Commissioner for Environment
Meeting of Young Global Leaders at the European Parliament
Brussels, 16 July 2008
Ladies and Gentlemen,
It's a pleasure for me to speak to such a distinguished crowd of young global leaders about what is perhaps the greatest and most urgent global challenge of this century – climate change.
As a slightly less young global leader who has spent a considerable part of the last few years dealing with climate change, I hope to see more young talented people like you join these efforts. We need leaders in all walks of life to show the world not only that climate change is a problem that can be solved, but that there are benefits and opportunities to be gained from doing so.
I was happy to discover the innovative actions you are taking within your own organisation. The "Earth Love Movement" you have created is a welcome tool to help create awareness of the opportunities involved in pursuing climate-friendly initiatives. And though some people could be misled by the title of your "Book of Love," the examples of good practice it contains will have opened the eyes of readers to the possibilities of doing something for the climate at low or zero cost.
The world is in strong need of more actions of this kind. The alarming projections made by the Intergovernmental Panel on Climate Change (IPCC) in its Fourth Assessment Report last year are all too clear. Unless we drastically reduce global greenhouse gas emissions, temperatures are likely to soar by up to 4 degrees Celsius by the end of this century, and in the worst case scenario by over 6 degrees.
Even the lowest increase projected would push the world's temperature more than 2 degrees Celsius above the pre-industrial level. This would take us into the danger zone where irreversible and potentially catastrophic changes to the global environment become far more likely.
But these changes are not inevitable. The world has a choice to make. It can either choose a strategy of non-action that would allow climate change to continue unabated until it reaches devastating levels. Or we can bring climate change under control before it is too late by making a collective quantum shift towards more carbon-efficient production and consumption patterns.
From an economic point of view there's no doubt which strategy is the better one. Lord Stern's review of the economics of climate change estimates the costs of non-action at between 5 and a staggering 20% of global GDP annually. This is many times the cost of the policies and measures that would prevent dangerous climate change.
To succeed in bringing climate change under control, a global effort is required. Last week's agreement among G8 leaders on the need to cut global emissions by at least 50% by 2050 was welcome progress, but this is only a first step. We cannot wait to take action. What is needed is a comprehensive and ambitious international agreement with concrete measure in the short- and medium-term and with clear reduction targets for developed countries for 2020.
It is largely thanks to Europe's leadership that negotiations on such an agreement are now well under way. At the Bali conference last December, the EU succeeded in convincing other Parties not only to start these negotiations and to agree to an ambitious roadmap to guide them, but also to conclude them at the end of 2009 in Copenhagen. The importance of this process cannot be overstated if we are to avoid a crippling environmental and economic burden on future generations.
Developed nations should lead by example. The European Council of March 2007 set out the European Union's leadership vision clearly for the world to see. The EU committed to two new targets for reducing EU emissions from 1990 levels by 2020. The first is a cut of 30% that is conditional on other developed countries committing to comparable efforts under the future global agreement. The second is a reduction of at least 20%, independently of what other countries do.
To achieve these targets, concrete actions are needed that will change the relative prices of goods and incite behavioural and technological change in favour of a low-carbon economy. The economic benefits are obvious, and this is even more the case with today's high energy prices. The economic impact of rising oil prices can only be efficiently addressed by structural measures that make Europe less dependent on fossil fuels. The targets agreed by the European Council will cut Europe's oil and gas imports, thereby increasing energy security and reducing our import bills. They will make our economies more energy efficient, develop alternative sources of energy and provide the basis for the deployment of new technologies.
An ambitious EU climate policy will also stimulate economic growth and job creation through innovation in what are important markets for the future: wind turbines, carbon capture and storage, smart grids, distributed generation, efficient cars, solar heating and cooling, and passive houses. Using resources and energy efficiently is essential for Europe's future competitiveness.
The climate and energy package of legislative proposals that the Commission put forward in January is intended to implement the targets set by the Member States. Central to the package is a revamp of the EU's emission trading system (ETS), the largest such system in the world. The ETS sets a price on CO2 emissions by granting allocations to all companies and setting a cap for emissions in line with the EU's greenhouse gas reduction targets. This allows companies to decide whether they reduce emissions or pay for reductions in other companies by buying allowances.
EU emission trading has been a pioneer in harnessing the power of the market to incentivise cuts in carbon emissions. It is a key tool for achieving emission reductions most cost-effectively. Since its launch in 2005 the ETS has rapidly established itself as the main driver of EU climate policy. We have learned a lot in that time and now we are proposing to strengthen the system and make it more efficient.
Let me highlight some key aspects of our proposal:
- First, we are helping the market to set a clear long-term carbon price by reducing the total cap on emissions year-by-year up to 2020 and beyond.
- Second, by widening the scope of the system to other gases and sectors we are creating new abatement opportunities which should lower costs.
- Third, we are moving towards a truly European market, with common rules for companies wherever they are located. This will increase the cost-efficiency of the system and reduce the risk of market distortions.
EU emission trading should be the central pillar of an international network of trading systems leading to a global carbon market. This will play a central role in the international climate agreement and the EU has therefore already started a dialogue with countries and regions that are in the process of setting up similar emission trading systems.
Putting a price on carbon can give a major boost to emerging eco-technologies. Take carbon capture and storage, for example, which the European Commission strongly supports. EU leaders have already called for up to 12 demonstration plants using this technology to be built by 2015. Our January package takes an ambitious and positive approach to supporting these projects. It offers a clear regulatory framework to ensure public confidence and provide legal certainty for operators, while leaving it to the market to decide when their full scale application will be desirable.
Another key component of the package concerns the share-out among Member States of emission cuts in the sectors that are not covered by emissions trading. These are in particular the housing and transport sector, agriculture and forestry, waste management and small businesses.
To reduce emissions from these parts of the economy– which means more than half of total emissions - we are proposing a fair distribution of the effort among Member States, based on GDP per capita. This differentiation leads to national emission targets for 2020 ranging widely from reductions of 20% for the wealthiest Member States to an emissions increase of 20% for the poorest. Thanks to this approach poorer Member States will have room to continue growing their economies but will still need to keep their emissions below 'business-as-usual' levels. EU-wide, emissions from these sectors will be cut by 10% below 2005 levels.
The Commission's proposals will go much of the way towards achieving the target set by EU leaders of cutting overall emissions by at least 20% of 1990 levels by 2020. However, they also allow for this to be scaled up automatically and proportionally in line with the higher reduction target that we hope will be agreed by developed countries. This means we are fully prepared for making an emissions cut of up to 30% by 2020.
Once agreed upon by Council and the European Parliament, which I hope will happen by early next year, the climate and energy package will reaffirm EU leadership in view of the UN negotiations. By implementing the most ambitious set of climate and energy targets anywhere in the industrialised world, the EU is demonstrating to our partners that making the deep emissions cuts necessary to avert dangerous climate change is fully compatible with continued economic growth and prosperity. This is a vital message if we are to succeed in rallying all countries behind a global agreement.
The climate and energy package will create conditions for increased innovation and investment in cleaner technologies. This opens up great opportunities for entrepreneurs to gain a "first mover advantage" in developing and marketing the solutions that will be in increasing demand in an ever more carbon constrained world. The environmental sector contributes over 2% of the EU's GDP and this figure is bound to increase. And as I have already mentioned, implementing the measures in our package is essential for safeguarding sustainable economic growth and improve energy security. It is estimated that the package will reduce the EU's energy imports by 50 billion Euros per year by 2020. These estimates were made at a time when oil prices were expected to be 61 dollar per barrel, the benefits are likely to be much lower still if today's prices around 140 dollars are maintained.
Let me conclude,
Climate change has the potential to redraw the face of our planet. To prevent this we must redraw our economy to make it sustainable. The Commission's climate and energy package represents a major step towards creating a low-carbon, highly energy-efficient economy that opens up vast opportunities for Europe. Our proposals are also a major contribution to a future global climate agreement. This is the big prize that Europe must stand together in fighting for.