This week ministers from across Europe are meeting to tackle a threat to our shared prosperity: the crashing price of carbon. The EU has the world’s largest international emissions trading scheme (ETS). The amount of carbon that companies can emit is capped, and each firm has its own allocation of carbon permits, which they trade freely. Ultimately, cutting carbon can yield financial rewards.
But the price of carbon has plummeted. In 2006 a tonne would fetch around £28. Now - thanks to the downturn, and a glut of permits - it’s barely £6. That’s bad for the environment: when it’s cheap to pump out carbon there’s less incentive for firms to go green. But it’s also bad for the economy, because it makes Europe less attractive to low-carbon investment.
The global low-carbon market is worth more than £3tn, and supports over 900,000 jobs in Britain. And those numbers can grow. The world’s savviest states are embracing low-carbon markets. We can’t afford to lose out.
That’s why the coalition has introduced a carbon price floor - a minimum cost to give investors the certainty they crave. We want Europe to take a similarly tough line. In the forthcoming talks, we’ll be calling for a more ambitious EU emissions target, and a set-aside of permits to strengthen the ETS. A Europe-wide agreement to a 30% reduction in emissions by 2020 will drive up investment - and the ETS carbon price. Moving to 30% is a key commitment in the coalition’s programme. There are five compelling reasons why we must act.
First, this approach is the most cost-effective way of cutting carbon. The EU has already agreed to cut emissions by 20% by 2020, and 80% by 2050. By going a little faster now, we will make it easier as we near our final goal. The longer we leave it, the more it will cost
Second, it will help us secure the investment in clean energy we need to stay competitive. Global growth leaders are investing in clean tech and committing to ambitious emissions targets. Globally, investment in renewables now outstrips investment in fossil fuels, but if we don’t up our ambition we will attract little of it.
As many business leaders recognise, the real risk is moving too slowly, not too fast. The private sector will drive the low-carbon transition, but investors need confidence that we mean business. No wonder 72 major companies - including M&S, Nike, Unilever, Coca-Cola, and Google - support an agreement to cut emissions by 30%.
Third, more ambitious targets will help grow our low-carbon industries, ensuring Europe’s competitiveness in a fast-growing sector. The global low-carbon market is projected to grow at 4% a year for the next five years. UK companies could seize a larger share of that market if we take a strong step toward a cleaner energy future.
This growth should not come at the expense of other industries. We commissioned a study looking at the impact of a higher target. For most industries, it was minimal. For those that were affected, free allocation of emissions allowances would help firms manage cost increases.
We are committed to helping UK industries find their place in the low-carbon future. So Vince Cable is working with businesses to support the most energy-intensive industries.
The fourth reason to aim high is to avoid saddling future generations with outdated power plants - and bigger bills. Exposure to volatile fossil fuel prices hurts consumers and businesses alike. Moving to 30% could save the EU €9.1bn in oil and gas imports by 2020.
Finally, a more ambitious target is good for the climate: not just because our emissions will be lower - with health, productivity and resource efficiency gains - but because it strengthens our hand at the UN negotiations. Sticking with 20% won’t prevent dangerous climate change. By committing to 30%, we can show developing countries the EU means business - and push all major economies to do the same.
Our ambition is to follow different paths toward a common aim: a globally competitive Europe, powered by clean energy, driving international climate action. Last year Denmark, Germany, Sweden, Portugal, Spain and Greece joined the UK in calling for a 30% target. The turmoil in the eurozone has focused minds: despite difficult times, Europe recognises that it must take the right decisions for the long term. The financial crisis happened because we let systemic risk build up unchecked. A clearer assessment of, and protection from, such risk is part of our response in Europe: it must be part of our environmental policy too.
We want to build a more sustainable economy for Britain, and for all Europe’s citizens. That means sending a clear signal to business: that the EU is committed to a low-carbon future. In so doing, we can also send a clear signal to the rest of the world - that Europe stands not just for ambition on climate change, but for action too. The choice is not between environment and economy, but between leading the pack - or being left behind.
Originally published in The Guardian