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SPEECH/ 11/780

Connie Hedegaard

European Commissioner for Climate Action

Climate protection is not DEindustrialisation, but REindustrialisation: doing things smarter and more efficiently!

Zero Emission Conference

Oslo, 21 November 2011

Some people suggest environmental concerns and climate change have disappeared from the agenda because of the economic crisis that is currently hitting large parts of the world. That climate change no longer occupies the minds of people. I think they couldn't be more wrong!

Earlier this year, millions of people have lost their homes – some even their loved ones - due to unusually strong floods in Pakistan, Thailand or Central America . For them the challenge of a changing climate is most certainly not an abstract concept of a distant future – it's a matter of utmost concern, here and now. The same is true for the victims of the catastrophic drought and famine in the Horn of Africa .

In Europe we are also affected; think for example of the recent floods in Italy and Ireland. But it is not just a concern for people that themselves have suffered from extreme weather events: A recent poll by the European Commission showed that almost nine out of ten Europeans think climate change is one of the most serious problems the world is facing; and - for more than half of the respondents - climate change is a more serious problem than the economic crisis.

"Yeah, but can't we wait a little while and deal with the climate challenge when we have solved the debt crisis in Europe, when growth has picked up again?" – some people will continue to ask.

The answer is no: the latest report by the International Energy Agency 1 is yet another wake-up call. It shows that we have only five years left to avoid a high-carbon lock-in that would make it virtually impossible to prevent dangerous levels of climate change. If we don't change our policies now, within five years we will have locked in all the CO 2 emissions that we can allow ourselves to 2035.

"Delaying action," – to quote the International Energy Agency again – "is a false economy. For every dollar of investment in cleaner technology that is avoided before 2020, more than 4 times as much [an additional 4.30$] would need to be spent after 2020 to compensate for the increased emissions."

Just last week, the IPCC published its Special Report on the Risks of Extreme Events and Disasters, linking climate change to a number of worrying trends. As global emissions keep growing, we are increasingly feeling the consequences for instance through more frequent or more severe extreme weather events. This comes with an enormous economic cost. Damages and losses related to flooding, storms and heat waves in Europe alone were estimated at more than €11 billion – just for last year! 2

So going on with business as usual is certainly not a cheap option.

We need to act NOW – now, when we still have a choice; now, when the crisis is inviting us to look into new ways of economic growth. This is the right time to start making the transition to a climate-friendly, low-carbon economy. Green growth will create new businesses, new markets, new services – and with all of these come new jobs. This is precisely the way OUT of the economic crisis.

Let me set out how the EU looks at green growth, and what we do to support and stimulate green growth.

Reducing emissions is no obstacle to economic growth

Economic growth is no obstacle to tackling climate change ; just as reducing emissions is no obstacle to economic growth.

The EU's emissions have gone down by some 17% since 1990. Over the same period, our GDP has grown by 40% and our manufacturing by more than a third. Climate protection isn't synonymous with de -industrialisation – but with re -industrialisation: doing things differently, smarter, more efficiently .

One of our primary concerns is to develop climate policies that are environmentally efficient, in a way that will not hamper economic growth in Europe but which leaves companies maximum flexibility to cut emissions at least cost.

Our flagship policy instrument is the EU's Emissions Trading System ( ETS ) for the heavy-polluting industrial and power generating installations – which account for about 45% of Europe's emissions. Norway is also a part of the EU ETS. By putting a price on carbon, we incentivise companies to cut emissions.

Targets are equally important. Targets help create certainty in what may otherwise appear as an uncertain and risky future to investors. On this basis companies can decide which long-term investments are required, and avoid locking in carbon emissions for the future. This isn't just theory – we can see the effects in very real terms: Analysis by the European. Patent Office and UNEP has shown that patenting rates in clean energy technologies significantly outpaced those related to fossil technologies after adoption of the Kyoto Protocol in 1997.

Some of our targets have directly contributed to improving the competitiveness of European industries . Think of my home country Denmark, where green industries have become a booming business thanks to the targets the government set. Also the European CO 2 targets for cars have led to an increased investment in innovative car technologies and made European cars among the most fuel efficient in the world.

So targets are necessary and have proven that they can both deliver necessary emission cuts and boost innovation.

Transforming Europe into a competitive low-carbon economy

Thanks to it's target-driven policies, the EU is on track to achieve a 20% emissions cut by the end of this decade, in line with our objective in the climate and energy package.

This is only a first step, though. If we want to meet our target of reducing greenhouse gas emissions in Europe by at least 80% by the middle of this century – as science tells us we should do, we will need more of these innovative low-carbon technologies : in transport, but also in the energy sector, in our buildings, and in manufacturing.

The Commission presented a Roadmap this spring that sets out sectoral pathways and milestones we should achieve by 2030 and 2040. All sectors will need to contribute, and some sectors, like the power sector and buildings, will need to become almost entirely carbon-neutral.

This will require a major increase in investments in low-carbon technologies, like renewable energy, passive houses and electric cars. Here, the EU will put more emphasis on investing at home and reducing emissions at home in future. Because: how wise is it to invest in improving the competitiveness of others?

If we want to continue using fossil fuels in the long-term, we will also need to develop technologies commercially to safely store carbon under the ground ( CCS ). Norway can certainly contribute with valuable input on potential ways of bringing competitive CCS to market thanks to the significant expertise it has developed at Sleipner and Mongstad.

The EU supports investments in R&D and the deployment of innovative low-carbon technologies.

One major EU funding programme is the NER 300 programme – this is the world's largest demonstration programme for innovative low-carbon technologies, such as CCS, and innovative renewable energy technologies such as wind energy, concentrated solar power, or smart grids. It is funded through the sale of 300 million allowances of the New Entrants' Reserve of the EU ETS.

In the next budget period , from 2014-2020, the Commission intends to increase considerably the money available for low carbon energy infrastructure and R&D. Overall, the Commission proposes to quadruple the budget available for the development of a low-carbon society, climate mitigation and adaptation – rising to 20% of the total EU budget.

The required investments should not be seen as mere costs. New money will be pumped into our domestic energy and manufacturing industries , thus creating new opportunities for technological development, growth and jobs.

The bank HSBC has calculated that last year global green revenues grew by 7% to an all-time record of more than €400 billion - that's more than the Swiss GDP! 3

According to news reports, China intends to invest about €230 billion in low-carbon technologies and energy efficiency in the next five years 4 ; it is already the world's biggest producer of solar panels.

This is of course good news. Thanks to Chinese investments, for example, solar panels have become 60% cheaper over the last three years, which has put solar power for the first time on a competitive footing with the retail price of electricity in a number of sunny countries.

However, Europe must act to ensure it maintains its leading position in green technologies if we want to have our share of new markets, technological developments and jobs.

Energy efficiency

The first thing that needs to be done is to boost energy efficiency across our economy. According to European Commission estimates, an average household could save up to €1,000 a year if we meet the 20% energy efficiency target over the coming decade. 5 And by 2050, energy savings could rise to more than €400 billion a year – that is 3% of our GDP. China and India already recognise this - improving energy efficiency is one of the central elements of their growth strategies.

Energy efficiency makes economic sense, and it is the cheapest way of cutting CO2 emissions. It also creates jobs – for installers, engineers, manufacturers etc. Many of these jobs are of a kind that cannot be outsourced – so it is jobs here inb Europe.

Renewable energy

Another key pillar is renewables. So far, Europe is still in the lead where it comes to renewable energy. Europe is home to 23 of the world’s 25 largest photovoltaic power stations. European companies have developed a lot of state-of-the-art renewable energy technologies and are creating real economic added value with these. Norway's own Renewable Energy Corporation (REC) remains one of the world’s largest players in the solar industry – and employs more than 4000 people. Statoil's Hywind project has been the first to test a full scale floating wind turbine – a turbine manufactured by Germany's Siemens , a global industrial giant who is now getting more than one third of its revenue from environmental technologies – for Acciona in Spain it's about a quarter. Denmark's Vestas remains the world's number 1 wind turbine manufacturer.

Over the last 5 years we have created 300,000 new jobs on our continent in the renewable energy sector – 300,000 jobs! This sector is employing more workers than steel, pharmaceuticals or aeronautics. If we continue at this pace, this could mount to 1.5 million jobs by 2020, locking in a virtuous circle.

However, there's no doubt that the current crisis makes things difficult – also for renewables. As for almost any other purpose, financing is increasingly hard to get at these days – and lack of access to finance risks jeopardizing our ambitions if we don't find new sources and ways of mobilising it. A renewed effort to boost investments will be needed if we want to meet our 20% renewable target by the end of this decade.

This includes upgrading our grids to smart grids , with better interconnections and large-scale storage. Norway's hydropower contribution to the European power network is valuable as it can provide back-up for wind power generation, not least in a scenario with further, large-scale development of offshore wind installations , notably in the Northern Seas

Need for a new, legally-binding global climate agreement

So, sustainability is at the heart of the EU's growth strategy and we have got both the tools and targets to make the transition to a green, low-carbon economy.

However, the EU represents only some 11% of global emissions . If we want global emissions to go down by at least 50% by the middle of this century, we must also get the remaining 89% of the world to act. That is why we need an ambitious, worldwide agreement that gets all major economies to sharply reduce their emissions too.

Why should the EU be legally bound and others not ? In just a generation's time, China's per capita emissions will match the average of industrialised countries. 6 We can no longer defend a situation in which only some developed countries have to take on legally-binding commitments.

So what can the Durban conference achieve, which starts in exactly one week? We will not get the future global climate agreement that we want signed yet. But we hope that Durban can produce a roadmap that sets out how we will work towards this goal over the next couple of years.

This will be the EU's yardstick for success in Durban. And not whether the EU and other developed countries would sign up for a second period with legally binding targets under the Kyoto Protocol – which is currently the big focus in the media.

Let's be frank: at best we could only get the EU, Norway, and maybe two or three more countries to sign up for a second Kyoto period. That will NOT make any difference whatsoever for the overall trend in global emissions. It would also take away pressure from other countries – both developed and developing - to engage in more ambitious climate action.

The EU is open to a second Kyoto period, though rather as a bridge towards what should come next, and only under strict conditions: first, we must get the roadmap which leads us towards the global, legally-binding agreement. Second, the environmental effectiveness of the Kyoto protocol must be improved. That means, for instance, improving the accounting rules for land use changes and forestry, finding a solution to the problem of hot air or surplus emission credits, and finally, improving the effectiveness of international carbon markets and introducing new sectoral market-based mechanisms for emerging economies.

Need for more sustainable global growth model

In the 21 st century, we must look beyond GDP . We must include environmental and social assets in companies' and countries' balance sheets. And public authorities must put a price on pollution and carbon emissions , to guide consumption and investment decisions in a sustainable direction. 7 More generally, we must adjust our tax systems to align them better with public interest goals and our priorities as a society. I often summarise it as matter of taxing LESS what we earn and MORE what we burn – in a century where we've got too little employment and too many emissions it's really quite a paradox that we continue tax systems that tend to reflect exactly the opposite.

In the coming decades, we will have to focus on universal access to efficient and renewable energy sources, on the sustainability of our agriculture and the global food chain; and we must improve the resilience and living quality of cities . 8

This is not just about the environment or climate change. The benefits of a green economy go far beyond that. Investing in bicycle lanes and public transport, for instance, not only cuts CO2 emissions – it also solves congestion problems, and it improves air quality and people's health.

So, in sum acting on climate will not mean that we give up on the good life and say good bye to bright, intelligent, and creative. On the contrary. If we continue business as usual, we will end up in something that is dark dull and gray.

Conclusion

To sum up, I believe that our economic system in Europe is capable of meeting the challenge, provided that we, policy makers, set the right directions and provide the necessary tools. As I think Lord Giddens has also pointed out, this is fundamentally not a technical challenge but a political one – it is about mobilising change and our capacity as a civilisation to address common challenges collectively.

We need to start making the transition to a sustainable, low-carbon society as soon as possible. There is no more time to lose for the environment. But greening our economy will also create new business opportunities and jobs, and slash our energy bills. Green growth is THE way out of the economic crisis.

1 :

IEA, World Energy Outlook 2011

2 :

EM-DAT, Centre for Research on the Epidemiology of Disasters

3 :

Bloomberg & Guardian reports about HSBC report on global climate revenues, Sept 2011

4 :

Reuters, 26 September 2011

5 :

European Commission, Energy efficiency plan 2011

6 :

IEA, WEO 2011: "China's per capita emissions match the OECD average in 2035"

7 :

From the GSP's draft report

8 :

Ibidem


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