Secretary of State Amber Rudd's speech to the Aviva conference, ‘Climate Change: The Financial Implications'.
Thank you Mark [WILSON – AVIVA CEO].
I’m really pleased to be here with you at Aviva. And talking about climate change.
The insurance industry deals in risk. It’s your stock in trade.
You were one of first business sectors to really think about what climate change could mean for the people of the UK.
And one of the first to argue unequivocally for action.
Because you have recognised that unchecked climate change is one of the greatest long-term economic risks this country faces.
Famously, the Stern report estimated that climate change could mean losing at least 5% of global GDP – and left unchecked that could rise substantially.
But the climate change risk assessment commissioned by the Foreign Office, and published last week by the University of Cambridge, concludes that, if anything, we have tended to underestimate the economic risk.
The Economist Intelligence Unit report you are publishing today highlights the significant financial losses that could be faced.
It is no surprise therefore, that the Bank of England has been taking climate change very seriously indeed.
Their ‘One Bank’ research agenda recognises the significant effects that climate change could have on financial markets and institutions in years to come.
We are committed to taking action on climate change and we are clear that our long-term economic plan goes hand in hand with a long-term plan for climate action.
Climate action is about security, plain and simple - economic security.
If we don’t act, it will become increasingly hard to maintain our prosperity, protect our people and conserve our countryside.
The economic impact of unchecked climate change would be profound.
Lower growth, higher prices, a lower quality of life – not to mention many properties and businesses at higher risk from flooding and extreme weather.
So I see climate action as a vital safety net for our families and businesses.
Protecting our homes, our livelihoods, our prosperity.
It is the ultimate insurance policy.
That is why we are committed to meeting our climate change targets.
And if we act in the right way by backing business and helping them grasp the opportunity that clean growth represents – we actually improve our economic security, improve our prosperity, improve our way of life.
The bottom line is this - if we are acting on climate change to preserve our economic prosperity, we have to make sure that climate change action is pro-growth, pro-business.
That is why our approach will keep the costs of bills down and encourage businesses to innovate, grow and create jobs.
If we act in the right way, decarbonisation supports our other priorities.
By focusing on storage and reducing energy demand, not just generating more energy, we also help to meet our energy security needs.
By focusing on energy efficiency we help keep bills down for people and businesses.
So what is this Government’s approach?
We are committed to climate action; committed to economic security; committed to decarbonising at the least cost.
Pro-growth climate action
In December, world leaders will gather in Paris to finalise the first truly global agreement to limit greenhouse gas emissions.
The UK is lined up with the progressive countries of the world on this.
We want a strong, ambitious, rules-based agreement that makes the shift to a clean global economy irreversible.
Why? Because that is the best way to convince the private sector and investors we mean business.
Without the commitment, energy and innovation of private enterprise – across the world – we will not succeed in making the transformation to the global low-carbon economy we need.
Governments can set the direction, set the vision, set the ambition.
We can create the framework, create the rules, provide the support, predictability and stability needed.
But that support must help technologies eventually stand on their own two feet, not to encourage a permanent reliance on subsidy.
The best way to deliver on this is through the way we know the economics will work best.
Using the markets.
Using free enterprise and competition to drive down the costs of climate action.
To develop new technologies.
With business recognising the opportunity for growth, and yes profit too, that a clean economy represents.
Just like our own economy at home, the global low-carbon economy needs to be a profitable economy of enterprise, competition, opportunity and growth.
What I am not going to do as Energy and Climate Change Secretary is waste any time re-running old arguments about whether climate change is happening or not.
Tuesday’s joint communique from the UK’s top academic institutions sets out the science clearly and the risks if we don’t act.
World leaders in the US, Europe, China and elsewhere, are united.
We need to act together. And we should be strong and decisive.
But how we act is equally important.
It cannot be left to one part of the political spectrum to dictate the solution and some of the loudest voices have approached climate action from a left wing perspective.
So I can understand the suspicion of those who see climate action as some sort of cover for anti-growth, anti-capitalist, proto-socialism.
But it was Margaret Thatcher who first put climate change on the international agenda.
She told the World Climate Conference in 1990 that “The danger of global warming is real enough for us to make changes and sacrifices, so that we do not live at the expense of future generations.”
This is equally an issue for those of us who believe a sustainable free-market delivers the best results for hard-working families.
The Governor of the Bank of England, the President of the World Bank and the Managing Director of the IMF have all spoken out about the economic risks that climate change will bring.
But in her 2002 book ‘Statecraft’, Margaret Thatcher was also sensible enough to ask the question “can global warming be checked at an acceptable price?”
And that remains a live issue. So let’s deal with that now in the domestic context.
The transition to a clean economy here in the UK does mean making up-front investment supported by the tax-payer – and in energy – from bill payers. Let’s not pretend it doesn’t.
This is used to develop clean energy supplies and to help people cut their bills by cutting energy waste.
For instance, the Coalition Government put in place the Levy Control Framework to support the growth of low-carbon energy – renewables, nuclear, biomass and other budding technologies such as carbon capture and storage.
By 2020, this framework will have provided around £40bn to support a clean energy boom.
Renewables, for instance, are likely to be providing over 30% of Britain’s electricity by the end of this Parliament – up from just 7% in 2010.
But the Levy Control Framework is a capped pot of money, because it is paid for through energy bills.
The burden is shouldered by the public – households and businesses.
We have a duty to protect consumers and keep bills as low as possible while we reduce emissions.
To work for everyone – and to maintain support for climate action - decarbonisation has to be sensitive to the impact it has on people’s pockets, and wider economic circumstances.
And that means we have to control public subsidies - taking tough decisions on what schemes and projects are supported.
The latest projections from the Office of Budget Responsibility show that we are likely to breach the Levy Control Framework cap by around £1.5bn by 2020.
This is due to a number of factors including falling wholesale prices, technological improvements and increased deployment under “demand-led” support schemes.
That is why this week have announced proposals to control costs including closing the Renewables Obligation early for small scale solar farms in the same way we have for onshore wind.
We still need renewable energy to continue growing and I understand that the industry needs certainty so they can continue to invest in the UK, supporting jobs and growth.
That is why existing investment has been protected.
And we intend to set out plans for continuing support beyond 2020, providing a basis for electricity investment into the next decade.
But we need to reduce our emissions in the most cost-effective way.
This is a long term transformation.
We have to pace ourselves so that energy bills remain affordable for households, business remains competitive, and the economy remains secure.
We have to travel in step with what is happening in the rest of the world.
And over the last decade a lot has been changing.
While we in the UK have been one of the pioneers, we are not a lone outrider.
Globally, the pro-growth, pro-market, business community has seized the climate change agenda.
The last 10 years has seen a dramatic boom in global clean energy investment.
Renewables accounted for nearly half of all new power generation capacity in 2014 with investment reaching $270bn.
The latest report from the New Climate Economy Commission published this month tracks the positive developments.
Green bond investments tripled in the last year.
40 countries have adopted or are planning carbon pricing.
Over 150 multi-nationals, including oil companies are using carbon pricing to guide their investment decisions.
One of the most positive developments is the momentum building to phase out inefficient fossil fuel subsidies that encourage consumption.
As the Prime Minister told the UN last September, these fossil fuel subsidies are “economically and environmentally perverse”.
The IEA have estimated that globally they run to almost $550bn a year.
The UK does not subsidise fossil fuel consumption, and we are working with the G20 and others to bring them down.
International action needs to be well co-ordinated and ambitious, which is why I am looking at ways of taking this forward.
For instance, I can announce today the UK is throwing its weight behind the Friends of Fossil Fuel Subsidy Reform Communique to be launched at the climate change talks in Paris this year.
All this pro-growth, pro-business climate action is now bearing fruit?
For the first time in 40 years we have seen global economic growth without a rise in energy related carbon dioxide emissions.
And that trend is being ably demonstrated here in the UK.
Provisional figures show that while the UK economy grew by 2.6% in 2014, CO2 emissions fell by 10%.
Indeed, the UK economy is becoming ever more energy efficient - even after adjusting for temperature we are consuming less energy for every pound earned.
In 2014, the energy intensity of the economy fell by 5.6%, the highest fall in the last 10 years.
The traditional link between economic growth and burning fossil fuels is being broken.
And this is critically important for the Paris climate change talks.
We need to convince developing countries that the agreement is not designed to hold them back, but to help them leap forward.
So let me turn to those international talks.
Getting a global deal on climate change in Paris in December is one of my highest priorities this year.
And all the signs are that a deal is in reach. There is still a long way to go and there is no room for complacency.
Key for me will be to ensure three things:
First - that the deal must keep the global 2 degrees goal within reach, because that is what the science tells us will avoid the worst effects of climate change – and so that must remain our ambition.
Second - the deal must include a set of legally binding rules that give us confidence that countries will deliver on their commitments.
Third - that we agree a process of regular five yearly reviews where we can increase our global ambition, taking account of what the science says is required and taking advantage of the increasingly lower costs of renewables and advances in technology.
As a whole, the deal needs to send a clear signal that the future is low carbon.
By doing that we will change investment incentives and unleash the private sector to lead the transformation that we need.
Intended Nationally Determined Contributions have been received covering 46 countries responsible for over 58% of emissions, including the EU, US, China, South Korea, Mexico, Russia and Canada.
And more are expected over the summer including from Australia, Brazil and India.
In September the United Nations Environment Programme will report on the aggregate of individual proposals and at that point we can judge what more the world needs to do.
And that will include helping vulnerable countries adapt to unavoidable climate change.
Climate finance will form an important part of any deal and the UK has been playing a leading role in supporting private sector involvement in developing countries to help with climate change impacts.
The insurance industry has a role to play here. The Africa Risk Capacity project helps countries lower premiums for farmers facing increasing drought conditions.
Between now and December I will be working hard with my counterparts in the EU and with others, to land this deal.
The conference in Paris is crucial. But it will not be the end of the process, nor the end of the story.
I have no doubt further action will be needed beyond Paris to maintain the ambition we have set ourselves.
That is why getting the right rules in place, and agreeing to ratchet up ambition as conditions allow will be so important.
Let me finish today on this note.
The business community is engaged as never before as one of the leading voices for climate action.
Because you recognise the risks and you recognise the rewards.
And we need you to continue to speak up for a global deal, to continue to invest, to innovate, to drive the clean economy forward.
To demonstrate that action to tackle climate change isn’t an indulgence. It makes cold hard economic sense.
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