Environment

Pathway to a low-carbon economy: Remarks at OECD-University of Cambridge COP21 side event

 

Opening remarks by Angel Gurría

Secretary-General, OECD

UNFCCC Conference Centre

Wednesday, 9 December 2015

(As prepared for delivery)

 

 

Ministers, Distinguished Panellists, Ladies and Gentlemen,

 

Welcome to our panel discussion on the pathways to a low-carbon economy – and how we can better align policy, business and finance efforts to deliver on this challenge.  

 

The starting point is clear: our economies have been hard-wired around fossil fuels for well over a century.

 

This hard-wiring is evident in our physical infrastructure. Perhaps less obvious, but equally problematic, it is also evident in our policies, regulations and institutions.  

 

Earlier this year, together with the IEA, ITF and NEA, the OECD released a report, Aligning Policies for a Low-carbon Economy. It is a first-of-its-kind diagnosis of the many policy “misalignments” that stand in the way of a low-carbon future.

 

Some of the most glaring misalignments are evident in the realm of public finance. The bottom line is that governments continue to support fossil fuels:
 

  • Governments in OECD and selected emerging economies spend up to USD 200 billion every year on subsidies and tax breaks for fossil fuels. That’s more than 5 times what they spend on support for renewable energy! These subsidies and tax breaks are bad for the environment and create a risk of carbon lock-in. But they also contradict basic social objectives in disproportionately benefitting the wealthy.
     
     
  • Coal is still the least heavily taxed of all fossil fuels – if it is taxed at all. Yet it is the most carbon-intensive fossil fuel and results in significant local pollution. It faces no import tariffs, while renewable energy technology often pays a 10 to 20% tax at the border. This creates an unequal playing field for innovation in low-carbon alternatives.

 

As a result of all these wrong incentives, new coal plants continue to be built as we speak, especially in developing countries.

 

But the tide may be turning. Just a few weeks ago, OECD member countries agreed to more strictly limit export credits to the least efficient coal-fired power plants. That very same day, the UK government announced that by 2050, it would shut down all coal plants without carbon capture and storage installed by 2025.

 

In a lecture I gave in London earlier this year, I underlined the risks of continued investment in coal. On the one hand, coal plants are a risk for the planet if they run their full life. On the other hand, in the transition to a low-carbon economy, they are at risk of becoming stranded before investment is recouped.

 

The good news is that private banks are starting to reconsider such investments. For instance, BNP Paribas announced just three weeks ago that it will no longer finance coal plants in high-income countries. For other countries, the bank will mandate an emissions commitment at COP21 and scrutinise potential local impacts more carefully before investing.

 

We must continue to correct the contradictions in every public policy to get us on the pathway to a low-carbon future! And leaders in government, business and global finance all have a role to play.

 

Fortunately, climate may be moving near the top of the pile of financial supervisory authorities. I applaud the recent call to action by Mark Carney, the Governor of the Bank of England: he urged investors to get a better grasp of the risks that climate change poses to financial and economic stability. This is a critical step forward – and one that needs to be taken by more private and public stakeholders if we are to mainstream climate action.

 

Today, we have assembled a terrific panel to reflect on how to do this.

 

First, let me thank our partner for this event, the Prince of Wales’s Corporate Leaders Group, which is run by the University of Cambridge Institute for Sustainability Leadership. We are delighted to have Sandrine Dixson-Declève, Director of the Corporate Leaders Group here with us. She will talk about their report, “Rewiring Our Economies – Ten Tasks, Ten Years,” which echoes many of our findings on policy misalignments.

 

Simon Upton will then delve deeper into the policy contradictions we find in all economic sectors that are holding back progress toward global climate objectives.

 

After each presentation, we will hear insights from Ministers and then from business leaders.

 

So, let me now turn the floor over to Sandrine.

 

Thank you.