Building growth in the low-carbon economy

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Minister of State for Trade and Investment Lord Green speaks about the UK's approach to developing a global low-carbon economy.

Thank you and good afternoon everyone.

One of the background documents to the conference today rightly calls Britain the cradle of the industrial revolution. The consequences of the revolution that Britain set in motion in the nineteenth century brings us all together today in pursuit of another sort of revolutionary change.

Directly or indirectly, industrialisation did of course bring initial hardships of a considerable order, and eventual wealth to much of the world. It brought health services and much longer life expectancies. It brought universal public education for both boys and girls. It brought of course, underlying all of that, urbanisation. And the process continues. As you are probably all aware, it was the year 2008 when we passed the threshold of fifty percent of the world living in big cities. That is expected to rise to at least seventy per cent over the next forty years. These are truly radical, revolutionary changes.

But we all know that they have been purchased at a high long-term cost in terms of impact on climate change.

Since Britain began the process of industrialisation, the world’s industries have spewed around 500 billion tonnes of carbon into the earth’s atmosphere.

The consequences are there for all to see and to anyone who is prepared to judge the evidence on its merits, we can’t go on this high carbon development path - or else.

Since 1900, the earth’s average temperature has increased by about three-quarters of a degree Celsius and the world is continuing to warm. The ten warmest years on record have all occurred since 1997.

The urgency of acting to reduce carbon emissions is drastically clear. The difficulty, or one of the sensitivities in this - to use an image given to me by Nick Stern - it is as if there was a banquet in which the participants have sat through the meal and invited the poorer countries for desert, or even just for the coffee, and then expect them to split the bill.

There is no way out of the paradox, or the dilemma, or the embarrassment if you will, that it is countries like Britain, the G7 countries of the world who have already achieved development, that have contributed so much of the carbon emissions stock in the climate today. What we are now facing is the challenge implied by growth of so many other countries achieving their legitimate aspirations to an equally attractive standard of living.

The shift to a low-carbon economy will require profound transformations in people’s lives and the way we all do business, but also to the way different nations interact with each other on the world stage.

A recent report by the Economist Intelligence Unit examined how global businesses are adapting to climate change. This survey of over 700 international companies found that 90 per cent of them had been experiencing climate impacts. In the past three years, more than half were noting that these impacts were increasing. So this really is out there in the public domain as far as business strategy is concerned and business challenges.

Crucially, two-thirds of those same businesses believed that adapting to climate change would provide new business opportunities. Therein lies, in my view, the basis for optimism about the challenge. The glass is half full and not half empty because transition to a low carbon growth path has been more and more widely recognised as essential, and more and more widely seen as a transition that will increase opportunities and not just difficulties and challenges.

Certainly as far as Britain is concerned, I think this a matter of opportunity, and not just challenge. We know that we have got plenty to do. We know that we have a transition a low carbon growth path. And we know that as we do that, we can set an important example both by delivering at home and by sharing the expertise, that I believe lies within the British economy, broadly through the world. This is a challenge that we all share.

It follows from all this that our ambition should be to drive economic recovery by building a green economy that will deliver future prosperity and energy security, as well as meeting our ambitious climate-change targets that are in the public domain.

And we also want to play our part in driving this transformation forward globally. Those parts of government that I am directly responsible for, UK Trade & Investment and ECGD, are moving to the forefront of the UK’s business-facing activity helping UK-based companies to succeed in the global economy, on the basis that we are showcasing a real expertise on the low carbon growth path.

The Coalition Agreement and the Trade & Investment for growth White Paper specifically both direct UKTI and the Export Credits Guarantee Department “to become champions for British companies that develop and export innovative green technologies around the world”.

In the three months that I have been doing this job, I have seen that the UK hosts companies across a wide range of low-carbon sectors, including energy efficiency; water treatment; financial services; ICT; new materials; electric vehicles and advanced manufacturing. Wherever you look, you find UK businesses across the range of sectors are facing up to the challenge of climate change and seeing the opportunities that lie in this.

They are already working with partners across the globe to develop innovative solutions. I was, a couple of weeks ago, on my first significant long distance business trip in my new job, inevitably in India and China - two countries that I have visited often with my previous hat on. This was the first time I have visited both countries back-to-back. I was once again struck by the dynamism, the momentum, the sheer scale in both countries of visible transformation, the rapid rate of urbanisation. For all of the differences between them, these are two of the most exciting economies on the planet. But what you also both see and hear as you talk to people there, in both places, for all their obvious differences, is a very real concern to address the low carbon growth challenge. They know that urbanisation brings with it such significant physical and social changes that is has to go along with a proactive climate change strategy if we are to do this in a way that really does deliver for the citizens of the world.

The most recent figures show that the UK’s low-carbon and environmental goods and services market is already the sixth-largest in the world, worth £112 billion a year and employing over 900,000 people. This is becoming a significant part of economic activity in the UK - and of course in other countries around the world too.

And there is scope for it all to grow much further in the next decade or two. So far as the Government is concerned, it is our job to facilitate that.

That is why you will have seen in the Budget, just a couple of weeks ago, we announced an extra £2 billion for the Green Investment Bank, giving it £3 billion of capital in total and allowing it to start borrowing from 2015.

It will start operating earlier than expected in order to enable it to leverage in an extra £15 billion of private investment over the lifetime of this Parliament, and increasingly significant in the coming years.

The bank will help secure the finance needed to make our economy more environmentally sustainable, unlocking significant new private investment into sustainable infrastructure projects.

The Green Investment Bank is far from the only environmentally focused measure that is important if we are to succeed in meeting this challenge. For example, the Budget also signalled plans for sweeping changes to the planning regime, including a clear presumption in favour of sustainable development. And further measures to reduce corporate taxes and to incentivise investment in research and development - which will have a very direct bearing on businesses engaged in green technology.

It is clear what the overall challenge is, and what we all need to be doing. It is clear that there is momentum underway, both in G7 economies and in the emerging markets.

It is very clearly something in which businesses have an important role to play.

If you look at the thinking going on in the British government, this will lead up to a Roadmap to a Green Economy, which we expect to publish by the summer.

It will provide businesses with more clarity and more certainty, and we certainly recognise that is necessary when you are investing in technology at the leading edge, you need as much certainty about the regulatory framework as possible in order to make a decision on a sensible basis.

This Roadmap will support the continued growth of low carbon in both the UK’s domestic and export markets alike.

It is vital that the Government play its full part in supporting businesses as they rise to the challenge of technological development and investment, in a sector which is going to grow as part of the manufacturing sector in this country and globally.

We are also supporting this process at the research end. We are supporting the National Renewable Energy Centre in Northumberland. This is a state of the art testing facility where companies can test and develop experimental technologies until they are commercially viable.

The scale of what we are talking about is already considerable.
The Carbon Trust estimates that the offshore wind sector alone could create up to 70,000 new jobs in this country by 2020.

This is a very important challenge facing us all. There is a very good story to tell so far. There is a long way to go on this, both here and globally. But if there is one thing that is for sure, I believe that this is sound both economically and necessary for human long-term well being.

Taking a long-term view of investment, it is very clear that there are all sorts of investors both domestic and foreign who have an interest in looking at investments in reasonably predictable operating environments with stable long-term returns. If you think about the objectives of Sovereign Wealth Funds around the world, which are there to provide income for future generations, it is the kind of investment that they should be interested in. If you think about pension funds which have long-term liabilities matched with long-term income streams, it is the kind of investment they should be interested in.

So the opportunities are there on the technology side in terms of business development, and the opportunities, I believe, are there on the investment side for anyone looking for long-term predictable returns.

And if we ever needed any incentive, we only need to be reminded that this an important imperative for the human race - if that doesn’t sound too grandiose.

Since I am in position of having five grandchildren, and they, on current demographic trends, have a fifty-fifty chance of living to see the next century, then you realise that actually the benefit we talk about for future generations is rather focussed on some individuals who you already know.

Thank you very much.