High Level Forum
Fighting Climate Change – What would be our legacy?
Remarks by Angel Gurría, OECD Secretary-General
Cancun, 9th December 2010
Heads of State and Government, Ministers, Excellencies, Ladies and Gentleman,
Let me start by trying to answer the question President Calderon has put in front of us: “”Climate Change - What would be our legacy?”
Our legacy is what we make of it! Our legacy should be the story of a job well done, of risks minimized and new sources of growth spurred by a determination to recognize the true value of the ecological services our planet provides.
We need a legacy of action in which we take concerted action to mitigate and build sufficient climate resilience to accommodate a further 2 to 3 billion people plus rising living standards across the world. Multilateral action will be as important as a better understanding of joint responsibility and just as important, international solidarity.
The good news is: We can afford to take ambitious action on climate change. Cost-effective approaches to reducing emissions would cost just a fraction of a percentage point of GDP per year and offer good returns - new opportunities for investment, innovation, efficiency gains and markets.
The flip side of the coin is: developing countries will be hit hardest by climate change and are the least able to pay the bill. That’s why rich countries agreed at last year’s climate change summit in Copenhagen to provide new and additional resources – US$ 30 billion over the period 2010-2012 and a longer-term goal of raising US$ 100 billion per year by 2020 from public and private sources.
This finance is possible – our analysis shows that if industrialised countries used auctioned tradable permits or carbon taxes to achieve the emissions reductions they announced in the Copenhagen Accord, they would raise up to 1% of GDP, or US$ 400 billion, by 2020 (i). We at the OECD are ready to track and monitor the mobilisation and use of these funds.
We know that inaction would be more expensive than embarking on the path of action now. Besides being a “good” fight: it can generate the resources needed. We would thus be in the presence of a self-financing war against the common enemy, “carbon”.
Public finance can jump-start the engine, but private investment in low-carbon infrastructure and low-carbon solutions will be crucial to keep it running. This does not necessarily mean new financing, but instead shifting private investment patterns from “dirty” to “clean” investments.
Besides being a good business, ‘going green’ can help companies to be more competitive (ii). But governments must give the private sector clear, long-term incentives to invest in low-carbon infrastructure and technologies. The technologies we have today need to be further advanced and developed, so we have to innovate, thus, the need for intelligent incentives! Leading Investors have just told us that they need T-L-C. This does not mean Tender-Loving-Care; this means Transparent, Long-lived, Credible policy frameworks.
What is needed is an efficient and widespread approach to reducing emissions, including a strong emphasis on carbon taxes or auctioned permits, and with the participation of as many countries and sectors as possible. Policies that put a price on carbon can help contain costs, spur innovation, and raise revenues. Our research shows that carbon markets and taxation can play a key role in efforts to reap the full economic and environmental benefits (iii).
An obvious further step is to cut the subsidies that currently support fossil fuel production and consumption. This would have a two-fold positive impact – it would help countries meet both their climate and their development objectives. Subsidies to fossil fuel consumption in developing and emerging economies are estimated to cost more than $300 billion per year. That’s a lot of money, and unfortunately today most of it is subsidising wealthier people’s petrol and electricity bills rather than the needs of the poor.
Removing these fossil fuel subsidies would free up scares government funds, increase economic efficiency and reduce greenhouse gas emissions by 10% in 2050 compared with business-as-usual. Thus, with one comprehensive strategy we can achieve four policy goals: in budgets, in the environment, in equity and in business. This is why G20 leaders have made the reduction or elimination of these subsidies a matter of priority.
Green and Growth can go together, creating a win-win situation for advanced, emerging and developing countries. At the OECD, we are developing a Green Growth Strategy looking at a new and green growth model, green production and consumption patterns, green investment and green jobs. Such a new perspective is needed not only for the growth model of the most advanced economies; it has the potential to create new development perspectives for emerging and developing economies. This work is being done with you and for you!
After Copenhagen, besides the obvious disappointment in the outcomes, something was broken. Confidence was lost. I would thus like to thank President Calderon for his substantive, serious and sober leadership which put back the confidence in the negotiations. You have provided an injection of trust and hope that was needed to jumpstart the process. Mexico has shown to the world that Cancun can!
(i) Costs, Revenues and Effectiveness of the Copenhagen Accord Emission Pledges for 2020 (2010), available: http://www.oecd.org/dataoecd/6/5/45441364.pdf
(ii) Transition to a Low-carbon Economy: Public Goals and Corporate Practices (2010), available: http://www.oecd.org/document/54/0,3343,en_2649_34889_46280502_1_1_1_1,00.html
(iii) Taxation, Innovation and the Environment (2010), available: www.oecd.org/env/taxes/innovation