Minister Wallin: Time for action - Industry and business

Ladies and gentlemen, representatives of industry and business, climate change experts,

I am happy to welcome so many of you here today to this seminar organised by the Finnish Ministry of the Environment. Our purpose is to discuss long-term climate policy and to consider means for combating climate change. Greenhouse gas emissions have to be reduced on a global scale, rapidly and significantly, and in this effort business and industry have a key role to play as partners cooperating with the governments that implement the actions.

Governments cannot act alone nor can they act without broad support from society. A distinguished guest at our seminar is Mr Björn Stigson, President ofthe World Business Council for Sustainable Development. He will be presenting one possible model of a joint approach for the different actors involved.

Climate is a focus of keen interest at the moment, and unfortunately the weather is on our side in this respect. Last December was 6 degrees warmer than average in Helsinki, and it has been possible to play golf as though it were summer. Winters like this may become the rule rather than the exception by the end of this century.

There is a lot happening in climate policy at the moment, too. Climate change was one of the priority areas of Finland's EU Presidency, and since then the issue has gathered momentum. A week ago the European Commission published its long awaited Communications on the EU's energy and climate policies.

In Finland, too, I am happy to see that climate change is becoming one of the main themes of the March parliamentary elections.

Various players in society have also been active. The Confederation of Finnish Industries, published its policy outline for the long-term control of climate change. The Confederation's CEO is also here today presenting his comments after the keynote speaker of the day.

In addition to the exceptional weather conditions, the Stern Review, a report by Sir Nicholas Stern, has attracted massive media attention. Its basic message is an alarming one: failure to respond to the threat of climate change will jeopardise the entire development of our economies: the costs of the inevitable adaptation we will have to make will rise steeply, and more and more often we will be faced with negative impacts and damage that we cannot prepare for in advance. The economically rational solution is therefore to take determined and swift action to combat climate change. Here I am hopeful, and would like to join Sir Nicholas Stern in saying that "There is still time to avoid the worst impacts of climate change, if we take strong action now".

Science is sending out strong messages, too. The latest research findings seem to reinforce earlier estimates of global warming, and the picture they paint is even more alarming than before. This year the Intergovernmental Panel on Climate Change is publishing its latest assessment of climate change. The first part of the report will come out in a couple of weeks' time.

The next few years are going to be decisive for international climate policy

The often-repeated phrase still holds good: climate change is a global problem; it needs a global solution. The Kyoto Protocol to the United Nations Framework Convention on Climate Change has created a framework for national actions.

The first commitment period of the Kyoto Protocol ends in 2012. It is a first step, and the EU has long advocated a global agreement, based on worldwide participation, placing commitments on all and imposing emission reductions on all the developed countries. The matter is urgent, and the EU's target is by 2009 to reach agreement through international negotiations on how the system will be developed after 2012. Business and industry need certainty about the continuity of political action in order to ensure that climate-friendly investments, technology developments and applications of these are initiated and also continue in the future.

The European Commission published its Communications on energy and climate change a week ago. It outlines actions towards 2020.

The aim of the Energy Package is to ensure a reliable energy supply, to create a competitive energy market and to limit climate change. It is thus an ambitious effort to examine many difficult questions in a coherent way. The Energy Package contains many important targets that also promote the objectives of climate policy. In addition, there would be other benefits: energy efficiency, improvements in air quality and greater reliability and security of the energy supply.

The Commission's Communication on climate change stresses the importance of immediate action, which is divided into two parts: internal EU action and global action.

The internal key measures proposed for the energy sector include improving energy efficiency by 20% by the year 2020, a binding target of 20% for the share of energy sourced from renewable fuels by 2020 and the introduction of Carbon Capture and Storage technology,.

An assessment of the development needs of the EU's emissions trading system is also mentioned, and this work has already started. According to the Commission, subjects that need further study include lengthening the allocation period for emissions rights, the inclusion of new greenhouse gases in the system and exploiting carbon capture. There is also a need for a better harmonisation of emissions rights allocation, for example, by more extensive use of auctioning, and linking the EU's emissions trading system to other compatible mandatory systems such as those of California and Australia.

The means proposed by the Commission also include extending emissions trading to air traffic, and the taxation of passenger cars and transport fuel.

The aspects of the Communications that have drawn most public attention are the target figures presented. The Commission proposes that the EU should put forward a 30% reduction in emissions for developed countries by 2020. Until global agreement has been reached, the EU should unilaterally commit to cutting emissions by at least 20% by 2020. According to the Commission this target would be a signal to industry that there is a continuous demand for emissions units and would also encourage investment.

The Commission considers that the targets will be achieved by the measures proposed in the Energy Communication and by emissions trading. At the same time it believes that these measures would have to be carried out in any case to improve the reliability of energy supply.

The Communication also states that the global targets cannot be reached by the proposed emissions cuts for developed countries alone. Developing countries, too, especially the important emerging economies, should start reducing the growth of their emissions as soon as possible and start reducing them in absolute terms after 2020.

Among other things the Commission mentions developing and financing the flexible mechanisms of the Kyoto Protocol. The interesting point for Finnish industry is the proposal to study the possibilities for extending inter-company emissions trading in energy-intensive, internationally competitive industries to cover the entire sector.

Further, the Commission proposes increasing international cooperation on research and technology. There should also be an international agreement on energy efficiency standards, which would apply to the key countries producing appliances.

The leaders of the EU Member States are to make their decision on the basis of the proposals in the European Council in March. Before that they will be discussed in the Council of EU Environment Ministers, for example.

The basic principles of our present national energy and climate policy are compatible with the Commission's proposals, and some of them are already part of our strategy, for example the strong investment in technology and support for R&D projects. However, our current energy and climate strategy only covers the Kyoto Protocol targets, while the international and EU-level debate I am talking about here concerns development after 2012. This means that the programme of the next Government will have to include longer-term climate policy outlines. A long-term national climate strategy must be drawn up with the aim of finding ways to make Finland a low-carbon economy. It is high time to start updating the current short-term strategy.

Business has a central role in curbing climate change

Corporate leaders and investors worldwide are becoming increasingly aware and committed to meeting the challenge of climate change. During the past few years many forums and action groups have been set up. One of the most important of these in this respect is the World Business Council for Sustainable Development with its 150 international member companies.

Therefore, it is indeed a pleasure to have Mr. Björn Stigson, President of the World Business Council for Sustainable Development, with us here today. Particularly interesting are his perspectives on the challenges of and opportunities for shaping our future with a view to moving towards a low-carbon economy.

A crucial question is: How can governments and business work together to address climate change and advance clean energy and sustainable development?

Promoting synergies between climate change, sustainable energy and competitiveness is a key goal of the EU's energy policy.

The world's total investment in the global energy system for the next 25 years will be close to 20 trillion dollars, with half of that in developing countries. This is a huge challenge, but at the same time an opportunity. The nature of these investments will have a decisive impact on the level of global emissions for many decades to come, even beyond 2050.

Obviously, with no single magic silver bullet to address the challenges ahead, the answer to our quest is at least threefold:

Firstly, there is a need to recognise the great potential of existing technologies and, in the longer term, to develop new technologies. We cannot afford to overlook any serious option. But this is not enough. We must also ensure that promising new low-carbon options have fair opportunities in future markets and that they will be deployed all over the world.

Internationally, technology cooperation should be further increased. Nationally, I have recently proposed that Finlandshould allocate one per cent of the proceeds from state property sales for the development and deployment of climate technology. Not only would such investments help us meet our emissions requirements, but they would also increase our competitiveness, boost exports and create jobs.

Secondly, we need to use innovative market-based instruments to ensure investments in climate-friendly solutions. The European Union has stressed the importance of carbon pricing as an incentive for low-carbon technology development, deployment and diffusion.

But there are also other instruments, such as public procurement policies. For example, the rapidly expanding heat pump business sector in Sweden and elsewhere largely originated from a targeted technology procurement exercise.

Finally, we need more innovative financing for investments in those climate-friendly solutions that are already cost efficient. In developed countries, most of the financing in new investments comes from the private sector, whereas, in developing countries, most investments are governments-financed.

These are the basic starting points from which approaches to using the supportive funding available from national, bilateral and multilateral resources should be developed. For instance the Nordic Environment Finance Corporation has innovatively captured the benefits of energy conservation projects where the investments often pay back in a very short time.

Ladies and gentlemen,

In curbing climate change, business and industry play a key role. For this reason I am particularly encouraged to see such a representative group from significant enterprises here today, participating in the discussion.

Limiting climate change is after all a joint concern, in which all countries and sectors of society must be involved, if we want to achieve significant results. It is my hope that this afternoon?s session will provide ideas and support for both business and industry and for government action.

As I said at the beginning, there is a lot happening in climate policy today, and unfortunately this affects my possibility to participate in the discussion in this seminar. I will soon have to leave for the parliament to take part in the debate on a question to the Government on the response to climate change and the related energy choices.

Nevertheless, I wish you all a rewarding and thought-provoking seminar and I am convinced that the discussions today will help the us to respond to the enormous challenges presented by climate change!