The business solution to the problem of climate change

Business input is going to be very important to the success of the other climate change conference in Copenhagen in December, so I very much welcome this timely initiative to hold a World Business Summit.

If you allow me, I'd like to take you back to Copenhagen in the 17 th century. From the beginning of recorded history, humans wondered why seashells and shark teeth could be found at the top of mountains. For many, the explanation was obvious, and could be found in the Bible: the maritime remains were left behind by Noah's Flood!

It took a young Danish scientist, Nicolas Steno – or Niels Stensen, to give him his original name – to discover that the teeth and shells were in fact fossils, deposited millions of years ago when the land was beneath the sea. He realised that the layers of rock in which the fossils were embedded told the story of Earth. And that story was a violent and ever-changing one.

He didn't know it at the time, but his work would unlock the door to a great deal of what we know today about plate tectonics, dinosaurs, geology and, of course, climate change.

That we are now entering a new period of climate change, there can be no reasonable doubt.  However, this is not - as many of the climate sceptics tell us – simply just another one of the many periods of global warming that the Earth has experienced in its 4 and a half  billion year existence.  All serious scientists agree that this time, it is being caused by Man, and it poses unprecedented risks to both human life and even to human civilisation itself.

With the scientific knowledge at our disposal on both the magnitude of the problem and its potential consequences, I think we can say that combating this self-inflicted climate change is fast becoming the defining challenge of our generation. We know that decisive and urgent action is needed.  And I am proud that the European Union is leading global efforts to mitigate its effects.

When the Commission's energy and climate change package was recently formally adopted, Europe became the first region in the world to implement such far-reaching, legally binding climate and energy targets.

The package delivers on EU leaders' commitments in March 2007 to reduce greenhouse gas emissions by at least 20% of 1990 levels and to raise the share of energy consumption provided by renewable resources to 20%, both by 2020. It also contributes to the target of improving energy efficiency by 20%.

Critically, the package also lays the basis for increasing the emissions reduction from 20% to 30% in the context of a satisfactory international climate agreement in which other developed and developing countries contribute their fair share to the limiting global emissions.

Ambitious targets, no question.

Some people however have questioned whether this is the right direction for Europe during the economic crisis.  In my view, the question they pose is a false dichotomy.

We must be capable of dealing with the financial challenges and the difficulties posed by energy insecurity and climate change.  These challenges are not mutually exclusive, and must be tackled together.  We cannot postpone today the need to modernise the European economy for the challenges of tomorrow. Indeed, the economic case for action on climate change is as compelling as the scientific case:

The costs of climate change will be much higher if we don't make adjustments now – up to 20% of GDP annually, according to the Stern Review. We think we can limit the cost of our package to around half of one percent of GDP; Without the package, the EU will be much more vulnerable to energy shocks, with potentially drastic consequences for our industry and economies.  We are already dependent on others for more than 50% of our needs - this could rise to 64% by 2020 under business as usual projections;

Finally, and most importantly of all: we must recognise that change brings big economic opportunities – if the EU further exploits its first mover advantage and consolidates its position on world markets for energy efficient and low carbon technologies. Achieving a 20% share for renewables, for example, could mean more than a million jobs in this industry by 2020. 

We have, in short, the chance to build a low carbon opportunity society, and we must not miss this chance.

So when the Commission designed the European Economic Recovery Plan, we were careful to ensure that the short-term response was consistent with our long-term goals.

Smart investment in infrastructure, energy efficiency, and clean car technology will support vulnerable industries in intelligent ways: by preparing them to thrive in markets of the future, instead of artificially propping them up for markets that are fading into the past.

Our Sustainable Industrial Policy Action Plan from last summer was designed to help industry seize the opportunities to reduce CO 2 emissions and generate cost savings.

Rewarding the best-performing products and consumers' eco-friendly behaviour in this way will strengthen the competitiveness of European industry, and keep it at the cutting edge of emerging global markets.

At the same time, the barriers that hamper the growth of environmental industries in the Internal Market, and limit their full uptake by other industries, are being identified and tackled.

There are so many other examples of our efforts to combat climate change while driving economic recovery. New rules on industrial motors that will save the equivalent of the entire annual electricity consumption of Sweden.  Or proposals to make greater use of information and communication technologies that could reduce the energy consumption of buildings by up to 17%.

A quick word here about energy-intensive industries, and the problem of carbon leakage.  Obviously, there is no point in implementing a shift to a low-carbon economy if it only succeeds in pushing such industries to countries where there are few, if any, environmental controls.

The best way of avoiding this is to implement an ambitious and comprehensive agreement in Copenhagen. That will enable us both to enforce strict global targets – and ensure a level playing-field for energy intensive industries. 

All our industry must make decisive efforts for climate protection, but the solution must encourage industry to be innovative and competitive; not to relocate half way round the world. 

Ladies and gentlemen, in tackling climate change, public sector action will not be enough. Only concerted efforts by all parties – policy makers, businesses and consumers – will allow us to tackle the climate change challenge with success.

The case for private sector involvement, as I mentioned earlier, is clear. So it is no surprise that businesses are increasingly taking a long-term view, and becoming a driving force in the fight against climate change; and it is no surprise that businesses are asking for a coherent, stable and efficient policy framework to guide investment decisions.

So many  businesses  are increasing efforts to curb emissions, optimise their supply chains, to improve information to consumers, and most of all, a number of industrial sectors are starting to come together to develop sectoral approaches to reduce emissions or develop energy efficiency benchmarks at international level.

But I am preaching to the choir.

This event has been organised by six of the most impressive and influential business initiatives on climate change. 3C, the Climate Group, the UN Global Compact, the World Business Council for Sustainable Development, the World Economic Forum and of course, our hosts, the Copenhagen Climate Council, have all shown vision and leadership when it is needed most.

This is vitally important, because most of the necessary change in investment direction to address climate change has to come - is already coming - from the private sector. We will need a strong public - private partnership, if we are going to deliver the necessary emissions reduction in the most cost effective manner possible, and ensure effective diffusion of new technologies.

So in the longer term, we should see a Copenhagen agreement as a major milestone on the path to a global carbon market which would increase business opportunities, particularly for European industry, and help to bring average carbon costs further down.

This is not some naïve aspiration. Look at Denmark. This country's commendable push for clean tech development, for example, has gone hand in hand with the rise of innovative home-grown companies that are now of global importance.

Finally, let me briefly update you on where we are on preparations for the Copenhagen Conference, and how I expect events to unfold over the coming months.

Based on our binding targets, now fully agreed at European level, we have a strong EU position on key building blocks for Copenhagen.

The main outstanding issues are to ensure the necessary mitigation commitments and actions, based on what science recommends: first, comparable emission reduction targets by developed countries. The EU has consistently asked developed countries to take the lead in emission reductions by committing collectively to cut emissions by 30% below 1990 levels by 2020, and we have proposed a balanced combination of criteria to compare developed country targets, and to help ensure equivalence of effort.

Secondly, and as agreed in Bali, we want to see developing countries do their part by designing and implementing national low carbon development strategies containing a set of mitigation actions for each key emitting sector, so that collectively they reduce their emissions by 15 to 30% below Business as Usual by 2020.

Finally, we need to develop clear financial architecture to underpin the Copenhagen agreement. This must allow for different sources of funding, private and public – indeed, the carbon market must be the major source.

International negotiations are progressing well, although they are every bit as tough as we all predicted they would be, and we are now entering the critical, text-based phase of the negotiation.  A very encouraging development has been the positive engagement of the US. President Obama’s personal involvement has brought about nothing less than a sea-change in the US position.

So the US is back in this debate. That is unmitigated good news. It also provides us with some timely and healthy competition. The starting gun has fired in the race for first-mover technological advantage - European industry has no time to lose in the search for innovative responses.

The US has also reinvigorated the Major Economies Forum to enable a real political dialogue on the key issues at stake and build confidence ahead of Copenhagen:  supporting but not supplanting the UN process.  The next meeting of the MEF takes place in Paris later today.

When the Commission came forward with proposals in 2007, many people told us that they would never be accepted by Member States.  When the economic crisis hit us during the course of last year, the critics redoubled their arguments.  They say the same thing now, ahead of Copenhagen.   But I was confident of success in the European Union, and I remain confident for Copenhagen, as we have two powerful weapons – namely public opinion, and science – on our side.

I flew in yesterday from Seoul, after a summit meeting with Korea, ending a week of summits with the Chinese (in Prague), and then the Russians (in Khabarovsk).  Of course, we are not yet where we need to be, and the way ahead will be difficult.  But I can tell you that the leaders of all these countries – and of course the US - are fully engaged – indeed, climate change was a dominant subject in all these summits - and I think science and public opinion will pull us to an agreement.  

The last point I want to make to you this morning is that we must not assume that the battle is just about targets for 2020, important as these mid-term targets are.   Scientific evidence shows that, for there to be a 50/50 chance of respecting the 2°C temperature rise ceiling, worldwide emissions will need to peak before 2020 and fall by 50% or more below 1990 levels by 2050.  This in turn means credible emission pathways to maximise our chances of meeting the 2°C target.

The Intergovernmental Panel on Climate Change indicates that this would require emission reductions for developed countries of not just 25-40% below 1990 levels by 2020, but of 80-95% by 2050.

Our second strategic energy review last November began the process of formulating an EU response to this 2050 challenge.   Some challenging examples:

Decarbonising EU power generation and transport fuels by 2050;

Ending oil dependence;

Constructing zero emission buildings;

Building a smart, interconnected, decentralised electricity network that incorporates thousands, even millions, of small and micro suppliers of renewable energy.

Some may say: these ideas are too far off to be usefully tackled now.  I disagree.

Indeed, this conference demonstrates that many businesses are investing precious capital now in finding new solutions. They are already looking to the future.

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