John Hutton : 2008 Climate Change Speech

Below is the text of the speech made by John Hutton in Brazil on September 2nd 2008.

Good morning.

I’d like to start by thanking the British Embassy for organising this event with the CBI and the CNI. For me, it seems only natural that Brazil and the UK work together on the issue of climate change. Brazil continues to play a leading role in pushing forward the climate change agenda internationally. And we in the UK are keen to build on this and to work with others to make the transition to a low carbon economy a reality across the globe.

Tackling climate change and ensuring energy security are, I believe to be, two of the greatest challenges that every country today now faces. Both are interrelated and both requiring global solutions. The work of CBI and others here today in Sao Paulo, convinces me even further that we need to work together to tackle these enormous challenges.

Because we cannot afford to wait.

The science is clear and beyond doubt. Human activity is causing changes to our climate. Do nothing and we threaten lives, economic growth and the standard of living of all of our citizens.

Nicholas Stern argued this point persuasively in his report for the UK government. Inaction will cost the equivalent of between 5-20% of global GDP. Taking early action to stabilise global emissions at an acceptable level will cost the equivalent of maybe 1-2% of global GDP. That’s the equivalent of being as rich in 2051 as otherwise would have been in 2050. Is that an unreasonable price to pay?

We can already see some of the economic and human costs associated with more extreme weather events. The occurrence of climate-related disasters in this region increased by 2.4 times during the periods 1970-1999 and 2000-2005, continuing the trend observed during the 1990s. Only 19% of these events have been economically quantified between 2000 and 2005, representing losses of almost $20 billion. In Brazil in 2001, I understand that a combination of increased energy demand and droughts affected hydroelectric supply, which amounted to a GDP reduction of 1.5%.

Brazil, as a leading economy, is right to take into account the potential costs to its economy and people. For this reason, I understand that a consortium of leading Brazilian institutions has embarked on Stern type study, looking at the economic costs as well as the opportunities of climate change here in Brazil. The UK government, as a friend and partner with Brazil, is happy to be supporting this initiative because we know how informative it was to our own thinking. Because we must all understand the economics as well as the science of climate change if we are to make the most cost effective interventions that can help achieve what I think should be our twin goals – firstly reducing green house gases to reduce the threat of climate change and secondly securing economic growth and prosperity in the future.

But climate change is not just a threat – there are countless opportunities as well. Opportunities for those countries in particular, those businesses and entrepreneurs who see that a high growth and low carbon economy are not incompatible. And there are opportunities too for those who move first, to deliver new technologies, create new jobs and drive economic growth.

Now of course some companies are looking to exploit new markets and technologies. Others are looking to become more energy efficient. Others are acting to enhance their corporate image and reputation, something which is increasingly central to the value of any brand or product.

But whatever drives these companies, the benefits of this work are huge.

Globally it is estimated that environmental industries will be worth $700bn by 2010 – equal to the size of the global aerospace industry.

While by 2050, the overall added value of the low carbon energy sector alone could be as high as $3 trillion per year worldwide.

Globally, a record $73 billion has been invested in green technologies this year. And of course green jobs also mean more jobs. This could employ more than 25 million people, creating a new generation of green collar jobs, spreading wealth and opportunity in countries across the world. A country with an energy mix containing 20% renewables can create twice as many jobs as a purely fossil fuel based economy. And we in this room all know the advantage that Brazil has in the renewables market.

Given the scale and urgency of our climate change challenge, the leadership of the global business community in this area can only increase in importance.

So how do we enable more businesses to seize these opportunities and help build our low carbon economies in the most cost-effective way possible?

Firstly, I believe Governments can help by creating the right incentives and frameworks to stimulate the deployment of new technologies. And at the heart of this work, there must be a commitment to competitive energy markets.

It is often very tempting in the face of high energy prices and the speed with which we need to decarbonise our economies, for governments to steer towards over-regulation, protectionism and away from market-based solutions.

But the transformation of global energy systems will require an enormous amount of investment in the decades ahead that in the end, in my view, only open, robust markets can deliver.

And as more and more countries compete for the people, finance and technology to make their own, low-carbon revolution a reality, we also know that the actions of government can make the critical difference between investors choosing to invest in one country over another.

So it is essential governments create the most stable, predictable and attractive regulatory environment to encourage companies to invest. And give investors the confidence and certainty to choose our markets as the right place to do green business. We can use the power of markets to provide the impetus for change and innovation – both of which will be needed to deal with the challenges that confront us all.

So this market-based approach applies not just to energy supplies but also to tackling climate change by cutting carbon emissions.

The UK is part of the EU Emissions Trading Scheme, which caps emissions from the electricity generating industry among others. We are making our 60% emissions reduction target for 2050 legally binding, and as the EU-ETS establishes a meaningful price for carbon, it will ensure the reductions are made in a cost-effective way. I believe the EU ETS is already starting to emerge as a model for carbon trading worldwide. UK/Brazil low carbon links

Secondly, we must build strong bilateral and multilateral relationships to share our expertise and help diversify energy sources, suppliers and transit routes.

Trade between our two countries began two centuries ago, when the UK Royal Navy helped to open up Brazilian ports.

In recent years, it has increased by more than 20% – totalling over £3 billion in 2007 – and matched by significant growth in bilateral investment.

The future development of low-carbon industries and solutions offers us even greater chances to build on this success.

An excellent recent example of business co-operation between our two countries has been the development of Clean Development Mechanism projects under the Kyoto Protocol.

Brazil has been a leading host country with over 290 CDM projects – a significant number involving UK companies.

Brazil is also a world leader in the generation of renewable energies such as hydro power and biofuels. And the UK is keen to learn from your knowledge and experience.

We have recently set measures aimed at delivering a ten-fold increase in our use of renewable energy by 2020.

And although we’re making substantial progress to grow our renewable energy sector, especially in the area of offshore wind generation, I think in the UK we need to go much further, much faster, and develop a range of renewable sources in the future.

By 2020 we’re aiming to source up to 10% of our road transport energy consumption from renewables – in line with the EU target.

We expect biofuels to play a big part in this. I believe there are huge opportunities in UK and EU markets for Brazilian biofuel.

Studies already show that Brazilian bioethanol can save up to 89% in greenhouse gas emissions when compared to fossil fuels. And your long-standing expertise in biofuel technology and as an ethanol exporter is invaluable.

There is also huge potential for co-operation between UK and Brazilian automotive companies in the design and delivery of flexfuel cars.

But first we need to gain agreement on sustainability issues to give business, government and individuals the certainty and confidence they need to act. Events such as the forthcoming international biofuels conference here in Sao Paulo will be critical to encourage international discussion and agreement in this area.

Facing up to the scale of the challenge presents the international community with immense opportunities. We are negotiating a new climate change agreement that will govern global emissions in the future to ensure we avoid the worst case scenarios of climate change. This is not an easy process – and alongside the DDA is an area of foreign policy today where a truly global effort is required to succeed.

This framework will not only have long-term environmental implications but, perhaps more importantly for those here today, it will form the basis of a long-term economic framework setting the planet on a low carbon path.

If we can achieve an ambitious global climate change deal next year in Copenhagen, we can move swiftly to a low carbon economy. An economy in which businesses like yours and ours can manage the risks and maximise the opportunities presented by a low carbon future.

We cannot be complacent. And we must recognise that there is no easy, cheap or risk free option before us. It will take a global mobilisation of leadership and resources. If we fail, the economic and social cots will be great.

As governments, businesses and individuals, we must act now to tackle climate change by reducing our carbon emissions, enhancing energy efficiency and adapting to some of the inevitable consequences of climate change. Consequences which will change our businesses, our livelihoods and lives.

But I would like to leave you with this final thought. We must see this as an opportunity – an opportunity for closer working, sharing of knowledge, expertise and technology. Making the investment now that will help secure our future prosperity, with economic security and, perhaps most importantly of all, continued progress in the fight against poverty and disadvantage across the globe.

Thank you very much indeed.