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Royal Dutch Shell Plc .com: Ignore climate change and humanity will suffer

By Alistair Darling and David Miliband

Published: June 30 2006 03:00 | Last updated: June 30 2006 03:00

Yesterday the government made a critical decision on Britain’s contribution to tackling climate change. The decision reflects three principles: our ambition to be world leaders in creating a low-carbon economy and to balance environmental and economic objectives; our commitment to do this through collective action at a European level; and our determination to use market mechanisms to enable businesses to find the cheapest way possible of meeting our objectives.

Our ambition to reduce emissions is balanced alongside the need to enable Britain’s economy to do business. We faced a clear choice over our contribution to the European Union’s emissions trading scheme – the most innovative attempt to reduce carbon emissions in the world. In March we began a consultation on how far we should reduce our emissions, setting out a range from 3m-8m tonnes of carbon a year.

We could have taken the easy option. In the first phase, we set tighter limits than other countries. While they struggle to meet their international obligations to reduce carbon emissions under the Kyoto treaty, our emissions of greenhouse gases are projected to fall by 23-25 per cent by 2010, nearly double the target set by Kyoto.

However, the human suffering that will result in the next 100 years from climate change could be greater than the suffering yet seen in this world. We owe it to humanity in the future to act. Across the globe, we have to be far more ambitious. That is why we have decided to adopt a carbon cap that will reduce emissions by 8m tonnes – the most ambitious figure within the range discussed. This is roughly equivalent to the carbon emissions produced by 4.5m households each year. It is a significant step towards our long-term objective of a 60 per cent reduction by 2050.

We have also decided to auction 7 per cent of our carbon allowances. The final amount raised by the auction cannot be determined in advance, as it depends on the price of carbon, but it will be substantial. We believe there is an opportunity for the UK not just to invest in renewable energy, other non-nuclear low-carbon technologies and energy efficiency, but also to build successful businesses in these fields. We will establish a new environmental transformation fund to help grasp this opportunity. The final details of the fund will be announced in the spending review for implementation, like the emissions trading scheme, in 2008.

Our decisions on emissions trading give business a framework in which long-term clean and greener investment decisions can be made. They highlight not only the level of our ambition, but the distinctive means by which we can achieve our objectives.

It is clear we must act within European institutions. The EU could be as important to the environment in the next 50 years as it has been to European peace and economic growth in the past 50. By negotiating as one block, the EU is a powerful driver of change. By creating an emissions trading scheme across Europe, we can create a framework that gives member states the confidence to act together. By enabling member states to buy project credits from outside the EU we are providing financial investment to help developing countries develop low-carbon economies and bind them into a global climate change policy framework. That is why we will support the European Commission in its efforts to enforce tough caps on member states.

But while governments and international institutions must specify the outcomes we seek in relation to carbon, we must allow businesses to find the most innovative ways of achieving these cuts. Indeed, when the Corporate Leaders Group, which represents businesses such as Shell and Tesco, met the prime minister recently, it argued that business could gain a first-mover advantage in new global markets for low-carbon technology. That is why we believe the best way to cut carbon emissions is through market mechanisms such as the emissions trading scheme.

In the twentieth century, social democrats demonstrated that greater ambition in tackling social justice must be pursued through two principles: collective action through the state and international action; and individual freedom through markets. In the 21st century, the social justice challenge is the environment – the potential human suffering we will cause to other countries and to future generations. The same combination of more ambitious goals delivered through collective action and markets will be needed. It is one we are determined to apply.

David Miliband is environment secretary and Alistair Darling trade and industry secretary

Copyright The Financial Times Limited 2006

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