Speech

Tackling climate change is not at odds with economic growth

Transcript of a speech by Edward Davey, UK Cabinet Minister for Energy and Climate Change at the Indian Institute of Management, Ahmedabad Thursday 24 July 2014.

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

The Rt Hon Edward Davey

I am delighted to be here on my first visit to India and to Gujarat.

I can’t begin to tell you how much I have wanted to visit your great country, and this great State for many years – and not just to escape the current cricket Test match series in England.

Your country had touched me in so many ways over the years. From my Indian neighbours when I was growing up in Nottingham – the Malhotras – who were so kind to my brothers and me when we lost our mother, bringing us the best curries I’ve ever tasted. To my cousin, Peter Lawton, who loves your country so much he named his daughter India and helped set up the Ranthambore tiger reserve. For now. I just want you to know that the affection and the bonds between the UK and India are personal, not just political.

But of course there are political bonds as well. Gujarat matters to the UK politically. For in fact, the UK is home to 600,000 citizens of Gujarati origin. More importantly, I have many voters in my constituency who consider themselves British Gujaratis. And if you have any relative or friends living in Kingston and Surbiton in South West London, we have an election next May; you know what to tell them.

But seriously, the economic ties between the UK and the Gujarat are close. The Gujaratis are drivers of economic growth. Your entrepreneurship and excellence across so many countless fields –and the Gujaratis play a critical role in the UK economy. Indeed, above all, Gujarat matters to the UK because Gujarat matters to India. Gujarat is a driver of growth and prosperity, learning and culture for all India. And you must be proud that the new Government in Delhi is publicly following the ‘Gujarat Model’ of growth.

Those of you studying marketing will know Gujarat is now rightly selling this message to the world.

Vibrant Gujarat has become a byword for attracting investment: it’s a powerful symbol of the success of the state. The UK was delighted to be a country partner to the 2013 event and we look forward again to partnering to the Vibrant Gujarat in 2015.

And because Gujarat matters, I am delighted that the UK will strengthen our relationship further with an agreement to open a Deputy High Commission here in Ahmedabad.

A DHC here will help us to deepen and broaden the ties between the UK and Gujarat.

It will help us to build on the thriving business links that drive growth here and in the UK.

It will enable us to build on the strong people to people links that enrich all our communities. For our vision of UK-India, UK-Gujarat isn’t just about series of one-off transactions, important though individual projects might be. The vision is more powerful – it’s about an enduring relationship, of families, friends and firms growing together.

And as Britain’s Climate Change Minister, it’s fantastic to see the work that is going on here. The world is developing cutting edge low carbon, energy efficient, technologies. IIM Ahmedabad rightly has a growing reputation at the cutting edge of incubating new technologies. And it’s been good to learn about your work including the impressive INFUSE collaboration, supported by BP.

So, it is truly a delight to be here. But I am here today to talk about a serious issue – about why tackling climate change matters. And to try to bust a myth – the myth that tackling climate change will harm economic growth.

I am here to talk about why changing economics are turning action on climate change from a cost to bear into a driver of growth. Why India’s impressive action on renewables and energy efficiency is so important. And why a global climate deal next year is important for us all.

Why tackling climate change matters

Friends, climate change is one of the defining challenges of our time. And my bold proposition to you today is this: no one should study management or business without understanding climate change. Why such a bold statement?

Well, the science is proven. Climate change is real, now. Indeed the danger to our economies and societies from climate change is growing. The results are evident in the changing weather patterns around us. Floods and droughts- More extreme weather events. Desertification. Sea levels rising.

Just today I talked to some senior Government Officials who worry that the climate change may be changing the pattern of monsoon here.

This cumulative scientific evidence reinforces the need for early action. In the UK, in India, and around the world to address the significant risk that climate change will worsen and its damaging impacts accelerate. Damaging impacts for our societies and economies. Damaging impacts for commerce and investments – if we don’t act.

We cannot afford to wait.

The recent reports in United States called ‘risky business’ made this absolutely crystal clear.

As a politician I am also clear that action on climate change won’t be easy – action for any change is never easy.

So, politicians have to gain support for that change, from across society. We have to demonstrate that climate change action - provides jobs and growth just as powerfully, in fact more so, as the old model of economic growth.

And that is what I want to talk about today.

I want to change the assumption that we, or India, need to choose between the environment on the one hand and growth and development on the other.

That is a false choice. We need both. And we can have both.

This city - Ahmedabad - is demonstrating the way forward.

An industrial trading hub. One of the fastest growing cities in India.

And from being the third most polluted city in India in 2005, this city is now receiving environmental awards for sustainable transport, urban planning, and waste management.

And has cutting pollution and increasing renewable energy harmed Ahmedabad?

Absolutely not. GDP has been growing at an average of over 10% per annum in the last few years – an incredible track record, of green growth.

UK and global action

Likewise, in the UK, we are moving to a green economy. Albeit not at your growth rate!

In the UK we have set ourselves on the path of reducing damaging greenhouse gas emissions by 80% by 2050.

This week I confirmed to the House of Commons our 4th Carbon Budget, which controls our carbon emissions between 2023 and 2027. By the end of that Budget carbon emissions compared to 1990 levels have to be down by 50%- legal obligations on the British Government.

These climate targets and carbon budgets come from our 2008 Climate Change Act – that climate law – a world first - provides the legal underpinning for an intergenerational effort needed over the next four decades.

The law provides a clear signal to our business community and to our investors too.

We will decarbonise. And by setting up those signals, we will cut our cost and drive innovation and technology.

Indeed, the UK is now pushing for higher ambition in Europe too. We are pushing the EU to agree a 40% cut on 1990 emissions by 2030, and to increase this to a 50% cut if there is ambitious global deal on Climate Change, next year.

In Europe, I established a group of Ministers called the Green Growth Group – from Germany, France, Italy, Spain, in fact from 15 countries. We’re all making the case for growth-friendly climate policy.

Europe has now developed some sophisticated economic instruments for encouraging low cost, low-carbon growth – from product standards to cap and trade, from CO2 targets to renewable energy targets.

But it is not just Europe that is embracing green growth.

Global clean energy investments have grown six-fold since 2004 to nearly €195 billion a year.

China will have invested over $1.2 trillion in its green economy between 2011 and 2015.

And America: the US is securing record sums in clean energy and recently became the world’s largest investor in low carbon energy research and development.

For the planet, this is truly encouraging. And it is suggested that China and the US, the world’s two largest polluters, have a growing stake in a low carbon-future.

So my argument to you is: none of us can afford to be left behind in the global low-carbon revolution – future growth will be low carbon. Modern economic policies must be sustainable economic policies.

The low carbon revolution will benefit India

And so to this great country.

There is no doubt in my mind that India is a crucial part of solving the global climate change challenge and will itself benefit from playing an active role.

Already energy hungry, India’s energy demand is expected to more than double over the next 25 years.

That’s daunting!

Where will that energy come from?

India already imports around 80% of its oil, 20% of its gas and 20% of its coal.

India’s annual energy import bill is around $120 billion. And this could jump to $230 billion by 2023, according to Goldman Sachs.

This creates enormous energy security challenges. And economic challenges.

Prices of oil and gas remain high and volatile. That strains budgets for energy importers - consuming foreign exchange and taking funds that are needed to invest in infrastructure and growth, to back the development India rightly seeks.

So it seems to me that in India, as in the UK, investments in the low carbon economy are important investments, not just for tackling climate change or stimulating green growth, but also for national energy security too. Indeed, that’s what the models of the future are telling us.

Even more significant, the 2047 India Energy Security Scenarios, developed, by India’s Planning Commission, with UK support, shows that scenarios for maximum energy security and minimum carbon emissions almost converge. National energy security and global climate security are becoming one and the same for India.

The models show that through following a low carbon pathway, fossil fuel import dependence could be reduced to between 25-30% by 2047, as opposed to over 60% under business as usual. And by reducing that import dependence – India will save billions.

Costs are coming down

Now, let’s be frank, some low carbon technologies are, or at least have been, expensive.

But a major feature of the changing economics of climate is the rapid reduction in the costs of key green technologies.

In India itself, costs for solar energy have come down by almost 60% in the last 5 years, making it competitive with new coal based generation.

Costs of energy storage have declined by 30% globally.

Electric vehicle costs have decreased by around 50%.

Highly energy efficient appliances like the latest models for fridges or TVs can now be competitive on capital cost terms with old inefficient models.

And the new clean technologies on the horizon show every sign of following the same path of cost reduction:

  • Carbon Capture and Storage
  • Smart grids
  • Intelligent traffic management systems
  • New energy efficient manufacturing processes

Innovation will be the key.

That’s why the UK and India have a rapidly growing research collaboration with over £150 million of joint-funded, high quality research in key areas such as solar energy, smart grids and energy storage.

Action on climate change can support economic growth

These changing economics are having profound consequences already, and they will have dramatic ones in the years ahead. But they are still not sufficiently widely understood.

In parts of the UK debate there are still people denying the evidence. We still need to bust the myth, to show how tackling climate change need not be at odds with growth. How policies to address climate change are a necessary component in a truly sustainable, inclusive economies.

And I suspect the same debates rage here too.

But, we cannot galvanise action on climate change or energy security unless we win this argument.

As India knows better than many other countries, development, growth and poverty reduction must be part of the energy and climate change solution.

And this solution need not cost the earth.

As far back as 2006, the Stern Review demonstrated how the benefits of strong, early action on climate change far outweigh the costs of not acting.

More recently, this April, India’s Expert Group on Low Carbon Strategies, concluded that a low carbon growth pathway for India would cost just 0.1% of economic growth.

Before one factored in the co-benefits of a low carbon pathways. And the co-benefits can be huge. The World Bank had estimated that poor air quality alone, in urban areas, costs India a massive 1.7% of GDP.

With those sorts of co-benefits of climate change action, moving to a low carbon economy will clearly enhance India’s economic development, not constrain it.

In fact, most of the low carbon measures suggested by India’s Expert Group are precisely those that successive Indian governments have seen as drivers of growth:

  • Dedicated Freight Corridors.
  • Building power generation capacity through more efficient thermal power and new renewables.
  • Driving energy efficiency.
  • Managing urbanisation.

India is taking action

India is taking impressive action on renewables and energy efficiency.

  • India’s renewables capacity has grown to almost 30 GW and is set to double during the 12th Five Year Plan period.
  • India’s industrial energy efficiency policy – the Perform Achieve Trade (PAT) scheme - is the first of its kind among the developing economies.
  • India’s cement, steel and textile companies are some of the most energy efficient in the world.

And the recent Indian Budget included several impressive measures to enhance energy security and boost renewable energy:

  • Support for ultra-mega solar projects.
  • Support for solar panels on the banks of canals.
  • And support for power sector reform.

On these measures, the leadership shown by Gujarat has been crucial. This state is in the vanguard in wind and solar deployment and has been successful in reducing financial losses in the power sector, too. I think this huge progress will gather momentum.

For this revolution in climate economics is being recognised by companies around the world. By investors around the world.

Far-sighted companies are adopting low carbon technologies, not simply to appeal to environment-conscious consumers, but because efficient resource use is a driver of competitiveness.

Some of India’s biggest companies - including the IT sector giants, manufacturers and even hotels - have recognised the benefits of a low-carbon, energy efficient business model. And they are using this to attract investors and clients.

And here, on this, in IIMA, I know I am talking to the right people – to the future entrepreneurs and business leaders of tomorrow.

And let me reassure you: UK companies are doing their bit, too. Take Marks and Spencer’s. Their so-called “Plan A” has driven energy efficiency across their retail stores, cut waste and improved the sustainability of raw materials: - Plan A delivered £70 million in net benefits to the company in one year alone. Benefits that can be shared. In India, the company’s “Better Cotton” initiative is helping to improve the lives of 20,000 farmers.

Take Unilever. Hindustan Unilever already source 48% of their agricultural raw material sustainably, and they have now committed to halving the lifecycle greenhouse gas impact of their products by 2020.

Indeed UK-India collaboration on climate change and energy is thriving.

The UK is the biggest foreign investor in India’s energy sector. British oil and gas majors are bringing in crucial technology to enhance domestic production, and improve efficiency.

Other collaboration is helping to tackle the causes and impacts of climate change and enhance India’s growth and energy security.

On renewables – we are working together to put in place the policy and institutional framework for offshore wind; helping states to develop solar rooftop policies; and testing business models for off-grid clean energy.

In the power sector – the UK and India are working together on reforms - to develop stronger, more efficient electricity markets, that will incentivise uptake of renewables and energy efficiency.

And in states and cities – we are working together to plan better, to tackle climate change and its impacts - for example, by designing better urban transport.

And more broadly, the UK is open for business with India. Trade and investment is growing. Last year nine out of ten Indians who applied for a UK visa (90%) were successful. India is the UK’s biggest visa operation in the world.

And I’d like to take this opportunity to make one point crystal clear. There is no cap on the number of students that can come to the UK. We continue to attract brilliant students from India and other countries to study in the UK. We are after all home to four of the top ten Universities in the world. And those who can get a graduate job can stay to work after their studies at British universities.

And we want a two way exchange. The British Council’s Study India Programme has provided the opportunity for over 1,000 UK students to study and work in India. And we hope to significantly increase the number of UK students studying in the best Indian institutions, like this one.

The need for a global deal

But the fact is that, despite all the fantastic cooperation in innovation and creativity, we are not making fast enough progress to reduce emissions and keep global temperature limits within a safe level.

Climate change is a global problem and a global agreement is needed to underpin action around the world. No one country can do this alone.

But after the climate summit in Copenhagen in 2009, many people started questioning whether a global deal would ever be possible.

But I believe it is. I believe we can do it over the next 18 months. Let me tell you why am I that optimistic.

First, the world agreed, in Durban in 2011 that we would work towards a global, legally binding agreement on climate change in Paris, in 2015.

Second, following that commitment, we’ve seen big steps forward – not least in the US, in the EU, in China and in India.

So I believe there will be global deal on climate next year – but it must be a fair deal

So what is fair?

A fair deal is one in which all countries take on emission reduction commitments. Every country needs to do something to cut carbon.

But, second, and this is crucial, these commitments should reflect the contribution countries have made and will make to the climate change problem. And the commitments should also reflect their true capacity to act.

So, yes, a deal should take account of past emissions. But it must also be set in the real world, where we stand now, and where we look out to the future.

It should include a genuine consideration of what countries are capable of, based on mitigation potentials, GDP per capita, and poverty levels.

Countries have vastly different national circumstances, and countries should reflect this in their commitments, and explain why their offer is fair.

That is how we can ensure that the deal is fair and equitable.

An ambitious deal

But we also need an ambitious deal. In which all countries put their best foot forward, and commit to real and lasting emissions reduction targets.

In the confidence that their neighbours, and their trading partners, will do the same.

We recognise the imperative for economic growth, for poverty reduction.

But, as I have argued, this is not an ‘either/or’ situation. Action on climate change is vital for both economic growth and poverty reduction.

We can have both, and we must have both.

The UK wants to see an agreement that is equitable and supports growth. A deal that enables India to increase its energy security, tackle climate change and complete the task of eliminating poverty.

Emissions reductions should be at the core - though for some countries, including India, emissions must inevitably increase in the short term due to development, before slowing, peaking and falling in the medium term.

But how to do this? How, practically, do we refocus investment? How do we fund this?

That brings me to my last topic – climate finance.

Climate finance

For climate finance will be critical if we are to go green.

The UK is actively deploying its own climate finance to support low carbon development globally, as well encouraging others to do their bit.

The UK’s £3.9 billion International Climate Fund is helping developing countries like India to reduce emissions and adapt to the impacts of climate change. Much of our work is through multilateral funds. Indeed we want to see the Green Climate Fund capitalised by the end of 2014.

And we are developing private climate finance funds so we mobilise the tens of billions fair global climate active needs.

The UK is completely committed to playing out part in raising the promised £100 bn by 2020 – and we have matched our words with cash and action.

To conclude, ladies and gentlemen. The climate is changing. But so are the economics. And the benefits of climate action.

I firmly believe that action to tackle climate change can make us more energy secure.

Can give us cleaner, healthier air.

Climate action means scarce government resources and foreign exchange can be focused on investments, not on purchasing ever more energy from overseas.

So it can drive growth and development.

Friends, we can – and we must – deliver growth and cut emissions.

We can – and we must – agree a fair and equitable global deal next year, in Paris.

And friends – whether you are teachers or students – please. You can – and dare I say it? You must play your part. The future needs your help now.

Published 4 August 2014