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Sanjeev Kumar Sanjeev.kumar@e3g +32 499 539731

Sanjeev Kumar Sanjeev.kumar@e3g.org +32 499 539731. Managing risk: Why the 30% GHG target is important for GDP, political security and economic growth. Climate Summit, Budapest. 19 January, 2011. E3G

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Sanjeev Kumar Sanjeev.kumar@e3g +32 499 539731

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  1. Sanjeev Kumar Sanjeev.kumar@e3g.org +32 499 539731 Managing risk: Why the 30% GHG target is important for GDP, political security and economic growth.Climate Summit,Budapest. 19 January, 2011 E3G - Third Generation Environmentalism

  2. E3G - Third Generation Environmentalism E3G • Independent, non-profit European organisation working to accelerate the transition to sustainable development. Based in London, Brussels, Berlin, Washington and Beijing. • Programmes of work on climate diplomacy, climate security and low carbon economy • Advises on international climate strategy to major EU governments, Most Vulnerable Countries, International NGOs and charitable foundations

  3. E3G - Third Generation Environmentalism Contents • What are the risks? • The case for doing nothing • Expectations from the Hungarian Presidency

  4. E3G - Third Generation Environmentalism Risks facing the EU Economic External Competitiveness

  5. Source: Climate Change impacts in Europe. PESETA (2010).

  6. Large Uncertainty around Climate Sensitivity – mainly on negative side Source: UK CCC, 2008 Source: NOAA, 2009 6

  7. E3G - Third Generation Environmentalism Estimates of likely impacts have been growing over time 2C Source: Smith et al., 2007 Dangerous Climate Change: An Update of the IPCC Reasons for Concern 7

  8. Economic: Annual damage to GDP from climate change impacts Source: Climate Change impacts in Europe. PESETA (2010).

  9. Source: Climate Change impacts in Europe. PESETA (2010).

  10. E3G - Third Generation Environmentalism Competitiveness: Innovation, markets and wealth • Producing products and services to satisfy demand. Protectionism and delaying investment reduces gives competitive advantage to the EU’s economic rivals. • Global market for low carbon goods & services was worth over €3.4 trillion in 2008/2009 (Source: UK Business Dept for Business & Enterprise 2009). • At €467 billion, climate revenues from the equity market have now outstripped the aerospace and defense sector, and could exceed $2 trillion (€1.76 trillion) by 2020 (Source: HSBC Annual review index 2009).

  11. Competitiveness: Investment drivers E3G - Third Generation Environmentalism

  12. E3G - Third Generation Environmentalism Competitiveness: China’s importance • 14% of EU GDP is dependent on Chinese imports. (Chatham House 2008). • China is major export market and greater value to EU than US as of 2008. • China plans to spend $300 billion into dedicated high-speed-rail corridors by 2020. (Business Green) • 2010 target to create 1 million electric cars by 2020 from 10bn Yuan fund. (China Daily) • China spending more than any other G20 on low carbon energy (Pew Centre). Most attractive centre for Renewables beating US and Germany.

  13. E3G - Third Generation Environmentalism External: European security most at risk than other OECD economies

  14. E3G - Third Generation Environmentalism External: Africa is extremely vulnerable 2000 2050 E3G 14

  15. E3G - Third Generation Environmentalism End of cheap conventional oil

  16. E3G - Third Generation Environmentalism External: Energy geopolitics • Oil: • EU is major importer of energy. IEA estimates EU energy imports cost €54bn in 2010. OPEC agreed to produce more to keep prices below $100 barrel (18 January 2011 – FT). • EU produces 14% of oil that it consumes. 44% imported from Russia (29%) and Norway (15%). • Since 1998, diesel consumption growing and gasoline consumption falling. Refining capacity has remained split since. So diesel subsidy policy driving closure of gasoline refining capacity increasing oil dependence. • Gas: • 26% of gas is imported. Main EU producers are UK and Netherlands. Imports come from Russia (42%), Norway (24%), Algeria (18%) and Nigeria (5%).

  17. E3G - Third Generation Environmentalism Contents • What are the risks? • The case for doing nothing • Expectations from the Hungarian Presidency

  18. E3G - Third Generation Environmentalism The case against: It’s too costly • 40-80% of the additional target can be delivered through no cost measures (CE Delft). Additional 16MtCO2 can come from lucrative and high-value electric car market (Ecofys). • Energy savings are immense: EU energy import savings of €68bn per year (European Commission). Additional €96bn per can be saved if oil price increases to $148 per barrel (E3G). • High-value 30% target should generate €45bn. Additional €30.5bn from health-related benefits (HEAL and HWCH Europe).

  19. E3G - Third Generation Environmentalism The case against: Our companies will leave if no one else does anything…. • EU ETS is largest industrial subsidy in the history of the EU with all sectors making windfall profits. • Commission estimates 2.4 Gt CO2 of banked allowances and unused international credits in the system by 2020. So ETS not effective until after 2028. (European Commission, May 2010). • ETS 3rd Phase oversupplied by 99 MtCO2 of allowances. Even if the EU moves to a 30% reduction target and imposes quality restrictions on CDM credits, it would take until 2017 for the market to absorb the excess allowances from 2nd Phase. (Societe General 2010). • PRIMES model estimates EUA price of €16 by 2020 and €18 by 2020. Today’s is €14. (PRIMES 2010). • Cement, steel, power generation sectors subject to serious cartel abuse which damages the rest of the EU economy. . • Other regions are implementing polices: China 5 year plan, Indian energy efficiency scheme, Californian ETS.

  20. E3G - Third Generation Environmentalism Contents • What are the risks? • The case for doing nothing • Expectations from the Hungarian Presidency

  21. E3G - Third Generation Environmentalism Expectations from the Hungarian Presidency Finance Climate Energy Climate

  22. E3G - Third Generation Environmentalism The priorities for the Hungarian presidency • Functioning internal market: liberalisation and competition in the cement, steel and power generation sectors. New regulatory system needed to reward energy savings, drive grid investment in electricity markets. • Financing transformation: Maximising use of EU Budget to deliver transformative change. • Low carbon industrial policy: Electric car market is vanguard of low carbon world. Large source of green jobs, reduces oil dependence, stimulates new regional infrastructure investments. • Climate target: Identifying the optimal design of the climate target. • Securing Head of State Commitment for unilateral move to a domestic 30% GHG target in the March European Council meeting.

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