Thank you for inviting me here today to your climate change conference.
You may have noticed. But we’re just a few weeks away from a general election.
For many MPs this is what Sir Alex Ferguson referred to as ‘squeaky bum time’.
So maybe it’s appropriate I’m at the Association of British Insurers.
Businesses can of course take out insurance against the possibility that a change in political conditions will result in a loss.
But I’ve not yet seen a premium to insure an MP against losing their seat.
Maybe you’ve missed a gap in the market for political life insurance.
Though the premia would be high in this General Election – because it’s easily the most difficult to predict in living memory.
Interestingly though your industry is getting ready for insuring the risks of climate change.
As you look ahead at the big long-term issues for global insurance, climate change is increasingly one of the biggest risks you’re considering. And I’ve been impressed by the leadership your sector has and is showing.
So in my speech today I want to look ahead – to one of the immediate challenges the new Government will face – the Climate Change Conference in Paris in December.
But first I want to begin by reflecting on what has been achieved in this Parliament here in the UK to meet this climate change challenge.
Consensus on climate change
In 2010, the Coalition inherited ‘a number of difficulties’ from the last administration.
The economic crisis being the most pressing.
But credit where credit is due, on climate change, the 2008 Climate Change Act passed by the previous Government positioned the UK as one of the leading nations for pressing for action.
And this position is supported by a wide political consensus.
Labour, the Conservatives and the Liberal Democrats all voted in favour of the 2008 Act.
It’s a consensus based on hard scientific evidence.
We are on course, at present, for a world far hotter than the 2 degrees or less rise that scientists tell us should avoid the most catastrophic outcomes.
Outcomes that will damage our prosperity, our security and our health.
Only yesterday, public health experts warned that climate change could see tropical diseases such as malaria establish themselves in Britain in a few short decades.
With climate change, our children and their children will face a harsher and more brutal world.
That is why the Climate Change Act remains a key feature of the UK’s energy policies today – rightly – because it ensures that, alongside energy security and price, low carbon energy is a core objective.
So in 2010, the Coalition did have the benefit of the Climate Change Act – and that’s helped people like me – both domestically and internationally – to argue for low carbon policies from a position of strength.
But there was still a major weakness in the position we inherited.
The 2008 Climate Change Act may have put in law the objective – a low-carbon economy and a decarbonised energy supply.
But no long-term, cost-effective policy framework to meet the Carbon Budgets.
We had a destination – but no credible road-map or vehicles to get there.
To make matters worse the coalition faced a legacy of under-investment in energy infrastructure – particularly in low-carbon electricity generation and networks.
No new nuclear for a generation. Renewables generating less than 7% of our electricity needs.
So radical action has been required, to maintain energy security while we decarbonise – and at the lowest possible cost.
Progress at home
The solution has been green growth. With a road map to reduce emissions, and provide much needed economic development and jobs too. And with not just one vehicle, but a garage and a cycle rack full of vehicles for low carbon growth.
First – in 2011 – our comprehensive Carbon Plan to set the strategy out to 2050. A strategy for the transition to a low-carbon economy based on the meeting the Carbon Budget System of the Climate Change Act. A practical plan.
And second, this plan came hand in hand with a trebling of the support available to 2020 for low-carbon, as part of the Levy Control Framework. Indeed, one of my proudest achievements was negotiating the Levy Control Framework with the Treasury – because we won that negotiation!
Third, in 2012, we set up the world’s first Green Investment Bank, dedicated to greening the economy, capitalised to the tune of £3.8bn, which is already transforming the way we look at long term climate friendly investment.
Fourth, we also remodelled the energy efficiency landscape, primarily with a tough new legal regulation on big energy firms – the Energy Company Obligation – to boost energy efficiency investment, especially for the most vulnerable people and the hardest to heat homes, but also with the UK’s first comprehensive “whole home” assessment system and ‘pay as you save’ mechanism – the Green Deal.
And, most important of all, Electricity Market Reform – with the 2013 Energy Act. This puts in place the world’s first low carbon electricity market, with long-term financial and legal structures to drive investment in low-carbon power generation.
And the results of this focus on green growth have been pretty spectacular.
Average annual investment in renewable power is now running at over twice the level of the last parliament, with 2014 a record year.
Since 2010, renewable electricity capacity has more than doubled: in fact it’s risen by over 165%!
Renewables now supply almost a fifth of the UK’s electricity – powering the equivalent of over 14 million homes every year.
Britain’s low-carbon economy as a whole grew at 7% last year – outstripping growth in the economy as a whole and now supporting 460,000 jobs.
And the insurance industry has played a vital part in all this – by developing risk management solutions for renewables and other low carbon projects.
Thanks to green growth, the UK now has one of the least carbon intensive economies in the developed world.
Over this parliament the UK economy has become almost 13% more carbon-efficient. With more growth not leading to more emissions.
Proving that going green and economic development can go hand in hand.
And, as Jeremy Oppenheim from the New Climate Economy Project, explained to you, the global opportunity for green growth is huge.
And through our actions we have put Britain in the leading pack.
Greenest government ever
But the billion dollar question is this:
What has all this action meant for UK greenhouse gas emissions?
No other measure matters more for the climate.
The latest stats show that between 2010 and 2013, UK carbon emission fell by 7%.
That’s good. But I think we’ll have done even better than that – once we see the full Parliament picture.
Official statistics setting out the 2014 provisional position will be published in the next few days. Rightly, I am not privy to the detail.
But if you look at those 2014 indicators already published, they are pointing in the same carbon reducing direction.
Over the last year energy consumption fell by 7%.
Coal use for power stations fell by almost a quarter.
Electricity from wind up by 11%
The carbon intensity of our economy dropped by almost 6% – even as growth began to pick up over the year.
So I can confidently predict – 2014 will have been a bumper year for cutting our emissions.
So – when people ask me – has this been the greenest Government ever? – I answer – unequivocally – yes. Based on the evidence. Based on the stats.
And better still – by our actions over the last 5 years, the next Government is set to be even greener still. Assuming of course it doesn’t totally mess things up.
For the 2013 Energy Act puts in place the ‘how’ to the Climate Change Act’s “what”.
With cross-party consensus, providing stability for investment in the low-carbon economy.
A beacon for others to follow.
As the Chief Economist at the International Energy Agency, Fatih Birol, has said:
“UK energy policies are moving in the right direction and can be an example for many countries to get inspiration from”
So the Coalition in the UK has put a lot of the policies needed to deliver on our own domestic climate targets.
But being a green Government in the UK is no good for the global climate, if we can’t take other countries with us.
And as a proud pro-European I was determined to take the UK’s leadership position and work with other leading nations in the EU – from the Nordics to the Germans – to build greater ambition across Europe.
So in February 2013, I set up the Green Growth Group – of Ministers from the EU’s Environment Council. My aim was to build consensus and drive more ambitious policy around a low-carbon, pro-growth position.
This Green Growth Group now boasts 13 member states representing 75% of Europe’s population, 85% of Europe’s GDP and 60% of the votes in the Council of Ministers.
And it’s partly down to the Green Growth Group that the EU rediscovered its leadership on climate.
Above all, with the new 2030 energy and climate change package.
Based on our British blueprint, the 2030 climate framework is ambitious – but it’s also realistic and fully achievable.
A target to reduce Europe’s domestic greenhouse gas emissions by at least 40% by 2030. At least 40%.
Backed up by a European-wide renewables target of 27%.
So combining the British wish for flexibility for member states to judge their own power mix, with a German and Danish demand for a strong long term signal for the industry. Which I thoroughly support.
It’s not a deal you could strike if you were out of Europe. Or even threatening to leave Europe.
Frankly, without nearly two years of determined EU climate diplomacy, that 2030 package would not have happened.
But it has put the EU in a strong leadership position in the run up to this December’s key Paris UN climate summit.
The second part of the international picture.
Prospects for Paris
People ask me. Will Paris be another Copenhagen – when we’re forced to agree to disagree?
My firm answer is no.
For the world has changed since Copenhagen. Momentum has definitively shifted.
Almost 500 climate laws have been passed in 66 of the world’s largest emitting countries.
Carbon markets have now been put in place in over 36 countries.
Many of the mechanisms and concepts we will need to implement a global climate deal already exist.
And all this action is having an impact.
The IEA estimate that last year, for the first time in 40 years – in the absence of a serious economic crisis – global emissions did not rise.
Of course, we actually need drastic cuts in emissions. Stopping them growing is just a first stage. But it’s a big plus.
And for the deal, the signs are increasingly positive: in the EU, in China, in the US – together responsible for over half of global emissions –.action is happening.
In China, President Xi Jinping has embedded climate action directly into the national planning process.
In the United States, the commitment of the White House to achieve a global climate deal has never been so strong.
And I’m still hopeful that the new Prime Minister of India, Nahendra Modi, will lead his country to a more climate ambitious position.
How will the negotiations go?
Well, the EU’s 2030 Framework has placed Europe at the forefront.
We have been one of the first to publish our Intended Nationally Determined Contributions – or INDC in the jargon. And it’s easily the most ambitious of any large country or block.
And yet it is the UK position – fought for by me in this Coalition – that the EU should be ready to commit to go further – if there’s a comprehensive global climate deal.
That’s why I fought for an EU target of “at least” 40% reduction.
The words “at least” ensure the 40% target will be the floor of EU action – not the ceiling.
So I’m pressing for the EU to develop credible options to deliver more, for instance, through using international credits.
But it will be impossible to increase the EU’s offer – unless we see real ambition – indeed a step up in ambition – from other countries too.
We have been the first to put our cards on the table – the spotlight must rightly now shift to other countries – as EU Leaders made clear at Friday’s European Council.
Path to Paris
So there is so much still to do.
At Lima we agreed that INDCs would be progression in ambition compared to what is currently on offer.
But the Lima decision did not set out any formal way of assessing the fairness and ambition of individual INDCs.
And it is highly likely – probably certain now – that the aggregate of INDCs will not reflect what is needed globally to achieve our below 2 degree objective.
So we need to use the time available between now and Paris to mobilise global civil society to up the pressure. Carrying out objective assessments. Making judgements about who is and who is not pulling their weight.
You here at the ABI have been at the forefront of arguing for action on climate change – articulating both the risks to the UK from climate change – as well as the opportunity that low carbon growth provides.
It is great to see leading insurers teaming up with academics and green groups to press the case for such action with today’s open letter.
And it great to see institutions like the National Trust throwing their weight behind climate change action.
But we are looking at an intensive year of climate diplomacy – and we look to the progressive business community and wider civil society to help us in this effort.
Paris will not be the end of the story.
A strong, rules based agreement in Paris must include a long term signal of where the international community is headed.
And a strong mechanism for increasing climate ambition over time – as trust is built, as costs fall and as technological innovations rise.
We will need to make sure we continue to help the most vulnerable countries adapt to the effects of climate change.
The UK’s International Climate Fund, worth almost £4bn, is part of the global effort to mobilise $100bn a year by 2020 from public and private sources to help with both mitigation and adaptation in developing countries.
I can announce today that DECC plans to create a new pilot joint venture with the UK Green Investment Bank worth £200m over three years to assist in investment of the UK’s International Climate Fund .
It will focus on renewable energy and energy efficiency projects in developing countries; delivering significant emissions reductions and poverty reduction by supporting economic growth, job creation, and the development of reliable energy infrastructure.
And by working with the Green Investment Bank, we can maximise the commercial viability, impact and effectiveness of UK climate finance.
And this work has to go hand in hand with reducing incentives for high-carbon energy.
That is why, in November 2013, I announced that the UK will end support for public financing of new coal-fired power plants overseas.
And why we are working with the US to change the rules on OECD export credit support to effectively rule out unabated coal.
One of the long-term issues we also need to tackle is that of stranded assets in fossil fuels.
We know that in the absence of Carbon Capture and Storage, a great deal of the world’s current fossil fuel reserves are unburnable if we are to limit global warming to 2 degrees.
Coal reserves, in particular, are a cause of concern.
Research suggests that over 80% of global coal reserves should remain untouched.
That is why DECC is supporting the climate analysis work of the Bank of England – including the impact of climate change on the insurance sector expected later in the year.
We are providing data on emissions pathways and investments to track how investment allocations are already changing.
It’s why I’m so keen on the work done by the Carbon Tracker Initiative.
It’s why we do need to look at disinvestment from coal assets.
But let me also be clear – we will still need a lot of oil and gas over the next few decades, as we decarbonise rapidly.
So the policy question is – how, during this historic energy transition from high to low carbon, do we maintain the financial system’s strength, given it’s highly exposed to fossil fuels assets?
I’m arguing for disclosure. Transparency. Reporting requirements on firms and financial institutions – to force them to set out the future income they expect from their fossil fuel assets. To give long term investors more information on which to base their decisions.
This will help smooth the transition to a low-carbon economy.
As Paul Fisher from the Bank of England, said this month:
“Even though the full impacts of climate change often may not be visible in the short-term, it is well worth insurers being alert to emerging risks, including those from policy makers”
Not that politically subtle for a central banker!
So let me conclude by looking at what the General Election could hold here in the UK.
I’m pleased to say that the political consensus I spoke about at the beginning remains healthy today.
The Valentine’s Day pledge by the leaders of the three main UK parties on Climate Change demonstrates this.
A pledge to stick to the Climate Change Act and its Carbon budgets system.
To continue the drive towards a low-carbon, energy efficient economy, and ending the use of unabated coal.
And to work for a legally binding deal in Paris that limits temperatures rises to below the 2 degree threshold that will avoid the worst effects of climate change.
The next Government will face an intense six months of climate diplomacy.
But how that Government acts will inevitably impact on our ability to make a difference in Paris.
And while the Valentine’s Day pledge gives us some confidence, I do see difficulties.[political content removed]
So the General Election does bring uncertainty at a critical time.
But I remain an optimist.
With the world-leading platform built by successive UK Governments.
Especially the significant achievements of the last 5 years, at home and abroad.
With the wide coalition of the willing. Not just in politics, not just in the UK – but across global civil society. The business community. And here, our financial community.
I do believe the prospects for a comprehensive and binding global deal to tackle climate change are the best in a generation.
Yes, the deal won’t be perfect.
Of course, Paris will not be the last word.
You bet, we’ll need climate talks after Paris.
But we cannot let this this moment slip by.
In Paris, the world has to act. And Britain has to lead.