Good morning [ministers], ladies and gentlemen.

As the British Prime Minister’s Special Envoy, Gordon Brown has asked me to convey our sincere condolences to the Chinese people for the shattering earthquake in Sichuan and our admiration for the way in which your whole country has mobilised support for those affected.

The Ancient Greeks had two words that in our modern world have often become confused.  Dynamis and Exousia – Power and Authority.  I am conscious that, as a politician, I have Exousia – authority.  But in talking to an audience of economists I am in no doubt that it is you who have the Dynamis – the power.  As a group you are responsible for planning the economic future of the country that, almost certainly, will become the dominant force of our young century.  Your decisions have the power to determine how successful the world is in meeting the twin challenges of climate change and economic development.  Your decisions have the power to determine how wealthy your children will be in the future and whether that future will be sustainable.

There are two imperatives that we must consider when designing a post-2012 framework to tackle climate change.  First, we must drastically reduce global greenhouse gas emissions to avoid dangerous climate change. Second, we must ensure economic growth for all.  Over the last two centuries economic growth has enabled only one third of the world’s population, largely concentrated in Europe and North America, to escape from a life of hunger, hardship and disease.  Over the past two decades, another third of the world’s population, mostly in Asia, has begun this journey, too.  Over the coming decades the final third will be looking to make their escape.  The need for economic growth is both a moral imperative and deeply ingrained in the human spirit.  As a politician I would argue it is nothing less than that third Greek word – dikaiosunt – justice itself.

These two imperatives present us with one fundamental challenge: to increase carbon productivity – the amount of wealth generated per tonne of CO2 equivalent emitted. 

The current level of carbon productivity is approximately one thousand one hundred and thirty US dollars per tonne of CO2 equivalent.  To maintain the current average global economic growth rate of three point one percent per annum and to reduce emissions to around ten gigatonnes per year (consistent with a 450-500 parts per million of greenhouse gases stabilisation scenario to avoide dangerous climate change), carbon productivity must increase in real terms by a factor of fifteen by 2050.

Without this major increase in carbon productivity, stabilising greenhouse gases would require a significant drop in lifestyle for developed countries and the loss of hope for developing countries – both politically impossible.

Achieving a fifteen-fold increase in carbon productivity will require radical and wholesale changes in the world economy at both macro- and micro-economic levels.  This is not unprecedented.  The US achieved a fifteen-fold increase in labour productivity between 1870 and 1995 during its industrial revolution.  The difference in this case is the timeframe – we need a carbon revolution on the scale of the industrial revolution but in a third of the time.

We know from studies such as the Stern Review and those by the IPCC that the total cost to world society will likely be in the range of 0.5 to 1.5 per cent of GDP.  This is not a large figure to insure against the impacts of climate change, especially when one considers the annual global spending on insurance was 3.3 percent of GDP in 2005.

Experience also tells us that the actual costs are likely to be much lower than our estimates today.  In 1988 it was estimated that the costs in the US for a 50 percent cut in CFCs by 1998 would be 21 billion US dollars.  The next year the Montreal Protocol came into force and the private sector responded with product substitutions, technological innovations and changed business practices.  Within two years, the estimated cost for a full phase-out of CFCs had dropped to 2.7 billion US dollars, just over ten percent of the original estimate.
Global carbon abatement is undoubtedly more complex but the basic principle – that many of the factors that will reduce future costs are unforeseeable – probably still holds true.

So, how do we increase the carbon productivity of our economies? In addition to the macroeconomic changes, achieving this increased level of carbon productivity will require widespread microeconomic changes as well. These will need to be stimulated by changes in the policy, regulatory and institutional framework of the global economy. 

Actions by government, business and civil society will have to be focused on abating the maximum amount of carbon for the minimum cost. 
There are five main areas on which to focus, all of which are well known in climate policy discussions:

1. energy efficiency
2. decarbonising energy sources
3. accelerating the development and deployment of new technologies
4. changing the attitudes and behaviour of managers and consumers
5. preserving and expanding the world’s carbon sinks

This approach is consistent with the approach taken by China in designing its domestic policies.  On energy efficiency, China’s 11th five-year plan includes a goal to reduce energy intensity by 20 per cent below 2005 levels by 2010 and its fuel standards are more stringent than those in Australia, Canada and the US (including California).  The top 1000 enterprises have signed up to energy conservation programmes with local government with a goal of saving 0.1 billion tonnes of carbon equivalent within 5 years.

On decarbonising energy sources, China adopted a Renewable Energy Law in 2005 that set a target of producing 16 per cent of primary energy from renewable sources by 2020 and a target of 20 per cent for the electricity sector.

On accelerating the development and deployment of technologies, China’s policies include mandates and incentives to support the development of domestic technologies and industries.  For example, spurred by a requirement that new installed wind turbines contain 70 per cent local content, Chinese manufacturers are now producing commercial large wind turbines selling for approximately 30 per cent less than similar US and European technology. 

On changing the attitudes of managers and consumers, China’s energy efficiency targets are being incorporated into the evaluation criteria for local officials – a sure way to ensure they are given the priority they need.

These are all policies that China has taken towards a truly sustainable economy.  But there is now a unique opportunity to effect a fundamental change in the global challenge of climate change.  Due to the large installed base of coal-fired generation, and the likely continued dependence on coal, the largest potential for global carbon savings lies in carbon capture and storage – up to 11 per cent of total global savings needed to avoid dangerous climate change and by 2050.  Installing this technology and potentially selling carbon credits on the international market could form a significant source of wealth for China in the medium-term.  Ever tougher emissions reduction targets being adopted in the EU and elsewhere will drive the price of carbon ever higher.  Yesterday the price of a carbon credit in the EU was nearly 25 Euros and rising.  This price does not make carbon capture and storage viable but, given the right incentives to accelerate the demonstration of this technology, and deployment at scale, history tells us that cost of CCS will fall dramatically, making it a profitable investment when looking at the medium- to long-term.  I am therefore delighted to hear that the EU-China Near Zero Emissions Coal initiative, to build one of the world’s first commercial scale CCS plants here in China, is making good progress.

Beyond CCS, preserving and expanding the world’s carbon sinks must be a critical element of any strategy to reduce carbon emissions and raise carbon productivity.  Forestation and avoided deforestation are among the most efficient options to take carbon out of the atmosphere, representing around 25 per cent of the potential for total global abatement by 2030.  They are also some of the cheapest.  If this abatement is not captured, then other higher-cost sources of abatement will need to be found, increasing the total global cost of avoiding dangerous climate change.

Here in China, policies to promote reforestation have helped to increase forest coverage from around 14 per cent in the early 1990s to over 18 per cent in 2005, with a target of 20 per cent by 2010.  This policy has sequestered an estimated 3 billion tonnes of CO2.  The UK recently announced a USD 30 million contribution to the World Bank Forest Carbon Partnership Facility plus a one and three quarter billion dollar Environmental Transformation Fund.  

So China is already pursuing policies that are helping to increase its carbon productivity.  And these are sensible policies not just for climate change but for energy security, competitiveness, air quality and health.  Clearly, there is much more that the world needs to do to increase our carbon productivity by 15 times, particularly in the EU, the US and other major industrialised countries, but we should be confident, given the experience of China and others, that the policies exist which, coupled with the necessary level of ambition, will meet the carbon productivity challenge.

GLOBE, the Global Legislators’ Organisation, has been pursuing policy recommendations in these areas through its working groups on energy efficiency, technology and market mechanisms and its dialogue on forestry and illegal logging.  At the most recent G8+5 legislators’ forum in Brazil last month, we presented our draft recommendations that include:

- creating a price for carbon through the creation of a global carbon market, regulated by an independent body of market and commodity experts;
- an increase in global technology Research and Development of at least four-fold and the creation of an international technology fund to promote the development and deployment of existing and new technologies, building on the very welcome recent contributions for clean technology finance made available by Japan, the UK and the US; and
- a range of ambitious, but realistic, energy efficiency standards and regulations covering appliances, buildings, vehicles and industry coupled with innovative financing mechanisms and education

The full recommendations can be seen in the working group papers, all of which have been developed in consultation with legislators from the G8 and +5 countries, including the National Peoples Congress.  These recommendations will be formally presented to the Japanese Prime Minister, as President of the G8, at our forthcoming legislators’ forum in Tokyo, Japan on 27-29th June.

The carbon productivity challenge will dictate the mitigation agenda but I’d also like to deliver a simple message on adaptation.  It is clear that even with the most ambitious mitigation package that may be agreed in Copenhagen in 2009, we will only be limiting, not stopping, climate change.  We are all going to have to adapt to our changing climate.  But it is the poorest countries that will be affected earliest and hardest.  It is undoubtedly very difficult to estimate the costs for developing countries to adapt to climate change, and any estimates can be indicative only.  But there can be no doubt that there is a serious gap between the funds available via the UN’s Adaptation Fund and the amount estimated to be required.  Research by the UN and the World Bank suggests the additional finance needed to adapt to climate change in developing countries is in the order of tens of BILLIONS of dollars per year.  By our estimates only 1 to 3 percent of the funds, at best, are projected to be available via the Adaptation Fund.  Addressing this gap is not only a moral imperative, it is a strategic necessity.  I cannot see that there will be agreement on a meaningful emissions reduction framework in 2009 unless, as part of that framework, there is a significant increase in the commitment of industrialised countries to help developing nations adapt to climate change.  And we must also be clear that this assistance is in addition to overseas development aid.

Colleagues, I am a politician.  That means I am used to thinking in short-term periods of 5 years – until the next election – rather than long-term through to 2050.  But let me present you with some estimates of the world as it will be when I die aged 93 in 2050:

- estimated population: 10 billion
- to achieve climate stabilisation – limit emissions to 20 Gigatonnes by 2050, declining to 10 Gigatonnes thereafter

That means an average of 2 tonnes per person per year, declining to 1 tonne.
This is so low that there is little scope for any large group to depart significantly above or below it.

Current emissions are around 11 tonnes per capita in the EU, 25 tonnes in the US, 5 in China and 2 in India.

This gives us 3 options for the future:

1. Accept inequality.  Not something that I, as a politician concerned with justice, can accept
2. Reduce population.  Something politicians in developed countries are very reluctant to discuss but which you here in China have tackled most commendably with policies that have avoided a population growth estimated at 400 million; or
3. Increase carbon productivity still further beyond the 15-fold increase by 2050 already discussed that I think you will agree is already a difficult target.

So, in summary, my messages to you are:
- that the carbon productivity challenge crosses many of the traditional boundaries in policy-making, public and private sectors and producers and consumers;
- history tells us that meeting such a challenge is possible but it will require unprecedented cooperation between all countries.
- we need to secure the framework that sets the macroeconomic rules, and a unique compact between the public and private sectors to unleash the innovation required to instil the necessary microeconomic changes; and
- that securing such a framework is conditional on addressing the adaptation challenge.

Through GLOBE we are preparing legislators from the G8 and +5 countries with the tools and knowledge necessary to set us on the right path to carbon productivity and to address adaptation.  And, through our work in national parliaments and contact with political leaders and citizens, we will be tirelessly pushing governments to rise to the challenge.  But governments have authority – Exousia.  You have the power – Dynamis.  To resolve the issue of dangerous climate change, we need to do more than simply take the right decisions.  We need to take them at the right moment.  The speed and scale of infrastructure build in China creates a unique window of opportunity to incorporate low emissions technologies in the capital stock.  Given the long life-cycle of much of that capital stock we know that once that infrastructure is built, it will be a very long time before the replacement cycle opens that window of opportunity again.  In my view it will be more than a very long time – it will be too late.  Distinguished and Eminent Academics – you have the power – you must use it now.