Antony Froggatt
Yes, hello, and good morning to those in London, afternoon, I think, probably, in Poland and Helsinki. My name is Antony Froggatt. I’m a Senior Research Fellow at Chatham House in the Energy, Environment and Resources Department. I’m your Chair today, and we have a very esteemed panel and a very exciting topic. So the topic, as you all know, is Can Europe Lead on Climate Action? It is a really pertinent time for us to be having this discussion, in particular, obviously, this week with President Biden taking the reins in the United States, and having a very clear and different agenda from the previous administration. And so, it really is a vital discussion for us all, is can Europe lead, and should Europe lead? So, I am delighted to welcome today really important speakers and influencers in this area.
We have Michał Kurtyka, who is Minister of Environment and Climate in Poland. He was previously the Head of the COP, the Conference of Parties to the UNFCCC in COP24, and has been a really important player within the scene in Europe and globally. And Terhi Lehtonen, who is the Secretary of State for Environment in Finland, she previously worked for the European Commission and the European Greens, and so, therefore, has an equally important role or equally important set of experiences in this issue in Europe. And Dr John Murton, who is one of the COP26 Envoys, because the UK’s hosting COP 26, so, in November of this year, the UK, along with Italy, will be co-hosting a really important meeting of the UNFCCC, and so, we are all very excited too, for this year, and what it might unfold. And, as I said, the topic of this discussion is Can Europe Lead?
So, just to remind our audience, we will be on live for about an hour. This event is being recorded for archive purposes. We will have – we have around 70 participants. You’re all very welcome. I’m sure more will trickle in, and we are encouraging people to tweet using the hashtag #CHEvents. In terms of our – how we’ll function this morning, we will have two ten-minute speeches from Helsinki and from Warsaw. And then we’ll have John Murton responding to that, giving over the UK’s position, as I said, in particular, given the Presidency or the Co-Presidency of the current COP. And then we will have a discussion, and I’ve got a few questions lined up, and then we will open this up to the audience. So, please use the ‘Q&A’ function within Zoom and ask – put your questions there. I will try and group these together, and then I will ask people to ask if they’d like to put over their questions directly, and then we will unmute you, and give you the opportunity to do so. And we are aiming to finish at 12 o’clock, so I will encourage my speakers to be precise, in terms of the timings. As I said, ten minutes first, from each of our keynotes. So, Minister Kurtyka, can I offer you the floor?
Michał Kurtyka
Thank you very much, and great to be with you at the Chatham House that’s, if I recall correctly, third or fourth time that I’m very happy to be part with you of these discussions. Always extremely interesting, and, for the first time, an online for me, but I hope we can deal with this. And going directly to the answer to your question, Antony, I see three conditions under which Europe can lead globally in this discussion on our common climate ambition, and let me go directly, well, to all three of them. First of all, competitive technologies; second, people-centric planning; and, thirdly, engage the world.
Starting with competitive technologies, we have seen, in last ten years, two very important technological breakthroughs. First, in terms of cost of producing electricity out of renewable sources of energy. That’s an extremely important change, a Copernicus revolution in our energy industry. But the second is within the transport industry, and that’s the emergence of electric vehicles, and the fact that within just a couple of years, electric vehicles will be cheaper, in terms of total cost of ownership to use than combustion and diesel cars, and we have seen a historical record, in this regard, in Europe. In September, we had more electric cars registered than diesel cars, so this revolution is ongoing.
But we are still facing with a couple of dilemmas. First of all, and we share this with Finland, that’s our, well, let’s say, weather in the winter when – where it’s extremely important for us to keep the security of providing heat to the population. And in a country like Poland, heating in fact is responsible for 60% of household invoices for energy. And when we see what’s going on in Madrid right now, that’s an anomaly for Spaniards, but that’s more of a current situation in Helsinki or Warsaw. We were not used to this situation in last years, but this winter, for – in Poland, we experienced temperatures going up to -20. And so, we need to be able to provide security, in terms of technologies, but it’s in terms of also of economics for our population, in terms of heating. Then the second thing is storage. Yes, we are able to produce cheap electricity out of photovoltaic panels and windmills, but this is not covering 100% of the demand for electricity during the year. So, we need to have some kind of storage technologies, and these storage technologies in fact will influence the overall cost of providing green electricity to our population. So, we need to develop these technologies.
And when we are speaking about competitive technologies, I’m completely convinced that we should do everything what is possible, in order to develop these technologies in a manner that will not be based on subsidies forever. We must not enter into the world of being addicted to subsidies, and there is a risk with unprecedented fiscal stimulus after COVID-19 that we will stay addicted to some kind of subsidies because, if it is the case, not only we will stay like that, dependent on subsidies here in Europe, but we will not be able to develop competitive technologies for the rest of the world. So, in fact, we will create a green island instead of aiming for a green planet. So, competitive technologies must be at the heart of European industrial strategy because that will be also an offer for the world, and that will be the guarantee that friendly – climate-friendly technologies will be able, at some point, to be more attractive to industries and to households here in Europe.
We have also to be very much aware of a possible export of emissions, if we are happy with not producing a carbon footprint at the European territory, but we continue to consume products and services, which are coming from the outside world, which have a heavy content in CO2 footprint, then we lose on both fronts. We lose in terms of industrial competitiveness, but we lose also, for the planet. And if I recall correctly, recently in UK, there has been a very interesting analysis by the Climate Change Council, saying that, in fact, emissions are twice as high in Great Britain when we compare – when we combine internal emissions and imports of products and services containing CO2 footprint.
So, again, first point, we need to, in the coming ten/15 years, to develop competitive technologies for Europe and for the world. That’s the first. The second issue is people-centric planning. What we see, and we have provided here in Poland, a very ambitious plan for decreasing the share of coal in our energy mix, which is right now, of 75%, but going by 2040 to as low as 11%. That’s an extremely ambitious objective; possible but will require a lot of effort. And we have calculated also that we will be able to create new jobs in zero-emission-friendly energy production, offshore wind, nuclear, decentralised energy, 300,000 jobs are at stake. And we believe that with our new energy policy here in Poland, we can create these 300,000 jobs, but they will not be distributed in the same manner as the jobs, which will be lost in the – in fossil fuel industries. That’s the question of mining, that’s the question of coal-based electrical system, but that also the question of energy-intensive industries. So, we need to be able to plan this transition during the next 20 years, in a manner which will synchronise the creation of new jobs compared with loss of jobs in all sectors. Otherwise, we will develop areas of poverty, and we do not want this. Also, we need to look at this transition with – from a perspective of individual people. When you have an old single person living in a big house, that’s not always obvious for this person to, let’s say, transform the house, and invest heavily, in order to make this house more environmentally and climate-friendly, so we need also to take this perspective while planning the transition.
And third, last but not least, we have to engage the world. We are, right now, living in a very exciting moment. Major Economists are aligned with their ambition to reach climate neutrality by 2050. That’s an unprecedented thing. We have not only European Union confirming its ambition by setting the goal of 55% by 2030, but we have President-Elect Joe Biden immediately declaring coming back to the Paris Agreement. But we have on the other side of the Pacific, Japan and Korea are going for climate neutrality by 2050, and China for carbon neutrality by 2060.
More than 110 countries are right now sharing this climate neutrality ambition by mid-century. That’s a very important element. But we need to look a little bit closer at this ambition, and to see how it is translated into acts. What are the real measures behind? And we are here in Europe, with a very vast legislative project of implementing this climate neutrality ambition, but that’s not the case of all countries in the world, and we should be also thinking about COP26 in Glasgow, from this perspective of implementation, of visibility of implementation, and also of the right planning.
And, last but not least, when we are speaking about engaging the world, there will be a very interesting and important topic around trade. We plan here in Europe to introduce what we call a carbon border adjustment mechanism for couple of sectors: steel, cement, glass, fertilisers. We are discussing about which sectors should be covered with this carbon border adjustment mechanism, which should help the competitiveness of European industry during the transition phase. But that inevitably will put us in the discussion on the future of trade in the light of our climate ambition. How do we want to trade, taking into account different standards, in terms of CO2 emissions, in terms of environmental standards? How do we want to make sure that level playing field is guaranteed; that what makes the force of Europe, the free trade is still preserved?
So, we need to engage the world, and probably we need also to develop in this engaging the world strategy some kind of a strategy, which will combine both positive aspects, helping developing countries, especially Africa, bringing more co-operation with Latin America, with Asia-Pacific region, but also having a very tough discussion on trade standards with major emitters, such as China.
Antony Froggatt
Perfect, thank you very much. A really clear set of points for us to discuss going forward. So, Secretary of State, can I ask you to give your views as well?
Terhi Lehtonen
Thank you, Antony, and, first of all, thank you to Chatham House, and a really warm thank you for the invitation to join today’s conversation in such distinguished company. We’ll first come back to the question whether Europe can lead on climate action, and I will – I’ll second – answer your question about how Finnish Government is approaching climate action and the climate neutrality goal by 2035, and third, also what we expect from our European and global partners.
Now, can Europe lead on climate action? I believe, yes, we can, and, yes, we must. We have a historical responsibility, and we have capacity to act. Still, like Minister Kurtyka clearly outlined, we should not underestimate the challenge. Our economies were built based on fossil fuels. Fossil emissions are deeply embedded in our societies, in buildings, transport, energy systems, and the necessary transformation is also considerable. So we have a lot of lock-in of fossil in our existing infrastructure. And while the world needs to be – the fast-growing economies to leapfrog to a different energy system and a smarter resource energy use, Europe has to show that a transition from a relatively high greenhouse gas-intensive energy economy to a climate-neutral and eventually climate-negative emissions is possible, and can be done in a fair manner, leaving no-one behind.
We need, and we have proof of, leadership at all levels of government, as well as business and civil society. We have Fridays for Future. We have Frontrunner Cities with very ambitious climate goals and action. We have significant mobilisation of businesses. For example, we have Climate Leadership Coalition founded in Finland 2014, which represent now, I believe, nearly 70% of the Finnish stock market listed companies, and Climate Leadership Coalition is working together with partners currently across the world on a carbon-pricing initiative, with an aim to call for effective and sufficient carbon pricing in line with Paris Agreement goals. And this is a little bit linked to what Minister was saying earlier that we’re in Europe planning a border mechanism to ensure fair competition in Europe. But I think all of us have the same goal that, eventually, we would want to have a global – globally sufficient carbon prices for these sectors.
I believe that Europe is also in a position to act collectively on climate change, that EU is showing leadership, and is setting an example guided by science. The EU has stepped up its domestic commitments, adopted 2050 climate-neutrality targets, enhanced its 2030 climate greenhouse gas emission reduction targets. The EU’s nationally determined contribution, NDC, has been raised to at least 55% by 2030 compared to 1990. The EU has shown its ability to agree regulation that is able to deliver and over – and has over-delivered its international climate commitments. The EU is – will implement its enhanced goals through the European Green Deal, and by updating the legislative framework. And we heard that the UK will link and mirror our policies as appropriate. I would also like to congratulate the UK for its leadership, putting forward its new NDC, with an emission-reduction target of 68%. We hope that together, these European renewed and enhanced commitments will encourage our international partners to increase climate action efforts and levels of commitment.
Antony, you asked me to briefly outline how the Finnish Government is approaching climate action. First of all, our climate neutrality by 2035 goal was set on the basis of our Climate Science Panel assessment, what is consistent with our commitment under the Paris Agreement to pursue limiting warming to one and a half degrees, and a fair share for Finland. Now, Finland is a large country, with a cold climate, as was already noted by the Minister. In fact, we had -25 here a week ago, and we have a sparse population, and long transport distances, and we have a high share of energy-intensive industry. In fact, our per-capita greenhouse gas emissions are among the highest in the EU, so we believe that if Finland can be climate-neutral by 2035, other countries should be able to do so as well.
Now, we have already many policies in place that will deliver greenhouse gas reductions, for example, a ban on coal by 2029, and targets to halve transport emissions by 2030. We have an objective to reduce our peat consumption by at least half by 2030, which is somehow a little bit our domestic coal discussion. While the government was not able to outline all of the policies necessary for achieving the target at the outset, we are currently working on strategies and sets of policies and measures that will lead to climate neutrality by 2035 in a manner that is cost-effective, and socially and regionally fair. The government has already set indicative emission-reduction budgets to different reforms, like energy tax reform, and to sectoral policies. And we will be taking stock this spring of the progress made to secure we are on the path to climate neutrality by 2035.
The government has also successfully worked together with industries for climate – for carbon-neutrality roadmaps. All the key sectors, and many more than were originally asked, have developed their roadmaps to map out their emission-reduction potential, and the necessary enabling conditions, as well as the clean technologies’ potential for positive carbon handprint across global value change. And, in fact, these industry and sectoral roadmaps add up to significantly higher greenhouse gas reduction potential than what the government expected in the – these indicative emission budgets that I mentioned earlier. Now, this doesn’t mean that these are commitments to achieve those reductions, but the potential is there, and we know where the target are measures.
And I would just say that, in this work, it’s clear. When we’ve been working on this, it’s clear that there are many measures that we can do at national level. There’s also many that require action from local and regional government. However, it is equally clear that we will crucially need tools and measures at the European level. In particular, we will need tightening and strengthening of the EU emissions trading system. According to our analysis, a big share of the emission reductions we need to achieve in the 2030 perspective towards our climate neutrality 2035 should come from the sectors under the EU emissions trading system.
Another crucial area where we need support from the EU-level policy is transport. Minister again mentioned already the technological leaps that are happening, and I believe that those are, at least in big part, driven by policies. And we need EU to strengthen these policies to bring down CO2 emissions in vehicles, and speed up the introduction of electric vehicles. We also need to agree effective measures on aviation emissions and implement a new ICAO CORSIA system in a harmonised manner across the EU. So, we look forward therefore to the whole package of legislative proposals for a 55 that will be published this summer.
Antony asked us to elaborate on our expectations from our European partners, and whether differences in approach can be overcome. I think differences can be, and, to be clear, the Paris Agreement is the powerful tool that unites us. In the Paris Agreement, we all committed to ensure that the global temperature increase is limited to well below two degrees and to pursue efforts towards one and a half degrees. We all share this common objective, and there’s no ambiguity about this. In the Paris Agreement, we also agreed to update our NDCs and to prepare long-term strategies in line with the temperature goals. As I mentioned earlier, the EU has agreed internally on the updated NDC, and I’m confident that we will find agreement on how to implement it through EU and national measures.
As Europe, and this was again already well-elaborated by the Minister, we should also, as Europe, step up our diplomatic effort and seek to join forces with the new US administration to encourage especially G20 countries to put forward more ambitious NDCs, and this applies also to the US of course. It has been encouraging to see how the majority of G20 countries have now adopted 2050 climate neutrality or net zero targets. And, as was already mentioned, these target will need to now be translated into consistent NDCs and consistent implementation.
And we share the understanding that the developing countries, especially the LDCs and vulnerables, need finance to implement climate action in – on the ground, and this can be a challenge, especially with the pandemic. Now, building on the continued scaling up of previous years, the EU and its member states are committed to further scale up the mobilisation of international climate finance. Europe remains the largest contributor to – of public finance to developing countries, having contributed about €22 billion in 2019, and having more than doubled since 2013. And I think it’s important to acknowledge the importance of a successful delivery of the climate financing goal in the preparation of COP26.
Other developing countries should also scale up the provision of climate finance, and we need to underline the importance of assessing the effectiveness of the funding provided. And there is many other issues I could raise, a green recovery for one, but I think I will leave it at this for my introductory remarks, and happy to come back, during the discussion, on further questions. Thank you.
Antony Froggatt
Perfect, thank you so much. Lots of really important things that we can get back to, yeah, in terms of importance of Paris, ETS, link with the UK, G20, etc. So – but, before I have a series of questions, maybe I can give the floor to Dr John Murton who, as I said, was one of the Special Envoys of COP26, to respond to some of those, but also, to put forward some of the key goals for the UK, as it co-hosts the conference in November of this year.
Dr John Murton
Thanks, Antony, and apologies, I seem to be dropping in and out a little bit today. I live in rural Kent, which is beautiful, and I urge you to come and visit, but the internet is very bad, and it comes and goes, so apologies. So, I’m – it’s odd to be at a Chatham House event where the Chatham House Rule is not applied, and we’re on the record. And, of course, I assume, when we’re talking about Europe, we’re talking about Europe in the broader, wider sense, including our friends in Norway and Iceland and, of course, the UK itself, and not just the European Union, of which we’re no longer a part.
Maybe I’ll just talk a little bit – just talk about the goals for COP26. COP26 has to be the conference where we put the world and demonstrate to the world that we’re on an accelerating and irreversible trend to a zero-carbon economy. As Terhi has, sort of, mentioned, it’s written into the Paris Agreement that we will bring the world into a balance between anthropogenic emissions and sinks, and we need to show that we’re on that path because, whereas Paris negotiated the agreement, it’s up to Glasgow to show that it works, and that has to be our job. And so, we have, sort of, three areas of working that we’re looking to demonstrate. One is, of course, in terms of emissions reductions. We want as many countries as possible to come forward with long-term targets of net zero, as early as possible, and, associated with that, NDCs for the shorter-term that are compatible with a net-zero pathway. We can’t just use long-term targets as an excuse to avoid short-term action. That mustn’t be allowed to happen.
Secondly, we need to demonstrate that we can deliver on other elements of ambition in the Paris Agreement, particularly climate finance, which has been picked up by Terhi and others. We – if we don’t deliver the $100 billion a year of climate finance that was promised at Copenhagen and again in Paris, it will make negotiations more difficult. We need to be seen to be making good on that, particularly targeting the poorest and most vulnerable countries, for the obvious reasons of, sort of, the recovery from COVID, and the fact that the poorest, most vulnerable countries are those that will be affected most by the climate change that is already ongoing.
And if we can deliver on finance, then we will, sort of, stand a better chance of delivering the negotiated outcomes that will resolve the remaining elements, such as Article 6 that was, sort of, left unfinished from Madrid, and will enable us to then go forward with confidence. And to do that, we’re obviously engaging all of our diplomatic network, and we’re also encouraging greater international co-operation in distinct spheres. So, we’ve got five campaigns that underpin that work: a campaign on renewable energy transition that the [audio cuts out – 31:34] the renewable energy, a second campaign on the transition to speed up the transition to zero-emission vehicles, a campaign on nature-based solutions for that [audio cuts out – 31:50] in terms of biodiverse [audio cuts out – 31:54]. But also, at the same time, lower our emissions. Things like mangrove swamps and conserving tropical peatlands and forests is very important, in terms of maintaining [audio cuts out – 32:09] campaign on adaptation and resilience to help those communities who are most vulnerable to climate change to adapt and be stronger in the face of it. And underpinning all of those four campaigns, a fifth one around climate finance, which is not just about the 100 billion, but it’s also about making sure that every financial decision-maker around the world, whether they’re the Chancellor of the Exchequer or [audio cuts out – 32:35] because we’ve talked about the 100 billion of finance, but it’s the trillions that will be unleashed by the private sector [audio cuts out – 32:48] revolution that will finance the renewables that we need to get to net zero.
And just in terms of the response to what colleagues have said, I would just, sort of, I would just draw everyone’s attention to the really rapid pace of transformation that we’re seeing in the industries like renewable energy and zero-emission vehicles that will take us to a low-carbon economy. My personal view is it’s going to – those transitions will take place far faster than we anticipate, and that if we – if there’s a risk of being addicted to subsidies, it will be addicted to subsidies to fossil fuels. Still too many of us have subsidies for fossil fuels. My Prime Minister announced, on the 12th of December, that we would be phasing out all international support for fossil fuels from the UK, and we’re consulting on how we do that, how we phase out support for fossil fuel developments overseas because, of course, there’s no use us continuing to support fossil fuels, if we’re trying to lower our emissions. And I think the markets have really seen that, and even just in the last three days, Ford’s share price has jumped nearly a quarter just because of a tie-up and the exciting news at Rivian, one of the – its electric vehicles-related firm. So, the market is seizing this, and we need to move quickly with the market.
Antony Froggatt
Dr Murton, thank you very much indeed. Yeah, I mean, I think we’ve got – heard an exciting set of views and thoughts. For me, one that does tie it together, it builds a bit on what Dr Murton’s final point was, in terms of the idea about being addicted to subsidies. And it would be interesting to maybe if we could unpick that a bit more is, in terms of the green stimulus package, and the EU’s financial framework. I mean, I think it’s a very, and please correct me if I’m wrong, but I think 30% of all funding within the final – financial framework is deemed for climate initiatives, with the rest of it deemed to be doing no harm, in terms of climate initiatives. So, where – what does that mean, in terms of us or Europe and the EU moving ahead with financing clean developments or low-carbon developments? And what are the dangers? Dr Murton mentioned fossil fuels, in terms of the ongoing subsidies there. What sectors do you think we should be wary of, in terms of funding through the green recovery plans, thinking ahead, in terms of net zero and the 2030 NDCs? So, Minister Kurtyka, could I ask you first, in that regard, ‘cause it was your phrase that particularly jumped out, in terms of we mustn’t get addicted to subsidies? So how can we avoid it, I guess, is the key question?
Michał Kurtyka
Thank you very much, and thank you for very useful comments from John. I completely agree with him that the first point is to get you rid of fossil fuel subsidies. That’s an obvious fact, and that’s something I’m not coming even back to, which is obvious, and which, by the way, is one of the major problem in hundreds of billions of dollars are still invested in fossil fuel subsidies all around the world. So – but then, we have this unprecedented situation of post-COVID recovery, and 12% of world’s GDP is right now on the table, in order to help us get our economies back on track after COVID. 12% of world’s GDP, that’s $11.7 trillion, $11,700 billion, which it has been calculated by IMF that we are going to spend this money in that post-COVID recovery. And what would be extremely important, from my perspective, is that we do not reproduce one-to-one existing schemes from the previous work, in terms of energy production, in terms of transport infrastructure, but we think of a leapfrog effect towards new technologies, especially that, in fact, going for climate-friendly technology – technologies is an extremely capital-intensive process.
When you compare, and let’s say, previous technologies like gas or coal powerplant, then you have, like, inputs, people working, and then resource also. But when you are thinking of a windmill or photovoltaics, then, basically, your cost is being both at the beginning, in terms of CapEx, in terms of investment. So right now, with this unprecedented fiscal stimulus, we have to invest wisely, in order to rethink the way energy is being produced. But we have to do it, and I like very much the idea of Minister Lehtonen providing us with some kind of carbon-neutrality roadmaps, if I understood correctly, which are being done for – by industries in Finland. This is extremely important because we will not be able to reproduce such a fiscal stimulus soon, so we need to use this COVID fiscal stimulus now. But we have to look at technologies in a couple of years’ time, five, ten years’ time, that they will be able to be competitive without this fiscal stimulus because, again, it will not be possible to reproduce soon, such a big stimulus in the world.
Antony Froggatt
Thank you. That’s a very clear answer, yeah.
Terhi Lehtonen
Can I also…?
Antony Froggatt
Please, yeah.
Terhi Lehtonen
I completely agree with the Minister there, and I think, in a sense, just wanted to say that I think with this pandemic, it’s clear that it is justified our econo – to intervene as a public sector. I think, in many ways, I think subsidies are not the favourite instrument, but, at this moment, when our economies are on life support, I think it is warranted, and especially for climate policies as well. We know that climate, for climate, we need investment into cleaner technologies, into more efficient measures, and there’s a risk that some of these investments, those good and perhaps planned investments, will not happen because of the economic situation, and some of it, it could be transport infrastructure. It could be rail or infrastructure facilitating electric vehicles.
So, I think there’s a good reason to intervene from the public sector, but I completely agree that this is a one-off, and we will not be able to do it or maybe want to do the same. But since we will be wanting to stimulate the economies, we should – we must use it to the same euro to fight both the economic situation and leapfrog, and make sure that we accelerate the development towards climate neutrality and [inaudible – 40:22] economy that we want to do, and that the minimum is obviously that we should do no harm. And Finland has also – we already decided that we will use, from the EU recovery funds that we have at our disposal, we will use at least 50% for a climate and green transition. I think the European minimum threshold for that instrument is 37%, but I think yeah, we should definitely use all of the resources efficiently and ideally to investments and to research and development that is serving this climate target as well. Thank you.
Antony Froggatt
Thank you. John, did you want to come in on that?
Dr John Murton
Yeah, if I could just make two quick points, which I think would be helpful. One is, I think we should look beyond subsidies, but also look at liabilities. One of the things – I’ve worked in the nuclear sector, and one of the things that, sort of, has made the finances of nuclear more challenging is, in some countries, an insistence that the liabilities lie with the private sector and the developers rather than with the taxpayer. And I think there are countries around the world where [audio cuts out – 41:35] you’ll see unfunded liabilities, in terms of, sort of, oil wells that are being capped, but not properly closed, and those unfunded liabilities are something that governments around the world need to look into to make sure that that’s not a, sort of, artificial subsidy. If that – all that unfunded liability comes onto the taxpayer, that’s essentially a subsidy to the fossil fuel industry that will need looking at.
And then the other point I’d make is Minister Kurtyka pointed out quite rightly that the balance of expenditure on renewable energy is CapEx upfront. But, equally, there’s a lot of evidence that suggests that investment in renewable energy, and in energy efficiency in particular, generates lots more jobs for $100 million of investment. You get a lot more jobs out of renewable energy and particularly energy insulation and energy efficiency than you do out of fossil fuel because a lot of the, sort of, investments in fossil fuel are actually very capital-intensive. To drill offshore platforms and so on is very capital-intensive. So, the – that’s one of the reasons why Prime Minister said, in his speech at UNGA and again on the 12th of December, we won’t be lagging and lagging. It’s a bad joke, and I’ll probably get sacked for saying that, but we will be investing in energy and efficiency because installing insulation in people’s houses is not only really great because the cheapest form of electricity is one you don’t consume, it’s also good for job creation. And he’s being very careful to frame what we’re doing in the UK, as it’s not just about tackling climate change, but also creating job [audio cuts out – 43:11].
Antony Froggatt
I think you finished there. Yes, thank you. If I might just abuse my position of Chair, I just have one more question, while I encourage people to put some more questions in the ‘Chat’. But I think it’s a really important issue that was raised about this carbon border tax adjustment, and I think it’s interesting in and of itself because, politically, it’s challenging amongst some political parties, some industries. It’s challenging, in terms of geopolitics, and how other countries react to this, and it’s interesting, in particular now, in terms of Brexit. What does this mean for us, in terms of that relationship? So maybe, yeah, we can have a few further remarks on – from a European perspective, where do we think border tax adjustment will go? Do we think it really will happen, and what are the ramifications, and what are – maybe what are the steps that we need to put in place for it to occur? So, yeah, Minister Kurtyka, as you raised it again, maybe I could offer you the floor first, and let’s keep the answers brief, and then we can come back to some of the excellent questions that are in the ‘Chat’.
Michał Kurtyka
Thank you very much. Yes, indeed, we have that challenge of energy-intensive industries where it’s difficult to find in short-term or even medium-term a climate-friendly substitute. And the production of steel is such a very interesting sector where we can see that steel can be produced with the help of hydrogen. We have couple of experiences within European Union in this regard but, unluckily, the differential in price, it’s extremely high. And so, there will be, and there is a discussion about keeping jobs in these sectors of activities extremely strategic sectors of activities within the borders of European Union while, at the same time, reforming European emission trading scheme. And this inevitably puts us faced with a question: how do we want, in the foreseeable future, in the transitional period, to keep the jobs but, at the same time, allow the climate transition? And I think it will be a very complicated discussion around carbon border adjustment mechanism and maybe less within European Union.
But you’re rightly pointing it, Antony, that the question will be, first of all, a transatlantic question because once we have UK and US and Europe aligned around climate neutrality, this question of trade might become a question, which will be of common interest. But then, clearly, there will be lots of discussion with Asian economies, and I’m not speaking about Japan and Korea, but rather of China. And how to make sure that there is a possible evolution of this mechanism within European Union, without transatlantic community, without the risk of retaliation, an extremely delicate and extremely complicated issue. But, at the same time, a way somehow to push on big emitters to also consider the same kind of policies as we are developing among this transatlantic community, as I said.
Antony Froggatt
That’s great, thank you.
Terhi Lehtonen
Thank you, Antony, I think very little to add there. I think, as was mentioned, I think it’s important that we maintain the possibility for EU to be – to do consistent climate policy, and to have a carbon price that reflects our target, and, at the same time, ensure that we have a level playing field, and that we are able to pass the carbon price onto the market. And I think a border adjustment measure would be a tool in this perspective, and I think I, for one, think that this is a serious possibility, and the Commission will introduce one. I think many are thinking of steel, but that might be – maybe a little bit more difficult than some of the other sectors, like cement or power, and I completely agree there that I think it’s an area where there needs to be a lot of diplomacy and discussion, and we need to discuss this with international partners. And, ideally, it should be a trigger for other partners, trading partners, to introduce carbon pricing for their industries and their exports, and it should be raising the game. And I think this is – I mentioned this Climate Leadership Coalition from Finland, and this is exactly what they’re working for as well internationally with their partners for – and pricing that is effective and sufficient, in terms of the Paris Agreement goals.
Antony Froggatt
Thank you. Dr Murton, do you have anything to add on that, on the…?
Dr John Murton
I do.
Antony Froggatt
The reason I mentioned Brexit, just do you see that there’s a role as the UK signs trade deals with other countries, do you see that there is – or what role do you see, within those for climate change, and is carbon border tax adjustment one of the levers that could be inserted within them?
Dr John Murton
I’m going to side-step that, partly because it’s not my area of great expertise, trade, and you’ll understand trade is a sensitive issue at the moment, as we work around the world to conclude trade deals. I would just flag however that this is not the only way you can – it’s not the only end to, sort of, attack the problem from. There is a, sort of, way to attack the problem if car makers, for example, agreed that they would stipulate steel of a certain carbon content, you know, on a reducing scale as we go forward in time in the manufacture of their vehicles, that’s the sort of thing, and public procurement, and other ways you can actually stipulate some of these standards, and achieve some of the same effects. So, it’s not the only way to attack all the issue, and there are other things that can be done. We know that although the cost of carbon-zero steel would be higher, when you factor it into the overall cost, say, for example, of an automobile, the difference is not so great.
Antony Froggatt
Great, thank you. So I’m going to turn to the audience now, so we’ve got a number of questions. There is a voting possibility here, so if you like questions, give it a thumbs-up, because it goes up my screen, and therefore, it’s more likely to be answered – asked. So, highest on the list at the moment, we have David Walker. David, do you want to take the floor and ask your question? I see you do. That would be great. Please unmute yourself, and fire away.
David Walker
Thank you, Antony. Can you hear me okay?
Antony Froggatt
Yes, we can.
David Walker
Lovely. Thank you to you all, State Secretary, Minister, and Chair, what a wonderful and interesting conversation. My question to you all is, should every country issue their own green bonds to demonstrate commitment to fund the key initiatives and stimulate the private sector in their own activity? And, secondly, are the measurement and data standards sufficiently standardised yet? Thank you.
Antony Froggatt
Who wants to go first on that?
Terhi Lehtonen
I’ll do that quickly.
Antony Froggatt
Yeah, go on.
Terhi Lehtonen
I think there’s probably interest in the EU, and there is probably interest in the member states to go forward with green bonds, and also from the, sort of, local authority sector. I think the important thing here would be indeed the standards and the taxonomy, and to make sure that we’re talking about the same thing, I think, and the big picture, of course, that we need all of the financial sector to move in line with the Paris Agreement commitments that we move our finance to become compatible with the Paris Agreement. So it shouldn’t be just a niche, but all of it should be more or less green, but in the – once we’re – when we’re still transitioning, I think there is a place for green bonds and, ideally, with quite good common standards on what that entails.
Antony Froggatt
Thank you. Minister Kurtyka, do you have any thoughts on this?
Michał Kurtyka
Well, we are living, right now, in times of very low interest rates, and so, I don’t – I’m not that much worried about lack of available fundings. A green bond might be one way of collecting them for the needs of transformation. But let’s not forget that 30% out of recovery and resilience funds are going for climate purposes, the same regarding new European perspective of climate, so I don’t think we will be that much challenged on this. Of course, issuing green bonds, and my country did it a couple of years ago already, so this is a good mechanism, yeah.
Antony Froggatt
John? Oh, he’s just dropped out; having connection problems. Maybe I could ask – usually, when we do these debates altogether or in person, we ask a group of questions, and then the panellists, sort of, pick which ones they’d like to respond to. So maybe just given our time, I’m going to ask the four people that have got one thumbs up if they want to fire away their question, and then the panel has then a chance to respond to those that they think is more relevant, and I think that may enable more views to be heard. So, if I can go down in terms of my screen, Anna Åberg, sorry, I should know it, my colleague, do you want to go first, in terms of your question?
Anna Åberg
That’s fine, Antony. Thank you, panellists, for a very interesting presentation. It’s a really fascinating discussion. I was interested in hearing your views on the prospect for enhanced co-operation between broader Europe, not just the EU, the US and China ahead of COP26 and, of course, beyond that, and what such co-operation could look like more concretely. Thank you very much.
Antony Froggatt
Thanks, Anna. Simon Burchett?
Simon Burchett
Yes, and can you hear me alright?
Antony Froggatt
Yes, that’s fine. Yeah, please.
Simon Burchett
Yeah, thank you. Could I just ask the speakers how they see the role of cities, health, justice, and measures to tackle local air pollution, in efforts to achieve one and a half and two degrees, but also in building momentum towards a successful outcome at COP26? Thank you.
Antony Froggatt
And then Domenic Carratu? I hope that’s how you pronounce your surname. Domenic, please unmute yourself.
Domenic Carratu
Yeah, can you hear me now?
Antony Froggatt
Yes, yeah.
Domenic Carratu
Yeah, good. Thanks for the panel for a very good summary of the huge amount of work needed to make a difference here, as well as underlining the global nature of the challenge. However, as came up through some of the discussion, how realistic is it to achieve this all, given both short-term financial and economic problems, notably the costs of COVID and recovery from there, plus also the long-term economic and political competition we see nowadays, as the world seems to move towards a new great power of conflict?
Antony Froggatt
Perfect, thank you, and I’m just going to take this up too, ‘cause another one’s been given the thumbs-up during this conversation. So, Sam Taylor has a specific question for Dr Murton. Maybe I’ll – if he’s not coming up, I’ll just read it out is, “How big a role does Dr Murton envisage multilateral development banks need to play in the $100 billion climate finance target? So, specifically on development banks. And, finally, David Simmonds, please unmute yourself, yeah.
David Simmonds
Yeah, well, thank you very much for a great talk. My question is the Minister mentioned that we need to plan for energy storage to cater for a full energy demand curve. Do our speakers agree that we need to promote hydrogen and/or ammonia in our future energy supply plans? Further, should we consider tax levies on fossil fuels for heating to promote these greener solutions?
Antony Froggatt
Perfect, thank you, so we have questions about, sort of, geopolitics, EU/China/US. What’s the new opportunities? What’s the key initiatives? Questions about financing, opportunities in terms of co-benefits, which I think hasn’t really been touched on and is really important, in terms of pollution and, in particular, now in terms of COVID and the links to pollution there. So, I fire those over to you, Minister Kurtyka. Do you want to kick off? And use this also as a, sort of, final round to wrap up as well, if you’ve got any final points.
Michał Kurtyka
Thank you very much. Well, what my personal experience shows also, when I was running COP24 in Katowice, or another successful COP, which was the Paris COP, they were both based on an alignment between major economic blocs in the world, and US, Europe, and China must have agreed that on the conclusions. So, I think we can think of Glasgow COP26 with some notes of optimism in this regard. I keep my fingers crossed for colleagues in Great Britain for managing this extremely complex process of converging 196 countries. This is what we did in Katowice, delivering Katowice Rulebook and 100 pages document implementing Paris Agreement. That was an extremely important diplomatic and political exercise, in order to make everybody – to have everybody onboard. And, indeed, as I see is that we can have this alignment for COP26 in Glasgow as well. It will require a lot of work, and some kind of compartamisation, if I may say, of subjects. We – the discussion on trades, the discussion on climate, the discussions on many other possibly difficult issues must be kept separate from the discussion on climate. If it is the case, if it will be the case, then COP26 in Glasgow will be successful, building on this alignment of major economies, and by the same, also major emitters.
Regarding the question of air pollution, extremely timely question. We are facing right now here in Poland the situation where smog and air quality is deteriorating, just because we are using individual heaters, and they are not very ecological. So, this is why we put in place clean air programme, and more than 200,000 houses, since 18 months, have been completely refurbished, and in terms of energy efficiency and in terms of getting another way of providing heat. And we want to continue and accelerate this programme because we see that that’s increasing the awareness of population, and that is bringing very concrete benefits at local level. At the same time, it helps us to decrease CO2 emissions as a lot of these households are using coal to heat their houses, and we are making them migrate – migrating them to gas, which has the half – which is halving the emissions of CO2, or even to heat pumps where the emissions are completely decreased.
And we are also putting in place a green transport programme. We want to double the share of electric and hydrogen buses on our streets. We have nearly 500 of them right now in Poland, and we want to double this number quickly, so we are also moving ahead. And then, energy storage where we have in Poland here this strategy of 3H, hydrogen, hydro, and heat, because we see that we can store energy either in the form of hydrogen, either in pump and storage facilities, or in hydrogen. We want to use all available technologies, in order to help buffer the production, intermittent production of renewables with heat or cold storage. It’s an extremely interesting technologically also way of solving this problem of energy storage. It’s much more complicated and much more costly to store energy as electrical energy than it is to store it as heat and cold.
And then, regarding short-term economic consequences, and if I understand correctly the question, if I understood correctly the question, it’s can we afford all these actions, taking into account that the world is somehow fragmented right now, and that we are facing an unprecedented challenge, economic recession linked with COVID-19? Yes, indeed, it is a challenge, but we have to keep in mind that in a couple of years, this fiscal stimulus will have to be repaid, and it’s debt, which is contracted will have at some point be repaid. But we have, I think, no choice right now, and we have to use the momentum of post-COVID recovery, in order to invest both in new ways of producing energy and, at the same time, recovering among our economies. But we need, again, and I come back to my first point, to invest wisely and to invest productively into new jobs, new sectors of activities, so that it – this unprecedented fiscal stimulus will be productive for our economies.
Antony Froggatt
Perfect, thank you very much.
Terhi Lehtonen
Thank you. Antony, I’ll be very short. I think the Minister made some very pertinent remarks there. I will just answer the question on, is this realistic in the current situation? I think it is. I think the challenge – well, the new investments will probably be aligned, and this is – the way we see it here is that in the economy, actually, this is – climate action and climate investment is the one area that is very much driving the investment, and it’s a growth strategy. This is the one positive and probably the future proofing our economy. It is in line with investing on climate. I think the challenge will be the existing capacity, the existing fossil fuel capacity, and also, at the same time, phasing out and not just investing in new productive capacities, but phasing out. But I think it can be done, and myself, I would be saying that for the EU/US/China, if I was able to be on that table, I would say that they should be concentrating on the NDCs for 2030, and then, having a serious conversation on these trade measures, and how to ensure a level playing field that is consistent with Paris Agreement targets.
Antony Froggatt
Thank you. John, do you want to pick up on that final point, and then anything else, in terms of the – yeah.
Dr John Murton
Yeah, let me answer – there was a question specifically asked to me about how big a role the MDPs should play, and I – yeah, they’ve got to play a big role. The EIB has led from the front in this, and we need the others to catch up, and we need to work together with countries who have set net-zero targets and, of course, now including the US, and use our shareholdings to make sure that they move faster in that direction, and I think we’re seeing the beginning of that. David Malpass of the World Bank spoke at the Climate Ambition Summit on the 12th of December, and talked about 35% co-benefits, environmental co-benefits for World Bank spend, and so they’re moving in the right direction. We need to use our weight to make sure they do more of that.
I would just address that question about can we afford to, in the short-term, given the pressures of COVID, and the, sort of, the dynamics of that? And I would just say I think we will look back in time and realise that we couldn’t afford not to. We’re in this age of profound technological transformation. Look at mobile phones as a good example. If you’d have said 25 years ago that we’d all have computers in our pockets that have more computing power than NASA had until about 1985, we’d have all laughed. And now we realise that actually, we – many of us can’t do our jobs unless we have these, so, and our industries will be left behind. It’s not – if you look in the car sector, Toyota or General Motors are not the ones leading zero-emission vehicle revolution. It’s Tesla. Minister Lehtonen will know, sort of, as a Finn that, actually, it wasn’t Nokia that brought us smartphones, it was Apple, and Nokia lost market share as a result. And so, we really – I think we’ll look back and realise we can’t afford not to because if we don’t compete in this renewable world, our industries will suffer, and we will lose jobs. So I turn it around and say it’s not that, you know, there will be no money to be able to, it’s that we simply have to there. We can’t afford not to, and our Prime Minister’s been really clear on that. That when he sets the target that by 2030, every UK home will be powered by wind power, he’s talking about jobs and he’s talking about creating the UK as a Saudi Arabia of wind, and giving ourselves an advantage as a country in the global, sort of, race to economic success.
Antony Froggatt
Perfect, thank you very much. I will draw a close to the meeting. I’m sure we’ll all – you’ll all agree it’s been excellent, in terms of the conversation. We’ve covered a huge range of topics. I know it’s sometimes we have to skim across some others, but I think what we’ve done is pulled out the most pertinent or a number of the most pertinent questions that we currently have. I think we all agree that this year is going to be very exciting. It’s going to be challenging, in other regards. But I do hope that you come back to us at Chatham House, both as speakers and as participants.
If I may give a quick plug, next week, next Thursday we have an event within our department looking at the year ahead, in terms of fossil fuels and renewable energy. So, if you’re interested in that, please do come and join us. You’ll find the link on our website. But, otherwise, thank you very much, Minister Kurtyka, Secretary of State Lehtonen, and Dr John Murton. It really has been a great privilege to be part of this discussion and thank you all very much indeed for your questions, and I hope you all have a very good afternoon, wherever you are. Thanks again, cheers.
