E3G

Climate change: EU-China and economic growth

By Quentin de Molliens

Treaty

Much of the discussion internationally focuses on the need for treaty arrangements based on reciprocal commitments, within the UN Framework Convention on Climate Change and the Kyoto Protocol. These arrangements are indeed very important. They will remain the primary vehicle for international action on climate change. They are essential to provide confidence to investors in a low carbon future. We urgently need to agree how they will develop beyond 2012, and I warmly welcome China’s reaffirmation, during the recent visit to Japan of Premier Wen Jiabao, that it will actively participate in the negotiations that will continue at the UN climate conference in Bali later this year.

But the framework we agree in these negotiations will just be part of a complex interlocking system that we need to build of mutually reinforcing policies, commitments, legislation and other arrangements at national, regional and global level. This needs to involve governments and the private sector in what will be in effect the biggest public private partnership ever devised. Crucially it needs to involve the financial sector, so that we can combine capital from different sources in creative ways to reduce investor risk and leverage a faster transition: this will be particularly important in China and I hope the new energy law will encourage it. We need to create a wide range of convergent forces, all pushing the flow of capital towards low carbon.

So the UN framework will be one of the means we use to achieve our goal. It is not the goal itself. And we will not agree an effective framework unless we see it in this broader perspective, based on a shared vision of the pathways that will lead us to a low carbon future.

The EU

How is Europe approaching the shared dilemma? Last month, at their most recent Summit, European leaders took a series of critical decisions – some of the most important they have ever taken together. They laid down what in China might be seen as a framework law for a low carbon energy system in our continent, setting ambitious unilateral targets for our overall carbon emissions, energy efficiency, faster deployment of renewables and advanced coal technologies including carbon capture and storage, as well as biofuels.

One consequence of this programme, if we are able to implement it successfully, will be that by around 2020 we shall have a virtually zero emission electricity sector. 20% of our energy will come from renewable sources. Fossil fuels, especially coal, will still dominate; but our aim is that all new fossil power plants should by then be equipped with carbon capture and storage.

Our Heads of Government took this step because it is now coming to be understood across the EU, in government, in industry and in society more broadly that we have to build a low carbon society. Since we have no choice but to achieve it, we need to see it as inevitable. This will require new technology standards across the energy sector. Some will lead this effort and some will follow.

But those who lead it – those who create the intellectual property for a low carbon economy - will achieve enormous competitive advantage. The key political calculation behind the EU decisions was that strong commitments of this kind were not a challenge to our competitiveness. On the contrary, if we want to remain competitive we must forge ahead in our own low carbon transition.

We realise that the transition needs to be global. We want other major economies – the US, Japan, Russia, China, India, Brazil, South Africa and so on – to join us on this long march. If we march together we will get more quickly to our goal. There will be more rewards for all of us and less cost.

But we cannot expect others to join us unless we show commitment ourselves. We have to ‘walk our talk’. Our calculation was that we can contribute more to the international transition, and to the prospects for an effective agreement on post-2012, by our own actions than we could just by asking others to act.