Rt Hon Edward Davey MP
Secretary of State for Energy and Climate Change
Speech: Ambitious and Flexible: Europe’s 2030 Framework for Emissions Reduction
Venue: Residence Palace, Brussels
Date: 18 June 2013: 12 Noon
I’m grateful to you - the CBI and the Prince of Wales EU Corporate Leaders Group on Climate Change - for this chance to set out a vision for a robust European Union Energy and Climate framework for 2030.
Now I’ve just come from a meeting in Luxembourg, of the Green Growth Group.
Who are the Green Growth Group?
That’s a group of EU Ministers - already consisting of 12 Member States – who are determined to work together to raise the EU’s ambition on energy and climate change policy as a pro-growth policy.
So while I’m sorry I’ve missed your morning’s discussions, the good news for you is that many of Europe’s politicians are still in the urgent marathon – the global race to tackle climate change.
But I wanted to hot foot it over from Luxembourg to Brussels, to support you as businesses who – like the scientific community – have stepped up to the plate when it comes to climate change.
Because while politicians must argue the economic case for climate change action, it’s absolutely critical businesses do too.
And, on both the key economic questions that face us on energy and climate change – carbon market reform and 2030 targets – politicians, scientists and business must speak out.
Only together can we provide confidence and credibility both for the market mechanisms we Europeans know we need to reduce emissions: and our linked efforts to maintain our global competitiveness at the same time.
In the United Kingdom, the CBI and the Corporate Leaders’ Group have been at the forefront of making the case for green growth –the transformation of our economies to a low carbon future and how that presents us with a huge opportunity to create jobs and industries of the future.
AN AMBITIOUS VISION FOR EUROPE
Today, I want to set out the UK’s vision for the future of EU Climate and Energy Policy.
And it’s an ambitious vision for Europe.
The EU should adopt a target of 50% emissions reductions by 2030, as part of a global deal in 2015.
Ambitious – yes - but if we are flexible in how we work to hit it a 50% target, it will be cost effective too, contributing to growth and maintaining competitiveness..
To be cost effective, we will have to enable our economies to take advantage of all the opportunities for green growth – from energy efficiency to new technology.
And to be cost effective, we will have to allow Member States to make the right choices for themselves – especially the choices over which technologies to use in the low carbon transition.
Preferably by enabling business and markets to help drive those choices.
We need to prove you can reduce carbon emissions while remaining competitive in the global economy.
Keeping energy affordable for our citizens and businesses alike.
In the UK, our answer to this challenge is to opt for a low carbon diversity goal, by establishing a technology neutral, low carbon electricity market.
Our electricity market reform.
And making such a long term reform alongside an urgent transition from coal to gas and the UK’s most ambitious energy efficiency programme ever.
By diversifying our energy mix and reforming our electricity market, we are exploiting home grown energy sources – conventional and unconventional; nuclear and renewable; old technologies and new.
So we also improve our energy security, reducing import dependency.
We think this is a very attractive proposition for the UK and the EU alike – yes, meeting the requirement for sustainability, but doing it in a way that enhances both energy security and economic competitiveness.
But in the UK, we are clear: our low carbon objectives will only be possible if we see reforms at the EU level too.
And today I will set out the UK’s detailed position on carbon market reform and 2030 targets, but I wanted briefly first to sketch out how I see the latest climate change science – because I think that argues for a more urgent, united politics and business approach to back them.
THE CLIMATE CHANGE CHALLENGE
Earlier this year, carbon dioxide briefly reached 400 parts per million in the atmosphere - 40% higher than before the industrial revolution and most likely higher than at any point in the last 3 million years.
The ice caps are thinning and melting. Sea levels are rising. Extreme weather events are happening with increasing frequency.
The science is solid and accepted by pretty much every government on earth.
Of course there will always be those with a vested interest in the status quo.
Who seek to create doubt where there is certainty.
And you will always get crackpots and conspiracy theorists who will deny they have a nose on their face if it suits them.
But the truth is this: while forecasts of the future rate at which the world will warm differ, and while many accept we will see periods when warming temporarily plateaus, all the scientific evidence is in one direction.
And then just think of climate change’s long-term impact on the global economy?
Well, we can be sure it will make current economic troubles look mild in comparison.
So if you meet in your boardrooms people who still doubt the evidence, ask them how they normally assess risk.
And how they normally act on the evidence and presence of risk.
For on the basis of any normal risk assessment – weighing probability against impact, weighing the cost of acting against the costs of inaction – taking a gamble on climate change wouldn’t be just incredibly stupid, it would have you locked up in jail for corporate negligence.
So remind people.
The real policy debate has moved on.
It’s about how you reduce emissions, not whether you must reduce emissions.
And when it comes to “how”, it’s elementary that countries must act together.
International action on climate change is indispensable, both at the EU level and at the UNFCCC.
I am delighted that the British Prime Minister David Cameron said last week that membership of the European Union was not a national vanity for the United Kingdom.
He said it was a national interest.
And nowhere is that national interest more vitally protected and projected than through the European Union’s collective approach to climate change.
When negotiating with the super-economies of the US, China and others, by acting as one on climate change, the nations of the EU are vastly more influential than if they were acting alone.
Because when the EU speaks on climate change, the world listens.
Countries accounting for four fifths of global emissions are following Europe’s lead in adopting mitigation pledges under the UNFCCC.
So looking forward, we in Europe have a real opportunity to continue as the driving force behind the new global deal we must sign in 2015.
For now, in 2013, that means we must urgently position Europe to take advantage of a low carbon future.
BUILDING ON SUCCESS
And as we have this debate, the first thing to recognise is the successes of the historic 20/20/20 package agreed in 2008.
Emissions down by over 18% on 1990 levels already.
Renewables up to over 12% as a share of consumption.
With this action delivering much needed growth and jobs.
For while these are tough times, they would have been tougher without our actions to stimulate green growth..
As the CBI has highlighted, in the UK, the drive for green growth has seen UK green businesses carve out a €142bn slice of the world market worth €3.8 trillion.
This growth translates into investment and jobs on the ground, with around a million people employed in green business in the UK.
In Europe, the market for low carbon environmental goods and services grew by 3.5% in 2010/11 alone to €873 billion.
And we are seeing new industries growing because of our green commitments.
In the UK for example, we see low carbon industries as key sectors for the future.
So we should be proud of what has been achieved.
But as the Commission has set out in its green paper, and as we have been discussing today, we must look ahead.
When it comes to investment decisions on energy projects that will last into the middle of the century and beyond, 2020 is fast becoming the rear view mirror.
And we must recognise - as we move on to 2030 targets - that we are in a different context from 2007 when the last set of targets were negotiated.
Back in 2007, few Member States had well established climate policies; most renewables technologies were immature; and we were at the peak of an economic boom.
Now, six years later, renewable technology is maturing and other technologies like Carbon Capture and Storage and new nuclear are set to contribute to the low-carbon mix over the coming years.
And, of course we are in an economic environment that is challenging European countries to address competitiveness and growth.
But, above all, we must recognise that our economic competitors are stealing a march on us.
According to the International Energy Agency, China has halved the rate of its emissions increases through renewables and energy efficiency. And the US switch from coal to gas for electricity production has seen emissions tumble.
So we have to develop and use more “low cost-low carbon” solutions.
Emissions reduction must be economically smart.
A FRAMEWORK FOR 2030 – AMBITIOUS EMISSIONS TARGET
So let’s look at what the 2030 framework should look like in the context of the lessons of the 2020 framework.
And let me address this by stating what the UK thinks should happen in one paragraph:
Europe should adopt an ambitious emissions reductions target for 2030, delivered in a flexible, technology neutral way, supported by a robust, reformed emissions trading system, and underpinned by a global agreement in 2015.
And let me explain our rationale for this approach.
First – on the overall emissions target - we must listen to the science.
The emissions reductions target of 20% by 2020 - set back in 2008 - was simply not sufficiently ambitious. A big mistake, if you look at the science.
For it falls short of the level of reductions required if we are to prevent dangerous climate change as recommended by the IPCC.
Incidentally, that’s why the UK remains committed to an increase in the EU climate target for 2020. We should raise that 2020 target, now, to 30%.
But that mistake over 2020 targets is why the UK believes the emissions targets the EU sets for 2030 must be ambitious, economy wide and meet the requirements of the science.
So the UK is proposing that the EU adopts a binding Greenhouse Gas target of 50% reductions compared to 1990 levels, in the context of a global climate deal.
And even without a global deal we should still be prepared to adopt a unilateral binding 2030 EU wide target of 40%.
Ambitious – yes. But it is what the science tells us is required.
And it is this ambition that will drive the delivery of a comprehensive legally binding deal at the COP 21 in Paris in 2015.
A FRAMEWORK FOR 2030 – FLEXIBLE DELIVERY
Second – emission reductions are the target and the focus, so we must be flexible about how we reach it.
We should not limit investment and innovation in one low-carbon area - at the expense of another.
And we should not define for each country their low carbon energy mix.
And that’s a lesson from the 2020 renewable energy target.
We strongly support a 2020 target, as it was needed to help develop new technologies.
And the UK remains fully committed to increasing renewables in our own domestic energy mix – to 2020 and way beyond.
The tripling of support available to renewables through the £7.6bn Levy Control Framework through to 2020 provides an immediate boost.
And I see renewable energy having a long and prosperous future in the UK and across Europe way beyond 2020, way beyond 2030 and frankly into the unforeseeable future.
Yet renewables aren’t the only way to decarbonise energy – from energy efficiency to new nuclear, from carbon capture and storage to renewable heat, there is strength and sense in a diverse, mixed energy strategy.
Renewables are part of the solution, but not the whole solution.
Take CCS. Without Carbon Capture and Storage being rolled out in the near future, the chances of dealing with emissions globally are severely damaged.
The EU should put itself in the forefront of CCS development, both for the climate and the commercial opportunities for our companies.
And countries should be free to pick the energy mix they prefer, and not be penalised for the choices they make – including on whether they choose nuclear to deliver their emissions reductions.
In the UK, our electricity market reforms will rely on the market and competition to determine the low-carbon electricity mix in the 2020s.
Our focus will be on overall decarbonisation of the power sector rather than technology specific targets.
Indeed, we are legislating now for the UK to have its own power sector decarbonisation target for 2030, to be set in 2016, that will drive the electricity market competition between renewables, nuclear and CCS.
And we will therefore oppose a 2030 renewable energy target at an EU level as inflexible and unnecessary.
As new technologies come on like renewables and CCS, as they are already becoming more cost effective, we believe we must move away from hard, binding technology-based targets and allow the market to determine the low carbon mix.
But this position should not be misinterpreted.
The UK remains very pro-renewables.
And I am looking forward to working with my colleagues in the Commission, other Member States and the Parliament to ensure that the 2030 package provides the necessary, cost-effective and long-term investment signals for all low carbon technologies including renewables.
But it’s not just about the supply side, it’s the demand side too.
Of course, delivering further improvements in energy efficiency must underpin everything we do, if we are to achieve our aims cost-effectively.
In April, all Member States set themselves ambitious indicative national targets under the Energy Efficiency Directive.
Targets that early analysis suggests will put the EU back on track to meet the 2020 target – so we are already moving in the right direction.
In the UK, we have already adopted an ambitious Energy Efficiency Strategy that will build further on the progress we have already made through innovative new policies such as the Green Deal
And we must also continue to act at the EU level - EU measures such as product labelling and standards have delivered, and should continue to deliver, significant energy savings and drive innovation.
Adopting an ambitious, and binding, Greenhouse Gas target will provide a further compelling reason for us all to do more on energy efficiency.
But we should not pre-judge the balance between increasing efficiency and deploying other low-carbon measures to meet the greenhouse gas target.
We must retain flexibility.
And for these reasons we also do not support a binding energy efficiency target for 2030.
A FRAMEWORK FOR 2030 – REFORMED EMISSIONS TRADING
Third – we must not give up on emissions trading.
Yes, we must learn from the shortcomings of the EU ETS, reform it and strengthen it.
But to sideline carbon markets now be a costly mistake.
Emissions trading is a powerful tool for using market forces, working with the grain of human behaviour, to cut emissions in the most cost effective way.
Putting a cap on carbon guarantees the level of reductions and enables countries and businesses to deliver those reductions in the most economically efficient way for them.
It can be the engine for the green growth that we know is possible and some of us believe is essential.
And the more global the carbon market becomes, the lower the cost and the greater the benefits.
For the EU ETS has been a significant success – let’s be clear.
It has pioneered the large scale use of cap and trade across national boundaries covering 11,000 installations in 31 countries and remains the world’s largest emissions trading system; and it is being widely copied.
But of course it’s far from perfect.
Supply of allowances massively outstrips demand in the system. The system was certainly not design-proofed against the extraordinary economic conditions we have faced in Europe recently.
But the EU ETS has been and should remain our primary tool to reduce industrial greenhouse gas emissions.
Companies who want to see the right conditions to invest in low carbon technology and infrastructure are increasingly making the business case for a stronger EU ETS.
So reform of the system is not just desirable: it’s an essential priority.
That means first getting the backloading reforms agreed, as quickly as possible.
And we need to hear business championing that today, tomorrow and through to future parliamentary and council decisions over the next month.
But backloading is only a short-term step: we can’t delay the move to more permanent reform any longer.
By the end of the year at the latest, I want to see firm legislative proposals for substantive structural reform of the EU ETS on the table.
And that is a view I know is shared by many of my friends and colleagues in the Council – in our green growth group and beyond.
The UK continues to call for immediate cancellation of allowances to reduce the surplus in the system.
And we want to see legislative proposals to bring the EU ETS cap into line with a 50% 2030 target in the context of a global deal, with provision for 40% if no global climate deal emerges.
Colleagues - 2015 will be a big year for this continent.
2015 will be a big year for the global fight against climate change.
France has shown great leadership in standing up and offering to host the 2015 climate conference where we hope to create history by agreeing at last a global deal on climate action.
The world will be looking to Europe to deliver.
It’s good news that other countries like the US and China seem to be more ambitious than in the past. It’s a real source of hope.
But without the EU adopting an ambitious approach, a global deal will be virtually impossible.
So let’s also sell that ambition as the economic opportunity it is – for green jobs, green growth and green renewal.
And let’s start this week, next month and in the 12 months ahead to win agreement for continued European climate change leadership.