Britain must not lose out to countries like France in the race for a greener future, says Chris Huhne.
Energy Secretary Chris Huhne at Delabole Wind Farm in February Photo: Getty
There are three key arguments about the economics of climate change that I believe must be crucial to our national vision of the future. First, we must get off the oil hook – and onto clean, green growth. The science demands it. Our survival requires it. And our living standards will benefit from it.
Second, this low-carbon revolution can offset fiscal tightening and turbo-charge jobs. It is a large part of the answer to the question of where the jobs and growth are coming from.
And third, our economy will be more stable and secure as energy imports wane. Every business will benefit from moderating boom and bust.
Together, these arguments make up the case for “green growth”: investment in the infrastructure, industries and technologies that can change our economic future for the better.
A low-carbon economy presents an opportunity, not a cost. Investment in our clean energy future should not be mistaken for a cost to the economy, or the public purse. Instead, as Lord Stern has shown, it can be strong driver of economic growth – boosting demand, and creating new supply in a sustainable way.
Private finance is already rushing in. In the first half of 2010, green technologies accounted for a quarter of all US venture capital investments. Globally, investment in renewables now outstrips investment in fossil fuels. This extra inward investment brings jobs and sets the conditions for growth. It also drives learning-by-doing: making companies and economies more productive.
The second reason to choose the low-carbon path is self-evident: it is more resource efficient. It uses less energy and fewer resources per unit of GDP. A survey of 300 top executives from large global corporations found more than three quarters of respondents expect their annual clean energy technology spending to rise over the next five years. No wonder 72 per cent of global CEOs actively support policies that promote economically, socially and environmentally sustainable growth. They know that a green economy is also more resource efficient. It saves money, boosts the bottom line, and helps shareholder returns.
There is a third reason to pursue green growth. Businesses hate unpleasant surprises, as the first two oil shocks showed. Green growth can protect our economy – reducing our exposure to price shocks. That is good for every business in the land from corner shop to conglomerate.
After all, dependence on oil for transport and gas for power puts us at the mercy of international markets over which we have no control. We cannot rely on the North Sea. We were once self-sufficient in oil and gas; now we importing 27 per cent of our energy. That vulnerability is projected to double by 2020.
And even home-produced oil and gas exists in a world market. It can still give us a nasty price shock.
The IMF’s World Economic Outlook for 2011 devotes an entire chapter to oil scarcity. It notes that “the persistent increase in oil prices over the past decade suggests that global oil markets have entered a period of increased scarcity. Given the expected rapid growth in oil demand in emerging market economies and a downshift in the trend growth of oil supply, a return to abundance is unlikely in the near term.”
Those emerging market economies will be ready and willing to compete for scarce resources. In extreme cases, control of and access to hydrocarbons will likely become a matter for militaries, not treasuries.
So what is to be done? We should head off the challenge of price and supply insecurity by getting off the oil hook.
The demand for oil and gas, of course, does not come down easily whatever the price. We cannot simply stop using them overnight. We are committed to car journeys. And locked into fossil fuel using capital equipment.
So protecting ourselves from price shocks is not the work of a day, a week, or a year: we must free our economy from carbon addiction over the long haul.
Some countries already have a head start. Electricity prices in France are set to rise by just 3 per cent this year. Compare and contrast with Britain, where prices are rising by three times as much. It is no surprise that France is the European country with the least reliance on fossil fuels, and enjoys some of the lowest prices – 9.4 per cent below ours.
We have a long way to go. But every long journey begins with a first step.
For us, that means building cleaner power plants, and encouraging the electrification of heating and transport. These are the fundamental components of a strategy that will deliver green growth.
The fourth and final reason to pursue such a strategy is simple: we cannot risk being left behind. Green growth is in our direct national interest. Around the world, governments are responding to the green energy challenge. The race for the future is already under way.
Chris Huhne is the Energy and Climate Change Secretary.
This is an edited version of a speech delivered by Chris Huhne to the Corporate Leaders’ Group in London yesterday.