Yvo de Boer: It’s the climate, stupid!

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This article is part of our special report Efficient EU budget 2014-2020.

EXCLUSIVE / Politicians look at costs in a "stupid" way and need more "adult understanding" of the tight links between climate, the economy and energy, including energy security, the UN's former climate chief told EURACTIV in an interview.

Between 2006 and 2010, Yvo de Boer was executive secretary of the United Nations Framework Convention on Climate Change (UNFCCC). A former head of the Netherlands Climate Change department, he is currently working as a climate change advisor to KPMG, the global audit, tax and advisory firm.

He spoke to EURACTIV's editor-in-chief Daniela Vincenti

To read the story linked to this interview, please click here

The world invested almost a billion dollars a day in limiting global warming last year, but the total figure – $359 billion – was slightly down on last year, and barely half the $700 billion per year that it is believed to be needed to tackle climate change and maintain rising temperatures under 2 degrees Celsius. Are we doomed?

I’m not particularly worried that the EU is going to meet its short-term target for 2020 for a very unfortunate reason. If he EU makes it to its target, it’s not going to be thanks to any brilliant policy effort on the part of the EU.

 If the EU is going to reach its target is because the European economy is going through a very significant decline, and as a result of emissions.

What does concern me, the more fundamental  target that have been formulated for the medium term. So already in 2005, I think, European heads of governments committed to reduce emissions by at least 80% by the middle of the century. Unless you close down the entire economy of Europe, which I’m sure is not the intention, some efforts will have to be made to meet that target–some serious efforts.

What do you mean by serious efforts?

 I’ll come to that in a second, but of course it’s not only a matter of the EU. The EU’s emissions I think count for about 11% of total emissions at this moment in time. So it’s very important that we see much stronger climate action from other countries around the world, because this is not a problem Europe can solve on its own. You need global engagement to solve it.

Regarding Europe, we need some serious efforts to stick to that target of 85 to 90% emission reduction by the middle of the century. That’s important, because climate change is important but also because we need to leave some room for developing countries to grow their emissions. So, the first point is stick to the target.

My second point would be to not be wasteful. We should not emit what you don’t need to emit. Europe has a tripartite target – 20% emission reduction, 20% energy efficiency, 20% renewable.

The energy efficiency target relates to not using energy that you don’t need to use. So, how can you insulate buildings better? How can you come to better transport systems? How can you use better lighting systems, etc?

Every saving that you make through energy efficiency is a euro saved, is a euro that you don’t need to spend on achieving climate goals, but that you can spend somewhere else in the budget.

Plus, efficiency enhances the competitiveness of your economy. Energy is a very significant part of the cost of production. So if you use less energy, you r product is cheaper and you compete better internationally.

The second of the three targets relates to renewables. Any kilowatt or megawatt that you generate through renewables is not a megawatt that you need to generate through fossil fuels that you pay a lot of money for.

So in other words, through energy efficiency, through renewables Europe can save an awful lot of money and make a lot of money by becoming more efficient at the same time.

Precisely, recently Günther Oettinger, the energy Commissioner was accused to suppressing data which shows that the bloc’s €30 billion of subsidies to renewable energy sources is outweighed by a de facto €66 billion of handouts to the fossil fuels sector.  How to rebalance these amounts?

Well, fossil fuels subsidies are there for a reason. The reason is not generally because politicians want to harm the environment. If you look at a country like Indonesia, the biggest item of expenditure on their budget is fuels subsidies to make electricity available for the poor. That’s quite a difficult subsidy to change. We all remember the situation in Nigeria a couple years ago, when they tried to raise the petrol prices, there was almost a revolution.

Many of the fossil fuels subsidies are linked to the poverty eradication. Therefore, you need to be careful in terms of how you phase them out.

There’s a G20 agreement for phasing them out, but in some cases it needs to be done carefully. There are other subsidies, for example in Australia for mining vehicles,  that’s an easier subsidy to remove, although you still need to look at the competitiveness of the mining industry. So: yes, fossil fuels subsidies are bigger than renewables subsidies, yes, there’s an agreement to phase them out but it’s not easy and it needs to be done intelligently.

Still, only two of the long-awaited 248 projects of common interest (PCI) to link Europe’s energy network will be smart grids, the European Commission has said, in an oft-predicted setback for plans to rationally manage energy demand and integrate renewable sources …

If there’s an advertisement in a newspaper for a beautiful fur coat, you probably wouldn’t buy a fur coat because you’re an environmentalist … well, let’s say there’s a beautiful fur coat and the normal price is €5000 but it’s on offer and it’s now €4500 for this coat. What is your feeling? Is your feeling that you have saved 500 or that you’ve spent 4500?

The reason I ask the question is because first of all we have a very stupid way of looking at costs. We did a report a year ago where we looked at what environmental cost is caused by industries and what would happen if those industries had to pay their own environmental costs instead of being able to pass those costs to the society, and we found that on average the industry would see about 50% of their profits wiped out.

So, part of the reason why fossil fuels are so cheap is because the people who burn fossil fuels don’t have to pay the environmental costs of the damage that is caused by burning those fossil fuels.

So you have people out there who are screaming “renewables are subsidised”, but they’re not looking at the extent to which fossil fuels are subsidised and they’re not looking at the damage that is caused by burning fossil fuels. The first thing is to do is get a better and more adult understanding of costs. And then you see that the cost of fossil fuels and renewable energy is not that far apart.

The second point is that it’s not only about energy and energy costs; it’s also about issues around energy security.

I remember years ago when I was working on climate policy in Europe, all the people working on economy policy in Europe thought I was an environmental lunatic, that I should be shot. Then something happened. The Russians for the first time closed the gas pipeline to Ukraine and everybody started realizing that “maybe energy security and climate action can be linked!”

So there are issues of energy security as well, and I know that people in Germany, in Poland, in the Baltic states care a lot about this aspect.

The final element is how do you ensure that you make investments for the future, how do you make sure that you’re investing in the technology of the future, instead of the technology of the past?

My country which is Holland is very famous for windmills. The windmills are actually abandoned industrial installations, they’re abandoned mills that are no longer used.

If you build a coal fire power plant in Europe today, that plant is going to last for 50 years. If you also want to reduce your emissions by 85 to 90%, there’s no way that you can keep that coal plant going for 50 years. So your children if you have them in 20 year- time might be going to see some closed down coal fire power plant as the next industrial monument of Europe.

I believe in March, Europe is supposed to be discussing a climate energy strategy, they asked for that in June, and already you see the electricity sector in Europe sharpening their knives to get ready for that.

Back to linking climate action to energy security, and economic efficiency.  The Barroso II Commission decided to separate climate and environment portfolios, but there were talks about merging climate and energy. Would you see this favourably, one person making the right choices for both policies?

 I’ve often thought about writing a PhD about what marks the transition from the short term to the long term. And I concluded that it would be a very short PhD because the transition between short term and long term is called elections.

And the problem with climate is that everybody knows in the long term you will have huge benefits, huge savings, the lives of your children will be better, the economy will be more efficient, the air will be cleaner, everything will be wonderful in the long term. But the long term is after the elections.

In the short term you have to encourage expenses for renewable energy, energy efficiency, higher standards for cars, etc.

And politicians do not like to be on the wrong sides of elections in terms of costs. So, the problem is that although everybody says that climate is very important, including all the people in the European Commission, this one and the next one, they’re not so brave when it comes to getting you and I to pay for the costs of pollution and they’re even less brave when it comes to asking you and I to invest in the future of our children.

They’re not brave enough to change the behaviour of consumers, but are they brave enough to give the right incentives to companies in this time of crunched budgets? What incentives?

The point is not public money. If you were to ask me where should I go for advice. Should I go to a politician or a palm reader? I would recommend that you go to the palm reader.

The reason is – look at what has happened in Germany, in Spain, in Portugal on feed-in tariffs where European governments respected the people. They said we are going to create special tariffs for renewable energy and the electricity sector invested in the sector. Then the government said: Now we’re going to stop the subsidies and suddenly the investment is no longer economically viable.

If I talk to CEOs around the world, which is my job now, and I ask them: What do you want most? Their answer is predictability, long-term predictability. They don’t say money, subsidies. They say we want to be sure that if you say at least 80% reduction in 2050, that Europe is actually going to stick to that target because then they know that they will need to invest not in coal, not in gas, but mainly in renewables and maybe in nuclear.

Business doesn’t trust politicians. That’s why an international treaty is so important because one of the advantages is it can commit countries beyond elections over decades. In fact, in 1997 I think, Europe committed to a target for 2012 under the Kyoto protocol and that target still stands although we’ve had several Commissions and elections, because the target is written in an international treaty.

This week, international negotiators are meeting in Warsaw precisely to advance talks on a climate treaty. What do you expect to come out of Poland? Do you see any light at the end of the tunnel?

 First, the rest of Europe needs to start being nice to Poland. That would help. If I have a fight with my wife at home, if I start screaming at her and calling her the most horrible names, that’s not going to make her listening to me.

 I think Poland has a real problem: It relies a lot on coal, 96% of the economy. It’s not Europe’s richest member state. They also worry about energy security vis-à-vis the Russians. They have a serious problem, and everybody is treating them as though they are the bad guys in Europe who don’t want to act on climate. A good step would be to take those Poles a little bit more seriously. 

Now for international negotiations … There’s supposed to be a climate agreement in 2015, something new, but at the moment it’s not clear what exactly it’s supposed to be, whether it’s supposed to be a new treaty or a protocol.

That’s like going out on a date with a very attractive man but you don’t know at the end of the evening if it’s going to be marriage, or living together, or you just get his telephone number. You don’t know what’s going to happen so that makes you rather careful probably in terms of how you enter into the evening. It’s the same thing here, if you don’t know if it’s going to be a treaty or a protocol, then it is very difficult to negotiate.

I think it’s important that already in Warsaw, countries have more of a conversation about what exactly is it that we want to agree in 2015, what do we expect from rich countries, from middle-income countries, from poor countries, how are we going to mobilise finance.

Are we seeing the same old divide between developed and developing countries? China has already started saying that the developed countries should help developing countries. Are we back to square one Copenhagen 2009? If we look at climate finance: Three-quarters of the climate revenues originated in the same country it was spent in, while the other quarter flowed from the global North to South, and was dominated by public sector funds. Is that right?

That’s a fair point, but here you also need to make a distinction between investment and subsidy. In Europe 85% of the investments in the energy sector are private, not public, so why in developing countries should we suddenly have the reverse equation? It’s going to be roughly the same.

Many economies in developing countries are doing really well, and they’re doing really well namely because of foreign investments because foreign companies, multinationals are investing in China, Vietnam, etc. And they are putting state of the art technology into those countries.

If you plan to build a wood factory in Vietnam, you don’t go to Holland and buy one of the old windmills and take it to Vietnam. You buy state of the art technology and that’s what happens. The economies of the South are growing very strongly. They’re growing very significantly due to FDIs and FDIs is leading to state of the art technology into those countries.

But yes, not enough money is going to the poorest countries. Because those poor countries don’t have such strong economies, are not such a good place to invest, you clearly need more public sector money going into the poorest countries.

I think it’s very important to make sure that if public money is mobilised, that it’s mobilised for the people who need it, as opposed to the people who don’t need it, and that it is targeted towards modernising the economies of those countries.

Definitely, not enough is happening on finance and the Chinese love to use this as an argument that since somebody else has done what they promised, China doesn’t need to do what they promised. They love using that argument.

At the end of the day, I think in Paris in 2015, you will need to consider, discuss finance and commitments, and technology altogether.

A multifaceted deal …

Well, a deal is a deal. You’re not going to give me the fur coat until I give you the $4500 and vice versa.

KPMG is preparing a second report of Expect the unexpected. If you had to make a prognostic, would you say that the world and the politicians are learning from their mistakes on climate—I am clearly referring to Copenhagen. But also are we putting in place the right strategies to combat climate change—mobilizing the right resources?

 At the moment, no. Very clearly, no.  I said it’s about the transition between short term and long term, and very few politicians are willing to incur short term costs for longer term gains. The stupid thing is that if you look at it from a macro point of view, it’s actually cheaper to act on climate change than not to act.

I find it fascinating that at this time of economic crisis, Europe seems to be looking for solutions to the future in the past. Europe is talking about “shouldn’t we all become manufacturing economies, like Germany again. Shouldn’t we get rid of all the stupid environmental regulation?

So you think we have the wrong strategy?

 I think we have the wrong strategy and I think there will have to be some quite significant shocks before people become really serious about this, and some of those shocks are pretty terrible.

 There’s a pretty good chance that we will get an ice age in Europe because of climate change. Why? Because it is the Gulf Stream that keeps Europe warm. The Gulf Stream is fueled by the ice sinking on the North Pole, if that stops—the Gulf streams stops, it will suddenly get very cold in Northern Europe because of climate change.

The other thing that worries me is that now there is in Alaska and in Siberia, there are huge quantities of frozen methane under the ground and permafrost. If that thaws and that’s beginning to happen, then suddenly massive amounts of methane are released into the atmosphere, you could get temperature increase of 8,9,10 degrees.

Once a process like that begins to happen, it’s pretty much irreversible.

I’m afraid that we need a shock to get serious, and I’m a little bit afraid that the shock could be a bullet in the head, which is not very good to wake you up, if you see what I mean.

The scientific world got it, politicians haven’t, at least not many.

I think there’s a consciousness. It’s like putting the frog in the water, slowly making the water hot, and suddenly the frog pops out of the water when it gets too hot.

 I think politicians have a very strong sense of “yes it’s important but we can deal with this tomorrow.” Then they wake up the next morning “it’s important but we can deal with this tomorrow”.

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