Transatlantic Cooperation on Energy and Climate Policy: New Stakeholders, New Strategies

by Stavros Dimas
Environment Commissioner of the European Union

European Institute
Washington, DC
February16, 2007

Ladies and Gentlemen,

The last few weeks have seen climate change become a hot topic again. This week in Washington, I have discussed this with Senators Bingaman and Boxer and listened to presentations from Senators McCain, Lieberman and Snowe. I am encouraged to see that the US is talking about securing our future.

It is good that we are all here today to talk about the future. It is important to talk about where we should be heading in the short term, in the medium term and in the long term. We need to talk about what we need to do at a global level to combat climate change, and then translate words into real deeds. This is an essential subject for transatlantic cooperation.


We know climate change is happening. The evidence is irrefutable. A fortnight ago, the Intergovernmental Panel on Climate Change issued its clearest warning yet. The panel confirmed that man-made climate change is happening and that we must act fast to limit its impact. Sir Nicholas Stern's report on climate change voices the same concerns, and shows us what they mean in economic terms. In his report he says that if we don't act, climate change could reduce the world's GDP between 5% and a staggering 20%. And of course, the longer we delay the more it will cost. On the other hand, our own estimate is that the cost of action would only be about half of one percent of global GDP per annum by 2030. Tackling climate change is also about sound economic management.

But climate change can only be tackled on a world scale. This requires, first and foremost, a strong political will to tackle this global challenge from the world's largest emitters of greenhouse gases. We, the European Union, the United States, and other developed countries, need to take the lead. But we must also reach out to the rest of the world, support them to limit emissions and help the most vulnerable countries adapt to climate change. Indeed, the impact of climate change is likely to be greatest in some of the poorest regions of the world which do not have the means to adjust.

Now is the time to start negotiating an international agreement on further action. The window of opportunity for action on climate change is closing. A new framework for action must be agreed before current international commitments under the Kyoto protocol come to an end in 2012.

The Kyoto Protocol, which came into force two years ago today, was just a first step. As a result of Kyoto, many useful approaches, largely building on experience in the US, have been put in place at a global level. But we need to do far more.

The first step towards international agreement is to reach a common understanding. The key parties must agree on what we are aiming for and by when. Europeans' objective is to limit the rise in average global temperatures to two degrees Celsius above pre-industrial levels. Above this threshold there are greater risks of catastrophic and irreversible damage in all regions of the world. Our assessment shows that worldwide greenhouse gas emissions must peak in around 2020. And after that, they will need to fall, so that by 2050, they reach 50% of what they were in 1990. This is essential if we are to have a reasonable chance of reaching the two degree objective. For developed countries this means reducing greenhouse gas emissions by 60 to 80% compared to 1990 levels by 2050.


On the other side of the Atlantic, the European Commission last month put forward concrete proposals to take us much closer to limiting the average temperature rise to maximum two degrees Celsius, that is 3.6 degrees Fahrenheit.

To get on the right path, we believe that developed countries as a group should reduce their greenhouse gas emissions by 30% below 1990 levels by 2020.

We want to send a clear signal to our partners around the globe from the European Union that it is time to move from words to action.

This is why we propose that the EU takes on an independent commitment to reduce its emissions by at least 20%, even before negotiations begin on an international framework. The independent commitment underpins our strong determination to obtain an international agreement. But, to be honest, we are also proposing this because it is in Europe's economic interests. It will be good for our energy security, our air quality and our competitiveness. Reaching this target will reduce our imports of oil and gas by 15% by 2020.

With our independent commitment we will also be sending a clear signal that the carbon market will continue, without interruption. In fighting climate change, we will need to make better use of markets.

The global carbon market will be a key tool. And it has got off to a good start. The Clean Development Mechanism is expected to generate more than 1 billion tons of CO2-equivalent emissions reductions by 2012. We in the European Union have created an emissions trading system [ETS], the largest of its kind in the world. At present it covers about 50% of our carbon dioxide emissions and 10,000 installations. In 2006 its value was worth more than $19 billion. And that is just in the learning phase. It shows that cap-and-trade works, even though we had some over-allocation in this initial period. Now that we have better data, we are moving forward with a stronger system. The next step is to extend it.

I am enormously encouraged by the growing interest in emissions trading here in the United States, both at state level in California and the nine north-eastern states and in Congress where several bills to establish a federal cap-and-trade system are being discussed. The United States pioneered cap-and-trade systems for other pollutants and it makes absolute sense to take this approach to carbon emissions too. Establishing emissions trading here would have a global significance in that it would help to reconnect the US with international action.

In the relatively short existence of carbon emissions trading, we in Europe have observed that putting a price on greenhouse gas emissions encourages investment in clean technologies. And in order to make their long-term investment decisions, businesses are now calling for a guarantee that the carbon market will continue. We are also looking to link the EU ETS with other cap-and-trade schemes, so as to increase the size of the market and increase the opportunities for more, low-cost emissions reductions. We will all benefit from a carbon market on a global scale, alongside better access to innovative financing tools after 2012.

The market has a substantial, if not primordial, role to play in this in tackling climate change. The transition to a low-carbon economy opens up enormous possibilities for dynamic companies that are willing to seize them. The market leaders of tomorrow's new industrial revolution will be those who include climate concerns in their business strategy. In an energy-constrained world those companies that do this early on will have a competitive advantage.

It is also clear that governments and legislators have a key role to play in creating the conditions for a new industrial revolution, through putting in place a policy framework that creates demand for low-carbon technologies and rewards clean investment. Governments alone cannot solve the climate change challenge. It is essential to attract private investment on a huge scale.

All economic sectors will need to be involved in the fight against climate change. Most recently the European Commission made proposals which would reduce emissions of greenhouse gases from fuels and new cars. Similarly, we are working on expanding the number of sectors involved in the emissions trading system. Late last year, for example, we proposed including aviation in the system. We would like to invite the US to work with us at international level under ICAO [International Civil Aviation Organization] on this. Other sectors are working hard to reduce emissions. Aviation, a fast growing source of emissions, also needs to do its share.

While the developed world needs to act, we also need to step up our cooperation with developing countries. We need to help them slow the growth in their emissions of greenhouse gases as soon as possible, and reduce them from 2020 onwards. The European Commission has put forward a number of options for engaging developing countries in a global climate agreement. In this respect, decreasing energy demand through energy efficiency is a win-win policy that not only reduces energy insecurity, but also decreases greenhouse gas emissions. At present, a country like India imports more than 70% of its oil. In two decades' time China will be doing so too. Air quality is another important aspect. Nine out of the ten mega-cities most affected by particle pollution in the world are in Asia, and the other is in Africa. Recent studies for the Beijing area estimate that halving local air pollution would also decrease expected carbon dioxide emissions by a third, with health benefits vastly outweighing the costs.

EU countries are already investing heavily through the Clean Development Mechanism, with more than $3.5 billion invested in getting clean technologies implemented in developing countries, in particular in emerging economies. Let’s not forget that China and India are the markets of the future--they have fast-growing populations. More and more people with growing incomes means more and more demand for consumer goods, cars and energy. It means increased air pollution, and growing public demand to address it. By engaging these countries in climate action, we can support the development of whole new markets for clean technologies, creating economies of scale, reducing costs, creating new business and jobs. This will also help keep world oil prices down. Helping developing countries has big spill-over benefits for developed economies.

Ladies and Gentlemen,

To avoid a gap at the end of the existing commitments and framework, after 2012, we must reach a global international agreement on further action soon, preferably by 2009. Now is the time to engage in international discussions.

Climate change affects everyone on this planet. For some it is their very survival that is at stake. It is their home, their livelihood, the food that they eat and the water that they drink that is at stake. But climate change is a worldwide phenomenon. It cannot be overcome by one country or group of countries, no matter how rich or powerful. It is a global problem and requires global solutions. All major emitters must take action. Our citizens and the world's citizens expect us to act. The European Union is taking a leading role. We expect the United States and the rest of the developed world to join us. We are ready to discuss how.

We must all agree on a way forward and lead the battle against climate change.

Thank you for your attention.