Andris Piebalgs Member of the European Commission responsible for Energy Energy in a Global Environment Mission of Japan to the EU - Commissioner Piebalgs' address to Japanese Companies Brussels, 8 December 2009

SPEECH/ 09/578

Andris Piebalgs

Member of the European Commission responsible for Energy

Energy in a Global Environment

Figures and graphics available in PDF and WORD PROCESSED

Mission of Japan to the EU - Commissioner Piebalgs' address to Japanese Companies

Brussels, 8 December 2009

Ambassador, Ladies and Gentlemen,

This will be one of my last addresses as Energy Commissioner. But I am honoured to be staying in Brussels as now designated and I hope in January confirmed next Commissioner for Development.

During my time as Commissioner, I have become more and more aware that the European project is fundamentally about the people of Europe. But I have also learned that we will only succeed if we engage in global debate, global cooperation and global action.

In energy this is particularly true. Yesterday the Copenhagen climate conference began. What is decided there will affect energy policies for probably every country in the world. Companies in Japan, Europe, China, Brazil or South Africa, are all in the same boat. Whatever decisions they make, they will have to take account of the climate dimension.

European Union's role

The EU has been at the forefront of policies to tackle energy security and climate change head-on.

We have a broad and powerful market of 27 Member States with 500 million people. Many other countries are also knocking on the door to adhere to the European Union. We have a broad and diverse energy mix and high levels of energy trade with many countries across the world. We have a political consensus which says that energy security and climate change must be dealt with at the European level.

We also have a single market based on transparent and democratic rules which extends beyond our Member States to include countries such as Norway, Iceland and Switzerland, down to the Balkan states through our special links under the Energy Community.

The EU has already made its weight felt in the global climate change debate and is an important partner for energy consumers and producers across the world. All in all, the EU has a unique capacity to help the world shift towards a more sustainable and secure energy path.

EU policy response

Two and a half year s ago, in March 2007, European Heads of State and government agreed for the first time that the EU energy and climate change strategies should be brought together into a comprehensive policy. This marked a dramatic shift from the past, when energy policy was quite definitely seen as a national prerogative.

Member States endorsed new targets to reduce greenhouse gas emissions by 20% by 2020, rising to 30% in the framework of an international climate change agreement, and to increase the share of renewable energy in energy consumption to 20% by 2020, up from around 7%. They also called for a cut in 20% in energy demand by 2020. These objectives have become known as the 20-20-20 agenda.

Within two years, the energy landscape in the EU has been transformed. A year ago, the EU adopted a historic package of legislation to make the greenhouse gas emissions and renewable energy targets binding on the whole EU. Every Member State has accepted national targets which, together, will realise the overall objective. Every Member State is also committed to implementing ambitious energy efficiency action plans.

This new-found solidarity in energy policy is an important change. It came to the fore earlier in the year during the Russia-Ukraine gas dispute. You will remember that this disrupted gas supplies to large parts of eastern and central Europe. As a result, the EU took the unusual step of mediating to resolve a dispute between two third parties. It did this because Member States recognised that the EU would only have a real impact if it worked together in solidarity.

As well as security of supply, climate change concerns are also bringing EU Member States closer together. The EU is fully committed to limit the increase of global average temperature to 2 0C above pre-industrial levels. This presupposes that emissions of global greenhouses gases are stabilized within the next two decades, and that industrialized countries reduce their emissions by 60% to 80% by 2050. It is in this context also that the 20-20-20 targets were agreed.

The strong and united position of the EU has helped to propel the climate debate forward also within the G8 and Copenhagen process.

On this subject, I can only welcome the Japanese government's new commitment to reduce greenhouse gas emissions by 25% by 2020. This is not only very important for the global climate change agenda. But it also creates a more favourable framework for companies like yourselves which operate in international markets. Effectively, it makes more sense than ever for companies to invest in the clean and efficient energy of the future.

This is already the case in Europe, where business leaders are increasingly seeing the climate challenge as an opportunity to lead consumers towards more sustainable habits of consumption. For example, Siemens recently reported that its revenue from energy-saving and other green technology products rose 11% to €23 billion over the past year. It now earns more than a quarter of its total expected sales from "green" products.

There are many other such examples, but today I would like to outline how the EU is taking forward is policies to tackle the urgent i ssues of climate change and energy security. As I mentioned, we started this track in March 2007. No matter what happens in Copenhagen, there will be no going back, even in the context of current economic difficulties. President Barroso has promised that the new European Commission will also give highest priority to a low carbon energy future.

European Economic Recovery Plan & Offshore Wind

In terms of concrete steps, I would first like to flag the European Economic Recovery Plan, in which a total of € 4 billion was reserved for energy projects this year and next. I am pleased to say that this money will be allowed in the coming weeks: € 1 billion is reserved for carbon capture and storage projects, and € 565 million is reserved for offshore wind projects.

On offshore wind, around 10 projects will be co-financed that will amount to over € 4 billion worth of total investment. These projects should be seen as a first step in the implementation of the European Wind Industrial Initiative that was set out in the Commission's Strategic Energy Technology Plan. The technology road map for the initiative has now been published as part of a Communication on Financing Low Carbon Technologies.

At the European Offshore Wind 2009 conference in Stockholm which I attended recently, I was struck by the level of interest among businesses to develop and market wind turbines, components, foundations, installation and cable-laying vessels. I know that Japanese companies such as Tokyo electric Power Company are getting more interested in the technology. But we know from the many barriers which still exist, such as planning rules and uncertain subsidies that the challenges are not only technical. They are above all political, and a political response is needed.

Solar

Another area where progress is being made is solar energy. European companies and Japanese companies are clearly convinced that solar power has a bright future and that it is worth investing today to bring costs down as quickly as possible. Companies at the forefront of solar and photovoltaic power in both Japan and Europe are starting to see their investments pay off. These companies are now in a strong position as the solar revolution starts to take off.

But whether we are talking about the EU or Japan, it remains the case that solar energy technologies have to become more competitive to gain mass market appeal. This means maintaining political support and funding programmes. In the EU, we have assessed that an adequately funded research programme costing in the region of € 16 billion over the next 10 years could, if coupled with the right market-based incentives to encourage deployment, result in up to 15% of EU electricity being generated by solar power in 2020.

SET- Plan financing Communication

Technology is obviously going to lie at the heart of a successful global response to climate change. Neither market forces nor public opinion will be enough to develop and deploy these technologies sufficiently quickly. The Strategic Energy Technology Plan wants Europe to work in a focused and result oriented manner in several industrial initiatives: Wind, Solar, Biofuels, Smart Grid, CCS and Sustainable Nuclear. The Commission estimates that realising the objectives of the SET Plan calls for some 8 Billion € per year, almost tripling what EU industry and governments invest today in technological development.

Funding for this will come from several sources, including the EU budget, national research budgets and the private sector. The strategic nature and public character of these efforts call for public private partnerships, which I believe can most effectively be establish as European projects. We have started with CCS and Off-shore wind as part of the European Energy Plan for Recovery. We need to follow suit with the other initiatives.

Emissions trading

Another source of financing are the revenues generated by the auctioning of allowances under the EU emissions trading scheme. Governments have committed themselves to use at least half of the resulting revenues for actions related to climate change. Furthermore, 300 Million ETS allowances have been put aside for promoting CCS and renewable energy generation.

These "new" sources of financing are there because the EU has already put in place the world's first multi-country cap-and-trade system. Since then other states have followed suite, including the Japanese Voluntary Emissions Trading Scheme. We should be working towards a global platform for emissions trading.

Quite apart from its financing potential, the European Emissions Trading Scheme has focussed the minds and ingenuity of business people all over the EU on their emissions of greenhouse gases. As a result of this, I know for a fact, that investment decisions have been taken that result in lower emissions. I am also convinced that these emissions reductions are being achieved more cost-effectively than if they had been imposed by "command and control" regulation. In the end, I do not believe that the EU's emissions trading system has proven to be an unacceptable burden on European industry.

Eco-design Directive

I would like to say a little more about energy efficiency and the "Eco-Design" Directive. Japan is the only region in the world where energy efficiency is given such as high priority as in the EU and I am sure we can learn much from each other. Since 2006, when the Commission launched its first Energy Efficiency Action Plan, we have taken some genuine steps forward.

The most prominent of those is the decision to phase out incandescent light bulbs. This is leading to an acceleration in the development of alternatives. But just as importantly are improvements in efficiency of other electronic goods. Last week indeed, the EU agreed to extend the scope of its energy labelling legislation to household appliances and all energy related products, including water boilers, heating appliances and air conditioning units.

Member states also agreed on a new improved energy label, adding supplementary classes on the top of the traditional best performing category.

So far, 10 product categories have had their energy efficiency standards set, and the total energy saving of these measures by 2020 will be a significant 150 Million tonnes of CO2, or 3% of the EU's projected emissions by 2020. The extension of the Eco-Design Directive will lead to a further 5% saving.

The revised Buildings Directive, agreed last month, will drive the market towards more efficient buildings. For example, among others, it sets a deadline of 2020 for all new buildings to have near-zero emissions.

The revised Directive with is various instruments is an important step in introducing ambitious but cost-effective requirements that will significantly reduce the energy use in the sector that is responsible for about 40% of final energy consumption in Europe and 36% of CO2 emissions. It is estimated that this measure alone could achieve a reduction in its greenhouse gas emissions equivalent to about 70% of the current EU Kyoto target. In addition to this, these improvements could save citizens around 300€ per annum per household in their energy bills, while boosting the construction and building renovation industry.

Energy efficiency

Next year the new Commission will present a revised Energy Efficiency Action Plan which will, I hope, offer still more. Effort will concentrate on refurbishment of the existing building stock. But we will also give a new emphasis to the concept of Smart Cities. After all, four-fifths of people live in cities, and this is where most energy is consumed.

Looking further forward, these trends are certain to continue. The Commission is now developing a strategy to "de-carbonise" the electricity and transport sectors by 2050. But this is a task for my successor.

Transport

I would like to say a few words about transport. This is one of our biggest challenges in terms of climate change, efficiency and energy dependence.

The EU has legislated on CO2 emissions from new cars, and will do something very similar on light commercial vehicles very soon. Aviation emissions have been brought into the EU's emissions trading scheme, and you will have heard about the promotion of sustainable biofuels that were part of the recently adopted renewable energy Directive.

Agreement has just been reached on a Regulation for the labelling of tyres, which is another example of incremental change for the better. This, taken together with the recently adopted Regulations on the minimum fuel-efficiency standards for tyres and the mandatory fitting of Tyre Pressure Monitoring System (TMPS) on passenger cars, is expected to achieve 5% fuel savings on the total EU fleet by 2020 . Add all these percentages together, and you will, I hope, begin to feel that significant added-value is being made by energy efficiency standards set at European level.

The market for more sustainable transport is wide open: cars with more efficient and hybrid engines are likely to be the winners of the economic crisis. And electric or hydrogen vehicles could fit well into the sustainable energy system of the future. ow luch could this save?H

Covenant of Mayors

Transport is also an important element of "greening our cities". Here I would like to mention the "Covenant of Mayors", where European cities commit themselves to go beyond the objectives of EU energy policy in terms of reduction in CO 2 emissions through enhanced energy efficiency and cleaner energy production and use. This project, launched as a result of the Commission's previous energy efficiency plan, has had a resounding success. Almost 1000 cities have voluntarily signed up.

This is proof above all that Europe's citizens want more sustainable energy solutions. But politicians cannot deliver this on their own. We have to rely on forward-looking and bold companies to offer the goods and services which will achieve this.

Nuclear

Finally a word about nuclear. I regard nuclear energy will give us the time we need, without the CO2 emissions, to decarbonise the electricity sector.

As in Japan, the interest in new nuclear build is growing in some parts of Europe. At the same time, public concerns continue to be strong, particularly as concerns safety and the disposal of waste. It remains the case that Member States take the decision at a national level whether to use nuclear power or not. But at the European level we have a solid legal framework, built around the Euratom Treaty. Recently Member States unanimously adopted new nuclear safety standards. The new rules make the EU the first major regional actor to apply legally binding safety standards based on the "fundamental safety principles" of the International Atomic Energy Agency and the obligations of the Convention on Nuclear Safety.

International dimension

I would like to close with a few words about the international context in which European companies and Japanese companies work. International cooperation is an integral element of the EU energy policy. This involves cooperation not only with supplier countries but also with other consumer countries and like-minded partners such as Japan.

Together we use our combined weight in global affairs to promote our common view of global energy security and the importance of transparent global energy markets.

The Japanese national energy policy and EU energy and climate change package are remarkably similar in content and in the priorities they stress. As our domestic production is limited or declining, energy security and stable, reliable energy imports are of significant importance for both. We are equally affected by the emergence of China and India as major energy consumers and the structural changes in the global energy market that this is bringing about.

This creates significant scope for cooperation in research, regulatory policy and coordinating strategies, both within our own markets and toward third countries. Industrial cooperation and open markets have enabled both Japan and Europe to grow over recent generations. And they are even more important to overcome the current global economic crisis and make the move to a new sustainable industrialisation.

There are many examples of international cooperation where Japan and the EU have come together for common goals. We have the ITER project in France, where Japan is a lead partner. The Joint Oil Data Initiative is another example where the EU and Japan share valuable oil market information under the umbrella of the International Energy Forum. And the recently established International Partnership for Energy Efficiency Cooperation (IPEEC) will undoubtedly benefit from our joint involvement.

In recent months the EU and Japan have been drawn even closer as our climate change targets in the run up to the Copenhagen Conference converge to a high degree. No matter wh

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European EC Rapid Press Release SPEECH/09/578, copyright European Commission.
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