World Energy Congress

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Rome, 12 November 2007

Ladies and gentlemen,

I'd like to thank the World Energy Council for inviting me to speak at the 20th World Energy Congress. It is good to see such an important international energy event back in Europe after 15 years.

I’d also like to thank the Council for the invaluable work it has done to promote the sustainable supply and use of energy since it was founded back in 1924.

Of course, the world’s energy landscape looked very different back then:

You could buy a barrel of crude oil for $1.43 at current prices;

It was the year the world was supposed to run out of crude oil, according to a 1915 report by the US Bureau of Mines;

It was also the year that enormous new oil fields were discovered in Texas, Oklahoma and California – proving how dangerous it is to make predictions!

There was no nuclear power - the discovery of nuclear fission was still a decade away;

And biofuels were common.

Today, of course, that energy landscape has transformed beyond all recognition, and will continue to change rapidly over coming decades:

Oil prices have hit record highs - above $98 a barrel;

Global demand for hydrocarbons is increasing – by more than 50% by 2030. Energy demand in developing countries is likely to double in that time;

Here in Europe, domestic reserves are dwindling. This is increasing import dependence from around 55% of supply today to almost 70% by 2030;

The global energy system requires investments of more than $20 trillion until 2030;

And above it all, looms the spectre of climate change, with global CO2 emissions set to rise by 55% between 2004 and 2030.

And the combined challenges of competitiveness, global energy security and climate change give rise to a new debate about the future of nuclear energy.

This is not sustainable, and burying our heads in the sand will cost us dear – up to 20% of global GDP, according to the Stern Review.

But don't just take my word for it. A few days ago, the International Energy Agency presented its World Energy Outlook 2007. This sends a clear warning signal that the continuation of current energy trends is not sustainable - economically, socially or if we are to preserve the world's climate, on which we all depend. And it is a wake up call to the world: we must act now, and urgently, and we must go for robust and ambitious policies to significantly reduce our greenhouse gas emissions.

That is why this Congress is so important, and its theme – ‘The energy future in an interdependent world’ – so timely.

If I am asked today what is the most important issue for global security and development, the issue with the highest potential for solutions but also for serious problems if we do not act in the right way, it is energy and climate change.

Energy today is not only considered as a major challenge from an economic point of view but precisely for its implications for environment and climate. Because of increased competition for scarce resources, it poses serious concerns for global security.

History will judge us on our ability to manage this energy environment, and mitigate the worst effects of climate change. It is the great challenge of our generation.

The European Union has put its cards on the table. As the world’s biggest importer of energy, and second biggest consumer, I think it was important for us to show a lead.

On the basis of a Commission proposal, the Heads of State and government of the 27 Member States have committed themselves to a low-carbon energy future. A future that reinforces Europe’s competitiveness, safeguards our environmental objectives and ensures our security of supply.

With this objective in mind, we adopted a major energy and climate change package this year, which sets out the tough goals and targets we want to achieve.

It contained an ambitious, but achievable, headline target: to reduce EU greenhouse emissions by at least 20% by 2020 compared with 1990 levels - a target that we are keen to increase to 30%, if other developed countries join us.

This is an essential first step on the road to our ultimate goal: to reach a shared vision on reducing global emissions by at least 50% below 1990 levels by 2050. Nothing less will do if we are to limit global warming to 2°C above pre-industrial levels.

Thanks to our energy package, Europe's energy future in an interdependent world is now clear, and it rests on five pillars:

First, we will increase our energy efficiency, saving 20% of our energy by 2020. This will reduce the carbon dioxide we pump into the atmosphere by 780 million tonnes.

Second, we will substantially increase the amount of energy we use from renewable sources, tripling renewable energy use to 20% by 2020, and requiring a 10% biofuel component in vehicle fuel by 2020 as well.

The third pillar involves substantially increasing the amount of clean hydrocarbons we consume. Great technological advances are being made to reduce the carbon emissions from hydrocarbons – for example through the capture and storage of carbon dioxide. In this context, I would single out in particular the importance of coal; it is a relatively cheap fuel, and available in Europe. But it is also very dirty. So it is important to accelerate the advance of clean coal technologies.

Fourth, we are strengthening the EU’s carbon market, which already covers 50% of our energy emissions and represents a market value of more than €20 billion.

Finally, we are continuing in our efforts to forge an open and competitive internal energy market.

Key in this context is the separation of production and supply from transmission networks, as was underlined by the Heads of State and Government of the 27 in March,

and here let me quote the conclusions of the March European Council, which has agreed on the need for :

"effective separation of supply and production activities from network operations (unbundling), based on independently run and adequately regulated network operation systems which guarantee equal and open access to transport infrastructures and independence of decisions on investment in infrastructure".....

Of course, an effective internal market also means promoting cross-border collaboration and investment, and facilitating cross-border energy trade. It also means increasing solidarity between EU Member States, and transparency.

Getting to this point will be hard work. Moving to a more competitive market is always a challenge, particularly in a complex and strategic sector like energy.

But the rewards of success are high.

Real consumer choice. Fairer prices. Greater sustainability and energy efficiency as even smaller companies – particularly those that invest in renewable energy - gain access to the energy market.

A truly competitive market would also ensure greater security of supply, by improving the conditions for investments in power plants and transmission networks, which in turn will help avoid interruptions in power or gas supplies. It also has the capacity to help us in tackling climate change.

This genuine single European energy market will continue to be open to our partners around the world, as long as they play by the same rules as our companies.

In other words, we will protect competition in our newly liberalised market.

Looking to the immediate future, later this month we will adopt a European Strategic Energy Technology Plan to speed up innovation of energy technologies by pushing the European industry to turn the threats of climate change and security of supply into opportunities to increase its competitiveness.

As transport continues to be a major contributor to C02 emissions, the European Commission will also present legislative proposals in December to cut emissions in the automobile sector to 120 grams per kilometre by 2012.

And we will complete our legislative proposals to implement our energy and climate change package next January.

We will put forward a revised emissions trading scheme, propose concrete measures to promote renewable energy and outline how each Member State should achieve the greenhouse gas reduction targets that were endorsed in March. There will also be measures to increase the share of biofuels in overall EU transport fuel consumption to a minimum of 10%, in a sustainable way.

All this work we are undertaking internally puts us in good shape to tackle the fight against climate change at the global level.

The 13th UN Climate Change Conference in Bali next month is crucially important in this respect. But it is also important to be realistic. If successful, it will only mark the start of a process, not its culmination.

For the EU, it is vital that the world's leaders use Bali to launch serious negotiations on a comprehensive, international, post-2012 agreement on fighting climate change.

If negotiations are launched with a view to reaching agreement by 2009 in Copenhagen, this will leave enough time for the new agreement to be ratified and in force before the end of 2012. A tight, but very necessary timetable, I'm sure you will agree.

We have already done a lot of groundwork to increase the chances of success at Bali. The G8 Summit in June was a particular achievement, securing a clear commitment to substantial global emissions reductions.

A post-2012 agreement should consist of several key elements:

Consensus on a shared vision to limit global warming to 2°C above pre-industrial levels, which requires global emissions to be reduced to at least 50% below 1990 levels by 2050;

Deeper absolute emission reduction commitments by developed countries. That means a 30% reduction for developed countries by 2020;

New, flexible and fair commitments from developing countries, to reduce the greenhouse gas emission intensity of their economic development. Let me be clear: we do not expect countries like India and China to take the same commitments as we do. But we do expect them to decouple energy consumption and growth, in line with our common but differentiated responsibilities. But we do want to cooperate with developing countries to strengthen their contribution to the global reduction effort. By taking bold action now, they can enjoy a win-win situation, because sensible policies to fight climate change also have real non-climate benefits;

Extending the carbon market, and including innovative and enhanced flexible mechanisms. This market promises to deliver many of the incentives needed to shift investment into low carbon options, and to help scale up financing of action in developing countries to bring down the emissions intensity of their growth. We need to expand this market, and the launch of the International Carbon Action Partnership in Lisbon two weeks ago, by a coalition of European countries, US states, Canadian provinces, New Zealand and Norway, is a strong step forward in that direction;

Increasing cooperation on technology research, development, deployment and transfer. Clearly, extending carbon markets will not be sufficient to bring about the transition to low carbon economies that we have in mind. So we will need additional efforts to bring down the cost of strategically important technologies, and to overcome barriers to market deployment, for example by agreeing on efficiency standards for a range of applications;

Appropriate adaptation measures to deal with the effects of climate change. Least developed countries, that are most vulnerable to climate change, need our support in coping with the effects of climate change. But ultimately, all countries need to adapt to unavoidable climate change;

Addressing emissions from international aviation and maritime transportation. Bringing this sector into the picture is important since it is showing rapidly increasing emissions; and finally

Action to address deforestation. This is an issue that attracts keen interest from developing countries, as a way of contributing to a post-2012 agreement.

We will not achieve all these objectives overnight. But we must start now.

So let 2007 be remembered as the year in which we constructed a global consensus for action on energy and climate change: from the EU's initiative to take a global lead in setting targets, to the G8 meeting in Heiligendamm, to the UN High Level Event in New York and the Major Economies meeting in Washington in September.

Along the way, we have moved from the EU to the G8, to the G8 plus 5 [India, South Africa, Brazil, Mexico, China] and finally to the UN framework at Bali, where we need to take the next, crucial step and launch global negotiations.

Ladies and gentlemen,

It is the nature of the business that when we talk about the energy future, we are not talking of tomorrow, or next month, or even next year. Large investments can take decades to bear fruit; reductions in greenhouse gases will change nothing overnight. And who knows? In a few decades, the energy landscape might look as alien to us as ours would to people back in 1924.

But that doesn't change the fact that the energy present is a difficult and unsustainable one. It doesn't change the fact that climate change requires urgent action now.

A long-term perspective is no excuse for short-term paralysis.

So I wish you successful and fruitful discussions this week, and look forward to the World Energy Council continuing to play an important role today, tomorrow, and in decades to come.

Thank you.

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