations. The European Union was the first to put a cap and trade system in place for emissions trading. The first to agree binding targets in a 2020 package. The first to float ideas on financing for developing countries.

In my next mandate, I have already signalled my intention to create a Commissioner for Climate Action. I will ask the Commissioner to look at each and every one of our policies to see how they need to be adapted, to see where we have to redirect our spending, as part of the EU's adaptation towards a low carbon economy.

I also want to announce now that there will be a big push on energy efficiency, on doing more with less energy.

Energy saving is the most readily available and cost-effective way of addressing all three of the EU's strategic energy objectives at the same time: fighting climate change, ensuring security of energy supply, and achieving sustainable economic and social development.

Only strong progress on energy efficiency now can make further commitments on greenhouse gas emission reduction in the short to medium term realistic. But I have to say that so far, we are far from reaching the 20% energy saving target by 2020 agreed to by all Member States in 2007, and which we reaffirmed in our climate and energy package of 2008 . Currently, we are only on track to achieve about an 11% cut in consumption by 2020. That is why more action is needed.

So the Commission will bring forward an ambitious energy efficiency action plan as soon as possible next year, targeting measures where cost-effective gains can be rapidly made across the whole of the EU, and where action at the Community level can be particularly effective.

Another reason Europe cannot afford to stand still is that, even at the international level, work won't stop at Copenhagen. Even with the best of agreements, an extraordinary amount of follow-up work will be necessary. Not just to flesh out the agreement, but also to start looking forward to what we have to do after 2020.

The year 2020 is an appropriate one to move into a second phase of global action. It is the half-way point between 1990, taken by many as the baseline for climate change action, and 2050, the cut-off date by which we must have reduced emissions by at least half their 1990 levels.

The time has come to start planting the seeds for that second phase. For example decarbonising the energy mix, and building a smart electricity network.

I mentioned these for the first time at a BusinessEurope Conference a year ago. They appear in my political guidelines for the next Commission, on the basis of which I was granted a second mandate. And work has already started within the Commission to flesh out those guidelines. A major theme of the next Commission's mandate will be to get Europe on track to deliver the 2020 targets, and to put on the path to be ready for the world beyond 2020.

Decarbonising the energy mix will require the elimination of emissions from fossil fuels in any of 3 ways: increasing the production and use of carbon-free energy, reducing emissions, and reducing energy needs.

Clearly, it will take more than carbon pricing, using emission allowances or fuel taxes, to remove all the roadblocks on that path. The 2050 Roadmap announced in the 2 nd Strategic Energy Review will be a flagship deliverable early in my next mandate. It will outline a low-carbon pathway for electricity generation, energy for transport, and for energy efficient living and working.

An early and ambitious energy transformation agenda in Europe will also help to turn Europe’s energy engineering world into technology leaders.

In many people's eyes, nuclear energy is an important component of any European strategy for a low-carbon energy mix. Of course, not all Member States will want to include nuclear energy in their own energy mix, but this issue deserves to be discussed, not least because of the implications for tackling climate change and improving energy security.

In any case, the European Union has a clear legal mandate in nuclear energy in areas such as safety and waste management, which we will pursue in the new Commission's mandate.

On building the European energy networks of the future, it is important to remember that in the short to medium term oil and gas will remain an important driver of prosperity. More than one third of our economic activity and almost the whole of our transport sector depend on oil – most of it imported.

So the EU should continue its policy of encouraging diverse supply routes and support strategic oil transport projects.

That said, infrastructure policy must reflect our decarbonisation agenda. In particular, it must tackle market failure to adapt the grid to renewable or distributed energy sources, thanks to a lock-in of fossil fuel-based power generation. So the Commission should coordinate and develop, with industry and regulators, the concept of a European supergrid and the deployment of smart grid technologies in Europe.

The smart electricity grid would enable stable and secure functioning even when millions of micro providers of renewable energy are added to the system. It would enable more efficient electricity production and consumption patterns and remove unnecessary waste.

Action on electricity is a vital component of any serious attempt to meet our climate action ambitions in a way that will safeguard economic and social development for future generations. Once again, there are major opportunities here for employment, investment and growth.

Ladies and gentlemen,

I hope I have given you food for thought on ways of tackling climate change in the next political cycle – whether that cycle is the next five years of the new Commission; the next cycle of international action post 2012, on the basis of a good agreement at Copenhagen; or even the second, post-2020 phase of global action to reach the most ambitious long-term goals for 2050.

One thing is clear: none of this will be possible without the continued strong engagement of the business community.

So I look forward to continuing our partnership in the years to come.

Thank you.

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