Hedegaard: ‘Rethinking our growth model’

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EU Climate Commissioner Connie Hedegaard says global development challenges cannot be met if the world's economic powers do not rethink their growth model. In an exclusive interview with EURACTIV, she also addresses controversial policies on emission charges for airlines and rejects calls for a price floor to sustain Europe's depressed carbon market.

Connie Hedegaard is the European climate commissioner. She one of 22 members of the UN’s high-level Global Sustainability Panel that published a report this week containing 56 recommendations on low-carbon and sustainable development. She was interviewed by EURACTIV’s Frédéric Simon and Timothy Spence.

You were a member of the panel that drafted the UN’s Global Sustainability Report. The document suggests that unless more attention is given to sustainable human development, there will be severe consequences for people and the climate. How does climate change affect development challenges and what is the EU doing to address it?

Climate is a threat multiplier in many developing countries. If you take the Horn of Africa, for instance, the Horn of Africa crisis is not just because of climate change, but that is making the crisis even worse. If you take the situation in Yemen, water scarcity is worse because of climate [change]. In China they make an annual calculation now how much does the change in climate cost their GDP, because they can see it is making other kinds of challenges worse and this changing weather, precipitation patterns things like that …

In Thailand, the world’s largest rice producer, one-fifth of the harvest rotted due to flooding. That’s the kind of interlinkage there is and that’s why we saw, when you have still more people, wanting still more commodities, demanding still more food, still more energy, still more water, and on top of that as an overarching challenge, you also have climate change, then you really have the recipe for a lot more problems if you just continue business as usual instead of rethinking your growth model.

Are you happy with the progress made in Durban about the Green Fund for developing countries?

It was foreseen that we should make it operational in Durban, and that happened. And now countries are starting to put the money in …

But are you happy with the pledges that have been made?

The decision by many developed countries has been, we are not pledging until we know exactly how does it work, what will the money be given for, and for whom, who will administer it? That was what was agreed in Durban. Some of our member states started to pledge already in Durban – Germany did, Denmark did, I think the UK also did and others are on their way now to say what they will put into it.

Is the issue only about aid?

No … on the climate finance, the [UN Global Sustainability] panel says very, very clearly there is no way we can do it only through public budgets. As you might know, it is still in discussions in the international climate talks. Europe’s position, and now it’s also echoed by the whole panel, there is no way that you can allocate or re-direct the money that you need and the kinds of investments that you need – for instance in access to sustainable energy – only through public money. You really have to make this a good business case, for institutional investors, for pension funds, for lots of private capital. …

In your statements on the UN report, you called for more subsidies for renewable energy and less for fossil fuel energy …

I think we put in a slightly different way. We said we should phase out fossil fuel subsidies, then we should take into consideration that we should phase out first the most harmful, and in the way you phase out, take care of the poorest people’s interests. We’re just stating as a fact from the International Energy Agency that in 2010 … the world subsidised fossils for more than $400 billion whereas it was only subsidising renewables for between $60-and-$70 billion, meaning that was six to seven times as much subsidising of fossils fuels that we want less of instead of renewables that we agree we want more of.

Here in Europe there still policies that subsidise fossil fuels. The Commission has signed off on continued state aid for unproductive coals mines, and many countries have scaled back subsidies for renewables …

You are distorting it a bit when you say the Commission supported unprofitable coal mines, because what the commission did was actually to set a deadline, when what the members states wanted was to continue unprofitable coals mines. We set a deadline when it now must be phased out and got a decision on that.

But how do you reconcile the rhetoric about supporting renewable energy and the reality that many European countries …

It’s true that, for instance, Spain cut back their renewables feed-in tariffs and Italy did the same, and in both cases the Commission wrote to the respective governments to say you can always change feed-in tariffs, but don’t do it retroactively so that you are harming existing projects …

I think that’s why we need milestones, why we need targets for renewables as we have for 2020, that’s why we also need now to define the milestones for 2030, because if you are – say – a pension fund, and you need to decide today whether you want to put your money in a new offshore wind farm, you need to know the conditions, you need to know whether there is predictability – do the countries really want to do this?

The Commission’s recommendations to member states have been very clear: don’t mess with this in the short term.  Of course if you want change after 2020, you can do that. But if now you have your national plans as to how much you want do in the field of renewables up to 2020, you should take very much care not to legislate retroactively or change the conditions retroactively.

This is not just an environmental or climate perspective, because what happens if you do this, then investors instead look to other regions and put their money there.

But how effective are milestones? They EU has plenty of milestone that the member countries are not recognising.

Definitely. But I think if you take the renewables target … there is a link between that kind of policy that we have here and, that even despite the [financial] crisis, member states have continued to invest in more renewables not less renewables … so I think this is a good example how targets actually help governments to stay focused on important issues even when they have other things that distract their attention.

Although they seem to be very reluctant about targets for 2030, which is something you have been promoting.

I think we should have it now. We will very soon be at crossroad where Europe has to decide, do we want to create jobs in the renewables sector or do we want to give away a stronghold we have had to, say, the China’s or some others?

You are thinking of Vestas?

No, because I think there are many other reasons for Vestas. … The fact is [in] the solar market, wind market, the offshore market … Europe still has a clear market advantage.

But on solar PV, we’ve seen a lot of production now going abroad, so that market advantage is eroding fast, it would seem.

And you could say, yes, and our auto manufacturers produce in China for the Chinese growing market … I mean it’s all about Europe’s general competitiveness. But I’m just saying here, we have an area here – renewables, and maybe even it is more clear with energy efficiency – where we can still create a lot of growth and jobs in Europe by addressing challenges that would not only be good for climate and for energy security, it would also benefit our economy. Last year our the oil bill to Europe was €315 billion … it’s almost the size of the Greek debt … €315 billion last year for our imported oil bill, increasing 40% compared to the year before. And last week Saudi Arabia announced that they want to stay in this three-digit oil price even if when/if the world comes back to normal.

That’s why we what we are recommending, in the panels’ report, is we must have a  more wholistic approach. Normally people tend to believe if we continue business as usual, then it costs nothing, but that is very, very false in the world we are living in. If we continue business as usual, our oil bill will increase, there will be much more volatile prices and the risk of oil shocks will be there. And the consequences for environment, for people, for poor populations that want migrate … will only increase.

Whereas if we had said, why don’t we now use the crisis to do something substantial to reduce this oil bill, to increase energy efficiency, to put less money to the Saudi Arabians of this world, to invest more in Europe? – and the big advantage would be that it would create jobs right now …

How do you do that in a time of austerity … in a time when companies are not investing?

If I could take an example from Denmark … Last year a big pension fund decided to pour substantial money into an offshore wind farm. All the risk analysis they had proved this is not more risky – if anything it is less risky than other areas where they would put their money. And now this big wind farm to supply 400,000 Danish household with electricity is being built, and it’s creating loads of jobs in some rather remote areas where there are not that many jobs being created for the time being…

And if you ask these institutional investors, they say if we get the signal, the targets, if we have the predictability through the milestones, and you show that you really want it in Europe, then the capital is there.

Going back to the energy security issue and your point about oil. There is a growing field of science that biofuels are not as climate friendly as they’ve been sold to be. How do you respond to this need for alternative fuel, and yet address these concerns?

By doing what we have been doing. I was the [Danish] minister for environment when we set up the sustainability criteria out of exactly the same fear … But the knowledge and the science were not that well developed at that time, so now we have been struggling to try to get a defined indirect land use factor in. And within some weeks, the Commission will present a way forward on this.

Personally, I’ve always been very cautious on biofuels. It’s great to see the potential in new technologies, but we should take very much care in Europe that we are now not establishing a new big industry that we then, after some time, say wow, that was not so good.

I think what they did in the US, for instance, on the corn ethanol – they’re starting to realise that might not be the wisest way forward, and we should be sure to get as right as we can get it.

Would the Commission be ready to rethink it’s endorsement and backtrack?

There are sustainable biofuels and there are not-so-sustainable biofuels. I have no problems and the Commission has no problems with sustainable biofuels – and there are sustainable biofuels – but there are also biofuels where you could say what it takes away from CO2 is not less than fossil fuels, in some instances it’s even more. And that’s of course not a clever strategy if we ask member states to replace fossils fuels with something that is not better than fossil fuels.

And that’s why to get the sustainability criteria right, to get the methodology right …  the Council discussions at that time we said, yeah, this is a new technology and you cannot always expect the total perfect world of a new technology. And that is why we made the percentage a dynamic one so that it will increase over the years, so that it’s built into the legislation that the industry must innovate and improve, and we are sort of adding to that also by what we are going to suggest on ILUC [indirect land-use change].

Could that lead to some rules that would effectively rule out some biofuels?

I’m not going to present what we’re doing now because I have half the this portfolio – [Energy] Commissioner Günther Oettinger has another half of the portfolio – and it would not be fair if I – before we’ve had it through the Commission – tell you what we are going to do.

There’s been a lot of talk in the European Parliament about instigating effectively a carbon price floor with a set-aside rule in the emissions trading scheme. Is it an initiative that you support and could you maybe quantify the amounts that in your view would make it workable?

In different Commission papers we have said how the set-aside could be done. I am also concerned about the too-low price we have for the time being, and we are also considering what to do and what not to do. But I cannot go into details because of the ETS, and it’s market-sensitive. In my position, it’s not because it’s not tempting, but I cannot speculate about what to do or what not to do …

But on this discussion on having floor prices and things like that, it’s easy to see the logic behind that. If you start to toy with that idea … then you will also have a ceiling and very soon you will not have a market-driven system. And we think it’s important to have a market-based system.

None of us should be surprised when there is a huge crisis in Europe, and production is coming down, it is no wonder then that in a market-based system, that demand will come down and therefore also the price. That is how the market works…

We will be in for so much more trouble if we had a politically regulated system all the time ….

On aviation emissions, the European Commission has said China and the US airlines could be exempted from emissions trading if they took "equivalent measures". Can you give examples of what these equivalent measures might be?

Our law says ‘equivalent measures’. And it was no coincidence when the law was done – it was before my time here – but that they did not specify that means ‘this and that’, that’s why there is a dialogue with different partners now.

Last fall or summer or even before, the Chinese authorities said, “Maybe we will set reduction targets for our aviation sector.” As soon as I saw that, I wrote to the Chinese authorities and said, let’s discuss that. …  They came forward with a figure and we are now discussing with them what it means.

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