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Malcolm Wicks MP, Minister of State for Energy
BERR Conference Centre, 1 Victoria Street, London, 09 June 2008
Climate change is arguably the greatest challenge facing the world in the 21st century.
I’m pleased to say that in this country at least, we no longer have to spend too much time debating the science: there is a consensus that the problem is real, the threat it poses is grave, and the need to address it is urgent. There is, however, healthy debate about the best way to do that.
As Energy Minister, my involvement is often with the practical question of electricity generation. How can we keep the lights on, ensure that the UK has secure and affordable energy supplies - no small challenge in itself when global oil markets are at very high levels - while dramatically reducing the amount of CO2 we emit?
We have had to make some tough choices. In January this year, we announced our historic decision in favour of new nuclear power stations. Nuclear has always had its opponents, but its low-carbon credentials and advances in technology in recent decades make it an attractive and commercially viable source for the future. We’re rapidly expanding renewable electricity generation - not least in offshore wind, where this year we’re set to overtake Denmark as the country with the most installed offshore wind capacity in the world - and we’re committed to meeting our share of the EU’s 2020 renewables target, which is a major challenge for this country.
We’re also leading the world in supporting a project to demonstrate carbon capture and storage on post-combustion coal, vital when the use of coal in countries like India and China is growing rapidly.
The debate about the various merits of these low-carbon technologies is a lively one - but what often gets overlooked is the fact that sitting above this all is the EU Emissions Trading Scheme, capping the overall carbon emissions from the electricity generation industry, just as it does for the major energy-intensive industries.
The EU ETS is vitally important, and I’m pleased we have a chance to talk about it again today.
When I spoke at the consultation event we held last October, and I know many of you were there, we were anticipating the Commission’s proposals for a revised EU ETS Directive.
We have now had the proposals for some time, and the views we are forming are the culmination of months of hard work on the Review of the scheme. Many of you have been involved, through a continuing, and I hope productive, dialogue with ministers and officials.
The Commission’s proposals attempt to build on both the successes and the lessons learned from the first two phases. They seek to deliver the long-term strategy we need for the transition to a low carbon economy - and, I would hope, to a truly global carbon market.
Negotiations have begun, and Heads of State have agreed that it is crucial to get agreement by the end of 2008. This timetable is very ambitious, but it is a clear signal of the EU’s intention to take decisive action on climate change.
The Directive is, of course, part of the EU climate change and energy package. And looking closer to home, we are embracing the opportunities climate change provides for industry. Estimates suggest our environmental sector is currently worth £25 billion and employs 400,000 people.
This could more than double over the next 20 years. Ultimately, the drive of business and the talent of individuals and communities will determine the UK’s level of success in environmental technologies. The ETS provides the incentive for innovation to thrive and for a low carbon economy to grow.
The ETS is at the heart of EU climate policy, and I am confident we can build on the improvements of Phase II and establish solid arrangements for Phase III. The Commission has proposed a single, EU-wide cap which would reduce Member States’ emissions by 21% compared with 2005, with a clear downwards trajectory beyond 2020 - providing both scarcity of allowances and certainty for business.
We are likely to see a widening of the scope of the scheme. For example, we welcome the proposed inclusion of carbon capture and storage in the EU ETS - CCS is, as I’ve mentioned, a vital technology on the path to a low-carbon world economy.
There are also proposals to exclude some of the smallest emitters from the scheme. The balance between environmental effectiveness and reductions in the admin burden for small and medium sized firms is a key consideration for my Department, and we have been looking carefully at what the right level should be.
We know there are concerns about the impact of the scheme on the competitiveness of EU industry, especially at a time of economic uncertainty. As a minister in the Department for Business, I can assure you that we’re paying full attention to these concerns. Clearly, a successful international deal on climate change is the best solution to avoiding competitive distortions, and we have high hopes for what can be achieved at Copenhagen next year.
But we also recognise the danger of “carbon leakage”. It would be counter-productive to introduce measures which simply resulted in EU production and investment moving out of Europe to uncapped economies.
The first key issue is to determine which sectors could be exposed to the risk of carbon leakage. This assessment must be based on the best information available. Economic analysis is key, and we are glad that the Commission is adopting this approach. And I want to stress that, as far as UK views are concerned, the research we have commissioned to date is not the end of the story. We will look hard at all the evidence, including what individual stakeholders tell us. This is a dialogue that will continue.
Subject to those points, we need decisions to be taken as soon as possible so that business planning and investment are not interrupted. The UK is pushing for at-risk sectors to be identified by mid-2009, a year earlier than the Commission proposes. And decisions on measures to address carbon leakage should not wait until 2011, but should be taken by mid-2010.
Over the coming months, we will be negotiating with other Member States and the European Parliament to agree the revised directive. We realise that good policies are not made by Government in isolation. Your views are essential in forming our approach and helping us meet our goals.
Moving to a healthy, growing, low-carbon economy is a massive challenge, and one on which I’m sure you all have important insights. I hope you all have a productive day as the discussion on the next practical steps continues.