john cridland deputy director general, cbi economic growth – driving sustainable investment
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John CridlandJohn CridlandDeputy Director General, CBIDeputy Director General, CBI
Economic growth – driving sustainable Economic growth – driving sustainable investmentinvestment
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ContextContext
Challenging environmental targets are here to Challenging environmental targets are here to stay...stay...
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UK emissions will grow & miss UK emissions will grow & miss targets under BAUtargets under BAU
UK total GHG emissions (MtCO2e)UK total GHG emissions (MtCO2e)
Business as usual abatementsTargets
0
1,000
250
500
750
2002
2020
2030
2050
Frozen 2002 technology
Source: Global abatement model; U.K. abatement model; team analysis
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ContextContext
• Challenging environmental targets are here to stayChallenging environmental targets are here to stay
• Business increasingly recognises that targets are justified on Business increasingly recognises that targets are justified on their own meritstheir own merits
• But if public support for such environmental goals depends on But if public support for such environmental goals depends on combining growth with environmental progress combining growth with environmental progress
• CBI believes that political momentum behind environmental CBI believes that political momentum behind environmental targets can be catalyst to create a policy response that targets can be catalyst to create a policy response that drives business investment in sustainable development drives business investment in sustainable development
• But even smart policy in this area not always cost-free – trade But even smart policy in this area not always cost-free – trade offs must be recognised and madeoffs must be recognised and made
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November 2007 - two major reportsNovember 2007 - two major reports
• Report of CBI Climate Change Task Force Report of CBI Climate Change Task Force Climate change: everybody’s businessClimate change: everybody’s business
• Report of Commission on Environmental Report of Commission on Environmental Markets and Economic PerformanceMarkets and Economic Performance
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Building blocksBuilding blocks
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Getting environmental policy rightGetting environmental policy right
‘‘Loud, long and legal’ policy framework Loud, long and legal’ policy framework
• Credible goals that give business clear sense of Credible goals that give business clear sense of direction of policydirection of policy
• Market mechanisms/price signalsMarket mechanisms/price signals
• Regulation: Avoid over-specifying the solutionRegulation: Avoid over-specifying the solution
• Level playing field Level playing field
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Nurturing investor and consumer Nurturing investor and consumer demanddemand
Investors:Investors:
• Growing investor interestGrowing investor interest
• Reliable, clear disclosure on environmental impacts Reliable, clear disclosure on environmental impacts (CBI project)(CBI project)
Consumers:Consumers:
• Rising consumer awarenessRising consumer awareness
• But clearer information and support needed to But clearer information and support needed to convert interest/good intentions into purchasing convert interest/good intentions into purchasing actionaction
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Combination of:Combination of:
Should create the conditions for a significant business response.
But for some markets not enough – innovation policy interventions may be needed as well
+Right
environmental policy
framework
Increasing consumer and
investor demand for
green products / services
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Innovation policy: market pullInnovation policy: market pull
• Public procurement Public procurement
• Local action – innovative, cost-effective Local action – innovative, cost-effective solutions to local environmental needssolutions to local environmental needs
• Deployment support – for products (e.g. Deployment support – for products (e.g. centrally generated electricity) that are hard to centrally generated electricity) that are hard to differentiate and need extra support (e.g. RO)differentiate and need extra support (e.g. RO)
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Innovation policy: supply pushInnovation policy: supply push
• UK public funding of energy R+D only 1/3 of EU UK public funding of energy R+D only 1/3 of EU average vs ‘picking losers’average vs ‘picking losers’
• Need for better co-ordination of public funded Need for better co-ordination of public funded green R+D capabilitygreen R+D capability
• Govt should prioritise technologies for support Govt should prioritise technologies for support which have greatest potential economic and which have greatest potential economic and environmental benefitsenvironmental benefits
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The business response...The business response...
• global market could be worth $1 trillion in early yearsglobal market could be worth $1 trillion in early years
• opportunities in climate change adaptation as well as mitigationopportunities in climate change adaptation as well as mitigation
• range of UK strengths e.g.:range of UK strengths e.g.:
financial services financial services AIM, insurance, emissions tradingAIM, insurance, emissions trading
high VA engineering high VA engineering transport, energytransport, energy
system-wide applications system-wide applications ICTICT
adaptation adaptation climate science, pharmaceuticalclimate science, pharmaceutical
• SMEs as well as big business - £3 billion market in UK by 2010 eg:SMEs as well as big business - £3 billion market in UK by 2010 eg:
commercial buildingscommercial buildings
renewable electricityrenewable electricity
renewable road transport fuelsrenewable road transport fuels
domestic energy efficiency & housingdomestic energy efficiency & housing
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Costs and scale of additional UK Costs and scale of additional UK greenhouse gas reduction measuresgreenhouse gas reduction measures
Cost of abatement2002 real €/tCO2e
Floor insulation
CCS (early retired gas)
Industrial motor systems
40 €/tCO2e50
0
-150
-50
Fuel substitution
550
Zero-carbon homes
Wind on-shore
CCS (gas)
450
350
-400
Solar water heating
-100
600
500
Solid wall insulation
400
Engine and non-engine efficiency (cars)
Lighting
Condensing boilers
Nuclear
Building structure Cavity wall
Biofuels
Abatement potentialMtCO2e
0 10050 250200150
Abatement required to meet 2030 target
Source: McKinsey UK cost curve; team analysis
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Action needed across all sectors to Action needed across all sectors to cut emissionscut emissions
* Major contributors are lighting, PCs/other office appliances, stand-by losses, water heating, washing and drying
Key insights from analysis
•4 main areas for cutting carbon – buildings, power, transport,
industrial processes
•Abatements roughly 50/50 energy efficiency +
low carbon energy
•Cost by 2020 €60-€90/tMtCO2e falling
to €40 /tCO2e in 2030
•This equates to £100 per household per year by
2030
MtCO2e
Source: McKinsey UK cost curve; team analysis
Building structure improvements
Appliances and lights*
Nuclear
CCS
Wind
Fuel efficient technology
Biofuels, plug-ins and hybrids
Motor systems
Non-CO2 gas emissions
Fuel substitution
BuildingsPower
TransportIndustry
0 20 40
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Green tech: UK potentialGreen tech: UK potential
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Green tech: UK potential contdGreen tech: UK potential contd
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Northern IrelandNorthern Ireland
• Avoid target one-upmanshipAvoid target one-upmanship
• Renewables – opportunity but also cost issue Renewables – opportunity but also cost issue given NI energy prices = tricky balancegiven NI energy prices = tricky balance
• In a small economy, can’t do everything. But In a small economy, can’t do everything. But imported green technology still benefits imported green technology still benefits economy, e.g. enhances energy efficiency.economy, e.g. enhances energy efficiency.