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The European Union may be facing some difficult economic challenges, but that's no excuse for not acting now to create an economy based on resource efficiency and low-carbon development. The benefits are potentially enormous, including lower greenhouse gas emissions, more efficient use of energy and resources, and rising growth and innovation.
Europe's economy is slowly starting to emerge from the deepest financial and economic crisis in decades, which is good news. However, we should be prepared for a slow recovery. In part that's because of the sovereign debt that still hangs over most EU member states. It's also due to a less tangible debt: not undertaking structural reforms on time. Admittedly, all this makes the reform agenda quite a tall order and prompts thinking along the following lines: first solve the financial and economic crisis, then the social crisis, and perhaps only later the environmental and climate crises. But this is wrong. Climate issues will not sit by quietly until we have some spare time to address them. We can't afford to build up this new debt while paying back the old ones. We must look beyond the short term.
The pace of change evident in nature is alarming. Formerly one-off weather events are becoming the new norm. Each year brings a catalogue of new records around the world. Last year saw the wettest summer for 100 years in the United Kingdom, while India, China and the United States experienced their worst droughts in decades. Hurricane Sandy, one of the most devastating Atlantic hurricanes on record, left a trail of destruction and damage estimated to reach $50 billion.
Is it a coincidence that so many extreme weather events around the planet seem to be so much in line with what scientists warned us would happen as the world gets warmer? Surely we do not need to wait for yet more torrential floods, storms and devastating droughts to tell us that time is running out. Delaying action will only increase costs in economic, environmental and social terms.
This is something decision makers need to grasp now if we are to build a more sustainable growth model that has resource efficiency and low-carbon development at its core. It is essential to prevent climate change from reaching dangerous levels. It is also a huge opportunity to boost economic growth and get us out of our current crises.
Fixing the climate might be seen as a luxury when jobs are scarce, budgets tight and commodity prices rising. But there are in fact several very good reasons why we should shift to a more sustainable economy: we will cut greenhouse gas emissions; we will use energy and resources more efficiently; we will gain health benefits; and we will trigger growth and innovation.
The EU's bill for crude oil imports in 2012 is expected to come to more than $450 billion. Net imports of coal and peat to Europe have increased since the beginning of the crisis. Increasing the share of renewables will make us less dependent on energy imports from outside Europe and much less vulnerable to increasing oil prices. By spending less on importing fossil fuels, we can free resources to invest in the EU.
Solar, wind and biomass technologies in Europe have grown impressively. Europe's renewables sector has added more than 300,000 jobs in just five years, and it is estimated that meeting our 20% renewables target by 2020 will bring 417,000 additional jobs. How many other sectors can show a net job increase over the last five years?
The European Commission is providing an initial €1.2 billion in funding for renewable energy sources projects within the EU under the NER300 programme. This will trigger significant private investment and job creation across innovative low-carbon technology industries.
Global investment in renewable energy reached record levels in 2011, despite the economic downturn. Total investments in renewable power and fuels increased 17% to a record $257 billion, a six-fold rise from 2004 and 94% higher than in 2007, the year before the global financial crisis began. The transition is too slow, but things are moving and new markets and job opportunities are there.
The building sector is one area where there is considerable scope for energy savings. Buildings account for almost 40% of the EU's total energy consumption and 40% of its greenhouse gas emissions. And yet 40% of buildings in Europe still have single glazing. The recovery of the construction sector could be significantly boosted through a major effort to accelerate the building of energy efficient homes and renovation of existing ones. And most of the new jobs would be local.
So it is not surprising that the "green" sector of the economy – along with ICT and health – comes out as one of the sectors with the biggest job growth potential in Europe this side of 2020.
The vision for green growth is also reflected in the European Commission's proposal that 20% of the 2014-2020 EU budget should be climate- related. This means not only a stronger focus on climate-related expenditure but also integrating climate objectives into other policies such as energy, transport and agriculture. Climate issues must be brought into all relevant sector policies.
Emissions can be cut without sacrificing the economy: since 1990, the EU has reduced its greenhouse gas emissions by 18%, while our economies have grown by 48%. EU manufacturing industry was able to reduce its energy intensity by a fifth between 1995 and 2009. Between 2003 and 2011, the EU attracted 40% of global “green” foreign direct investment, while the US brought in only 12% and China 7%.
Our key tool for cutting emissions is the European Union Emissions Trading System (EU ETS). From 2013 onwards, EU governments are expected to receive auctioning revenues from the EU ETS, and member states have committed to spend half of these revenues on climate action. The current crisis is also an opportunity for member states to make their tax systems more job-and-equity-friendly, especially for low-income and vulnerable employees, by shifting taxation to resource use. Surely it is better to tax more of what we burn and less of what we earn.
Getting the pricing right is absolutely key to a successful and cost-efficient transition. That the world instead last year increased fossil fuel subsidies by more than 30% to now more than $500 billion is a sad sign that leaders' recognition of the need to tackle climate change is not adequately reflected in the actions of governments. One way of getting the pricing right is indeed through emissions trading, an increasingly popular approach around the world. Besides the EU ETS, national or regional systems are already operating in Australia, New Zealand and Switzerland, and are planned in Canada, China and Korea, and other countries are also considering their introduction.
We all know that life is too complex to be described by just one variable – be it GDP, employment rates or even reductions of a certain pollutant. Despite this, I was recently accused of being "anti-capitalist" for arguing in favour of going beyond GDP. That is, of course, absurd. This discussion is not about capitalism or not. It is not about growth or not. It is about what kind of growth we can afford in this 21st century. The sooner we realise the imperative for making the transition–globally–to more truly sustainable, resource-efficient and low-carbon growth, the better.
References and recommended sources
European Commission Climate Action
OECD Forum 2013 issues
More OECD Observer articles on climate change
Subscribe to the OECD Observer including the OECD Yearbook
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By Connie Hedegaard, Commissioner for Climate Action, European Commission
©OECD Yearbook 2013
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