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Speech

Keynote speech at conference on "Opportunities for Green Growth in Estonia"

20/05/2010

Green Growth Conference in Estonia

Tallinn, 20 May 2010

Chair,

Minister Paet, Mr. Gomov

Excellencies,

Ladies and gentlemen,

Good morning. This is my first visit in Estonia – what a beautiful day! This conference on opportunities for Green Growth is very timely and I would like to thank the organisers for taking the initiative.

Because, as the title of the conference rightly suggests, green growth really is an opportunity, and it is one we must seize with both hands.

I know very well – as we all do – that these are tough times. Focus right now is on managing the crisis. But soon, hopefully, the key question will be: how do we manage the situation after the crisis?

Green growth is an opportunity.

An opportunity to modernise our economies, and develop new sources of sustainable growth and jobs.

  • It is an opportunity to strengthen our energy security by reducing our dependence on imports of oil and gas.
  • It is an opportunity to reduce air pollution and the high health costs associated with it.
  • And it is an opportunity to increase Europe's competitiveness, if we can maintain our leadership.

Green, low-carbon growth is much more than an opportunity. It is a necessity if we are to contain climate change and many of the other environmental challenges we face.

That is why, in the Europe 2020 strategy we proposed in February, the European Commission has put the achievement of greener, more resource efficient, low-carbon growth at the heart of our vision for the EU's development over the coming decade and beyond.

Because let's be clear: climate change is for real. Urgent and bold global action is needed to prevent it from reaching dangerous levels within the lifetimes of our children – levels that could cause irreversible and potentially catastrophic changes in the global environment and wreck our economies. 

I know the cold winter we've had in northern Europe has made some people question whether climate change is happening. But this is to confuse the climate, which is about long-term trends, with short-term weather events.

In fact a hot summer in the southern hemisphere made the first quarter of this year the fourth warmest on record worldwide. And globally, this March was the hottest March ever. The scientific reality is that global warming is happening.

To prevent it from getting out of control we have to drastically cut greenhouse gas emissions by building a low-carbon global economy based on green growth. And to succeed we need a global agreement. A clear policy framework will help businesses by providing the necessary incentives and long-term signals to investors.

And even the worst climate sceptics can agree with us on the tools to fix the problem. Why? Essentially because they will provide us with a cleaner and greener, more resource efficient economy.

Building the low carbon economy will be a huge challenge - and I know this is not least the case here in Estonia.

But it is also a huge opportunity for the businesses that will lead this new industrial revolution. And we need to make sure that businesses here will be in the forefront. We, the politicians, must provide the framework – and businesses must come up with the solutions.

Environmental industries are hugely important to the EU's economy.

They directly employ around 3.4 million people and account for around 2.2% of Europe's GDP. That is more than the pharmaceuticals or aerospace industries. And each direct job in Europe's eco-industries creates between 1.3 and 1.9 indirect jobs.

What is more, the global market for environmental technologies and products is forecast to grow strongly at around 10% annually over the coming years. So the EU needs to be in a position to take full advantage of this opportunity. 

In the European Union we gave ourselves a head start in 2007 when our leaders agreed an integrated energy and climate strategy and set our ambitious 20-20-20 targets for the year 2020. That is: a 20% cut in greenhouse gas emissions, a 20% share for renewable energy and a 20% improvement in energy efficiency.

These targets are now being implemented through the climate and energy package that was agreed in 2008, and through our energy efficiency action plan.

But in the meantime the other major economies have also recognised the need to shift towards the low-carbon economy. They too see the benefits of greater energy security and cleaner air – and the huge opportunities for producers of low-carbon equipment and infrastructure such as renewable energy technologies, energy efficiency, carbon capture and storage and smart grids. 

Some weeks ago I visited China. And believe me: You cannot imagine how fast things are moving out there. Whether it is buildings, railways or mobile phones, they are moving at almost surreal speed. And this goes for the clean tech sector as well. There is no doubt that Beijing has realized that this is the business of the 21st century. And by the way, this goes for other countries like Korea and Brazil.

So the global race is on. This is an excellent development in terms of fighting climate change. But it also means we in Europe will have to work even harder to stay in the lead.

Let me illustrate how we are challenged. The stimulus packages introduced by governments to counter the economic and financial crisis show this clearly. China is undertaking the largest green investment programme of all, totalling around 230 billion US dollars. The US will invest over 80 billion dollars in clean energy according to their recovery plan.

By contrast the EU and the bigger Member States are investing only about 25 billion euros all in all.

The reality is that global competition for green growth and jobs is getting fiercer.

Europe no longer leads on renewable energy when it comes to the installation of new capacity. The 2010 Renewable Energy Attractiveness Index cites US and China as the best investment opportunity for renewables.

The US is aiming to double its renewable energy generation by 2012. Last year China topped the global league table for wind power installation. Chinese and Indian wind turbine manufacturers now appear in the top ten. China and Taiwan now produce most of the world's photovoltaic panels. These industries are rapidly becoming global players.

So other regions are moving and they are moving very fast. Europe needs to do more to drive our innovation and leadership forward if we are to avoid the risk of being left behind. If we stand still, we will lose our frontrunner status.

And that we cannot afford. Europe can not win the competition against other regions when it comes to taxes, wages and pension systems. Our welfare states are expensive so we need to export a lot in order to finance them.

My ambition as Commissioner for Climate Action is to see Europe become the most climate friendly region in the world. This is in our own interest, because it will solidify our position in the expanding market for clean technologies.

Denmark provides a very convincing business case for this. In the 1970s we relied almost exclusively on imported oil. And as a consequence the oil crises literally pulled the plug on our economy.

In order to tackle the crisis, Denmark established policies to limit our energy consumption and spur renewable energy production – using taxation, fiscal subsidies and public funding for research and development. Furthermore, comprehensive district heating systems were established in all cities and communities supplied by highly efficient combined heat and power plants. And waste incineration was introduced for power and heat production. Today – in Denmark – we turn all of our household waste into energy.

And these initiatives did not harm the economy. On the contrary: Since 1980, Denmark’s economy has grown by 78 percent with nearly stable energy consumption. And today, Denmark has market leaders with a number of clean tech industries, wind, pumps, waste handling, combined heat and power –– just to mention a few.

It will require a battery of initiatives over the coming months and years to green the European economy. The Commission has already started with a strategy to promote clean and efficient vehicles. And we are setting up standards for cars, buildings, and machines.

As the next step we need to reconsider the implications for Europe's competitiveness of our emission targets for 2020.

That is why the Commission, by the end of this month, will present an updated analysis of the costs and benefits of both our unilateral 20% reduction target and our conditional target of 30% in the light of the economic crisis.

What we can see is that the crisis has reduced both greenhouse gas emissions themselves and the cost of cutting them. The crisis has also pushed down the carbon price as companies have more unused allowances to carry forward, and the price is likely to stay lower than expected for the foreseeable future.

That is good, isn't it? Yes, it is positive insofar as they make the 20% reduction target reachable with less effort and at lower cost.

But: they also have a clear downside: the 20% target and the low carbon price will be much less powerful drivers of innovation in Europe than we had expected when the climate and energy package was agreed two years ago.

And moreover, emissions fell due to the crisis and what we saved can be banked – meaning that the price of emitting a ton will remain low for many years to come.

The result of this will be less innovation. And that is not what we need.

The Commission's communication tries to assess costs and benefits of the 30% reduction. It is not an invitation to take the debate now.

But we know this: A reduction of 20% by 2020 is not enough to put emissions onto the right path. That is why our unilateral 20% reduction target has always been accompanied by the commitment to move to a 30% cut by 2020 if other major economies agree to take part in a genuine global effort. 

If, as our analysis shows, the 20% target will drive change much less strongly than had been expected in 2008, there is a clear risk that achieving the deep emission reductions that will be necessary after 2020 will become more difficult and more expensive. Remember that EU has said that we will reduce by 80-95% by mid century.

The EU would have to catch up post-2020 at potentially higher cost: for example, the International Energy Agency has estimated that every year of delayed investment in more low-carbon sources adds €300-400 billion to the global cost.

However, I fully appreciate that making the shift to the low-carbon economy will require major changes here as well, also in the way Estonia produces electricity. This country has so far invested significantly less than other Member States in the environmental sustainability of energy production. This is a handicap today - but it also means that the economic and environmental benefits of building up your renewable energy capacity and improving energy efficiency await you tomorrow.

There appears to be considerable potential for energy savings in industry and transport in particular. On the other hand, from the statistics I have seen, a rapid expansion of renewable energy is now under way here, making it a major green growth sector already.

I particularly welcome the ambitious plans you have to expand your wind power capacity by almost 400 MW over the next few years as a contribution towards meeting your 25% renewables target for 2020. Coming from a country that has led the wind sector over the past couple of decades I know the advantages!

The EU has set up mechanisms to make the transition away from carbon-intensive fuels and technologies as smooth and cost-effective as possible. One of the main purposes of putting a price on CO2 emissions, as we have done through the EU emissions trading system, is to direct investment towards less carbon-intensive technologies. To make it attractive to be energy efficient. If you are inefficient, it costs. If you are efficient, you save money.

The European Commission does recognise, however, that the implementation of EU climate policy in general poses a challenge in Estonia due to your particular circumstances. We are sensitive to this country's concerns about energy security. That's why the Commission is closely monitoring the situation and will take measures as appropriate. That is also why I am here today – and I am also meeting with the Prime Minister, ministers and NGOs.

The revised Emissions Trading Directive does offer the possibility for the power sector to receive emission allowances for free, temporarily. This could help to alleviate energy security concerns arising from the introduction of full auctioning of allowances for power generators.

And in the meantime projects are under way to improve interconnections between the Baltic electricity markets and the rest of the EU and these should help both to improve energy security and strengthen the competitiveness of Estonia's electricity sector.

Ladies and gentlemen,

Tackling climate change and building the low-carbon economy may sometimes appear a burdensome challenge, but the bottom line is we cannot afford not to do it.

The landmark study on the economics of climate change led by Lord Stern concluded that sitting on our hands and letting climate change reach dangerous levels will cost the world economy at least 5% of annual GDP in terms of damage, and in the worst case perhaps as much as 20% or more. That would mean economic and social disruption on a scale similar to the two world wars or the Great Depression.

On the other hand, the cost of taking action to prevent global warming from reaching dangerous levels is around 1% of global GDP.

In other words, the benefits of strong and early action far outweigh the economic costs. As Lord Stern has put it, tackling climate change is the pro-growth strategy for the longer term.

And we need growth. But I firmly believe that the countries and regions that are the most energy efficient also will be the most prosperous in the future.

Hence, this challenge is also an opportunity for Europe. Let us seize it and ensure we stay at the front of the global race for green growth and jobs. In this century, no field will see higher growth rates than clean energy and energy efficiency. Therefore this theme and this conference are very timely.

I wish Estonia all the best with your efforts and look forward to working with you on creating a prosperous and sustainable Europe.

Thank you.

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