Commissioner Wallström speaks on Implementing the Kyoto Protocol

Ladies and gentlemen,

Thank you for your invitation to this conference.

This is the first Brussels Climate Change Conference, and the attempt to create a regular forum for discussing climate change developments is a welcome initiative. In such an important area we cannot do without a continuous dialogue between NGOs and business, scientists and politicians, us here in the EU and partners from other parts of the world.

We can all be sure of one thing: Climate change will remain on our respective agendas.

I want to do two things in my speech, and that is to up-date you on where we stand in the European Union in implementing the Kyoto Protocol, and to provide an outlook to the next steps.

We are convinced that what now counts is practical action to reduce emissions.

Progress achieved in reducing emissions

First of all, where are we in reducing emissions? Two weeks ago, the European Environment Agency published the greenhouse gas emission figures for the European Union for 2001. They present a worrying picture.

There is one positive element. In 2001, the EU's greenhouse gas emissions were down by 2.3 per cent as compared to 1990. This means that we have made progress towards our 8 per cent emission reduction target under the Kyoto Protocol since 1990.

However, the trend is going in the wrong direction. We moved away from our target in 2001 given that emissions were 1 per cent higher in 2001 than a year earlier. The analysis indicates that this was partly due to weather conditions: The winter that year was particularly cold, and rainfall was less which led to less electricity production from hydropower and more from fossil fuels. Yet, 2001 was the second year in which emissions went up in 2000 emissions stood 0.3 per cent higher than in 1999. And in 2013 we will not be able to excuse ourselves for not meeting our Kyoto commitment by referring to a series of cold winters or dry summers.

A continuing worry also is that 10 of the 15 Member States are way off track in reaching their EU burden-sharing target. While Ireland for example is required to limit its emissions increase to 13 per cent by 2008-2012, its emissions had grown by 31 per cent by 2001. And while Austria should cut its emissions by 13 per cent it actually increased them by nearly 10 per cent.

The fact that the EU as a whole reduced its emissions is only due to the substantial cuts especially in Luxemburg, Germany and the UK. This is not a healthy situation.

Looking at these figures, I want to be very clear about my worry about the lack of progress in many Member States in reducing their emissions. Those Member States that are not on track towards their burden-sharing targets should urgently make additional efforts.

The EU's cost-effective climate change strategy

Let me turn now to the actions that we at a European level undertake to reduce emissions.

It is certainly an encouragement to me how successful the European Climate Change Programme has worked since we set it up three years ago. The ECCP has helped the Commission to put forward a number of important proposals, some of which have already been agreed by Council and the European Parliament. This is the case for the Directives on energy efficiency in buildings and on the promotion of bio-fuels that Loyola de Palacio presented. Proposals currently under discussion in the other Institutions include legislation on promoting combined heat and power and of course on emissions trading, to which I will return in a minute.

It has been encouraging to see how we have been able to involve stakeholders through the ECCP. We value the expertise and advice that our partners in industry, among the NGOs and from the Member States can provide. Since the beginning of the ECCP, more than 200 stakeholders have been involved in 11 different working groups.

Finally, the European Climate Change Programme underscores our commitment to a cost-effective strategy to reach our Kyoto objective. It allows us to select those measures that reduce emissions at least cost to society.

Emissions trading is the centrepiece in this cost-effective policy mix. I do not have to explain to this audience the logic of emissions trading and the future EU emissions trading system. I was gratified that the Environment Council last December was able to agree on this system, along the lines of the Commission's proposal and with strong safeguards for an environmentally sound system and for the internal market.

Given that trading should start at the beginning of 2005, it is now essential that Council and Parliament finalise this legislation as quickly as possible. The Commission will do everything it can to support this process.

I dare say that with our legislation the EU will be a world leader in emissions trading. I am convinced that in the end emissions trading will help us prove those wrong who claim that combating climate change goes against business interests, both in the EU and in other parts of the world.

The results of the second phase of the European Climate Change Programme

Two weeks ago together with the new emission figures - we also published the second progress report under the European Climate Change Programme, and now I turn to the next steps in our climate policy.

The overall message of the European Climate Change Programme (ECCP) is a positive one, and it was confirmed in the second progress report. I will not bore you with many figures you will find them in the report itself on our web-site. The main point is that there are more than sufficient cost-effective measures with the potential to reach our Kyoto target.

Indeed, the Community measures that have been decided already will make a major contribution to reaching the target.

Now, we have to be cautious of course. How does the positive picture cast by the ECCP square with the worrying emission figures that I presented at the beginning?

The easy answer is that the measures developed under the ECCP have still to be implemented. The more difficult question is whether they will produce the emission reduction effect that we have estimated.

There are many uncertainties in the analysis, such as the emission forecast under business-as-usual, or the emission reduction potential of specific measures. They are inherent in any such analysis.

Moreover, the emission reduction potential may not be fully utilised. The theoretical effectiveness of a measure is one thing. Another is whether the action finally decided in the political process and implemented on the ground fully exploits this potential.

One conclusion that we are drawing hence is that we need to monitor the effectiveness of the measures finally adopted. The risk is that only in 2010 or 2011 we will know how effective the measures are - but then it will be too late to adopt additional measures in case we are not reaching our Kyoto target.

My message therefore is: Community policies will help the Member States in meeting their burden-sharing targets, but they have to adopt their own policies as well. They remain legally bound to meet their burden-sharing targets. When it comes to climate-friendly transport policies, to fiscal measures or to educating citizens about climate change - these are areas where Member States have their own responsibilities.

The fact that most Member States are not on track in reducing their greenhouse gas emissions should spur them into taking this responsibility very seriously indeed.

As far as the ECCP is concerned, during 2002, it has first of all accompanied the finalisation of the measures identified earlier.

Another focus has been on deepening our analysis on some specific measures and on looking at agriculture and forestry both as emission sources and as carbon sinks. On carbon sequestration in agricultural soils and forests the experts concluded with a note of caution. More research is needed and concerns remain for example in relation to the permanence of carbon storage.

The second ECCP report also reminds us of one very problematic sector, and that is transport. Between 1990 and 2000, transport emissions grew by 18 per cent while transport already accounts for a sizeable share of the EU's total emissions. The car industry's efforts to improve the fuel efficiency of new passenger cars will certainly help to reduce emission growth in transport. However, transport is a long way from contributing positively to climate change objectives.

To summarise, the European Climate Change Programme shows that the EU can reach its Kyoto emission reduction target, and that we can keep the economic costs down if we are smart and choose the right measures.

However, Member States must not rely on Community measures alone.

New initiatives

Nonetheless, in the coming months the Commission will present further proposals to reduce emissions.

Allow me a few words on three of these up-coming proposals.

I intend to present a proposal on mobile air conditioners. The increased use of air conditioning in cars is wiping out a significant part of the emission reductions achieved under our agreement with the auto industry on higher fuel-efficiency. While we will be reducing the average CO2 emissions of new passenger cars from 186 grams per kilometre in 1995 to 140 grams in 2008/2009, scenarios show that in the range of 18 to 28 grams of this is lost due to higher fuel consumption because of the air conditioning and due to the emissions of the refrigerant. This corresponds to about 40 to 60 percent of committed CO2 reductions, and is clearly not acceptable! We of course do not intend to ban the air conditioning. However, we will at least make sure that it is run on refrigerants with a low global warming potential.

Another proposal that many of you are expecting with great interest is on linking Joint Implementation and the Clean Development Mechanism to our future emissions trading scheme. As you know, under the Kyoto Protocol, credits from JI and CDM projects can only be used by the Parties themselves to meet their obligations. Our proposal will be to allow private actors to use these credits for compliance with obligations under the trading scheme. This will provide an additional incentive to engage in such projects and additional benefits to companies who do so.

In this proposal we will build upon the Kyoto Protocol and Marrakesh Accords, and we will make provisions to assure the compatibility with the architecture of our trading scheme. I want to be very clear though that the environmental integrity of emissions trading has to be safeguarded. Opening the doors for JI and CDM too wide would mean low credit prices that undercut efforts to reduce emissions within the EU. This would not least reduce the incentive for technological innovation. Hence, we will need to find the right balance between encouraging the use of JI and CDM and making emissions trading deliver real emission reductions within the EU.

Finally, in the autumn, we will start reviewing together with the auto industry our agreements on CO2 emissions from passenger cars. The European and Japanese manufacturers have made good progress so far while the Korean companies are lagging behind. Some of this progress has been bought at the price of a higher Diesel share, which is worrisome from an air quality point of view. On the basis of the review we want to discuss with the car industry when they will achieve the 120 grams per kilometre target fixed by the Council for 2005 2010.

In the light of what I said before on the growth in transport emissions our expectations towards the car industry are high.

So as you can see, we have a number of important proposals in the pipeline that should help us move further towards our Kyoto target.

The importance of voluntary actions by business and citizens

Now, this all sounds as if governments should or even could implement a successful strategy to combat climate change on their own. That is of course not the case we have to count on voluntary action by business and by citizens as well.

I am convinced that without their commitment we have no chance to prevent the dramatic deterioration that global warming could bring to our and future generations' living conditions on this planet.

To me it is always exciting and encouraging when I see what individual companies are doing out of their own initiative to improve the environment, and what citizens can do by changing their behaviour.

I want to give you two examples that I have recently come across.

The first comes from the Business Leaders Initiative on Climate Change, a group of six major companies all committed to acting on their greenhouse gas emissions. Over the last two years they have been working first of all on monitoring and reporting their emissions, on best practices and on setting themselves emission reduction targets.

In a new initiative they have developed the idea to influence their customers to use energy-saving light bulbs. They have calculated that if all 380 million people in the EU-15 exchanged two standard incandescent bulbs for energy-saving bulbs, 10 million tonnes of CO2 could be saved per year.

I find the idea of companies working together with their customers very interesting. Linking companies' commitment to environmental sustainability to green consumer awareness could become a powerful force for change.

My second example is the myclimate project. We all know that flying is a highly unsustainable mode of travelling and that air transport does not internalise its external costs.

A group of young entrepreneurial scientists at the Swiss Federal Institute of Technology in Zurich has therefore developed the Climate Ticket. Everybody taking the plane can pay 5 US Dollars per hour of flight for a Climate Ticket. This money is then used to support climate protection projects in developing countries to offset emissions. The first project was to replace a diesel burner with solar panels for heating water at a business school in Costa Rica.

I can only pay tribute to the entrepreneurial spirit of these young people! Of course, it cannot substitute for finally making progress either within ICAO or if necessary at a European level on kerosene taxation or the introduction of emission charging.

These and other concrete projects tell me that we can dramatically cut greenhouse gas emissions if only we manage to mobilise the commitment of companies and individual citizens.

Progress at international level

Before I come to the end let me say a few words on the international situation. Let us remember first that by now 107 countries have ratified the Kyoto Protocol.

Of course we are all keen to see Russia finally ratify the Kyoto Protocol. Russia knows that it holds the key to the entry-into-force of the Kyoto Protocol, and they are aware that the eyes of the world are on them.

Together with the Greek and Italian Environment Ministers I was in Moscow in early March to remind Russia of the commitment to ratification that Prime Minister Kasyanov made at the Johannesburg World Summit. President Putin has been reminded personally by President Prodi and several other EU leaders of this commitment. We know that the Russian Government is working on ratification, but we also know that there is little political momentum behind this work.

The Russian Government must remember that its demands were fully met in the final negotiations on the Protocol in Bonn and Marrakesh and that they will benefit from emissions trading and Joint Implementation at all only if they ratify the Protocol.

I hope that the EU-Russia Summit at the end of the month will be able to make some progress also on the Kyoto Protocol.

I am also often asked how I see the chances for the United States coming back to the Kyoto process. I will be frank: I believe that this will not happen under the current Administration and probably take some more time.

I want to recall though that President Bush promised at the EU-US Summit in Göteborg in June 2001 that the United States would not undertake any steps to sabotage the Kyoto Protocol. We remember this promise.

While there seems to be little headway to be made at the moment in a political dialogue with Washington on climate change, we are interested in co-operating in the areas of research and new technologies. We need major technological breakthroughs for example on hydrogen and perhaps fuel decarbonisation through carbon storage to combat climate change in the longer term, and if we can work together on those all the better.

Where we differ is that the present US Administration wants to focus on the development of future technologies while largely continuing with business-as-usual in the meantime. We instead believe that we have to do both developing breakthrough technologies but at the same time exploit the many existing emission reduction possibilities through better energy efficiency, energy saving and renewables.

We should not sit on our hands and say that in the future new technologies will bring the miracle solution. Climate change is happening now, and many actions to combat climate change make not only environmental but also economic sense.

Finally, we have to strengthen our co-operation with the developing countries who will be the first to suffer from climate change. We enjoyed a good partnership with the developing countries in the final phase of the negotiations on the Kyoto Protocol.

At the last UN climate conference in New Delhi we had difficulties in explaining to them our views on starting work on a second commitment period. From this experience we have drawn the conclusion that we need to strengthen our dialogue with the G77, and this is what we are doing. My colleague Poul Nielson and I also agreed in March that we should integrate climate change concerns further into our development co-operation policy and help developing countries for example in capacity building. In the entry-into-force nears it is imperative to start reflections on ways and means to develop the international architecture beyond 2012. I challenge business, civil society groups and the academic community around the globe to join us in a creative process to identify promising and practical options for the next step in the international climate regime.

In this context, a very focused and practical initiative is the Johannesburg Renewable Energy Coalition that we launched at the World Summit last year. Over 80 countries around the world, including important developing country partners, have now joined this Coalition, and we are delighted to host the first international Coalition conference during our Green Week here in Brussels on 4th June. I advise you that this is a story to follow!

Concluding remarks

Ladies and gentlemen,

The European Union is committed to continue exercising leadership on climate change internationally. We are taking measures to reduce our emissions even though progress is not easy and particularly those Member States that are not on track have to redouble their efforts. From the European Climate Change Programme we know that we can reach our Kyoto target and that we can do so while minimising the cost to our societies and even reaping economic benefits through innovation and higher competitiveness.

The floods last year in many parts of Europe have made us aware of the kind of economic damages and human hardship that climate change will bring. Climate change is a threat to sustainable development in all its three dimensions in an economic and social as well as environmental sense.

We have to act, and this is what we are doing.

Thank you.

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