Climate Change: Carbon Budgets

My Lords, I warmly welcome the report of the Committee on Climate Change and I thank noble Lords who have made kind comments about the Stern review. The climate change committee is doing its job. It is charting a path and is holding the Government to account. It is doing that, as can be seen in its recent progress report, with a clarity and quality of analysis that we should warmly welcome. It is an excellent model for other countries, as is the cross-party support for the work of the committee. This is mostly about private investment. That is a long-running story, and private investors need to have the confidence that the rules will not suddenly change and that there is a broad shared understanding. That is an important part of what we have seen in the UK. The report, as a first progress report, sets a strategy and lays out key indictors. It has done that clearly, but it has also sent a clear message to us all that we need a very strong acceleration. It is called a step change in the report. We have been reducing our emissions by less than 1 per cent per annum. We have to increase that figure strongly to 2 per cent or 3 per cent. As the Minister said, that is consistent with the low-carbon strategy that the Government set out in July 2009, but the climate change committee has sent a strong and important message that we have to move very fast if we are to have any chance of achieving the most sensible targets that have been set. The good news is that we can see how to do it. We can see the technologies and how rapidly they are developing. It is hard to give a talk on this subject without having with your pockets filled with the business cards of people who are making new discoveries. Even if only 20 per cent of those are sane and 80 per cent are whacky, we still have a rate of technical progress that is enormously encouraging. We can see the economic policies, too. Regulation and standards will be part of the story. But in large measure this is about correcting a market failure associated with not paying for the damage that you do when you emit greenhouse gases. This is about making markets work well; it is about policies that correct markets, work with them and promote the right kind of private investment. What will it cost? We estimated in the Stern review that to achieve concentrations of less than 550 parts per million of CO2 equivalent, it would cost about 1 per cent of GDP. I now argue, and have been arguing, that we should stay below 500 ppm, and that is why it may cost us a little more—perhaps 2 per cent of GDP. That is equivalent to a one-off 2 per cent increase in prices. You shift over, do things differently, it is a bit more expensive, and that is why it is a one-off cost in increased prices across the economy as a whole. That is significant, but surely it is something that we can absorb. As we learn over time, those costs will reduce, and we are learning rapidly. Those are the estimates that I have been working with. In response to the question of the noble Lord, Lord Turnbull—my friend and former colleague in the Civil Service—if he looks at other estimates such as those of International Energy Agency, McKinsey or the Potsdam Institute for Climate Impact Research, he will find that most estimates are lower. However, we should not see these as costs and burdens, but as investments of great creativity and enormous importance. The main focus of my remarks is on COP15—the Conference of the Parties No. 15 of the United Nations Framework Convention on Climate Change, which has already begun in Copenhagen. I believe that, given what is at stake, it is the most important international gathering since the Second World War. I should declare an interest in the sense that I will be at Copenhagen for the second week, working very closely with the European Commission. I am an adviser to President Barroso, as a member of his so-called high level committee on energy and climate change. I shall also be working very closely with the Prime Minister of Ethiopia, who is speaking on behalf of the African Union, and principally with the Danish authorities in trying to put a good agreement together. I also declare an interest in that I sometimes speak and advise on this subject, including to HSBC and IDEAglobal, but I have no shares in these or any other companies, and I am not a director of any company, be it connected with climate change or anything else. What about Copenhagen? What are the stakes that we are playing for? We have heard from the distinguished scientists here today. If we do nothing and allow emissions to accumulate, they will reach around 750 parts per million CO2 equivalent by the end of this century. The level is already at around 435 and we are adding two and a half per year. Therefore the figure is going up and, with business as usual, we will add at least 300 parts per million over the course of the century and will reach 750 parts per million. That implies roughly a 50/50 chance, although of course we do not know these things for certain—this is about risk management and probabilities. However, we would have roughly a 50/50 chance of being either side of 5 degrees centigrade—a level that this planet has not been at for about 30 million years. In pre-industrial terms, which are the benchmark here, the planet has not been at 3 degrees centigrade above the norm for about 3 million years. We, as humans, even on a very generous definition of homo sapiens, have been around for about 200,000, and we have never seen anything like that. The temperature reached 5 degrees centigrade lower quite recently—in the last ice age, about 10,000 or 12,000 years ago. The ice sheets came down to a latitude roughly where Watford is and people lived closer to the equator. These kinds of temperature increases rewrite the physical geography and therefore the human geography of the world and thus dictate where people can live. A rise of 5 degrees centigrade upwards would have the same effect. It would reconfigure the coast, the rivers and the track of hurricanes. Hundreds of millions—perhaps billions—of people would have to move, and that would lead to severe global conflict. Those are the stakes for which we are playing. What about the other route? What if we go for low-carbon growth? We can see some of that and will discover lots more of it along the way. I believe that the transition over the next two or three decades will be the most exciting period in economic history. It will seem bigger than the introduction of the railways or electricity; I agree with my colleague at the LSE, my noble friend Lord Giddens, about that. What does low-carbon growth look like? It is more energy-secure and is cleaner, quieter, safer and more biodiverse. Surely the choice is crystal clear. The noble Earl, Lord Selborne, made very clear the appropriate risk analysis in this area. If we go ahead and ignore the warnings of the science, it will be very difficult to back out of the position that we find ourselves in because of the longevity of greenhouse gases, particularly CO2. If the risks turn out to be lower than we currently think them to be and we go down the more sensible route, we will have a more energy-efficient society, we will have an economy and new technologies, and we will be more biodiverse. On any commonsensical analysis of risk, surely the path to follow is clear. What should we be looking for in Copenhagen? We should be looking for strong results on emissions reductions and on finance. On emissions reductions, we should be looking for a path that gives us roughly a 50/50 chance of being either side of 2 degrees centigrade. Above 2 degrees centigrade, the risks, as the scientists have taught us, get bigger and bigger. So what do we have to do? The answer concerns initiatives. We are currently at a level of around 47 billion tonnes of CO2 equivalent a year, and these numbers matter. The figure would have been about 50 billion had it not been for the slowdown in the world. We need to get that figure down to about 44 billion tonnes in 2020, well below 35 billion tonnes in 2030 and well below 20 billion tonnes in 2050. That target for 2050, or a good bit lower than that, is what my noble friend Lord Krebs described as around 2 tonnes per capita, compared with the 10 or 11 tonnes per capita that is currently the case in the UK. That is the measure of the required radical change. The good news here is that, if you add up the pledges that people have made over the past few weeks and months, you will see that we are not far away from that target. We could get a good result in emissions reductions in Copenhagen if everyone moved to the upper end of their ranges and if we found just 2 billion or 3 billion tonnes more. We could reach the emissions reduction target, but more worrying is where we are on finance. This is a profoundly inequitable phenomenon. The rich countries are responsible for the bulk of the greenhouse gases in the atmosphere but the poor countries will get hit earliest and hardest, although we will all be very badly hit unless we control emissions in a responsible and sensible way. However, the situation is deeply inequitable. We must support the developing world in the action that it takes. I have argued, and continue to argue, that that support should be at least $50 billion per annum by 2015 and at least $100 billion per annum by 2020. The target of $50 billion per annum by 2015 equates to 0.1 per cent of rich-country GDP. How can we tell the people of the world, and how can we argue to ourselves, that climate change is the most important challenge that we face and not find 0.1 per cent—one in a thousand—of rich- country GDP to provide assistance to the developing world? The priorities should be adaptation in vulnerable countries, particularly in Africa, strong support for the battle against deforestation, and strong support for the development and deployment of new technologies in the developing world. I believe that we can find new sources of finance but we must make sure that they are additional to development aid. We do not want any funny accounting which takes out of one pocket and gives to another. We can do all those things, particularly if we find new sources of finance, which might be auction revenues, carbon taxes, taxes on international aviation and maritime taxes. We can look at using the special drawing rights that have just been created in the International Monetary Fund and we can also look at Tobin taxes. We can, and should, investigate a whole range of new instruments to make sure that the money that the rich world offers for 2015 and 2020 is truly additional. I welcome the start-up funds, which are now under intense discussion and will be discussed in the European Council at the end of this week. I trust that tomorrow in the Pre-Budget Report we will see strong additional start-up finance in the next two or three years that will enable us to provide strong support for the developing world. We will be looking to tomorrow’s Pre-Budget Report to take the UK on to a path which could, in about 2015, mean $3 billion or £2 billion of support per annum, roughly in proportion to its share of rich-country GDP. I believe that we can get a strong result in Copenhagen. I believe that the support of the British Government, acting directly and through the EU, will be very important. I welcome and support the fact that the Prime Minister is urging the EU to go to its 30 per cent target. Finally, I believe that the Committee on Climate Change has shown that country by country, community by community, we can make the changes that will make a difference here and that, in doing so, we will find a creative and attractive path to low-carbon growth.