One of Gordon Brown's first actions as prime minister of the U.K. was to create the Department of Business, Enterprise, and Regulatory Reform (BERR) and to name John Hutton secretary of state for the new department. VerdeXchange News is pleased to present the following speech, which John Hutton delivered at the "U.K. Energy Policy and Opportunities for Business" panel, held by RAND earlier this month. In the speech, Mr. Hutton details some of the ways that the U.K. and California have served to develop complimentary, groundbreaking legislation and technologies that are leading the world in the fight against climate change.
Secretary Hutton: Make no mistake—energy and climate security is one of the defining challenges of our time. The International Energy Agency projects that global energy demand will rise by about half by 2030. That's a lot of new, additional energy, but we shouldn't be surprised. If there's one thing that unites countries around the globe, it's that we all want economic growth to meet our hopes for prosperity and a higher standard of life. How successfully we make the transition to a low carbon economy, while ensuring reliable energy supplies, will partly determine the future prosperity and security of our countries. No major economy will be able to stand alone. It is a shared challenge for the U.S. and the U.K., and one that I feel we can win given our track record of standing up together to face global threats. In the U.K., we are working within the context of a gradual decline of indigenous supplies. Our Energy White Paper sets out our strategy for "keeping the lights on" while delivering a low carbon economy. Markets are at the center of this strategy, both for energy and carbon, together with the interventions government needs to remove barriers and ensure that markets work well and in ways that meet our energy and climate change goals.
Properly structured, well-regulated markets will be the very foundation of our long-term answer to the climate change challenge. But, as in other parts of our economy, well-functioning markets don't happen by accident. They require government and regulatory participation to build and sustain them. To tackle climate change, we are setting legally binding carbon targets, scaling up our efforts on energy efficiency, and providing support for low carbon technologies. These measures will also enhance security of supply but, in addition, we are looking to maximize oil and gas production from the North Sea, streamline the planning process, and improve market transparency. We know from clear evidence that simple measures such as phasing-out incandescent light bulbs and bringing down the standard for power use in computers, television sets, and other electric appliances could save energy equal to the output of 100 average-size power plants. That is compelling.
Nicholas Stern, former Chief Economist at World Bank, published a comprehensive and independent review of the economics of climate change. He concluded that ignoring climate change would damage economic growth. But he also emphasized that tackling carbon emissions will bring economic benefits. IEA figures show that investments in cleaner energy would pay for themselves while simultaneously enhancing energy security. On climate security, I want to make two basic points. First, the British government— and, I note, your [California] state governor—have no doubt that man-made climate change is happening and that its potential to threaten all those things we hold dear—peace, prosperity, a clean environment, even the planet as we know—is clear and growing. In our view, the question has moved on from whether climate change is happening, to how best to tackle it. In the first–ever debate on climate change in the UN Security Council earlier this year, the potential consequences were clearly laid out: flooding, disease, famine, drought, and crop-failure—and flowing from that, increased migration with growing competition among nations for food, water, and energy.
Last week, President Bush reaffirmed a U.S. commitment to work with other countries to solve the problems of climate change. But the U.S. needs to demonstrate a more ambitious approach to climate change. The example of California should be used to inspire the whole of the U.S. to a more aggressive drive to reduce greenhouse gas emissions. Secondly, it is striking how much the business community and others are convinced about the reality of climate change. As evidence, there are some fine examples from the U.S.: the formation of the Climate Action Partnership by ten major U.S. companies, including Dupont and General Electric, and the initiatives in this state and the North-Eastern states to set targets to cut carbon emissions. So what are we doing in the U.K. and the E.U.? Are our actions matching our words? The goals agreed at this year's E.U. Spring Council—a 20 percent reduction in greenhouse gas emissions, increasing to 30 percent if our international partners join in; a central role for emissions trading; and a 20 percent sourcing of renewable energy supplies by 2020—are ambitious and a clear sign we intend to lead.
The objective that lay at the heart of these decisions was to set Europe on the fast track to becoming the world's first competitive, energy-secure, low-carbon economy. A key part of our strategy is the need to value carbon, and we are looking for a strengthened E.U.-ETS to provide an appropriate price signal. It was important that we work to extend carbon trading globally. Over the past 10 years, the U.K. GDP has increased by 28 percent. At the same time we have been able to deliver a reduction in greenhouse gases of almost 7 percent. Going green doesn't mean going slow. But it does mean working to create a level playing field in energy production over the next twenty years that is increasingly built upon the true price of carbon to the economy and the country. We are focusing on drawing through energy efficiency measures, but we also need to develop our renewable resources. We started from a lower base than some countries, but the progress during the last few years has been rapid. Since the start of the Renewables Obligation in 2002, where renewables were responsible for just under 2 percent of electricity generation, the U.K. has grown to more than double that with 4.4 percent of electricity from renewable generation eligible under the scheme at the end of last year.
We have three pieces of legislation—the draft Planning, Climate Change, and Energy Bills. These are all interwoven, setting legal frameworks for how we will achieve our goals. Taken together, the three bills will give the U.K. a fit-for-purpose legislative framework that will put the U.K. on a longterm path to tackling climate change and ensuring secure energy supplies. The Climate Change Bill will, for the first time, impose a legally binding duty on government to reduce the amount of carbon that is produced as we work towards our target of achieving at least 60 percent reduction in carbon emissions by 2050. We are the first country to take this step. We are committed to leading by example and former Prime Minister Tony Blair made it clear that our vision for the 2012 Olympic Games is that it will be carbon neutral. To make this happen we will need the support of global leaders in clean technology. We will need renewable energy sources, waste management technologies, green buildings, and green transportation. There are many opportunities for innovative companies.
We have always been conscious of the leading role played by California in developing low carbon technologies and leading visionary thinking on climate change. You are the seventh largest economy in the world and home to some of the world's most innovative, knowledge-driven companies and some of the most farsighted sources of capital. And you have shown that you can take care of the environment and still ensure good economic growth. That is why Tony Blair and Governor Schwarzenegger signed an understanding in 2006 to collaborate on climate change and clean energy policy. We see that understanding as part of the growing international cooperation between the U.K. and U.S.—at national and state levels—to develop the innovative solutions we so urgently need. But governments and state administrations can't solve this problem alone. The low carbon revolution we are seeking will only be achieved through a strong and active private sector. The incentives for business are clear. Recent studies have shown that responding to climate change could be a £30 billion business opportunity for companies in Britain alone over the next ten years and could be a $500 billion world market by 2020. The IEA also predicts that between now and 2030, something like $20 trillion will need to be invested in the energy sector. And there is an increasing sense that those companies who move early to invest in and develop clean energy technologies will be those which reap the most long-term competitive benefit. Silicon Valley is a clear, world-renowned example of the success of "first movers"—concrete evidence that the low carbon proposition makes business sense.
Globally, what we are looking at is, perhaps, the greatest public-private partnership of all. This means that in the U.K., we will continue to encourage the development of a market and price for carbon, promoting trading schemes that ensure energy prices reflect the true cost, including environmental costs, of their production and consumption. By this means, the market will send the right price signals to incentivize the adoption of climate friendly energy policies; we will encourage business to develop technological solutions, be it through energy efficiency—potentially the most lucrative pathway of all—carbon capture, renewable energy, or other alternative clean energy sources; and we will continue to press forward on energy efficiency. We see government's role as stimulating investment in a broad range of R&D activities, aimed at accelerating the deployment of new lower carbon technologies, for example, by raising building and product standards and using public procurement to create market pull for the most efficient technologies.
We are already seeing joint U.K.-California business opportunities developing. These include: 1) The announcement that I made yesterday with the CEO of Clipper Windpower that the Carpinteria-based company will be establishing a Center of Excellence for Offshore Wind in Blyth in England's North East Region. Clipper intends to invest $60 million in the design and development of a new, innovative, 7.5 megawatt wind turbine, capable of generating the same amount of electricity in its operating lifetime as that currently produced by one million barrels of oil. 2) Renewable Capital's G24 Innovations, the world's first large-scale producer of dye-sensitized solar cells, which has opened its 187,000 square foot manufacturing facility in Cardiff, Wales. 3) We also are seeing innovative U.K. technology coming to California such as Pelamis Wave Power, the groundbreaking Scottish company which has developed an offshore wave energy conversion technology, and which is speaking to the California Energy Commission and one of the major California utility companies regarding deployment.
Another way in which both the U.K. and the U.S. are showing support for the transition to low carbon is the key technology of carbon capture and storage (CCS)—or carbon sequestration, as it's often known. There will be no silver bullet that can solve the international energy and climate change challenge. But many commentators have singled out CCS as the technology that would allow the continued use of fossil fuels without damage to the atmosphere— and thereby meeting squarely the definition of a low carbon energy source. CCS has the potential to reduce CO2 emissions from fossil fuel power stations by up to 90 percent, and can contribute 28 percent of global CO2 mitigation by 2050. The technologies involved in CCS are well known, but system integration and commercial demonstration are needed if CCS is to play a significant role in the coming decades. I am receiving a briefing from BP later today regarding their $1 billion joint venture with Southern California Edison to build a CCS plant in Carson. We believe that CCS has a crucial part to play, particularly if we want to address the emissions from China's rapidly expanding coal-fired power generation sector—our latest analysis indicates that China is building the equivalent of a large coal-fired power station every four days.
That is why we are supporting a CCS demonstration on a commercial-scale power plant. The specific project will be chosen through a competition and will be operational by 2014. Making the U.K. one of only 3 countries showing this level of commitment to developing this key technology. Europe is also making progress on CCS development, having set an aspiration to work toward CCS being fitted to all new fossil-fueled power plants by 2020. We are, of course, aware of the Futuregen project, and will be watching further developments on CCS in the U.S. with much interest. We need to ensure we have a wide range of global demonstration projects so that we learn from each other and drive down costs. Our aspiration is for an international agreement looking beyond Kyoto that brings China, the U.S., and others (such as India) behind a common goal to stabilize emissions. The feature of many of the new technologies I've mentioned—and CCS is a prime example of it—is that at some stage their credibility for producing viable solutions has been questioned. But progress is being made by those willing to take risks and to be creative. That's what strikes me about RAND and companies in California—a tradition of daring to think differently, challenging assumptions and innovating despite often skeptical audiences. This is the spirit in which we need—together—to tackle the energy and climate security challenge. The U.S., with California as a leader, and the U.K. can, as part of an international effort, make the change to a low carbon economy and prove that together, we can solve one of the major challenges of our time.