UN Environment Head says World at Green Economy Crossroads on Eve of G8 Summit

London, 7 July 2009 - In a key note address to Chatham House in London, UNEP Executive Director Achim Steiner today said G8 leaders have a golden opportunity to focus political action towards powering forward a Green Economy future.

With some 150 days to go to the crucial UN climate convention meeting in Copenhagen, the UN Under-Secretary General told delegates that a transition to a low carbon, resource efficient global economy was underway propelled by the existing UN-brokered carbon markets and the current global stimulus packages.

How far this transition can go will now depend on the political will of world leaders to make good on the Green Economy pledges environmental-investment pledges by fully investing the stimuli in renewable energies and energy efficiency up to smart grids, high speed rail and more fuel-efficient, sustainable transportation.

Mr Steiner said:" A greening of the global economy was underway before the economic crisis and the more than $3 trillion-worth of stimuli packages".

"This has been in part driven by the existing carbon markets; the need to combat climate change and the urgency of energy security," he said.

Mr Steiner pointed to UNEP's recent Sustainable Energy Finance Initiative global trends report that shows that in 2008 investment in renewables was $155 billion, compared with investment in new fossil fuel generation of $110 billion - the first time ever.

He also cited the growth of the Clean Development Mechanism (CDM) of the Kyoto Protocol with more than 4,200 projects up and running, or in various advanced stages of the project pipeline with around a third of these involving some level of technology transfer.

"By 2012 we estimate that over 8,000 CDM projects may be up and running or in the pipeline generating financial flows from North to South of well over $30 billion," said the UNEP Executive Director.

The economic stimulus packages are now accelerating the transition with countries from China and the Republic of Korea to at least a dozen European countries and the United States earmarking significant slices of their packages into green investments including freshwaters and ecosystems alongside energy-related clean tech.

Mr Steiner said the G8 Summit, which opens in Italy tomorrow, needed to ensure that the global economy hit the 'green tape' and keeps running through to Copenhagen and beyond rather than running out of steam half way round the track.

He welcomed UK Prime Minister Gordon Brown's suggestion that close to $100 billion should be made available as a signal that developed economies are prepared to table a financial and technological package that could be a key to Sealing a Deal on a comprehensive post-2012 climate agreement.

Speaking Points for Achim Steiner

The Chatham House Conference on Climate Change 7 July 2009

The Politics of Climate Change Agreement

Elements of the Deal

Mr Steiner's theme for Key Note as suggested by Chatham House - Government Green Stimuli - Will They Work?

While also touching on the current state of UN climate talks

The Ambition

There are 153 days to the crucial UN climate convention meeting in Copenhagen - where 192 nations need to Seal the Deal.

We know what needs to be done scientifically.

Without action, global greenhouse gas emissions are likely to hit over 60 Gigatonnes by 2020 and 70 Gt by 2030 setting the planet up for a four degree C, perhaps even six degree C rise.

To give the world a chance to keep temperatures within a two degree C rise above pre-industrial levels, global emissions need to peak at less than 50Gt by 2020 and then fall sharply.

No one country or countries can do this on their own - it is a truly multilateral task


Economic Crisis-Climate Opportunity


The current crisis is likely to lead to a one-to-three per cent drop in global greenhouse gas emissions - it is not enough, nor have we changed the fundamental trajectory or quality of economic development.

In response to the current multiple crises, UNEP in collaboration with leading economists and others launched the 'Global Green New Deal/Green Economy initiative.

The short term aim being to argue that a proportion of the up to $3 trillion-worth of stimulus packages be invested in environmental areas from renewable energies to 'ecosystem infrastructure' while generating or at least stabilizing jobs.

With the medium-term aim of catalyzing a sustainable transition to a low carbon but in parallel a resource efficient, green jobs-generating global economy.

The overall ethos is that multiple benefits can accrue by the right kind of government-backed investments under the right kind of enabling policies and market signals.

Investments and policy frameworks that will in turn unleash and direct private investment and entrepreneurs.

So what has happened?

A more than $36 billion Green New Deal from the Republic of Korea.

Under full implementation it involves an investment equal to around 3 per cent of GDP and a job creation potential of close to one million jobs by 2012.

The energy conservation and green building investments amount to 0.5 per cent of GDP and the full, low carbon strategy accounts for 1.2 per cent of GDP.

Elements of the Republic of Korea's new deal package

· $7 billion to be invested in mass transit and railways over the next three likely to generate 138,000

· The $5.8 billion in energy conservation in villages and schools - 170,000 jobs

· Other parts of the stimulus will also create employment including the more than $10 billion river restoration stimulus; close to 200,000 jobs

· The more than $1.7 billion forest restoration stimulus - over 130,000 jobs

· The $690 million water resource management stimulus - over 16,000 jobs

China is expected to spend $586 billion or just over eight per cent of its GDP on a fiscal stimulus package.

· An estimated $140 billion or just under two percent of this is earmarked for green investments including new rail links.

China's green investment package is likely to boost further its $17 billion renewable energy sector which already employs around one million people.

The United States stimulus package amounts to $787 billion or around 5.7 per cent of GDP of which $100 billion (based on estimates on the new package) or between 0.6 per cent and 0.7 per cent of GDP are on directed towards greening the US economy

· These include $18 billion for clean water, flood control and environmental restoration and $8.4 billion for transit, and $8 billion for high-speed rail

· $4.5 billion to make federal office buildings more energy-efficient.

· $30 billion for a smart power grid, advanced battery technology and other energy efficiency measures.

· $20 billion in tax incentives for renewable energy and energy efficiency over the next 10 years.

· $6.3 billion for energy efficiency in multifamily housing that gets federal assistance, such as HUD-sponsored low-income housing and $5 billion to weatherize more than 1 million homes owned by "modest-income" families

The report cites a study by the Peterson Institute of International Economics and the World Resources Institute that estimates that green energy investments in the United States could save the economy an average of $450 million a year for every $1 billion invested.

And that every $1 billion of government spending in this area will create around 30,000 job years and reduce annual greenhouse gas emissions by close to 600,000 tons from 2012-2020.

Japan's green element, around over Euro 12 billion, includes plans to lead a "low-carbon revolution" and generate one to two million jobs through tax breaks in areas such as electric cars, low-energy appliances and renewables

Japan has also announced a $5 billion loan to developing economies who embrace renewable energy investments.

A report by the OECD - a partner in the UNEP Global Green New Deal - launched last week, cites many, many more examples of green stimulus investments.

For example:-

· Australia - close to Euro five billion in clean energy and national energy efficiency initiative: represents around 0.7 per cent of GDP

· Canada - about Euro 2.8 billion in green technology and green infrastructure: represents over 0.3 per cent of GDP

· Czech Republic - over Euro 1.5 billion in for example household energy efficiency and environment-related research and development: represents over one per cent of GDP.

· France - spending close to 40 per cent of its stimulus package on environmental investments including Euro five billion in the acceleration of railway development and renovation; investments in canals and energy efficiency in public building : represents 0.3 per cent of GDP

· Germany - over Euro 25 billion in green technology investments and energy efficiency in buildings: represents around one per cent of GDP

· Slovenia - investing just over 0.3 per cent of GDP in energy efficiency improvements in public buildings and green R and D.

· Spain - over Euro two billion in projects such as carbon capture and storage technology; forestry schemes and R and D in energy and climate: represents 0.13 per cent of GDP

The Greening Impact on Business


The stimulus packages are improving the bottom line and stimulating companies' accounts

* Siemens, the industrial conglomerate, has just announced it expects sales of environmentally-friendly products to be Euro 25 billion in 2011, up from Euro 19 billion in 2008

According to a new report by the banking group HSBC economic stimulus plans the world over are largely responsible for the healthy state of the energy efficiency market:

· Over 50 percent of all stimulus funds directed toward climate investments to date have gone to Energy Efficiency and Energy Management (EEEM) firms, which in HSBC's analysis equals about US$184 billion.

Of the four categories of companies in HSBC's Climate Change Index - EEEM, Low Carbon Energy Production (LCEP), Water, Waste & Pollution Control (WWPC), and Finance (FIN) - EEEM firms are leading the pack by far.

· In WWPC companies have landed around 25 percent of global climate-stimulus funds, or about US$86.2 billion, and businesses working in the LCEP space have taken home about 22 percent of funds, or $US75.2 billion.

"Prior to the passing of the first stimulus package in October 2008, the Energy Efficiency and Energy Management sector, global equities and most other climate-related themes and investments were all in decline," the report's authors write.

But soon after the announcement of China's stimulus package in November 2008, these companies' stocks steadily increased in value, and continued to do so with the announcement of the U.S. stimulus package in January 2009.

In March 2009, the U.S. government released the first $8 billion in stimulus funds for weatherization and energy efficiency, and earlier this month another $256 million in funds targeted at energy efficiency, and there is likely much more to come.

Other and Related Actions Towards a Low Carbon Future by Governments and Industry

* On June 5, World Environment Day, President Calderon announced that Mexico was taking on voluntary greenhouse gas emission cuts of 50 million tonnes of C02 a year or a reduction of around eight per cent


* Also announced that, with the right financing in places, this could rise to close to 16 per cent


* Brazil, with close to 50 per cent of its energy coming from renewable sources such as hydro and ethanol, has just announced a 30,000 to 40,000 megawatt wind power programme backed by incentives and market mechanisms


* This month a consortium of some 20 firms are expected to start raising money for the African-European Desertec project - an area of 800km by 800km of desert has in theory enough sunlight hitting to generate the world's entire energy needs

The Greening of the Economy was Already Underway before the Economic Crisis and the Stimuli

In part driven by the existing carbon markets; the need to combat climate change; deliver energy security and energy access in developing economies the renewable energy economy was already emerging

* UNEP Sustainable Energy Finance Initiative global trends report shows that in 2008 investment in renewables was $155 billion, compared with investment in new fossil fuel generation of $110 billion - the first time ever.

It was up from around $35 billion only in 2004: how many economists in the 1990s would have predicted such a turn around.


* An inaugural survey of 1,000 renewable energy and carbon trading professionals world-wide for Thomson Reuters found that many are increasingly well-paid and despite the current crisis believe their jobs are secure - the fact that such a survey even exists in testament to the change in the workplace

A year-end snapshot of the Clean Development Mechanism (CDM) of the Kyoto Protocol- by UNEP's Riseo energy centre for the last UN climate convention meeting in Poznan shows that more than 4,200 projects are up and running, or in various phases of the pipeline.

Leading are medium and small-scale hydroelectric projects; followed by biomass energy, wind power and electricity from industrial waste heat.

However the CDM is also now triggering interest in a wider range of renewable energy projects. These include solar and geothermal power and one 250 MW tidal project in the Republic of Korea.

It is also being accessed by a wider number of countries.

For example Chile had just five projects in 2004 but today has well over 60 registered or in the pipeline. Colombia had zero four years ago and now has 36.

China and India still dominate the projects in Asia Pacfic, but Malaysia now has 145 projects registered or in the pipeline up from one in 2004 followed by Indonesia with close to 100 including geothermal.

By 2012 we estimate that over 8,000 CDM projects may be up and running or in the pipeline generating financial flows from North to South of well over $30 billion.

The calculation is based on the CDM generating an estimated 1.6 billion Certified Emission Reduction" carbon credits worth $20 each.

The first CDM projects have also been emerging countries such as the Democratic Republic of the Congo (DRC); Madagascar, Mauritius, Mozambique, Mali and Senegal.

Kenya has set a target of well over 1,000Mw of geothermal and a private consortium is installing an initial 300MW of wind in Turkana in the north of the country - in all a more than doubling of that country's installed capacity.

Incidentally, an estimated one third of CDM projects involved some level of technology transfer according to the UN Framework Convention on Climate Change.

Last week 40 countries, meeting at the ministerial level at the OECD Paris, issued a declaration backing Green Growth while a similar statement was issued by more than 20 UN agencies in support of the objectives of the UN Secretary-General Ban Ki-Moon.

Is All This Enough?

We may be out of the blocks but nowhere near the tape towards a low carbon, resource efficient Green Economy.

Nor have we in place yet the conclusive elements of a deal for Copenhagen - without doubt the biggest green stimulus if a real deal is done.

Financing is the key.

In a policy brief on the Global Green New Deal, delivered to environment ministers attending UNEP's Governing Council/Global Ministerial Environment Forum last February, internal and external experts recommended one per cent of GDP or around $750 billion be invested in environmental measures and technologies.

With some notable exceptions, such as the Republic of Korea, we are short of that transformative threshold.

But how much money are we really talking about?

One new report - Towards a Global Climate Agreement - spearheaded by the Climateworks Foundation under Project Catalyst estimates that existing power capacity will provide 23 per cent of global energy needs by 2030.

In other words 77 per cent of the capacity needed has yet to be built.

How much might it cost to 'green' those energy investments in order to meet the two degree or 450 parts per million goal.

· The report says: "the net cost to society as a whole of a low carbon transition to the 450ppm path could be approximately zero as many of the gains from energy efficiency measures offset other costly actions".

· If energy efficiency is excluded the costs is Euro 55 billion or US 77 billion to Euro 80 billion or US 112 billion between 2010 and 2020 for developing economies

· And Euro 40 billion or US 56 billion to Euro 50 billion or US 70 billion for developed economies.

Interestingly the figure of one per cent of GDP again emerges ie the sums involved are less than one per cent of global GDP.

Where do We Get the Money to Power a Green Transition and Seal a Deal in Copenhagen

It seems to me that money needs to be put on the table to allow an even more vibrant set of carbon market mechanisms to evolve post 2012.

British Prime Minister Gordon Brown recently suggested a sum of around $100 billion was needed to assist developing economies in their transition.

President Calderon of Mexico is suggesting a Green Fund into which countries contribute according to their responsibilities under a proposed formula.

There are many possible financial packages that could be considered - some have talked about levies on shipping and aviation others have muted different plans.

Firstly, the pledged green elements of the stimulus packages should be spent and spent now - a key message from renewable energy investors to UNEP in the light of the continuing difficulties raising finance on the capital markets.

Secondly perhaps we can also utilize fuel subsidies - an estimated $300 billion is spent annually, the lion's share of which is for fossil fuels.

Politically, many are couched as pro-poverty subsidies.

But a recent study by UNEP and partners indicates that the poor rarely if ever benefit as they never get the fuel in the first place.

It is the middle class, the fuel companies and the fossil fuel technology suppliers that benefit.

So here is a sum of money ripe for harvesting and re-directing towards low carbon investments.

And perhaps there is another swift and simple route.

If, for argument's sake, you were to put a five-year temporary levy in OECD countries of $5 a barrel, you would generate $100 billion per annum.

Consumers would hardly notice this at the pumps especially after oil prices have jumped to close to $150 a barrel and are now in the $70 range.

And easy to collect too.

Together the sums offer something close to the figure suggested in Project Catalyst with a bit to spare - funds that might also be usefully used to assist vulnerable economies adapt to the climate change already under way.

· Lord Stern estimates that global annual adaptation costs that should be spent now in developing countries are $4-37 billion

· World Bank estimates we should b spending $9-41 billion

· And OXFAM says $50 billion

· UNFCCC says $28- 67 billion should be spent annually by 2030

· UNDP says $86 billion in 2015

A Green Economy is being glimpsed - the stimulus packages are assisting.

Copenhagen can assist even more.

Making it happen requires the developed economies to evolve, and evolve swiftly over the coming weeks and precious few months, some creative and meaningful finance packages.

But the sums in all reality look small when compared with what is being spent to bail-out banks.

And when stacked against the inordinate opportunities that can be unleashed by a comprehensive, scientifically-credible and ratifiable agreement in just over 150 days time.


 

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