Speech by EU Commissioner Dimas - Commission's initiatives for shaping climate change policy

Summary: Speech by EU Commissioner Dimas - Commission's initiatives for shaping climate change policy (3 October 2005: Vienna)

Speech by Mr Stavros Dimas, Member of the European Commission, Responsible for Environment, "The Commission's initiatives for shaping future policy", Climate change conference, National Library, Vienna

The Commission's initiatives for shaping future policy

Minister Pröll, Madame Chairman,
Ladies and Gentlemen,

It is a great honour to be invited at this symposium to speak on the future climate change policy and on Austria's energy future. Thank you for inviting me.

The European Commission is highly concerned about the current situation in the oil market, characterised by an unprecedented rise in prices. The underlying cause for these high prices is the increasingly tight balance between supply and demand.

To address these issues, the Commission has recently discussed a five-point plan of measures, which are already in the pipeline and will now be accelerated. They refer to saving energy and reducing demand; increasing Europe's use of alternative forms of energy; increasing transparency and predictability of oil markets; increasing the supply of oil and gas and, finally, reacting effectively to emergency situations with respect to oil stocks.

The decisions we make in energy policy will of course have important consequences for our economic development and competitiveness. Europe draws important economic advantages from its good track record on energy efficiency and is hence less vulnerable to oil shocks than other parts of the world. To foster economic growth, our energy policy needs to be stable and long-term. It needs to build on the fundamentals of the market, with the EU promoting a strong and predictable framework for investment decisions.

Climate change is one of the key market realities that will determine this framework. The need to move to a low-carbon economy will set new rules for energy activities by shifting the cost structure of all energy sources. At political level, it is therefore essential to be very clear and transparent on our climate change policy, giving clear signals to the market on our overall objectives and the carbon limits that our economies will have to respect. This will give European companies important economic benefits. Nothing will be a better vehicle for competitiveness than an EU energy policy preparing our companies to the carbon constrains of the future.

This is why I welcome this opportunity to set out briefly the European Commission's view on the future international policy to combat climate change, particularly in view of the important annual climate conference in Montreal at the end of November.

Recent examples of extreme weather around the world were a shock for us all. While it is not possible to link individual events directly to climate change, this summer's floods in Austria and Romania, and the more severe and frequent tropical storms and hurricanes, like Katrina and Rita, are consistent with scientific warnings about the changing climate.

These changes bring huge costs, and not only in terms of the terrible loss of life. The economic losses resulting directly from extreme events were over 11 billion US dollars greater during the 1990s than in earlier decades. And we have all seen the astronomical estimates of what Hurricane Katrina may cause the US economy.

But we also know that, with the right policies, governments are capable of taking effective action against climate change, and that these actions are affordable. A recent assessment by the European Commission estimated that cutting EU emissions annually by about 1.5% would reduce the EU's economic output by the year 2025 by only some 0.5% compared to business as usual. In short, the cheapest way to move forward is to take gradual action at global level now.

This shouldn't come as any great surprise. Any market analyst would agree that good economic management avoids abrupt changes in the business environment. Any project manager would recommend planning ahead. This explains why the European Union feels the international community must act straight away.

EU climate change policies:

Climate change is a truly global issue. However, countries that are committed to taking action internationally must match their words with deeds domestically.

In 2000, we launched the European Climate Change Programme. Stakeholders, including representatives from Member States, have actively participated in the search for smart and innovative ways to reduce emissions. So far, we have identified - and in most cases put in place - 42 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 have committed themselves to reducing the CO2 emissions of cars sold in the EU by roughly a quarter of 1995 levels by 2009. We are pushing for higher levels of renewable energy production - an area where Austria is already well ahead of most Member States - and for more combined heat and power generation.

The most recent official figures (for 2003) show that greenhouse gas emissions in the EU 25 are down by 5.5% from their level in 1990. But, between 2002 and 2003, emissions went up by 1.5% - and in Austria by nearly 6%. Austria has agreed to reduce its emissions by 13% between 1990 and 2012, but at the moment they are 16% above the 1990 level. Several other Member States are also in danger of missing their targets. It is clear that more needs to be done to change this trend.

That is why the Commission will launch a new phase of the European Climate Change Programme on 24 October. This new phase will review the progress we have made and take a closer look at how existing policies have been implemented in the Member States. We will also launch work on specific areas such as carbon capture and storage, and emissions from the transport sector - in particular aviation and cars.

Regarding aviation, I am pleased to tell you that the Commission has just made a decision on the way forward. Although aviation's share of overall greenhouse gas emissions is still modest at around 3%, its rapid growth undermines progress made in other sectors. If that growth continues its current trend, by 2012 emissions from international flights will have increased by 150% from their 1990 level.

The Commission's proposal is that aviation be incorporated into the EU emissions trading scheme so that aircraft operators start contributing to, rather than undermining, efforts to combat climate change. The Commission will work with stakeholders on the technical issues so that a legislative proposal can be put forward already by the end of 2006.

The EU's flagship measure is, as you know, the EU Emissions Trading Scheme, which successfully kicked off on 1st January of this year.

The scheme covers almost half of the EU's CO2 emissions, which are emitted by some 11,500 energy-intensive installations. It has broken new ground as the first international trading system and the biggest ever in terms of economic coverage. But, perhaps even more importantly, it has set in train a cultural change in the business environment.

Companies used to see carbon dioxide as solely an environmental issue. Now CO2 emissions are a financial issue too. The figures appear on the balance sheet. Companies across the EU are now beginning to establish carbon management systems, where monitoring and reporting systems, production data and commodity trading desks are being linked together.

It is still early days, but the financial potential of the market could be significant in the future: the estimated 150 million allowances traded so far in 2005 have a financial value approaching 3 billion Euros.

EU emission trading is probably the best example of a market based approach in EU environmental policy. It shows how market forces can be harnessed to reach environmental objectives, generating these environmental benefits at the lowest possible cost.

Post-2012:

Now let us look ahead. Certainly the most burning issue in the climate change debate at the moment is what a future climate change regime should look like. The Kyoto Protocol has been a first crucial step, but what do we want to do when our targets expire in 2012?

Earlier this year, the Commission put out a paper outlining some basic elements we believe a future climate change regime should include and how it can deliver on the global challenge: deep cuts in emission of greenhouse gases.

Firstly, it must be based on broad participation in the global reduction effort - by all major emitters, including the US and rapidly developing countries. Our projections show that, in the absence of an international climate policy, absolute emissions from the developing world will continue to increase, while emissions from industrialised countries are likely to remain stable. Only through broad participation can we effectively tackle climate change and minimise costs.

However, we do not think that developing countries, even those with booming economies, should or indeed could take on the same commitments as 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, under which developing countries would take on commitments that were in line with their level of economic development.

Secondly, continuing with this first theme, the future regime must include all greenhouse gases and all sectors, including aviation, maritime transport and forestry. Deforestation is an important source of global emissions that we cannot continue to overlook.

Thirdly, the development of new technologies will be indispensable to master the shift to a low-carbon society. Spending at international level on research and development in the field of energy has been decreasing ever since the early 1980s. This needs to be reversed. Bilateral and multilateral agreements such as the Asia-Pacific partnership and the EU partnerships with China and India will help to reverse the trend.

However, and this is my fourth point, it is crucial that there are incentives to ensure that new technologies which are already readily available are actually taken up in practice. There is a big difference between a government-funded demonstration project and a commercially viable mass-marketed product. The cheapest way to do this is to implement market mechanisms such as emissions trading that pull new technologies onto the market by allowing companies to profit from exploiting these new products.

Lastly, we have to start developing policies to adapt to the inevitable impacts of climate change. This requires identifying vulnerabilities and measures to increase resilience across the whole range of regional decision-making, such as flood protection measures, land use methods and building codes.

Upcoming negotiations and conclusion:

On the international scene, the EU must continue to exert leadership. The Conference of the Parties to the UN Convention on Climate Change at the end of November will bring together 189 governments and is a chance to initiate the process. It will also be a good opportunity for countries to explore what common ground they share.

The EU's aim will be to start the process that will lead to international discussions on the future climate change regime. The EU should adopt an open and constructive approach in these discussions. Our overriding aim is of course that the international community works towards achieving deeper cuts in greenhouse gas emissions than those agreed so far.

It is too much to expect full agreement to be reached in Montreal on all the core elements of a future climate change regime. This is likely to take some time. But the conference will be an important stepping stone towards a global consensus.

Ladies and Gentlemen, the climate challenge is considerable but there are solutions. Good economic management dictates that we address the challenge by taking measured but continuous action now. There are so many other reasons for doing this, not least those linked to energy policy. Making ourselves more energy efficient will enhance our competitiveness. Diversifying our energy sources and boosting renewables will reduce reliance on oil and increase our energy independence. And of course many measures to cut greenhouse gas emissions also reduce air pollution, thus saving on health care costs.

To anyone who doubts that the challenge can be met, I say look back 50 years and consider how our world has changed - how we have moved from a time when owning a refrigerator was a rare privilege to the point where we can store all the documents in our office on a 3 inch memory stick. Human ingenuity can achieve great things. But political leaders need to make the right decisions. If they do, the prospect of a low carbon economy 50 years from now can become a reality.

Thank you for your attention.

Ref: SP05-287EN
EU source: European Commission
UN forum:
Date: 3/10/2005

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