Presentatie voor de Stichting EFACT bij het congres over de economische effecten van klimaatverandering, gehouden te Tilburg op 27 september 2007.
Alleen het gesproken woord geldt
Ladies and gentlemen,
It is a great pleasure to be here in Tilburg to discuss one of the great challenges of today, tomorrow and many years after.
After an intense and very rich programme, I have the honour to deliver one of the two closing lectures. That is not an easy task since all relevant perspectives have already been high lighted by more than qualified speakers in the numerous conference sessions.
Let me start with some introductory remarks.
First of all, it is good news that the media attention for climate change has put sustainability back on the political en public agenda. In the Netherlands, sustainability is one of the top priorities of the new government.
In my view, the debate about the climate change has to go hand in hand with the discussion about the effects of globalisation. There is no doubt that globalisation holds a promise of great opportunities for millions of people in developing countries. Travel through China and India and you will see what I mean. There is also no doubt that rapid economic growth requires strong political guidance to address its negative side effects. Strong political guidance is needed in order to avoid social misery for the weakest groups in society. Strong leadership is also crucial to preserve our natural habitats and to secure our future environment.
To fully address climate change, a global policy is needed which is ambitious but realistic. I fully agree with Nicholas Stern that the international response has to be based on a shared understanding of long-term goals and agreement on frameworks for action. That means that every country should contribute to the solution of the climate change problem in proportion to its ability. It can do so by intensifying its energy conservation efforts, encouraging the development and use of sustainable, low-CO2 energy, and making rapid progress in the area of “clean fossil fuels”.
We have to be realistic, however. Scarcity of fossil fuels and other raw materials is putting international relations under ever increasing pressure. Alain Greenspan’s recent remarks about the real reason for the American invasion in Iraq are a fine illustration of that. The power play of Mister Putin with regard to Russian gas is also damaging to a constructive international dialogue. We can add the hunger of the Chinese for raw materials, resulting in growing and intensive activities on the African continent. One can have serious doubts whether this Chinese involvement is in the interest of African development.
Against this background, EU-leadership
is of great interest. The EU should take the lead in establishing an ambitious follow-up to the Kyoto agreements.
It is also extremely important that the European countries succeed in their efforts to put forward a common European energy agenda. In an integrating European economic and energy market, energy and climate policies can only be effective if common problems are tackled in co-ordinated action. This co-ordination regards policy directions, policy instruments as well as adequate market conditions. Fortunately, the European Commission has recently initiated several activities in this field. An important instrument with great potential is the EU’s system of trade in CO2-emissions. Under the right conditions, this instrument can make a major contribution to climate policy. This is why, the EU should press for the global introduction of CO2 emissions trading.
I just mentioned the US, Russia, China and the EU. Does that mean that national policies of small European countries like the Netherlands are less important? By no means. It is my strong believe that the Netherlands can play an important role in the transition towards a more sustainable, low carbon economy. I will go into this in more detail in the second part of my introduction, when I will discuss energy and climate policy on the basis of recent advisory reports issued on the subject by the Social and Economic Council. Then, I will also focus on the role of the various stakeholders in the transition process towards sustainability.
Before doing that, let us first discuss the key elements we need in order to address climate change effectively.
In my view, three factors are crucial.
The first one is leadership, leadership on all levels.
In addition, business has to be stimulated to invest in eco-efficient innovations, since technological progress is one of the main drivers towards a sustainable future.
A third essential element is the support from society to speed up transitions from unsustainable to sustainable methods of production and consumption. Leadership On the global scale
leadership is necessary to develop more adequate mechanisms to tackle growing greenhouse gases in the post-Kyoto era. As Sir Nicholas Stern rightly writes in his report, one of the problems is that the poorest countries and people will suffer earliest and most. These countries are not in a position to make the big difference in world politics.
Another problem is the fact that we are forced to look a long way ahead – a hard task for every policy maker who wants to be re-elected. Although it is clear that politicians cannot avoid taking unpopular measures, we also know that it is not easy to resist popular pressures to refrain from painful policies. Eco-efficient entrepreneurship
It is evident that technological breakthroughs are the key to a more sustainable world.
Therefore, it was a very good initiative from the Dutch Presidency of the European Union - in the second half of 2004 - to put the theme of ‘eco-efficiency
as economic opportunity’ on the Union’s political agenda.
Eco-efficient technologies simultaneously offer economic opportunities and benefit the environment. The motto ‘Clean, Clever and Competitive’ is quite illustrative.
The advantages of eco-efficient technologies and innovations enterprises may be evident, their adoption by industry is another matter.
From the perspective of corporate strategy, eco-efficient investments are mainly driven by expected results, quality improvement and changing market needs. Eco-efficient innovations can have a positive effect on each of these factors.
However, the fact remains that various trade-offs
often stand in the way of individual companies implementing environment-friendly innovations. These include sunk costs and learning effects that make it difficult for companies to switch from one technology to the other. In addition, the introduction of new technologies is often accompanied by a number of uncertainties, regarding their reliability, for instance. Investments in innovative new technologies must also be weighed up against other possible uses of the resources available (i.e., opportunity costs).
In environment-related sectors, the expectation that the global market for environmental goods and services
will grow strongly in coming years – with new products, new market opportunities and new markets – is an important driver. Significant export opportunities will arise for European companies, particularly in fast-growing economies such as China or India, which are increasingly facing environmental problems.
To illustrate this, I would like to refer to the announcement Philips made a fewdays ago, that in the next five years they want to double their share of green products. In 2012, 30 percent of their world wide sales must come from environment-friendly products.
At the same time, social and political pressure can clearly guide companies towards eco-efficient behaviour that goes beyond just complying with the minimum legal requirements. This touches on corporate social responsibility
, which concerns issues such as positive image-building and improved relationships with stakeholders. These stakeholders include employees (i.e., making them proud of their company), other companies in the same chain (i.e., suppliers and buyers), customers, the physical community in which the company is located, and the government.
There is no doubt in my mind that this element also plays a role in the Philips strategy I just mentioned. Support from civil society
Support from civil society (including the business community) is important for several reasons. In today’s complex societies top down policymaking is increasingly ineffective. Civil society can offer information which is not directly available for policy makers, for instance regarding the preferences and needs of groups concerned.
Another reason for civil society involvement is that it can create commitment. Especially when policy changes affect the direct interests of large groups of society, it is important that the people concerned recognise the sense of urgency and agree on the goals and policy direction of reforms.
Involvement of civil society also opens up opportunities for public-private partnerships. This type of cooperation is of growing importance in the Netherlands.
Today, a great deal has already been said about climate and energy policies. I will therefore limit myself to what I consider the very promising policy on energy transition introduced by the Dutch government in 2001. At that time, Mister Jan Pronk was the responsible Minister for the Environment.
For a long time, policymakers – and more particularly economists - thought that if you make polluters pay for the damage they cause, producers would have sufficient incentives to change their behaviour in a sustainable direction. Recent insights from evolutionary economics show, however, that making companies directly accountable for the environmental costs they incur is not enough to ensure eco-efficient breakthroughs. Account must also be taken of the increasing economies of scale of existing technologies (i.e., the lock-in effects) and the high costs of new technologies that are still at the very start of the learning curve.
The government can stimulate new technologies by creating a favourable environment, for instance by creating or stimulating niche markets. In this type of protected market segment (e.g., solar cells or heat pumps in the construction sector), a new technology can benefit from economies of scale and learning effects.
This insight plays at the background of the energy transition policy.
The key element of the energy transition policy is the switch to sustainable energy management. – a process that will take many decades to complete. Whereas the current policy is set on achieving various targets by 2010, the transition policy focuses on the period post-2010. The transition policy involves a mix of technological, structural and cultural changes designed to ensure that energy needs are met in a completely new and sustainable way. Among other things, the transition policy requires an administrative revamp. In other words, more effective cooperation between government, market operators, knowledge institutes and civil society organisations. Thus, while government is certainly not the only player in the transition process, it is quite clearly expected to lead the way. Government gives targeted direction to an uncertain, complex and interlinked process. Government is a stimulus, putting in place the requisite conditions, acting as a link between stakeholders and making sure agreements are met.
Six platforms – public-private partnerships – have now been set up to consider the main energy transition issues. They regard green raw materials, sustainable mobility, chain efficiency, new gas, sustainable electricity supply and energy in the built environment. The platforms initiate and broker projects relating to various issues. Their aim is to create innovative opportunities for Dutch companies and other organisations and to identify problems in policy and legislation. Proposals of the platforms have led to the selection of 26 so-called transition paths that have the potential to achieve the aim of energy transition. In making its selection, each platform has considered which transition paths offer the best prospects from the perspective of the Dutch economy and the environment.
The aim of achieving a sustainable energy supply within just a few decades can only succeed if all the parties involved do their share. Besides the government, trade and industry, labour and management, business and sector organisations, environmental organisations and consumers (and their representative organisations) must each take responsibility and do their part.
I will illustrate this with some examples from a recent SER advisory report. Business and sector organisations
can enhance the energy awareness of SMEs by means of information and demonstration, promote energy conservation and encourage the use of new “clean” energy technologies (best practices). Dialogue and advice
can also generate broad support for the energy transition policy. Here, the Social and Economic Council has a role to play. But also other ngo’s are involved in the dialogue with policy makers.
Stakeholders also are in a position to accelerate processes within the energy transition policy by entering into public-private agreements
. The Netherlands has a rich tradition in this field. A good example is the consensus reached in energy efficiency covenants in the energy intensive industry.
In addition, banks, pension funds and other financial institutions
can support the switch to a sustainable energy supply by adjusting their lending conditions and setting up specific types of investment funds.
Ladies and gentlemen,
Climate change and sustainability are today’s hot items. In politics, but also in business.
At the end of last year, for example, Dutch business leaders wrote an open letter to the leaders of the Dutch political parties in Parliament in which they expressed their concern about the possible effects of climate change and publicly called for action. They invited the new government to develop a long term global vision for the sustainable management of our natural systems, as well as clarity on who bears political responsibility for that agenda.
At the same time, several companies have launched ambitious programmes aiming at CO2
The new Dutch government which took office on 22 February this year has laid down ambitious climate and energy objectives. Increasing energy-saving up to 2% per year, the share of sustainable energies has to go up to 20% in 2020 and a reduction in greenhouse gas emissions in 2020 of 30% over 1990 figures.
Realising these ambitious objectives requires new energy-efficient technologies, establishing international partnerships and applying market incentives (“the polluter pays” principle). In consultation with stakeholders, a targeted approach is being pursued with regard to the built environment, the energy sector, industry, transport and farming.
The ambitious government plans have encouraged stakeholders to come forward with specific proposals of their own. Just a few examples:
- The employers’ organisations have joined forces to ask the new government to enter into a sustainability pact setting out arrangements for an innovation strategy designed to achieve the energy and climate objectives. They have worked out a list of sector-based options and proposals.
- The biggest Dutch trade union (FNV), in collaboration with a number of environmental organisations, has drawn up a scientifically based, green energy plan.
- The Dutch energy companies have also joined forces to draw up plans for achieving the government’s climate and energy targets. The energy companies are determined to make a strong commitment to tackling the issues involved, providing that the government strives to secure a strong, bold, consistent policy in this area that also has a European dimension.
- The energy companies, housing corporations and building and installation businesses have drawn up a joint plan designed to save 30% of energy in dwellings and other buildings by 2020.
These examples are only a fraction of the initiatives which have been launched recently. There is more, as Mister Ruud Lubbers will illustrate in a minute.
Let me finish by saying that I fully agree that there is every reason for concern. On the other hand, there is an abundance of initiatives – by very diverse stakeholders – and there is much creativity and enthusiasm. Therefore, I firmly believe there is also reason for hope. Anyway, there is no choice. For people in responsible positions optimism is a moral duty.