EU Sustainable Energy Week Opening session: Introduction of IEA's World Energy Outlook - 2015 Special Report on Energy and Climate
Ladies and Gentlemen,
The International Energy Agency'sWorld Energy Outlook 2015 Special Report on Energy and Climate' will provide the context for discussions for the next few days and the strategic framework for the run-up to Paris in December. It shows us where we currently stand on sustainable energy and climate and maps out the different scenarios post-2015. I am delighted that Dr Fatih Birol is here to speak about the IEA's new report and share his insights on the way forward.It is a privilege to have such an authoritative voice today with us. Thank you Fatih.
Going through this report there are two things that struck me in particular.
The first is that we can put to bed the argument that economic growth and CO2 emissions are inseparable. The report shows that, last year, global energy-related emissions stayed flat, whereas the world's economy grew by 3%. In the EU, emissions dropped by more than 6% and the economy grew by around 1.3%. In fact, since 1990, the EU's GDP has grown by 45%, while our emissions have declined by 19%. That gradual decoupling is a strong signal ahead of the climate negotiations.
The second thing that struck me is just how far we still have to go. If anyone around the world was hesitating on how ambitious we should be in Paris, then this report will help them make up their minds.
Investments in renewable energy sources are still disproportionately low – 600 billion euros less than the investment in oil, natural gas and coal. And emissions from the energy sector are double the level of all other sources combined.
As the IEA's report points out, what is needed is an integrated approach to energy and climate change. As EU Commissioner for both, I fully agree! So how do we respond? How do we meet the target of a 40% emission cut by 2030 that we committed to ahead of COP21?
The answer is in the report. Put simply, the level of climate mitigation ambition can be raised across the world based on energy-sector measures, making use of both proven practice as well as new technologies.
There are three areas which stand out in the IEA report and also in our Energy Union Strategy:
- The first is carbon markets and in particular the EU Emissions Trading Scheme (ETS)
- The second is becoming more energy efficient so as to reduce demand in the first place
- And the third is investing in research and innovation to reduce sustainable energy costs
EU Emission Trading Scheme
Let me start with carbon markets, as this takes such a prominent place in the report.For me it is clear, putting a price on carbon is the best way to cut emissions cost-efficiently. And I am very encouraged to see that an increasing number of carbon markets are emerging all over the world.
The ETS family is growing, and it has a clear-cut explanation:
The ETS reinforces the internal energy market, incentivises businesses to further reduce their emissions, and stimulates the uptake of low-carbon and energy efficient technologies.
As the IEA report rightly highlights, the EU ETS is the world's largest carbon market, bigger than all others in the world combined! It is a core part of the EU's strategy to decarbonise and it will play a major role in meeting our 2030 targets.
But as the report also states, the ETS continues to suffer from a massive surplus of allowances that depresses the carbon price and provides no incentive for low carbon investments. We have taken decisive steps to address that by postponing the auctioning of 900 million allowances. And, crucially, we have reached agreement on a Market Stability Reserve to make the supply-side of the system more flexible and resilient.
This is important in the short term, but it also paves the way for a long term structural reform of the ETS. We are putting our proposals together now and will publish them in the coming months. Our ETS will continue to get bigger and better.
And today I can already tell you that the reformed ETS will include:
- continued free allocation to industry, without however reducing the share of allowances to be auctioned;
- optional free allocation of allowances to the power sector in certain Member States; and
- the creation of a modernisation fund and an innovation fund.
Those funds will build on the success of the "NER 300" programme - one of the world's largest funding programmes for innovative low-carbon energy demonstration projects. Its resources come from the monetisation of ETS allowances. All in all, 38 renewable energy projects and one carbon capture and storage (CCS) project have been selected for funding worth 2.1 billion euros. That money is expected to leverage a further 2.7 billion euros of private investments.
Another major opportunity highlighted in the IEA report is energy efficiency and demand reduction.
First the good news – despite lower global energy prices, energy efficiency continues to be prioritised.
Global energy intensity decreased by 1.8% in 2014. In Europe we have cut energy use in buildings by 3% every year for the last five years. Over that same period energy efficient products have saved us 100 billion euros and avoided around 360 million tonnes of CO₂ emissions.
Now for the less good news – 20% of all residential electricity is used unnecessarily. It heats our houses when we are on holiday, lights rooms when the sun is shining, and charges unused appliances! For me this is unacceptable – and I am committed to making energy efficiency our most sustainable source of energy.
By 2030, we must improve our energy efficiency by at least 27%. And hopefully more, as I will work hard to go beyond the at least 27% figure. For that to happen we need to embed energy efficiency across all our energy policies, as recommended by the IEA report. As part of the Energy Union, we will make sure that we do not take any other measures if the same goal can be reached through energy efficiency.
The building sector will be particularly important. We spend 90% of our lives in buildings which are responsible for 40% of our energy consumption. Almost half of our building stock was built before the 1970s, when no energy performance standards were used. We need to make sure that renovation rates pick up. The business case is clear – it will create 2 million local jobs by 2020 and save the public purse 39 billion euros! A big part of making that happen will be the proper enforcing of the Energy Efficiency Directive. I take this very seriously and we will not be afraid to be tough where countries are not following their responsibilities.
But we will also provide them with investment support. This can be provided through the Juncker Plan and also the "Smart Financing for Smart Buildings" Initiative. This support will also stimulate private investment in energy efficient buildings and renovations.
Research and Innovation
But as the IEA report highlights, investment will also be needed elsewhere – and in particular in developing emerging, clean technologies. The good news is that renewables are increasingly seen as a stable, low-risk investment. Costs are going down! In some sectors of wind and solar generation they have reduced by 60% in the last five years!
But we are also witnessing other technologies becoming increasingly competitive, such as LED technologies for lighting, battery technologies, and systems for Nearly Zero Energy Buildings.
And the reason that costs are going down is because we are constantly innovating. Our researchers are developing cleaner energy technologies which help us do more for less. They help us increase our renewable energy capacity even when investing less. EU companies already hold 40% of global patents for renewable energy technologies. But to stay ahead of the game we need to keep investing in research.
We have doubled the funding for energy research from 2014 to 2020 and we have ring-fenced 35% of all research money for climate action technologies. In fact we are investing in clean energy technologies in all parts of the EU budget – from regional to maritime funds!
But we need to turn those inventions into interventions. That only happens once they are deployed at scale. Many non-technical, non-financial barriers currently prevent that from happening. So yes, it is about funding the research, but is also about the right policy platform and culture to make sure we can bring that research into the market. Our upcoming review of the Strategic Energy Technology Plan will look into how we make that happen.
Ladies and Gentlemen,
We need to be ambitious when it comes to the technologies of tomorrow. In fact, I would say that what this report shows us is that ambition should be the keyword for this week. And it will be my keyword in Paris.
The IEA shows us that we are moving in the right direction in lots of ways. But we also know that in the fight against climate change every action is important and time is running out. The more we delay, the more we will pay. We need to step up our efforts in the transition to a sustainable energy system.
We need to work together to make it happen. And I am very encouraged by last week's G7 summit, where climate goals and the transformation to a low-carbon economy were put at the heart of the leaders' declaration.
This IEA report identifies the need for clarity of purpose and certainty of action from all stakeholders with a commitment to a long-term goal. It establishes the need for a clear, tangible and collective long term vision that will guide energy sector investment decisions and technology development.
It describes a transparent structure to achieve the energy transition, to support successful implementation and to build trust and confidence. For us, all that means reforming the ETS so industry can play its part, it means all of us using energy more efficiently and it means investing in clean, renewable energy technologies.
These commitments continue to lay the foundation for a very meaningful and ambitious climate change agreement in Paris.
To finish I would like to thank Fatih for this report which continues to support us in achieving these important goals and thank you to all of you for your continued support and hard work.
 IEA Special Report on Energy & Climate Change, 2015: "Investments in RES(243bn EUR) remain only a fraction of the investment dedicated to bringing oil, natural gas, and coal to consumers (883bn EUR)"