Good evening everybody.
And thank you Laura and John for the very nice words.
It’s a real real pleasure to be here and to see so many friends and familiar faces in the room.
And let me take the opportunity of congratulating Ireland with the presidency so far.
We all realise how much work that is, but so far I think
the journey has been "impeccable", as we say in Brussels.
What I will try to do tonight is give you a selection of elements
that we are dealing with when it comes to climate action in Europe, in the world.
I will not be complete, but I will try to highlight a number of points,
and hopefully raise a number of points that we can take up in our conversation later this afternoon.
And I will take three chapters, the climate policy challenges globally, worldwide.
Where are we? And where are we going towards?
And then review a little bit what the key instruments are that the EU has been employing.
And that is basically the package that we have in place until 2020.
I will pick up the most successful elements and comment on some of them.
That may be familiar in your ears.
And then I will move to the 2030 Climate and Energy Package that we are currently preparing.
Because we would like to sum up by the end of the year a policy package for the future.
Because there is a lot of demand about how to clarify
and how to make much more predictable the regulatory framework
we are going to have between now and 2030.
So to move on to the climate policy challenges.
In fact climate change is to be put against a number of mega trends,
that put in perspective what we are currently experiencing.
And the most important perhaps is population.
We have today more than 7 billion inhabitants on the globe.
And we are moving towards 9 billion. It was hardly 1 billion in 1900.
So the acceleration and the number of people on the globe is just daunting, and it keeps rising.
The rate of increase may slow down a little bit, but still we are doubling the population
on the globe in less than half a century, which is really daunting.
The other major change that we are seeing is that the emerging economies are on the rise.
And that’s good for those living in those economies.
So nothing to complain about.
But it gives a wake up call to Europe,
because the economic footprint of the western world I think is declining.
We all experienced that.
And we have to find a new role for ourselves in that picture.
And what is important for what we are studying
is that the environmental and resource pressures are increasing.
And there is a scramble for resources.
Because the resources, energy and raw materials are very scarce.
And the more people are living the lives we are living
the more we are going to see the scramble for resources.
And the images that you have seen for sure
about Chinese companies being present everywhere in the world,
in Africa, Latin America, etc. the Arctic is just an indication of where we are heading towards.
And climate change is making all that more visible.
The pressures are increasing.
The normal environmental pressures, but also the resource pressures are increasing.
And it is against these mega trends that we would like to put our policy on climate change.
Now I think Laura was already making reference to the fifth assessment report.
The science I think is now almost entirely proven.
We had a few hiccups on the science,
but I think that it is now clear that climate change is threatening the future of our planet,
but also of our economic growth.
And the number of incidences that we can track and that scientists are tracking is just on the rise.
And in fact to put it short the more we know the worse it gets.
And I think that the fifth assessment report is going to show that
in the usual depth and with the elaboration of almost the entire community of scientists of the world.
Where does it leave us in all that?
I think that there is perhaps one element on which we have a firm agreement,
even if it is increasingly under pressure.
That is that if we would move for climate change beyond the 2oC
compared to pre-industrial levels we are going to see a rapid increase in costs.
So limiting climate change to 2oC is going to be absolutely important.
And that means that there is a limited envelope so to speak,
a limited number of emissions to be released into the air.
And in that limitation, and given the restructuring in the world,
I think it’s fair to say that the industrialised world will have to reduce its emissions more
compared to the emerging economies in the developing world.
So within that 2oC overall objective,
which means that we will have to cut globally the emissions by 50%,
in 2050 compared to 1990, the industrialised countries, in other words us,
we will have to do the big part of it.
And we have calculated that with the number of considerations
you can make that 80%-95% of reductions will have to be required in Europe
in 2050 compared to 1990.
So that’s a daunting figure.
And we were getting lots of questions.
How are going to work that out?
And how is the world at large going to work that out?
And I will come to Europe in a moment.
But if we look internationally what is happening,
I think we should recognise more openly compared to what we do today
that lots of actions are taking place.
And when we look at, for example, a non-Annex I country
or a country that is not considered to be industrialised according to the UNFCCC,
like Korea, or like China,
then we see that they are about to set up quite significant policies and measures,
including on carbon markets.
If we only see in the five year plan of China how much attention is being given to energy questions,
renewable energy questions, the pilot emissions trading schemes,
you cannot imagine how important the shift is in China today
compared to let’s say the pre-Copenhagen world.
Also when we look around Australia,
when we look around even in the U.S., look at California,
like what Quebec is doing, what Mexico is doing,
we see a lot of actions on the ground.
And I think we should recognise those actions a little bit more prominently.
But what is important is that in the international negotiations
where commitments are taken there we have extremely slow progress.
So the United Nations negotiations,
the annual CoP, the Conference of the Parties,
we are having, there the progress is disappointingly slow.
Apart from that what we could get out of the Durban/Doha process
is that we are working towards a comprehensive climate agreement in 2015,
including all major emitters.
And I think it is the three last words that really matter,
because all major emitters must be brought on board.
So it brings us to the question
– where is the rest of the world when we try to quantify what is already taking place?
Well we have pledges by more or less 90 countries in the world
and they cover more than 80% of the global emissions.
And they have made pledges which are up between half way,
where we should land to reach the 2oC,
and where we would land without any policy.
So half of the job is being done, the other half is still to be done.
And looking at who could do more for the other half and looking at the statistics
it brings us to a picture where the share of non-Annex I
means developing countries and emerging economies
in total emissions as of 2011 is more than half of the emissions.
So the share of the industrialised countries is rapidly decreasing.
So what needs to be done in terms of international negotiations
in case we succeed in having a global deal in 2015
and we are really committed to that: three, four elements I was lining up for.
If we in Europe think that we are going to have a Kyoto bis
or a Kyoto three protocol in place in 2015 we are dreaming.
We are not going to have that.
Why are we not going to have that?
That is because the Kyoto Protocol is, according to what I am hearing from the Chinese and the Indians,
and also the United States, the Kyoto Protocol is really conform a European interpretation
of what the United Nations should do.
And so if we want to bring on board more countries
we will have to review a number of elements that we have as a standard view of the U.N. process.
And I think that the big element that we have to consider is
whether we want to have all major emitters on board,
and what change we are ready to compromise on.
Compromise cannot be on the science.
The emission level of 2oC must remain there.
But we may not get the entire 2oC objective already in 2015.
Which brings the question, how can we have a ratcheting up mechanism,
a kind of review mechanism that brings us to the 2oC,
perhaps not in 2015, but then shortly after.
If we want to bring the major emitters on board,
and in particular the emerging economies,
we are talking about a number of financial commitments
that will have to be made by the public, but primarily by the private sector.
And when we just look at the figures of where the global CO2 emissions –
and these are figures the IEA are currently heading towards –
the blue shaded area is the emissions of the European Union,
and the emissions of the United States.
Look at 1990, where more than half of those emissions were coming from the E.U. and the U.S. together.
When we look at 2011 and when we extrapolate that to 2035
you see that the part of the E.U. and the United States as a short word,
the old industrialised world, is shrinking very fast.
But what we see is that in particular China and India is increasing
so fast that whatever we do is marginal
compared to what we see in the rest of the world.
If we take the IEA figures on where investments in the power sector are going to happen,
in the period 2010 to 2035, you see the bars, they speak for themselves.
China is going to have a tremendous development of investment in power,
while Japan, the E.U. and the U.S. is going to have very moderate increases.
And we are admitted going to invest primarily into renewables.
And what is interesting about China and India and the other emerging economies
is that they do invest as well a significant part in renewables.
They are even becoming the market leader in renewable energy technology.
But they are going to invest in everything, in renewables,
as much as in nuclear, and in coal.
And you know that coal is the major culprit in this story.
And it just gives an impression how much negotiation
is that we have to finalise in 2015 to bring on board the major economies,
and we know that the emissions in the United States per head are the highest,
but when we look at the quantities that are going to be added to the emissions in the world
we must have also action in the emerging economies.
So these are a few changes that I wanted to highlight to you,
which makes the path to 2015 extremely arduous.
We have to change a number of design elements,
or rather more precise, interpretation of a number of design elements.
Because that the climate convention has one big principle,
the common but differentiated responsibilities.
And we recognise and we stand for recognising that principle of common but differentiated.
But the interpretation of that principle has been in the past
that too often the challenge was common but the differentiated meant
that emerging economies were not committing themselves to any action.
As I said we are on a change when that is concerned.
And in particular the five year plan in China is bringing forward real change in the field.
But we do not see it yet.
And hence binding them in, in an international agreement in 2015,
even if we would not get it entirely right according to our expectations,
would be a very important step forward.
So my call is a call for pragmatism,
where the call is to have an arrangement in which we have also the emerging economies on board.
Let’s then move to what we did in the E.U.
And I think if there is one element on which we can be proud of in the E.U,
and that is the lesson we learned through the Kyoto Protocol,
is that we succeeded in decoupling CO2 emissions from economic growth.
And that is the essence.
Because we do not want to slash our GDP in order to reduce our emissions.
We want to combine emissions and economic growth.
And that is what we did in the period 1990-2010.
We had a reduction of greenhouse gas emissions of 15%
and we had an economic growth of more than 40%.
And I think that’s the way to go.
And that’s the major element I think we can bring on the negotiation table.
So how did we do that?
Of course we were subscribing to a target, and the Kyoto Protocol -8% by 2012.
We delivered the target.
And we already engaged for the target of -20% by 2020.
But these are targets. You have to deliver on the targets.
So policy measures are important.
And I would like to highlight five of the policy measures that we have been undertaking.
And the first one is the ETS, the Emissions Trading Scheme.
That is a subject of some discussions and policy discussions those days.
And I would like to claim that the ETS has been a major achievement
because it is bringing one price for carbon
and through that one price for carbon for the entire E.U.
In fact we have more than 30 countries,
because also Norway and Iceland are covered,
and we are linking the system up with Switzerland.
So we are now even opening linking negotiations with Australia.
So the idea is to build from the ETS towards gradually a global carbon market.
That market is liquid and functioning.
In 2011 the carbon market had an annual volume of more than €120bn.
Of course since then the price has been coming down. I come to that.
But what was delivered, and I would like to underline that very clear,
is that the reductions that were materialised under the ETS have been produced,
which is 1.74% annually reduction of the system.
What is the problem today?
That it does not drive any investments, because the carbon price has been going down,
from something €25 when we were in 2008 to €3-€5 today.
So of course the major element in all that is the recession.
But we have to recognise that behind this price development,
which is of course of concern,
because the price is no longer acting as an incentive for innovation and low carbon development.
We have to recognise that the cap that was put on half of the European economy has been delivered.
And every year the emissions of the companies covered goes down with 1.74%.
So we sometimes forget that part of the story in being overly obsessed about the price is too low.
There is the reality that the emissions were going down
and are going down continuously according to the 20% target that we were subscribing ourselves to.
So we have now in the European Parliament and in the European Council a big debate,
what are we going to do to have a better price?
And the proposals that were made by the Commission is to go into two steps.
The first step is that we would bring less allowances to the auctioning platform.
So we would take €900m allowances out of the system and park them on a separate reserve.
And that separate reserve may be brought back in 2020 to the market.
But in any case we would bring €900m allowances less to the market.
This has caused quite a little bit of animosity.
And a couple of days ago, last week in the European Parliament,
the Parliament voted against and said that a number of elements needed to be clarified.
We are in the process of doing that.
It was the subject of a lot of discussion in Dublin yesterday and today,
a lot of diplomatic and negotiation talks were taking place.
And I am confident we are finding a way out.
But that way out is not going to be immediate,
because it’s going to take us a bit more time.
But it is democracy at life if you do not have your majorities in one go
you have to try again and to build and construct your majority in a second go.
But I am relatively optimistic that we are going to get there.
Of course the nervosity about the carbon market price has a lot to do with the emerging economies
competitiveness, carbon leakage, the old story, are we shooting ourselves in the foot etc.
And we are terribly confident that if we invest in the right stuff
we do not have that major risk of carbon leakage.
So the Emissions Trading System has been delivering the emissions reduction.
The second major piece of policy that we have been putting in place is renewables.
The investment in renewables, we have a target that 20% of energy consumption by 2020
would come from renewable energy sources.
So we talk about hydro power,
but primarily and increasingly we talk about solar,
we talk about wind and we talk about biomass.
These are the three major sources.
And what we have been doing through the renewables policy
is that a kind of marginal energy production solution,
a niche has been brought to the mainstream.
And that is what we, I think, successfully did,
but with one caveat, that is by doing that we had to pay for it.
And the feed in tariffs that were organised in most of the member states were not for free.
So there is a price tag related to that.
But the other thing is that we created the mass market for windmills and solar panels.
And that has been discovered also by new emerging economies such as China and other players.
So they have been starting to produce this stuff at a much lower price.
So what is good news, if this equipment is cheaper,
then we have to subsidise it less intensively.
That’s the good side of the story.
The other side of the story is of course,
if the jobs are not created in Europe but in China
we also have to watch out, how are we going to sort out the next generation of renewable energy.
So the industrial policy challenge related to the renewables policy of the future is a very important one.
When we just look at the performance of the renewables targets
that were distributed amongst the member states,
you see the bar and you see that for example Ireland is doing fairly well.
It’s not too far off the commitment.
I think that today almost 13% of the 20% target has been delivered.
That’s the latest report that we just finalised a couple of weeks ago.
And I think that renewables policy as we have putting it up has been,
quite a successful story.
There are some caveats on which we continue to discuss,
in particular when it comes to biofuels.
We still have a heated debate to what extent biofuels is the right way to go.
But I think that the bulk of what you are seeing here is delivered through hydro,
through solar and through wind.
And biomass is increasingly now being brought into the picture.
So first measure ETS, second renewables delivering.
The third one is energy efficiency.
We have an energy efficiency directive.
We have labels for energy domestic appliances.
We have energy efficiency standards.
But perhaps the star measure that we have been putting up is the CO2 in cars.
I think that you notice if you go to the showroom
and look for a new car that compared to the car of four or five years ago
the energy consumption of the car has gone down with at least 25%-30% for a comparable model.
We have in place in energy regulation that by 2020
the energy consumption of cars is going to be half compared to what it was in 2008.
So I think that that is quite an achievement on which we can have our heads up in Europe.
Because together with Japan we have been champions in energy efficiency of cars.
And you know where the competition of the future lies,
it is about energy efficiency and it is about the electric and other power trains.
On the electric engines it’s good to see that all major brands in Europe are investing in that now.
Because we all know that the Chinese are going to go for the electric
or the semi-electric or hybrid variation of cars, for obvious reasons.
You know how much air pollution there is in Beijing and Shanghai and other places.
So all our brand car manufacturers are investing into that.
And our CO2 regulation on cars is doing that trick.
So energy efficiency I think is the third one
on which I think that when you go for your next fridge or refrigerator
or car or light bulb these are all coming from Europe.
This is European R&D that is found in the shop.
And I think we see that in the figures.
The fourth measure I would like to highlight is the internal market for energy.
In the environment community sometimes it’s a little bit forgotten,
but the fact that the internal market for power and gas that we are gradually creating in Europe
was breaking open national monopolies,
where interconnections have been built,
smart grids have been built and are being built,
made at the same time an openness of the grid to renewable energy technology.
We would never have had the quite dramatic development in renewable energy technology
if the internal market for energy would not have gradually opened itself.
So that’s a very important one on which we should build further in Europe,
because we are quite vulnerable on the energy front.
I will come back to that later on.
But the internal market limits the vulnerability of different sectors,
but in particular of different member states.
And what the internal market has also been bringing
is that the prices for electricity have been kept in check
compared to the price increases for gas and oil.
Today in the middle of the deepest economic recession we are having
that the price of oil is still around $100 per barrel.
Five years ago the price was still around $30 per barrel.
And when the price was rising to $40 or $50 we were in panic.
Today in the middle of the economic recession we still are around $80-$90, sometimes $100-$110.
But we see, we observe that the price of oil and linked to that of gas
has been and remains incredibly high, while on electricity we were able,
thanks to the internal market, to keep the price levels in check.
Of course there is no free lunch.
Also for electricity, as for general, the price developments,
prices have been going up, but much less compared to oil and gas.
And the fifth and final measure I would like to bring to your attention is the budget of the E.U. for 2020.
We are finalising the nuts and bolts.
Your presidency is finalising the nuts and bolts of the multi-annual financial framework.
But what is important for us is that in the budget that is about €1,000bn
20% is earmarked directly or indirectly for its relation to climate change.
So climate change, energy, transport,
so the indirectly related expenditure related to climate change
has been earmarked up to 20% and is staying up and is no longer for discussion.
So that’s quite an impressive figure.
That means that for the regional funds, for those investing in energy,
in energy efficiency, in transmission lines and things like that, there is privileged funding.
For those looking to R&D for innovation
a third of the research budget that is managed by your commissioner,
the Irish Commissioner, Geoghegan-Quinn,
35% is earmarked for climate related expenditure.
So we are going to follow that up very cautiously.
Because that would mean that the expenses,
or the expenditure of the European Union as related to climate change
will have multiplied by four, compared to what we have today.
So these five measures I wanted to highlight to you,
not that I am going to say that everything is perfectly nice.
But I think on the essence of every measure
that I was highlighting to you I think we made some progress.
Let’s then move to the third and final chapter of my talk.
Where are going in the long term future?
What are we preparing for 2030?
And so what we did …remember we said in the E.U.
we will reduce the emissions by at least, we said, 80%-95% in 2050 based on 1990 levels.
We were calculating E.U. roadmap and we came to the hopeful conclusion
that you can reach that objective with current technologies.
So there is no technological breakthrough needed to make happen
such a drastic reduction in greenhouse gas emissions in 2050.
What is the target for 2030? It is a 40% reduction.
And that is the figure that we are going to take as the starting,
the opening shot for our discussion on 2030. And what do we conclude from this graph?
That is that the power sector, and the residential and tertiary sector is going to deliver the bulk
in the emission reductions of 2030.
While for transport and for non-CO2 agriculture it’s going to have to wait until after 2030.
So the bulk in the emissions reduction is going to take place in the power sector
and in the residential and tertiary sector.
But there is a price tag related to that.
And our calculations showed that the investments that will have to be done annually,
in addition to what we already plan, is in the order of magnitude of €270bn,
which is quite a daunting number.
And you may ask yourself where is the money going to come from?
Well we calculated that with current prices the fuel savings
that we would win through that are going to be of such a magnitude
that we could pay off that policy due to the fuel savings.
So if we were to make the E.U. economy more energy secure
we could halve the imports of oil and gas which are the highest priced energy commodities
and we could save more than €400bn of E.U. oil and gas imports between now and 2050.
So that is more or less more than 3% of today’s GDP.
So I am not going to say that these figures match every year.
This is a roadmap. This is a scenario calculation.
But what is the essence of it is that the savings
that we can make on reduced imports of oil and gas are so massive
if we do it together that we can use that money to invest in own technology
in own capital equipment that we are building ourselves,
and we are talking about buildings, we are talking about transport,
we are talking about power, three things that we normally do at home
and for which we are not relying that much on imports from others.
So what does it bring us for the preparation of a framework
for climate and energy policy in a 2030 perspective?
The discussion of also today in Dublin was which targets do we need?
You remember for 2020 we had three targets.
We had a greenhouse gas emissions target.
We had a renewable target and we had an energy efficiency target.
So the question is, shall we continue with those three targets
or can we say one target is more important than another?
And this has different connotations, different implications.
This is going to be one of the discussions on which we are seeking now
the advice of stakeholders, of member states, of the Parliament.
And the question about targets is going to be a very important one.
I think that we have almost a unanimous view
that a target on greenhouse gas emissions is absolutely important,
to guide the power sector, the energy sector towards the right investments.
And this is a sector investing in the long term.
On the renewables target the ideas today are split.
There are some very forcefully in favour.
There are some who say well have we already not done enough?
Are the technologies out there? What is it going to cost us?
On energy efficiency we all agree how important that is.
But the downside is that we just last year only adopted a directive on that.
And the question is, are we already going to review that directive
now that it is just about to be implemented? Is it not too early?
But on the target issue more debate is going to be had.
Then of course on the instruments to reach the targets,
I think that the point we have been making in the 2030 paper is that ETS,
a price on carbon, one way or the other,
if it is not through the market then through other means is absolutely important.
A major element is about the cost effectiveness of our policy measures.
Because the issue that is making a lot of industrialists very nervous is about competitiveness.
Are we not creating too high energy costs for ourselves
and through that making our products that we are selling on the world market too expensive?
Carbon leakage is the short word on that.
So competitiveness and carbon leakage is going to be very important.
And that is important in particular for commodities, traditional production commodities.
While I think that the future lies presumably more in the industrial opportunities of new technology,
and which we have seen the most intensive growth in new jobs over the last years,
despite the crisis, the green growth has continued.
And the creation of green jobs has continued.
Now in our 2030 framework the bulk of the questions and the bulk of the reflections
still to be had are for sure related to energy.
And I was putting up just three words,
shale gas, nuclear and the new renewable energy technology.
Look at the IEA figures for gas. In the United States they have shale gas.
And the shale gas development has developed stormingly, unforeseen almost.
And as a consequence the prices for gas in the United States have gone extremely low.
You see on the red line that the prices per BTU is not more than $2, $3, $4,
the jury is open comparing to whom you are asking for.
While the prices in Europe are almost twice as high
if not much higher compared to what we see in the United States.
So the business newspapers are full of industrial activities,
energy intensive industrial activities, relocating away from China,
relocating away from the Middle East and making fresh investments in the United States,
attracted as they are with the very cheap gas prices that are currently being developed.
Now another figure from the IEA shows this,
that is that all countries in the world are doing over time worse
in terms of their energy dependence, except the United States.
The United States is becoming completely independent from oil and gas imports
and are even about to start exporting part of their conventional fuels.
While we see that the European Union and Japan,
whatever the policies that are being made,
are becoming more dependent in terms of oil and gas imports,
and also China and India are moving up very rapidly
to the situation we are finding ourselves in today.
So the shale gas revolution is clearly making lots of people nervous.
And the downside that we have from this is that coal is no longer being used in the United States.
And the effect of the shale gas revolution in the United States
is that coal is cheap and coal comes to Europe.
And we have seen in Europe two decades of declining coal consumption
but over the last year, year and a half,
our coal consumption is increasing again, and very rapidly.
So coal is cheap. And normally what hinders the use of coal is the carbon price.
Because the carbon price, coal is carbon intensive,
if the carbon price is around €15-€20 then coal is in the market
at a disadvantage and natural gas is being favoured by power generators.
With the carbon market close to €3-€5 that leverage is not taking place and coal,
that is now abundant in the United States,
comes to Europe and is being used here, which is not good news for what we are doing.
Another element that we see and that makes a lot of people nervous is the price of power.
Because there is a lot of nervousness that through a number of policy interventions
the power price in Europe would become very high.
Well when we compare it, and these are IEA figures,
we see that we are not doing too bad, but we are at the higher end.
Japan is way beyond us.
And the United States is below us, with China very much below us.
So the electricity intensive users like non-ferrous manufacturers
or steel production is making a case that we have to look at energy prices
and electricity prices for major industrial users.
So the 2030 number of questions is about the greenhouse gas emissions target for Europe,
but at the same time about the new realities in the energy market,
which is shale gas, which is of course the decision following Fukushima
to move out of nuclear in Germany and in a number of other member states,
and the new realities on renewables which I already mentioned,
that is more competition by emerging economies,
which means cheaper renewables,
but with the job loss that this globalisation of this sector is bringing about.
So I come to an end of my talk.
What are the three conclusions I wanted to convey to you?
That is that the E.U. policy on climate change works.
But today we have a period of economic crisis, recession,
and it works more slowly compared to what we hoped for.
But basically it works.
We have the new cars produced.
We have less carbon intensive fuels.
We have to remedy the carbon price,
but the carbon price has been important in bringing down the greenhouse gas emissions of Europe.
We have to remedy a number of things but basically the architecture is there.
The second thing I wanted to say is that we have to build up a rational perspective
of the long term, 2030, because predictability is needed by our industrial players
and certainty needs to be created as much as possible.
In other words we were putting our manufacturing on a low carbon trajectory,
we cannot say that trajectory is going to come to an end in 2020.
No, that trajectory continues up to 2030, even up to 2050.
And the third point I wanted to make to you in the earlier part of my conversation tonight,
is that the global deal is possible, but difficult.
And that we have to be pragmatic in Europe,
in particular the way we look at the functioning of the United Nations.
Because the United Nations institutions are important,
but they are undergoing a major change because of the emerging economies
that are claiming their place in the debate and around the table.
Thank you very much.
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Jos Delbeke,Director-General, DG Climate Action, European Commission: EU Climate and Energy Policy - Moving to a competitive low-carbon economy
EU Climate & Energy Policy