Why bold climate action is in Europe's economic interest
One of the major dilemmas facing political leaders across the world today is how to combine economic prosperity with bold climate action.
It is obvious that climate policy-makers must anticipate the economic impacts of climate policies. Anything else would be irresponsible. Everybody agrees to this elementary reasoning. But how come it is not equally elementary to all that economic policy-makers must anticipate the climate impacts of their proposed economic policies?
However, when World Bank President Jim Yong Kim calls climate change a fundamental threat to economic development, IMF chief Christine Lagarde says it is by far the greatest economic challenge of this century, and OECD chief Angel Gurria says we face a choice "between stranded assets and a stranded planet'', you know that climate change is moving towards the centre of the debate on economic policy.
Global economic leaders are finally beginning to understand that, beyond the global economic crisis, the world is experiencing a climate crisis. And neither can be resolved without addressing the other.
With Europe's economy growing more slowly than those of its major competitors, its leaders must take a more far-sighted approach to restoring – and preserving – its growth potential. This is why in January the European Commission will propose a new climate and energy framework for 2030. Of course a framework that does not run counter to Europe's economic interests.
Just take our energy bill as an example. For years, imports of fossil fuels have weighed in negatively on the European balance of trade. In 2012 alone, Europe's imports of oil, coal, and gas, amounted to EUR 545.9 billion, a figure equivalent to the combined GDP of Finland, Hungary, Portugal and Slovakia, or more than five times the aggregate EU trade deficit the same year. Would it not be wise – also economically – to bring down those sorts of bills by saving and producing energy here in Europe?
Furthermore, with record-high unemployment rates, Europe needs jobs in dynamic, competitive industries that cannot easily be outsourced. Currently over 3.5 million people work in the green sector in Europe. Between 1999 and 2008, Europe's green sector created 180,000 jobs per year. And most of these jobs were retained – and many more created – during the worst years of the economic crisis.
Europe's competitive edge lies in innovation, technology and increased energy and resource efficiency. And taking climate action yields most of these important economic benefits. But still, some businesses and politicians fret over the risk of climate policies driving away energy intensive businesses.
Carbon leakage is an important risk but it shouldn’t be exaggerated. In designing climate policies, we have identified the key sectors that are genuinely at risk of carbon leakage and then developed targeted remedial policies. That is of course the sensible thing to do.
With the current safeguards in place, recent independent studies show that Europe is actually guarding well its industries against carbon leakage.
So maybe we should be a bit more concerned about the risk of low-carbon leakage. Without ambitious climate polices, Europe will fail to attract investments in rapidly innovating economic sectors and the high-quality jobs we so badly need. Europe is leading the low-carbon technology race, but other international players are catching up fast. Renewed climate ambition is required to maintain Europe's advantage in rapidly growing low-carbon markets.
Europe is by far the largest importer of fossil fuel in the world. And as growth in oil production slows and global demand continues to rise, sustained high oil prices and price spikes will have a significant impact on the European economy.
But the International Energy Agency (IEA) says that Europe does have options: we can build an economy that is less dependent on imported energy through increased efficiency and greater reliance on domestically produced clean energy.
Of course, Europe cannot resolve the climate problem alone. We must continue to demand action from the other major economies. Last month, the UN climate conference in Warsaw agreed that all countries, developing and developed, must contribute to the new climate deal to be struck in Paris in 2015, and that all countries should now go home and do their homework - that is, prepare their emission reduction plans well in advance of Paris.
This is what Europe is now busy doing. Europe's ambition will be seen by many countries as a benchmark, both in terms of timing and ambition, and an important driver in securing ambition for the domestic preparations of other countries and, as a result, for the 2015 agreement.
And with political progress edging forward, the summit of world leaders on climate change that UN Secretary-General Ban Ki-moon will host in September 2014 will be a crucial milestone on the road to Paris.
Business as usual is not an option if the economic recovery is to be sustained. Many economic leaders get that already. They understand that there is not a choice to make between good economics and climate protection, but that climate action is indeed good economics. European leaders must take bold climate action for their own economy’s prospects for a sustainable economic recovery.