Analysis… Climate leader
The European Climate Foundation’s Dr Christoph Wolff outlined to Portal the continent’s leading role in tackling climate change, but said further efforts are needed to realise the Union’s full potential.
The EU is widely considered a major, global leader in tackling climate change. In December 2014, the European Commissioner for Climate Action and Energy, Miguel Arias Cañete, joined other world leaders in Peru to agree key steps ahead of the COP21 talks due to take place in Paris this December.
The high level conference saw agreement on the Lima Call for Climate Action, which requires all countries to describe their proposed targets in a way that will bring clarity and understanding as to whether we are on track to achieve the below 2°C objective. The conference also laid down the key draft text elements for a 2015 climate change agreement.
Representing 28 countries and over 500 million people, the EU played a strategic role during talks in the Peruvian capital. Following the conference, Cañete said: “The EU came to Lima to lay the ground for negotiations in Paris. Now we are on the way to Paris, and although the EU wanted a more ambitious outcome from Lima, we believe that we are on track to agree a global deal in Paris.
“The EU has taken a constructive approach throughout the last two weeks and has shown itself willing to build bridges and compromise where possible. The EU particularly builds on its own experience of overcoming differences and finding common ground. Our ambitious 2030 climate and energy package is proof of this.”
Adding her thoughts, Gian Luca Galletti, the Minister of Environment of Italy, which held the EU Council Presidency at the time, said: “We have spent many long days and nights seeking a compromise. We thank the Peruvian COP presidency for its leadership and guidance during these intense negotiations. Although this was a difficult conference, it is important to maintain the spirit of optimism and political momentum that brought us to Lima; the Lima outcome provides a solid basis for the forthcoming negotiations.”
The EU will play a leading role at the COP21 talks in furthering global action to combat and adapt to climate change © bob
Initial assessment
Now in its 15th year, the European Business Summit brings together leading industrialists, policy makers, academics and European Commission officials to debate issues regarding economic growth and the wellbeing of society. Taking place in Brussels in May, Portal was present at the conference, covering the discussions taking place. One session during the summit, ‘The Climate Challenge – How to reconcile climate objectives with industrial competitiveness?’, discussed the role of the EU in international climate change negotiations, the impact of the Emissions Trading System (ETS), and the major steps the Union has taken to address the warming of the planet.
Following the seminar, Portal sat down with Dr Christoph Wolff, managing director of the European Climate Foundation, to record his take on the EU’s progress. Portal began by asking Wolff how he would assess the work of the new College of Commissioners and their approach towards addressing climate change.
“It is very encouraging that climate change is high on the agenda of the new Commission. They have made the Energy Union a central, programmatic piece and, within the first month, started at a remarkable pace.
“There are two areas on which the Commission have set their focus – the first is the ETS. Last October, the heads of states decided on the 2030 climate and energy targets, and the ETS is seen, certainly by the Commission, as the instrument to achieve those targets.
“The cap of the ETS has been designed to last until 2020, and so with a new horizon it has now been extended with new policy frameworks; the Commission acknowledged the need for repair and a need for upping the carbon price to make the instrument effective. It is encouraging that back-loaded as well as unallocated allowances will go straight into reserve and not come back onto the market right away, which would have actually led to levels of distortion. The 2019 introduction is better than 2021, although the governments in the UK, Germany and France would have probably supported a 2017 introduction.
“The second area is the carbon leakage list, where everyone agrees that the leakage criteria led to too wide a group getting free allowances. Those who really are exposed to carbon leakage are not protected, and this creates some distortions. We think the criteria need to be revised in order to make this a sharp weapon.”
Innovation fund
Wolff then drew attention to the EU’s NER 300 programme, which, according to the European Commission, ‘is one of the world’s largest funding programmes for innovative low carbon energy demonstration projects’. The scheme is seen as a ‘catalyst for the demonstration of environmentally safe Carbon Capture and Storage (CCS) and innovative renewable energy technologies on a commercial scale’. The instrument, the director said, had not been a particular success.
“The NER 300 was meant to help energy intensive industry adjust to the new low carbon economy – that hasn’t really worked out. The NER 400 should build on this, and we need a significant upgrade of that fund.
“There are a number of interesting lab stage areas where venture capital technology is developing that could help or support energy intensives to stay in Europe and be protected, for example the industrial CCS clusters, clean cement or green cement, or green steel.
“Those developments at lab stage are under-invested and under-accelerated, and we actually think we have a great value in keeping energy intensives in Europe and making their goals and their business models compatible with the low carbon economy.”
Horizon 2020
The EU’s framework programme for R&I dedicates over €3bn to ‘climate action, environment, resource efficiency and raw materials’ research, a move that is particularly important, said Wolff.
“Investment in innovation is indeed the name of the game; the low carbon transition would be won by innovation, not only by rules or regulations, and its innovative spirit would make that happen. There is a pledge in Europe for R&D investment of 3% of GDP, which is not currently happening. In other areas of the world, China is massively investing in clean technologies and is alone dwarfing European investment into smart grids, advanced materials and renewable energies.
“80% of renewable investment, which has increased from last year, is coming from China, and Europe needs to make sure that we are not left behind on innovation investment, a claim for its future.”
It is now considered that the benefits of combatting climate change will not affect the long term objective of business growth but will instead bring new attributes, as Wolff outlined: “A new carbon economy report was published last year by the UN that set out that business and environment are not in contradiction, but actually reinforce each other. Environmental protection is about new markets and technology, growth and jobs. We see more and more businesses agreeing with this, and we need to, as well: you need to invest today and define your place in the future.
“If this is a new paradigm, we need to make sure we achieve investment on a critical mass and ensure that there is an industrial strategy at European level. China has targeted seven sectors in which it wants to become world leader, from alternative car technology to advanced materials. We need to make sure that we achieve critical mass to keep leadership on a global scale, and hopefully Horizon 2020 will be the instrument to achieve that.”
Leading role
Later this year, world leaders will gather in Paris for the COP21 talks on climate change. Wolff commented that the discussions in Lima in 2014 were the “preparatory sessions”; however, the talks in France should not be seen as “the end of the game,” he said.
“Even though these climate negotiations present a pivotal moment every five years, the view should be that this is not the end of the process, but rather a beginning of a hopefully more educated and more constructive process.
“The EU is the host of the conference and we have seen that the Peruvians have done a great job in linking effectively with the French hosts, and this actually makes a major difference. Europe has an historical role, and everybody is looking very carefully at the approaches that are being taken.
“Europe has been a traditional investor in renewable technology and was instrumental in bringing costs down; it just needs to make sure that we benefit from those investments. What should not be underestimated is combining the diplomatic force of the EU and the plans by European Commission Vice-President Federica Mogherini for the climate diplomacy action plan, making sure that economies around the world join in on intended nationally determined contributions. These are very good ways to exert European climate leadership.”
Wolff said it is important to have a “process of review and enforcement”, helping to lead to an “improvement on those pledges”. He hopes that such a move will lead to a closing of the gap over time between the various stages countries are in regarding combatting climate change.
This, he said, is “probably the right way of dealing with that. We actually think that this paradigm shift will have a much bigger chance to achieve the goal and that it will achieve it. The year 2014 actually had a lot of positive news on the climate scene – emissions came down, China consumed less coal, and investment renewal had risen by 17%. Investment into these areas is becoming
a sensible business proposal for many institutions, and this will become self-propelled; if it’s self-propelled, then it will actually be sustainable in the long run.”
Global role
Through its diplomatic muscles, the EU has the potential to encourage countries throughout the world to build economies that are both environmentally friendly and leading international competitors.
“They have to lead by example,” Wolff said. “The EU has been able to link sustainability with competitiveness, which is being followed very closely by other countries, although some people are afraid that this aspiration for sustainability will lead to deindustrialisation. Yet only through targeted industrial and smart investment policies are we able to open those markets and establish momentum on the ground, creating new products to redesign our value chains.”
Wolff then drew attention to industries where innovation is key to helping maintain long term international competitiveness whilst also realising environmentally friendly attributes: “A study was completed with the chemical industry last year which showed that the sector is still in a global leadership position, despite higher energy prices than in the United States. There are many innovations being captured, but you need to take an innovative value chain approach and we need to look into other industries.
“In the construction industry, there is a need for innovative materials, whilst in the car industry, there is a need for lightweight materials, so there are many new markets opening up. If the EU can continue to keep innovative leadership in those traditional business sectors, this would be a very attractive model to follow for other countries.”
Convincing industry
Moving forward, Wolff commented that traditional industries are beginning to recognise the benefits of a low carbon economy, though two major steps need to be taken.
“Firstly, we need to look at the ETS and secure the investment into decarbonisation; there is under-investment and it’s not fast enough. If you look into the very early innovative lab stages, plans on how to green the steel production, on how to change processes around cement, how to deploy renewable energy in paper production, etc., this is all happening, but it needs to be supported in order to keep these developments in Europe.
“Secondly, we need to look again, as the Commission has recognised, at CCS – not only for utilities but for industry, as well, and we will see this in the spirit of the circular economy. If you build industrial CCS clusters to actually be deployed, and not just to work in enhanced oil recovery solutions, this actually becomes a competitive industry. Yet the Commission needs to revise the ETS policies around leakage and investment and, in 2020 and 2030, needs to keep those energy intensive industries in mind.”
Wolff added that it is important to explore the “whole area of demand management”, with a focus on the deployment of renewables, and to “utilise the productivity of renewable generation”.
“You need to get away from regulatory hurdles,” he said. “You need to create some incentives and some investment in processes that are needed to provide the appropriate flexibility. It needs a push and a political framework in which it can thrive.”
It is clear from Wolff’s words the immense potential and influence that the EU has in encouraging countries around the world to play their role in combatting climate change, and the Union’s authority will be closely assessed by policy makers and media commentators when world leaders gather in Paris in December.
The Union is also taking steps to encourage industry to realise the benefits and the balance of investing in green technology whilst at the same time embracing sustainability. Policies and investment frameworks such as NER 300, the ETS and Horizon 2020 are having varying degrees of success, but it will be up to the new European Commission to demonstrate the Union’s full potential.
Dr Christoph Wolff
This article first appeared in the seventh edition of Horizon 2020 Projects: Portal, which is now available here.
