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31/06

20 April 2006

Speech by the Rt Hon Gordon Brown MP, Chancellor of the Exchequer, to United Nations Ambassadors, New York, 20th April 2006

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Let me start by saying what a privilege it is to be here today: to speak to such a distinguished audience; here at the home of the world's most important international institution and following my meeting with the UN Secretary General, to discuss with you one of the greatest international challenges of our time - how we protect our environment, secure our planet and safeguard our future for our children and generations to come.

It may seem surprising for me as a minister concerned with the economy to make the theme of my speech here today the environment.

But environmental priorities - including climate change - have all too often been compartmentalised away from economic priorities. Even when they have been considered together they have too often been seen to be mutually exclusive: that we can have economic growth but at the expense of the environment; or environmental care, but at the expense of growth and prosperity.

And we know that from soil erosion to the depletion of marine stocks, from water scarcity to air pollution and flood defences, any failure to protect the environment will put at risk future economic activity and growth.

I want to argue today that far from being at odds with each other, our economic objectives and our environmental objectives now increasingly reinforce each other.

Six decades ago, the great British economist John Maynard Keynes, speaking here in America, laid down what he believed were the foundations of economic policy - that it was for government to ensure the twin objectives of high and stable levels of growth and employment.

So today I want to propose a third objective on which our economies must be built - and that is we must match growth and justice with environmental care.

Environmental sustainability is not an option - it is a necessity. For economies to flourish, for global poverty to be banished, for the well-being of the world's people to be enhanced - not just in this generation but in succeeding generations - we have a compelling and ever more urgent duty of stewardship to take care of the natural environment and resources on which our economic activity and social fabric depends.

So the new synthesis we need is that economic growth, social justice and environmental care advance best when they all advance together. This imperative applies most strongly of all to the greatest of the environmental challenges we face, that of climate change.

It is now clear that, if current trends are left unchecked, the economic costs of climate change will be far greater than previously thought.

And yet at the same time it is becoming evident that the means of tackling it are increasingly available and the costs could become affordable - and that tackling it offers real economic benefits and opportunities to developed and developing countries alike.

So I want to argue today that it is through the new economics of climate change that a new global consensus for tackling environmental change can be built.

Whether we agree with Time magazine who observed last week, that 'the serious debate has quietly ended' or not, the real question now is not whether climate change is happening or indeed what are its causes: the question is how fast it is happening and how we address these causes.

Since the start of the industrial revolution global greenhouse gases have risen by 30 per cent. In the last century alone global temperatures have risen by almost one degree Celsius - probably the fastest rate of increase for a thousand years. And the rate of change has been speeding up. The ten hottest years since records began over 150 years ago have all occurred in the past twelve.

The consequences of this warming are now evident right across the world.

In the past century almost all the major ice caps have started melting - adding 20 billion tonnes of water each year into the oceans. Since 1900, global sea levels have risen by 10 to 20 centimetres.

And the Intergovernmental Panel on Climate Change suggests that by the end of this century, sea levels could rise by up to a further 90 centimetres and temperatures could rise by a further five to six degrees.

And with rising sea levels and temperatures on this scale, we must assess the consequences for agricultural productivity, for water stress, for ecosystems, for flood defences and for human health.

Studies for the UK Environment Department, led by Margaret Beckett, suggest that, by 2050, African cereal production could fall by 10 to 30 per cent, up to 3 billion people could live in areas of increased water stress and millions could be at increased risk of malaria and dengue fever.

Already we are seeing changing rainfall patterns and increased weather extremes.

And the intergovernmental panel estimated that the global economic costs of a temperature rise of just 2.5 degrees could be up to 2.5 per cent of global GDP.

So climate change is not just an environmental issue, but most definitely an economic issue.

And the time lags between greenhouse gas emissions and climatic impacts mean that to affect climate in 20 years time, we have to act now.

This is why last year, I asked Sir Nicholas Stern - former Chief Economist at the World Bank and Head of the British Government Economic Service – to report on the economics of climate change.

And what his initial findings suggest is that the risks of climate change will not be evenly spread, but will hit poorest countries most, making the issue of climate change one of justice as much as economic development: a problem whose causes are led by industrialised countries but whose effects will disproportionately fall on developing countries – most recently drought in the Sahel and the Horn of Africa.

And because we have to spend $6 billion of aid simply to respond to this humanitarian crisis, resources are being diverted to tackling the short-term consequences of environmental change and away from dealing with the causes of underdevelopment and environmental neglect.

So it is not surprising and indeed it is right that anti poverty campaigners have taken up the environmental as well as poverty challenge. Round the world, as they know, it is the poorest - those who depend most upon the natural world for their survival, and those with the fewest resources to buy their way out of unhealthy environments - that suffer the most.

"Today, we understand that respect for the environment," Kofi Annan rightly said, "is one of the main pillars of our fight against poverty.” thus essential for achieving the Millennium Development Goals. Indeed an unstable climate can lead to economic instability, thus threatening investment and economic development and growth.

So we must start from the profound truths: that economic development in poor countries is going to take place in the context of a changing climate, that underdevelopment and environmental neglect go hand in hand, that future development strategies are going to have to adapt to meet this new twin challenge. This is not a question of making climate change a priority over poverty reduction it is ensuring that policies for growth offer the technological advance and necessary resources to overcome both poverty and underdevelopment and environmental neglect.

Climate change is therefore a global problem. And it requires a global solution.

This is not say that countries do not individually have a responsibility to act. We do. And we will.

But it is to acknowledge the reality that no country can solve this problem on its own: Britain only produces 2 per cent of the world's greenhouse gases; even America - the single largest source - produces less than one quarter.

The message that global problems require global solutions underpinned the United Nations framework convention on climate change agreed at the Earth Summit in Rio nearly fifteen years ago.

And, whatever its shortcomings, this also underpins the Kyoto protocol - now ratified by over 160 countries, representing over 60 per cent of the world's emissions.

And now I believe it is not just more urgent than ever before but also more possible than before to build a global consensus for tackling environmental change.

Such a consensus is not easy. It must be founded first on a shared understanding of the challenge ahead.

But under Tony Blair's chairmanship, the G8 began a process of dialogue with other major energy consuming nations on climate change and clean energy.

Agreement at the UN Convention in Montreal shows that the will is potentially there.

And I believe that this global consensus, which over recent years has often seemed impossible, is now within our grasp because the policies we need to meet economic and environmental needs are now converging.

First, as Kofi Annan said last month: "Today's high oil prices make the economic and environmental arguments even more mutually supportive." And with the trebling of oil prices over three years, the demand is more broadly based than ever: for a supply of energy that is secure, stable and sustainable. A more sustainable and efficient use of energy resources was the focus of consuming and producing nations discussions when I attended the opening of the new headquarters of the International Energy Forum in Saudi Arabia last November.

President Bush's State of the Union Address in January highlights both America's dependence on oil and the need for change.

But the concern goes far beyond America. Previous shocks have been triggered by supply shortages.

And indeed today's high prices can be attributed in part to uncertainty of supply from political instability in major producers to the impact of hurricanes.

But few doubt that the underlying issue is one of demand - with a rising Asia now consuming one third of the world’s oil. Higher prices are now requiring countries and businesses to examine their energy costs, in particular greater efficiency of use and diversification of supply.

Of course major advances in the efficiency of the use of oil have been made since the last oil price spike in the 1970s. New technology has made drilling more successful and increased the yield from fields. In addition to this continued advance, new finds in oil and gas will almost certainly give us greater supply than previously documented.

But even with this progress, we cannot escape the conclusion that more environmentally sensitive uses of energy must become an essential element of delivering future economic growth rather than being seen as at odds with it.

And in Washington tomorrow - with global oil prices now again above $70 a barrel - based on the plan Britain set out last year, I will ask the G7 to discuss not only how we ensure greater security of energy supply but support alternative sources of energy and greater efficiency of energy use, so reducing carbon emissions is an energy and thus an economic imperative as much as it is an environmental imperative. But the economic agenda and the environmental agenda are not only now converging: the one now reinforces the other more than ever before. And while of course there will be costs to reducing greenhouse gas emissions, preventing climate change can contribute to the next stage of economic growth.

It is a lesson we are learning from Britain's recent experience. We are on course not just to achieve but to go beyond - indeed nearly double - our Kyoto target for greenhouse gas emissions. But these numbers do not tell the whole story. For in the last decade our economy has grown much faster than in previous decades and faster than the rest of Europe. Yet in Britain in this period of high growth, greenhouse gas emissions have not risen. So without being complacent about what more we have to do, which we are not, it is correct that the carbon intensity of the British economy - carbon emissions per unit of GDP - has fallen by a third.

And if in the future all countries are to both change and grow, we must set the common framework that allows this to happen:

By acting multilaterally, we can ensure in the new global economy there is no race to bottom in business competitiveness;

By developing long-term incentives, we provide the certainty that business requires to invest;

And by working with the grain of the market, we free innovation, flexibility and entrepreneurship that promotes growth rather than holding it back.

This is why the innovation of carbon trading offers us a way to reinforce economic and environmental objectives.

It gives carbon an international price. It means carbon saving can be a way of making money and increasing returns on investment. And it makes the economic opportunities of a climate friendly energy policy real and tangible. We first saw its potential in America with sulphur and nitrous oxide trading in the 1990s - reducing acid rain emissions by 1 million tonnes.

In Britain, our voluntary carbon scheme, with more than 30 companies, helped reduce carbon emissions by more than 1.6 million tonnes. And the City of London is now a global centre for carbon trading.

And now in Europe, we have adopted a scheme that will cut emissions across all 25 Member States.

And Britain is now proposing to extend and strengthen the European scheme beyond 2012.

By matching it with an extension of the Clean Development Mechanism beyond 2012 - our aim is for it to support investment not just in Europe, but in developing countries. And we will examine how we can guarantee a continued market for carbon credits up to and beyond 2012.

And by linking it with other initiatives now being developed across the world from states in America and Australia to countries such as Canada and South Korea - our aim is for it to become the driver for a deep, liquid and long term global carbon trading system.

Our ultimate goal must be a global carbon market. And with a global framework in the making, the environment can itself become a driver of future economic growth, economic competitiveness actually increasing by improving environmental efficiency as we secure more wealth from less energy and fewer resources.

Of course increasing labour productivity has always been a core goal of all successful businesses.

Now as energy costs rise and materials become more scarce, we need to pay the same attention to resource productivity.

Perhaps the most promising development is that new jobs, new industries and new exports come from rising investment in new, low carbon technologies.

In Britain alone, the environment market has increased from £16 billion, 170,000 jobs and 7,000 companies in 2001; to £25 billion, 400,000 jobs and 17,000 companies in 2004. Over the next ten years a further 130,000 jobs could be created. In Europe, the environment sector already accounts for 1.3 per cent of employment – 2 million jobs. And in 2010 the global environmental market - clean energy, waste and water - could be worth almost $700 billion - a sector as big as the successful aerospace or pharmaceuticals sectors.

And the role of governments - in partnership with business and science – is to harness market power and dynamism by stimulating the discovery and development of these technologies.

Because while the technologies that will set us on the path to the low-carbon economy of the next 20 years exist now, those of the following 20 do not.

America is the world's largest investor in environmental R&D. And is now joining in a new Asia-Pacific technology initiative with Australia, India, Japan, China and South Korea.

Europe's environmental research funding is the basis for a new partnership with China on virtually zero carbon coal emissions.

For our own part, Britain already spends over £800 million a year on environmental research, backed up with tax breaks and capital allowances to encourage innovation.

And Britain is jointly working with Norway on developing the potential of carbon capture and storage in the North Sea.

In my Budget last month, I announced proposals for a new energy and environmental research institute, a public-private partnership - with the aim of raising finance of £1 billion - to create a new facility at the cutting edge of innovation and engineering.

And at the heart of its mission is a clear goal to bring together the best engineers, scientists and companies from around the world, our investment in science and technology going hand in hand with the new market incentives.

With a developing global environment market, the new global consensus I believe to be possible grows into more than a shared understanding of a shared problem, and becomes a set of shared solutions in the shared interest of us all.

And it is this that underpins the next driver for consensus: all of us -countries, consumers and companies - are increasingly realising our responsibilities for environmental care.

So just as a growing sense of personal and social responsibility which is more than just enlightened self-interest paved the way in the past to socially responsible growth, so today in the Twenty First century such personal and social responsibility can be the basis for mutually beneficial environmental and economic progress.

With the scientific evidence now clear, we are as individuals increasingly aware of what we can do.

Encouraged by market solutions, companies are also increasingly aware of their corporate responsibilities.

And with internal carbon markets, commitments to become carbon neutral and energy efficiency initiatives, the world's leading firms are already showing that the flexible will invariably defeat the inflexible.

And with many new and smaller far-sighted firms emerging into these markets the companies that look like leading tomorrow are those that are already investing in a low carbon economy today.

And as the market increasingly pioneers answers to climate change –governments also need to act with imagination and initiative, recognising our responsibilities – by consciously deciding and putting in place the right long term policy framework with clear, credible and forward looking signals.

We have all come to realise the importance of using the full range of potential measures from exhortation, an appeal to people, and information, to incentives, to the setting of standards and taxing 'bads' while promoting goods.

Of course even within a multilateral framework, no two countries will have the same policies for their own specific needs. But the principles are common: ranging from the most basic - that consumers have the information they need to make informed choices about their environmental impact; to introducing fiscal and other incentives for environmentally friendly behaviour; and then to setting, where it is right to do so, standards for environmental protection including our proposed annual carbon report.

In this way not just the department of environment but every department of Government from transport to foreign affairs, from education to overseas development becomes a department of the environment.

In Britain - under the leadership of Margaret Beckett, our Environment Secretary - our new Climate Change Programme, published last month, sets out the details of our approach. And our Energy Review, concluding this summer, is examining our future energy options - including renewables and nuclear - and will set our future strategy.

Central to our approach has been our willingness to take the difficult decision to introduce a Climate Change Levy - and around it 5,000 Climate Change Agreements and the hypothecation of its revenue to goods – cutting business taxes on jobs and new carbon reducing measures.

By incentivising better energy use, the levy has increased the energy efficiency of British business by over 2 per cent each year and because of its incentive effect has done so since the measure was first announced. And in each of the next 5 years these climate change measures will cut emissions by more than 6 million tonnes, accounting by 2010 for a third of our total carbon reductions.

And what the levy shows is that by targeting the marginal use of energy, we can provide real market incentives to energy efficiency; and that by taxing bads - emissions - we have been able to reduce taxes on goods - the cut in employment taxes for business.

Nearly a quarter of carbon emissions come from vehicles, so alongside our Climate Change Levy, fuel efficient cars are being incentivised with measures that range from variable rates of vehicle duty, starting with no duty at all for the cleanest and support for bioethanol fuels to a renewables obligations on fuel companies, the share of biofuels in petrol in vehicles is being increased to 5 per cent.

And a similar obligation - and supported by financial incentives for microgeneration - is increasing electricity generation to 10 per cent.

The energy used by buildings and the products in them account for half of our emissions, so far bolder new regulations introduced this month will make new buildings 40 per cent more energy efficient than they were just 10 years ago - showing that alongside exhortation, information and incentives, targeted standards can make a difference, in the same way that new regulations for fridges cut CFCs and ozone damage 20 years ago; and the Clean Air Acts did away with London's infamous smog 50 years ago.

But our new approach also offers a way out of the trap that so often governments round the world have fallen into: we are pioneering risk based regulation which means increasingly that only on the basis of risk will we demand information, form filling and inspection.

We are recognising too that even the most basic addition of information can play a powerful role in making self-driven change happen: providing people with their right to information enables them to meet their responsibilities for environmental change.

In Britain, for consumers, we are now piloting better labelling on electric goods and smart meters in homes; for businesses, we have established a Carbon Trust that has helped over 3,000 businesses identify 700,000 tonnes of carbon savings in the last year alone and progress on this and other measures will be incorporated in the innovation of our annual carbon report to Parliament.

Here too with a global goods market - with more products than ever made in one country but bought in another - we also need global action. Today consumer goods left on standby worldwide are responsible for 1 per cent of global emissions. So Britain will propose that the EU and international energy agency bring together leading manufacturers and countries to speed up the international implementation of the 1 Watt standard for energy efficiency.

Finally, a global consensus for environmental change can only be secured if all countries can share in the benefits from action to address it.

For this to happen, developed countries must be prepared to support, with public investment, through grants or loans, developing countries in their efforts.

And we have a special responsibility to help the poorest countries to adapt to climate change and to invest in climate-friendly energy production and energy efficiency to ensure that all the Millennium Development Goals are met - not at the cost of economic growth, but to achieve it.

Indeed new alternative energy technologies not only offer the possibility of meeting Africa's growing needs; but also the potential of new exports to the rest of the world.

And when I was in Africa last week, Britain began discussions with Mozambique and South Africa on a new partnership with Brazil - today the world's largest producer of renewable biofuels - on how southern Africa could become a leader in biofuels production as well.

Yet globally there is an estimated $60 billion annual shortfall in energy investment in developing countries.

So at the G8 meeting in Gleneagles in Scotland last year, Britain proposed a new global energy investment framework.

The aim of the framework is to remove the barriers that prevent investment, by developing new financing mechanisms which leverage private and public finance from both within and outside developing countries. And in Washington tomorrow, I will propose a new public-private partnership, a World Bank led facility, a $20 billion fund for developing economies to invest in alternative sources of energy and greater energy efficiency.

I believe it is by providing in these ways for a flow of public and private investment funds for developing countries that we will be able to bring these countries into the global consensus on climate change that I am calling for today.

But globally we can do more. For just as the post-1945 international institutions were founded for new world problems of their time, we need to find ways for our institutions to meet and master the challenges of our generation.

Our international institutions are essential to global action on the environment because, as I have said, the impact is global and felt disproportionately by the poor and there can be no development without environmental care.

In the review Kofi Annan has constituted, chaired by three Prime Ministers - of Mozambique, Norway and Pakistan - and of which I am privileged to be a member, the United Nations is testing its global remit against the challenges ahead and it is clear that if we were starting afresh, environmental stewardship would play a more dominant and central role.

The UN Environment Programme based in Nairobi plays a key global role in setting global standards and ensuring that the environment is properly integrated into the UN's development and humanitarian work. And next month the Commission for Sustainable Development will launch its next two year energy strategy.

Increasingly, as a sister international organisation, the World Bank has become the key financier of environmental standards and programs in the developing world.

If we are to encourage lower-carbon energy supply, energy efficiency and adaptation to climate change, we must do more at a global level.

Take one example - while we are in the process of forming national institutes for environment and energy, research into the environment remains underdeveloped in contrast to medical and IT research work and we lack a global network.

The UN’s uniqueness lies in its representativeness, and thus accountability and legitimacy.

The World Bank has financial power and experience of long-term project investment to make the right connections between tackling environmental neglect and addressing poverty and underdevelopment.

Both can be both voices for the poor and vehicles for action against poverty.

So I believe that to meet and master the scale of the challenges ahead together the UN and the World Bank must work to create a global environmental presence that exhorts, incentivises, researches and monitors change and most of all for the developing countries is in a position - alongside the private sector - to invest in change.

And I hope that the UN review, which will report later this year, will make concrete recommendations on this new framework for environmental progress at a global level.

Great challenges require great acts of statesmanship.

And this is the right time to move from words to a commitment to deliver practical policies that can unite world opinion in a new and broad based consensus that could bring about change.

In facing up to the challenges of their times, the world leaders of 60 years ago created new international institutions - the United Nations, the IMF, the World Bank - and demonstrated by their actions that international cooperation was the best way to solve the economic challenges of the post-war world.

Path breaking statesmanship and leadership created the UN, the IMF and the World Bank. But such bold leadership also brought the Marshall Plan of the 1940s.

Starting from communist threats in Greece, Turkey and the Balkans, the statesmen of the day quickly realised that there was an even bigger challenge: the political economic and social reconstruction of Europe.

For four years America contributed 1 per cent of its GDP to the rebuilding of Europe.

But the greatest contribution was in the transatlantic trade and commerce and flows of people and ideas between both continents.

I believe that today - in the first decade of a new century –international cooperation built on bold innovative statesmanship is again the best way forward.

And by our actions we could in reality realise the ideal of an international community acting for the public good - for the present generation, and for generations to come.

But this is an endeavour that, because it has not yet been met, challenges us to reach out in dialogue and debate.

The visionaries of the 1940s understood also that the global challenges they faced required them not just to have the right policies but that they should seek to build a consensus for stability and change across the world.

And I know from experience of the long but ultimately successful journey to debt relief for the poorest countries that to build a consensus for environmental action founded on detailed practical policies for change will take time but is an essential element for success.

And I have suggested today how a progressive consensus can be built for sustainable, stable and equitable growth for both developed and developing countries.

A new paradigm that sees economic growth, social justice and environmental care advancing together can become the common sense of our age.

The scale of environmental challenge we now face brings home to us that working apart we will fail but working together we can make progress.

And by acting boldly together, it is in our power to achieve for our times what the post 1945 pioneers achieved for theirs. In our generation we can indeed make the world anew.

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