Summary: April 19, 2005: Speech by Stavros Dimas, Member of the European Commission, responsible for Environment. Meeting the Climate Change Challenge. Brookings Institute (Washington, D.C.)
Ladies and Gentlemen,
It is great pleasure to participate at this event at the Brookings institute today. I am very glad to have the opportunity to inform you about what we in Europe are doing in the field of climate change, and our views on what needs to be done in the future - by the EU, in co-operation with the US and the rest of the world to tackle what I see as one of the main challenges that we are facing.
Minister Lux has already told us about the science of climate change. Let me add a concrete example that climate change is happening today. In one month, the managers of the popular Andermatt ski resort in Switzerland are going to cover part of the Gurschen glacier with a giant insulating foil. The glacier has been melting and has sunk 20 meters below the top cable car station in the last 15 years. Skiers can no longer reach the glacier when there is no snowfall. If the trial is a success, next
year the whole glacier will be wrapped up during the summer.
This desperate measure to save a glacier is for now unique, as far as I know. What is not unique is that the Gurschen glacier is melting. Nine out of ten of all glaciers worldwide are dissolving. Switzerland, renowned for its snow-covered Alps, is likely to lose 75% of its glaciers by 2050 - and with that, some of its lovely charm.
What we know today:
The EU remains committed to the international fight against climate change. We know that technological options to reduce emissions already exist and that significant reductions and significant savings can be made if a broad portfolio of options is used. This is where we - political decision makers - can act. It is up to us to take the right decision.
EU climate change policies:
Climate change touches on all aspects of our society. It is a threat not only to the environment, but also to our economies and, in the end, our security.
Internationally, the EU has pushed for a multilateral framework to address the issue since climate change is a global problem and no country can achieve much on its own. This is why we consider that the UN Framework Convention on Climate Change remains the appropriate context for dealing with climate change, and why we believe that the Kyoto Protocol, in spite of some weaknesses, has been a step in the right direction.
Domestically, EU climate policy has matched its words with deeds. In 2000, we launched the European Climate Change Programme. Under this umbrella, stakeholders, including industry, have actively participated in the search for smart and innovative measures to reduce greenhouse gas emissions. So far, we have identified - and by and large put in place - 42 such cost-effective measures.
For example, we are requiring new buildings to meet energy efficiency standards since better insulation can reduce energy consumption by up to 90%. Carmakers selling passenger cars in the EU have voluntarily committed themselves to reducing CO2 emissions of their cars by roughly a quarter between 1995 levels and 2009. We are pushing for combined heat and power generation. We are controlling the fluorinated greenhouse gases used in air conditioning. We have set limits on methane emissions from
landfills.
But what is our flagship is the EU Emissions Trading Scheme, which successfully kicked off on 1 January of this year.
It is breaking a lot of new ground as the first international trading system and the greatest ever in terms of economic coverage. EU governments have set limits to how much CO2 some 12,000 energy-intensive plants are allowed to emit per year. This covers about half of our CO2 emissions. The value of the annual allocations that participating companies receive amounts to some 30 billion Euro. Factory owners can trade these allowances - those who can easily reduce emissions can sell the surplus
allowances to those for whom reductions would be more expensive. In this way, cuts will be made where it is cheapest.
The scheme will give European business - including US companies based in Europe - a first-mover advantage through the invaluable early experience they will gain. Due to mandatory monitoring and reporting of emission, companies will establish carbon management systems for the first time. One of the first companies in Europe to do so was Exxon refinery in Rotterdam.
A whole new range of new business is emerging in Europe as a result of the EU carbon market: carbon traders, carbon management specialists, carbon auditors and verifiers. New financial products such as carbon funds are entering the market.
It also possible for companies to use credits from Kyoto project based mechanisms to help them comply with their obligations. This means the system will not only provide a cost-effective means for EU based industries to cut their emissions but it would also create additional incentives for businesses to invest in emission reduction projects abroad, for example in developing countries or in Russia. In turn, this will spur the transfer of environmentally sound technologies to other industrial
countries and developing nations giving tangible support. EU companies are already preparing projects worth some 500 to 600 million tonnes of CO2 for the period 2008 to 2012.
With the Emission Trading Scheme, the EU has created a new currency based on tonnes of CO2 and a new market, in emission allowances. Never before has the EU used a market-based instrument on such a scale to achieve an environmental goal. It is still early days, but the volume of traded allowances is steadily increasing and we have already seen trading days with allowances for more than 2 million tonnes of carbon dioxide changing hands.
The scheme will be reviewed around mid 2006 to allow fine-tuning in the light of experience gained. We will also consider extending to other sectors such as chemicals, aluminium and transport as well to more greenhouse gases.
That I can present today our Emissions Trading Scheme is to a certain extent thanks to the positive experience of the US with emissions trading to combat air pollution. When such market-based instruments were discussed in the Kyoto Protocol negotiations - and actually proposed by the US - the EU had strong reservations. But our views have evolved.
Today, we recognise the crucial value of market-based mechanisms to harness the creativity of the business sector, to offer economic incentives to cut emissions, and to reduce compliance cost. Our Emissions Trading Scheme will reduce the cost of achieving our Kyoto target by about a third, saving EU industry millions of Euro. We are convinced that such instruments must be at the core of a successful long-term response to climate change.
Post-2012:
Let us now look ahead at the future climate change regime. This is certainly the most burning issue in the current climate change debate. The Kyoto Protocol has been a first crucial step, but it is now time to start discussing where we want to go from here or in other words what we want to do when our targets expire in 2012. This is also the date when the current US Climate Change Programme ends.
For the EU, non-action is not an option. Studies find that the costs of unbridled climate change, in terms of the damage and the suffering it will cause, will be far higher than the cost of reducing emissions if we opt for the right approach. Business too is looking at us for clues what to expect in the future, in particular since many companies need to make long-term investments.
So, earlier this year, the Commission put out a paper outlining some basic elements we believe a future climate change regime should include.
Firstly, from what I already said, you won't be surprised to hear that we consider the continued use of market-based instruments very important.
Secondly, we think that a determined push for innovation and new technologies is indispensable.
Thirdly, we believe that there must be broad participation in the reduction effort - by all major emitters, including the US, but also developing countries such as China, India and some others.
China, for example, already contributes 14% to global greenhouse gas emissions, which is the same share as the EU's. Our projections show that absolute emissions from the developing world will continue to increase, while emissions from industrialised countries are likely to remain stable.
We do not think that developing countries, even the booming economies among them, can or indeed should take on the same commitments as us in the industrialised countries. Their per-capita emissions and income levels are still a fraction of ours. But we could design a system with different types of participation.
And there are good reasons for developing countries to join the effort: they are very vulnerable to climate change, and many have huge energy needs. They are likely to embrace policies that focus on improving energy efficiency and foster clean technology as well as new energy sources that could at the same time be low-carbon.
With 20% of the global share the world's largest emitter I call on the US to recognise the need and the value of an international approach to reducing emissions, in particular if major developing countries would join our efforts. Mobilising them is a common responsibility for the US and the EU - one where we can show international leadership by working together.
Moreover, we believe the future climate change regime should cover emissions from more sectors than are covered under Kyoto, notably aviation, maritime transport and forestry. That is also an element that the EU will push for in the up-coming negotiations.
Upcoming negotiations and conclusion:
Stakeholders are reflecting about the architecture of a future climate change regime and a wide range of ideas has been produced. We should soon open formal negotiations since the clock is ticking. The conference of the Parties to the UN Convention on Climate Change in December in Montreal will bring together 189 governments and is an opportunity to initiate the process.
The European Union is open to hear what its partners have to say, and which measures they consider appropriate to master the climate challenge. We have no pre-conceived ideas what the future climate change regime should look like - we only believe it should usefully include the basic elements: keep it flexible, broaden participation and widen its scope!
The climate challenge is considerable. The world is in particular looking at the two leading economic powers, the US and the EU. In the last one and a half decades we have identified and carefully looked at many ways and means to address the climate challenge. We have identified pros and cons for every single approach. We can continue doing this navel gazing but valuable time will pass by. I would, however, suggest we should enter a more mature stage. We need to resolve our differences, pull up
our sleeves and find solutions. Together we can rally the rest of the world behind us and drive the process - so that our children and grandchildren can continue to prosper under stable climate conditions.
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