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Committee Opinion | Doc. 12037 | 28 September 2009
The challenges posed by climate change
(Former) Committee on Economic Affairs and Development
A. The committee’s conclusions
(open)The Committee on Economic Affairs and Development congratulates the rapporteur, Mr Prescott, and the Committee on the Environment, Agriculture, and Local and Regional Affairs for this excellent report, which it fully supports. The committee is convinced that climate change is a major challenge for our economies and requires them to make far-reaching adjustments and changes to preserve the quality of life of future generations. The current global economic crisis affords us a unique opportunity to carry these changes through.
B. Explanatory memorandum by Mr Luuk Blom, rapporteur
(open)1. Introduction
1. The breakthrough by ecology parties and movements
in the recent European elections highlighted the overriding need
to address the major challenges posed by climate change for the
future of our societies and subsequent generations.
2. Among the great issues that public- and private-sector decision
makers must tackle today are the economic challenges closely tied
up with environmental considerations. Very often, investment in
sustainable development and in reducing greenhouse gas emissions
makes possible substantial medium- and long-term savings. Failure
to invest in renewable energies contributes to increased global
warming and hence, in the very near future, to higher public spending
linked to the consequences of climate change. The Intergovernmental Panel
on Climate Change (IPCC) believes that the world’s GDP could shrink
substantially if the temperature rises by two to three degrees.
3. Today, the economic crisis which is affecting most of the
world’s economies, and more specifically the Council of Europe member
states, means that they are obliged to anticipate future problems
and above all to propose and adopt measures and projects which meet
the desire to preserve the environment from global warming. These
measures will lay the foundations for a less carbon-rich economy.
2. The economic consequences of climate change
4. Many areas of the economy in both the commercial
and non-commercial sectors may be affected by climate change. Agriculture
is probably the most exposed economic sector. Access to water and
the increasing scarcity of this resource will have a major economic
impact in regions where farming is still very important as a source
of both food and jobs. Water shortages will force the authorities
to invest in water supply facilities on a massive scale (including
new water and sewerage networks and more rainwater collection systems),
not to mention the new investment connected with the need to shift
to new energy sources.
5. The tourist industry will also be affected by climate change.
Increasing temperatures will alter the tourist map, and many European
regions for which this economic activity is a major source of income
are likely to be severely penalised. In the Alps, for example, which
stretch across many Council of Europe member states, lack of snow
will lead to major reductions in turnover.
6. The effects of climate change on the non-commercial sector
will also have economic repercussions. Coastal erosion and migration
will result in a drift to the towns and cities and the problems
of housing, unemployment and insecurity that this provokes. Health
facilities will have to face up to new illnesses which will necessitate
change.
3. The economic proposals of the Stern report (2006)
7. The report on the economics of climate change (2006)
by Sir Nicholas (now Lord) Stern, former chief economist at the
European Bank for Reconstruction and Development (EBRD) and then
at the World Bank, marked a turning point in public awareness about
the threat that global warming poses to the world economy.
8. The main thrust of the report is that, while investing today
would most certainly be costly, economic losses would be very much
greater if nothing were done. In economic terms, failure to invest
in action to combat climate change would cause GDP to fall by around
5% per year. This shrinkage could even be up to 20% if deterioration
in the climate and the ensuing problems and risks were particularly
severe. Such a change would cause the same kind of upheaval in our
economies and activities as were brought about by the two world
wars.
9. On the other hand, economic investment to adjust to global
warming would only reduce GDP by 2%. The report puts forward a number
of ideas about how to achieve this. Reducing greenhouse gases, which
are the main causes of global warming, continues to be the priority,
and industrial policies must be devised with this in mind. To create
the new tools required to meet future needs, innovation and research
budgets will have to be increased so that new carbon-free technologies
can be introduced, particularly in the energy field. Agriculture is
also affected and should be included in wide-ranging economic development
policies, so as to enable people affected by global warming to survive
economically.
10. The Stern report steers away from scaremongering and apocalyptic
views of the future, focusing on the economic opportunities that
will be created by this reorientation of our economic policies.
The work will revitalise economic growth, which will be galvanised
by new job opportunities and the opening up of new markets. Fresh
economic opportunities in areas such as new energy sources (solar
and wind power) and carbon-free goods and services will be opened
up by these investments. The financial world will have ample opportunity
to devise new financial and exchange instruments in the carbon-free,
clean energy and, of course, insurance markets. According to the
Stern report, the potential economic scope of the carbon-free energy market
may be in the region of US$500 billion (€350 billion) by 2050, and
possibly even more. These opportunities will bring substantial economic
advantages for businesses which are currently losing out in terms of
both profits and jobs. According to a study by the Boston Consulting
Group, the measures taken in France in the context of the government’s
environmental initiative, the Grenelle
de l’environnement, will lead to the preservation and
creation of some 600 000 jobs over the next twelve years. And these
policies will provide secure energy markets, which will benefit
all our member states.
4. The demands imposed by the current economic crisis
11. The financial and subsequently economic crisis has
drawn attention to the need to implement long-term measures taking
appropriate account of climate change. As Mr Prescott’s report points
out, since the election of Barack Obama, the United States has started
work on such new policies. Despite the inertia of the Bush administration
on the issue, however, it was back in September 2006 that the State
of California adopted a Global Warming Solutions Act, which set
out a timetable of measures to be taken up to 2012 and planned for reductions
in CO2 emissions of 25% by 2020 and 80% by
2050. In economic terms, this law will bring an estimated US$48
billion benefit for the people of California. President Obama has
also committed the United States to the fight against global warming
and to taking new measures as part of his economic recovery plan and
under the various laws adopted or in the course of adoption to promote
a clean economy (clean energy, jobs in the green economy, etc.).
12. However, in European countries the idea of incorporating sections
on climate change into economic recovery plans has met with a mixed
response. Admittedly, in January 2008, the European Commission adopted
several measures moving in this direction, in particular a reform
of the European Emissions Trading Scheme (EU-ETS) intended to limit
emissions throughout the EU, which could create revenue of some €50 billion
a year by 2020. This revenue will be returned to the member states
for investment in renewable energies and carbon storage. In January
2009 the European Commission also decided to reallocate €5 billion originally
included in the recovery plan to clean energy (€3.5 billion) and
to other measures designed to combat climate change. Although France
has not centred its economic recovery plan on the new economic prospects linked
to the major challenges posed by climate change, the French Government
has invited tenders for the construction of at least one solar power
plant per region by 2011. This measure would require an investment of
some €1.5 billion spread over three years. However, only €1 billion
out of the €19 billion programmed will be spent on renewable energies
and the introduction of a carbon tax, which should come into force
in 2010. It would be good for such an important and still much debated
initiative to be a subject of discussion and concerted policies
at European level, so as to avoid competition problems.
13. In recent years, countries such as Germany and Spain have
made major financial efforts in the renewable energy field (solar,
photovoltaic and wind power) thanks to investments by large industrial
and banking groups such as E.ON and EWE in Germany, which is Europe’s
undisputed leader in wind power. However, the economic crisis is
currently holding back the development of these renewable energies,
whereas they should in fact be providing an opportunity to move
a little further down this road.
14. In order to make these economic efforts, the Council of Europe
member states will have to adopt efficient economic tools such as
climate-change-adapted insurance systems, market-pricing signals
(reductions by the state in taxes on certain goods and services),
finance through public-private partnerships (to alleviate the pressure
on the public purse), regulatory incentives and measures to promote
development. The OECD has also called for discussion “on the role
that the market could play and regulatory mechanisms which might facilitate
adaptation”. 
5. Preparing for the United Nations Conference (COP 15) in Copenhagen (7-18 December 2009)
15. As Nicholas Stern points out in his report, the problem
is a worldwide one, which must be dealt with at international level.
This is the whole purpose of the Major Economies Forum on Energy
and Climate (MEF), which has now met several times (including in
Paris on 25 and 26 May 2009), bringing together the major developed
countries and developing countries. The economic and financial aspects
of climate change are also regularly discussed by numerous international
forums on which Council of Europe member states are represented,
including the Gleneagles Dialogue on Climate Change, Clean Energy
and Sustainable Development (involving the G8 countries, Spain and
Poland), which has been assigned the task of establishing the link
between the activities of the energy industry and climate change.
16. The OECD has also taken a position along these lines. At the
OECD’s Ministerial Council of 24 and 25 June 2009, a declaration
on green growth was adopted, in which an undertaking was made to strengthen: “our
efforts to pursue green growth strategies as part of our response
to the current crisis and beyond, acknowledging that ‘green’ and
‘growth’ can go hand-in-hand”. The OECD was also invited to develop a
green growth strategy which would “achieve
economic recovery and environmentally and socially sustainable economic
growth”. It now seems absolutely crucial for our economies to turn
round and embrace wholeheartedly the green economy.
17. Denmark’s capital city, Copenhagen, where the United Nations
Climate Change Conference will be held from 7 to 18 December 2009,
is the site of a permanent forum hosting major international meetings
and conferences on climate change. For instance, from 24 to 26 May
2009 it hosted the World Business Summit on Climate Change. On this
occasion Connie Hedegaard, the Danish Minister for Climate and Energy,
said that businesses could provide the means to live in a modern,
sustainable society. Acknowledging that reducing greenhouse gas
emissions is vital for the social, economic and environmental future
of businesses, the participants adopted the “Copenhagen Call”, appealing
to businesses to reduce greenhouse gas emissions, invest strongly
in existing low-emission technologies and develop new technologies.
With this goal in mind, on 4 and 5 November 2009 the OECD is holding
a Global Forum on Environment focusing on the theme of eco-innovation.
18. The Local Government Climate Change Leadership Summit, also
held in Copenhagen from 2 to 4 June 2009, was another forum where
discussion took place on the role of municipalities in the climate
change agreement which will come into force in 2012. Among the many
subjects discussed were the variety of local government finance
mechanisms, transport, technology transfers and private sector involvement.
Lastly, Sweden, which has held the Presidency of the European Union
since 1 July 2009, also wishes to take things forward in this field
by establishing a European Union carbon tax. According to Emma Lindberg,
a climate change expert from the Swedish Society for Nature Conservation,
a carbon tax is a good idea, and Sweden wants to show that climate
change offers Europe a good economic opportunity and a means of
creating jobs and new markets. The
rapporteur points to the need for consultation at European level
on this issue.
The
rapporteur points to the need for consultation at European level
on this issue.6. Conclusion
19. Climate change presents our societies with numerous
challenges, some of them economic. As the Stern report points out,
it is now becoming urgent for us to invest in the green economy
and measures to combat global warming, so as not to jeopardise the
future of our economies and of the societies in which our children and
grandchildren will live. This requires investment today in long-term
viable solutions which respect an environment which has been, and
still is, deteriorating.
20. A comprehensive process of multilateral consultations has
been set in motion to reach an agreement at the conference in Copenhagen
in December 2009. This event should mark a significant milestone
in the fight against global warming, as a financial agreement is
possible which will introduce new financial instruments and, above
all, formalise a major economic commitment by the parties concerned.
As the Secretary-General of the United Nations, Ban Ki-moon, pointed
out on 3 September 2009, “scientists have been accused for years
of scaremongering. But the real scaremongers are those who say we
cannot afford climate action – that it will hold back economic growth”.
C. Proposed amendments
(open)On the committee’s behalf, the rapporteur proposes the following amendments to the draft resolution contained in the report of the Committee on the Environment, Agriculture, and Local and Regional Affairs (Doc. 12002):
Amendment A (to the draft resolution)
Add the following sentence at the end of paragraph 12: “It is therefore important to invest among other things in a new green economy which will set in train a lasting process of world economic growth and meet the economic challenges ahead.”
Amendment B (to the draft resolution)
Add the following at the end of paragraph 17: “and is convinced that investment in new clean technologies cannot fail to be of economic benefit to the industrial fabric of the countries concerned and to corporate development.”
Amendment C (to the draft resolution)
After paragraph 22.12, add a new paragraph worded as follows: “The Parliamentary Assembly encourages the Council of Europe member states to find economic solutions based on clean forms of energy supply which are less dependent on fossil fuels. Solutions of this kind should make it possible to foster economic growth that can be shared by all, and to avoid future conflict.”
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Reporting committee: Committee on the Environment, Agriculture and Local and Regional Affairs
Committee seized for opinion: Committee on Economic Affairs and Development
Reference to committee: Reference 3447 of 29 September 2008
Draft opinion adopted unanimously by the Committee on Economic Affairs and Development on 28 September 2008
Secretariat of the committee: Mr Newman, Ms Ramanauskaite, Mr de Buyer and Mr Pfaadt