Speech by Rt Hon Hilary Benn MP at the Environmental Industries Commission - "Climate Change Bill – Implications for Business", London – 24 April 2008
Introduction
It is pleasure to be with you today.
And how appropriate that this event should be held here, in the Cavendish Conference Centre. A name forever linked – through Henry Cavendish – to the study of atmospheric gas, which after-all is what climate change is all about.
It is a particular pleasure to be here because the Environmental Industries Commission represents a truly dynamic sector of our economy – and is celebrating 30 years in existence. The EIC and its members have demonstrated responsibility, innovation and leadership in business – and I want to take this opportunity to thank you for the work you do.
Of course you don’t need me to tell you that environmental industries are undergoing a revolution. The sector in the UK is growing from a 2006 base of £25 billion, to a projected £34 billion in 2010 and £46 billion by 2015.
The market for environmental goods and services is growing by the day.
Indeed, it is estimated that industries such as renewable energy, waste management and water treatment will be worth $700 billion globally by 2010. As big as giants such as aerospace.
And the market is set to expand as worldwide take-up of green products and services increases. By 2050, the annual value of the low carbon energy sector could be as high as $3 trillion, as every industry becomes – in some sense – an environmental industry.
So the prize for the UK is to lead this transformation.
In the next two decades I want to see one million jobs for the UK in this sector – both in manufacturing and services.
I want a generation of Britons to be able to work in a fast growing renewables industry, exporting British technology and energy sources to the rest of the world.
And in a growing and increasingly competitive market, I want to ensure that environmental industries in the UK have the support they need to become world leaders in their field.
So why is all this happening?
We are living through a period of seismic change – in environmental and political terms – the scale and outcome of which we cannot wholly predict.
As I speak, preparations are underway in capital cities around the world for next year’s negotiations in Copenhagen on a global deal on which the future of our planet will rest.
And in homes and communities around the world people are realising that climate change is no longer a problem just for environment ministers to talk about with other environment ministers or with environmental groups. But that it is a problem for all of us. It concerns our society, our economy, our security and our politics.
We are already starting to see some of the effects here in the UK.
The summer of 2003 was Europe’s hottest in 500 years. That heat-wave caused 28,000 premature deaths.
Last summer Europe was racked by severe storms and forest fires. While in the UK we experienced our worst flooding in 200 years. I was appointed to this job just as these floods struck and I saw the devastation they caused.
Visiting places like Doncaster and Toll Bar I talked to people whose homes were ruined, businesses wrecked and lives thrown into disarray.
And though it is impossible to prove that any single event has been caused by global warming, we can see trends emerging. The evidence suggests that these extreme weather events will become more frequent.
In my former job, I also visited places in the world where there was not enough rain and people were forced to move to where they could be survive.
So let’s be clear. In the UK and in other countries, climate change will mean more upheaval, more storms, more flooding and more droughts.
Unless we act now.
So in reacting to climate change, we must change the way we live, and change the way we do business. We cannot separate ourselves off from the rest of the world.
And, as ever, change stands shoulder to shoulder with opportunity.
The UK is a net-exporter of environmental goods and services but of course competition is fierce. France and Germany account for almost half the total turnover in the sector across the EU, and there is growing competition from developing economies.
To seize the opportunities of the transition to a low carbon economy that Nick Stern’s report on the Economics of Climate Change set out so clearly, government and industry must work together.
Government must work to provide industry with the framework that it needs. And industry – the EIC and beyond – must respond to the challenge.
Today I’d like to set out how I think we can achieve this.
The Climate Change Bill
The Climate Change Bill provides the stage on which all our policies will play out.
And let’s remember just how radical this Bill is.
When I talk with environment ministers from other countries, it’s clear to me that the eyes of policymakers across the world are on this Bill. They are wondering whether they should – or could – adopt something similar.
With this Bill we have become the first country in history to propose a legally binding framework to reduce carbon dioxide emissions.
This will fundamentally change our economy and our politics, placing the environment at the heart of everything the government does and every decision it makes. Under this new system every policy will be assessed for its carbon effect - across all sectors of the economy, including energy, transport and housing.
And the practical implications of that framework will be clear when the first ever national carbon budget is published – alongside the financial budget – in just 11 months time. We will then have budgets set for the next 15 years. What this means is that we will have to live within our means. We’re used to this in a financial context, but we’ll now have to live within our carbon means and think about what the implications are if we go overdrawn at the carbon bank.
The Bill sets a course for the UK to reduce emissions by at least 60% by 2050, with at least a 26% reduction by 2020.
The Committee on Climate Change will then advise on these targets, and how we reach them. And because we know the science is changing, the Prime Minister has asked the Committee to advise on whether the long term target should be higher – possibly up to 80%.
The Bill also creates a framework for dealing with the impacts of climate change.
So, for the first time, we are putting action to adapt to climate change on a legal footing. We are creating a new legal requirement to regularly assess the risks that climate change poses to the UK, and to set out a programme to respond to these risks. And as ever, this will bring opportunities for investment.
Through the Bill we are providing the broad framework that business will need to navigate through this period of change. This is based on three core principles: transparency, accountability and stability.
Transparency about what we’re doing, how we’re doing it, and what we’re achieving.
Accountability through publishing details on progress towards our targets, and the reports of the Committee on Climate Change, so that everybody will be able to hold us to account on our progress – year after year.
And stability through 5 year carbon budgets, set three periods ahead, providing business with increased certainty and the ability to plan for the future.
This is the clear, long-term, and legal framework that industry has been calling on government to provide.
I recognise the challenges that businesses face. Challenges that vary hugely for small and large businesses – from SMEs to multi-nationals.
And so I want to propose a deal – to all businesses in the UK.
I will pledge to support you in your efforts by providing the framework within which to operate, the means to do so and the incentives to reward good practice. And in return I ask that you rise to the challenge to make the UK a world leader in environmental innovation and responsibility.
After all, partnership and dialogue are vital here.
In government we are taking practical steps to be as open as possible. The mandatory impact assessments that we rightly apply to all major policy decisions must now include the emissions that would result.
And on procurement, Whitehall must now consider the environmental impact of all decisions. And they will be supported in this by a new Centre for Expertise in Sustainable Procurement.
And then there’s corporate accountability in reporting emissions – something in which there has been a lot of interest of late.
The Government has been a keen supporter of voluntary reporting schemes, such as the Carbon Disclosure Project, in recent years. Indeed this Project has now established itself as the gold standard for carbon reporting – the largest investor collaboration in the world.
And the value of such schemes can only grow as customers and investors increasingly want to know – and expect to be told – just how green companies are and what their carbon exposure is.
I have been delighted with the positive response of companies to calls from their investors to disclose details of their emissions – with over 90 of the FTSE 100 taking part.
At the World Economic Forum in January a new scheme was announced with the aim of developing an international standard on reporting emissions to allow investors to compare information. We can’t end up with a VHS and a Betamax system. We need one agreed standard.
So with this in mind we are looking at the issue of mandatory corporate reporting in the Climate Change Bill.
In my view it is something that we must seriously consider, and I would strongly welcome your views on the likely costs and benefits.
Delivering on our targets
I have set out our framework for the transition to a low carbon economy But of course frameworks do not cut emissions.
Individuals, communities and businesses cut emissions.
So now I’d like to explain the practical ways in which we are trying to enable business to play its part – and to take advantage of the opportunities that are on offer.
First – through carbon trading.
The most effective way of reducing carbon emissions is to give carbon a price.
That’s why we are in - and strongly support - the EU Emissions Trading Scheme. This caps emissions from the biggest polluters across Europe, covering almost half of the UK’s emissions, and then lets them trade amongst themselves, so creating a carbon price. The first phase didn’t get it quite right, but we are correcting this. This is the only fully operating scheme in the world at the moment and we absolutely need it.
Alongside this, we are setting up a new trading system in the UK to reduce emissions from large organisations and the public sector, from supermarkets, banks and department stores, as well as Local Authorities and all Government Departments. In total around 5,000 organisations will be involved – all with an energy bills over £500,000.
The scheme will deliver carbon savings of at least 4MtCO2 by 2020 – equal to taking more than a million cars off the road.
The participants stand to benefit too, as all the money raised will be recycled directly back to them, and of course they will also reap rewards through lower energy bills.
In developing a vibrant low carbon economy it is vital that we do not generate unnecessary regulatory burdens. But carbon trading provides a great deal of flexibility for industry in how it responds.
Indeed the fact that the UK acted early on carbon trading allowed the City of London to establish itself as the world leader for trading CO2 credits – a potentially vast new market. This lesson in acting early, is one which I believe we can apply to other areas of policy to great effect.
A further financial mechanism is the Climate Change Levy, which taxes energy use by industry, commerce, agriculture and the public sector, adding about 10% to average energy bills.
This encourages business to improve energy efficiency levels and has saved over 16 Mt CO2 since we introduced it in 2001. And again to strike a fair deal with businesses we accompanied the Levy with a reduction in employers’ National Insurance Contributions, enhanced capital allowances and reinvestment through the Carbon Trust.
This brings me to the second way that I want to help businesses – through investment in innovation and skills.
In a competitive market we will only get ahead through leadership – through taking the biggest steps, and taking them first.
It was Lloyd George who said: ‘Don't be afraid to take a big step if one is indicated – you can't cross a chasm in two small jumps.’
And so to develop the talents of the British people, we are setting up a National Skills Academy for the Environmental Industries.
And in government we are acting to build expertise and spur investment and leadership. For example, our commitment to build five zero carbon eco-towns by 2016 and up to ten by 2020, will mean that the UK is acting early - developing the expertise and the technology which we can then export to others.
I want to remove barriers to innovation and invest in its development.
Just this month our Environmental Transformation Fund came on stream – this is a £400 million investment programme to support development of low carbon and energy efficient technologies.
Meanwhile through the Energy Technologies Institute, funded partly by our Environmental Transformation Fund, we are aiming to invest more than £1 billion over ten years in new energy technologies, in partnership with the private sector.
And we have committed to fund the first post-combustion coal carbon capture and storage plant in the EU. We need more of them. The EU said it would build 12, but at the moment we only have 1 in the pipeline and this is being built in the UK.
You will all have heard the incredible reports of coal-fired power station construction in China – one a week at the last count. Imagine if we could export the technology to significantly reduce those emissions.
The final way we should create opportunities for business is through action on energy production.
The measures set out above will help to reduce our energy consumption by increasing our energy efficiency. But that isn’t enough. We also need to move to an economy primarily powered by low carbon energy.
And we are already achieving a great deal. This year we will overtake Denmark as the country with the highest operating offshore wind capacity in the world.
Earlier this month I visited the offshore windfarm at Kentish Flats. Some 10 kilometres out to sea – and, when the haze lifts, just visible from the shore. The windfarm has 30 turbines, capable of supplying the equivalent of over 100,000 homes with clean, renewable and sustainable energy. 100,000 homes – from just 30 turbines.
I took a ride out from Whitstable Harbour on the ‘Celtic Storm’ to see the turbines up close. I was truly impressed – each one stands some 40 stories high. And the UK has the capacity, given our geography and our existing oil platforms, to explore this technology and create further opportunities for business.
In the UK we have some of the richest renewable resources in Europe.
We worked hard to get agreement on the EU target of delivering 20% of all Europe’s energy from renewable sources by 2020. And we are completely committed to meeting our share. We will shortly be consulting on how best to meet our target, and again I welcome your views.
Commission on Environmental Markets and Economic Performance
In the light of the Stern Review, Gordon Brown established the Commission on Environmental Markets and Economic Performance. The Commission was tasked with advising the government on how the UK can make the most of the potential economic benefits of the transition to a low carbon economy. The Commission reported its findings last November and we will shortly publishing our response.
Conclusion
We are approaching a pivotal moment in our history on this planet.
Are we able – and willing – to make the changes in our lives and our businesses that will help the world to achieve a 50% cut in emissions by 2050? This is a global challenge and a political challenge. Ultimately we’re going to have to find a way to divide up a finite quantity of greenhouse gases between the citizens of the planet. We haven’t yet got a fair and equitable world or a way of doing this.
When it comes to the negotiations in Copenhagen at the end of next year, I want us to show that legally binding targets on emissions can work. That the economy does not have to suffer as a result. And that our environmental industries are thriving.
It is up to all of us to seize that opportunity.
Thank you.
Page published: 3 April 2008