The Davos Climate/Energy brief

Potsdam Institute and Global Utmaning ,

Swedish Embassy in Berlin, January 17, 2011

A post-Cancún agenda to break the political

deadlock on climate investment

- The Davos Climate/Energy Brief

The Davos Climate/Energy Brief

The Theme of the World Economic Forum in

Davos,26-30 January 2011:

”Shared norms for the New Reality”

Our Brief focuses on the New Reality in Climate negotiations

The New Reality: 1. The political deadlock in the

UN-process

Copenhagen, Cancún, Durban

-no global treaty in sightin spite of twenty years of

climate negotiations

The New Reality: 2. The Investors

Dilemma- Copenhagen and Cancun left the business

community ”confused about…the wider…economic implications”

-”a stable global carbon price is neccessary to form the cornerstone of any successful

policy in the longer term” (IEA)

- still, no global CO2-price in sight

The New Reality: 3. ”The Green Race”

3. ”

- The EU presently the leader in clean tech export

- Asian countries determinedto win the race

The New Reality:Emerging consensus on

energy*)

Climate: an energy revolution is needed to tackle climate change

Energy Security: reduced global pressure on oil is needed

The Economy: a low carbon future is a powerful tool for economic modernization

*) International Energy Agency, World Bank, EU Commission, Major Economies Forum, World Business Council for Sustainable Development, European Climate

Foundation

Investing in a low carbon future

- the hard choice:

Two main avenues to level the playing field for

climate investments

- more subsidies?

- or a CO2 price?

Our contribution to a post-Cancun Agenda:

Three elements

1.Focus on investment and technology, ”sharing opportunities”!

2.Agree on the principle of a technology neutral carbon price!

3.Introduce a bottom up approach, building an International Climate Investment Community, as a complement to the UNFCCC-efforts to get 192 countries to agree on a global deal!

A technology neutral CO2 priceThe aim:

levelling the playing field between fossil technologies and low carbon technologies

The level:- the present CO2 price 15 € a ton is ”subsidised”

by 25 €/ton, at least 40 Euro/ton is needed by 2020

The effect: ”Pricing carbon .. is the optimal way of both

generating carbon-finance resources and directing those resources to efficient opportunities” (The

World Bank)

A technology neutral carbon price

- how- A price trajectory to 2020

- A mix of national policies

- Using cap-and-trade and CO2- taxation

- ”less on what we earn, more on what we burn”

Three reasons for a technology neutral CO2

price

- business and consumers, not governments, will choose

technologies

- will create predictability for sustainable energy investment

- will bring revenues for the greening of the tax systems

An International Climate Investment

Community- a European initiative

- inviting like minded countries to agree on the basic principles

- growing step by step to an International Community (as the WTO and as the EU did)

- a complementary approach to the UNFCCC-process, not an

alternative one

- more flexible, more ambitious

- some key issues addressed, not all

- similar initiatives exist, could be integrated

A concept – not a blueprint

The Davos Brief:

- to be discussed in Berlin, Washington and New York this week as an input

to the Davos meeting

- Input to discussions after Cancun among European and likeminded

countries

- Next step: An Indepdendent Commission on Climate Investments?

Subsidising or pricing to level the playing

field?

- att all nödvändig teknik blir lönsam

A price trajectory to guide investors

Development of the Swedish CO2 tax general level and industry level

from 2008 industry outside EU Emissions Trading Scheme (EU ETS)

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Carbon tax (euro/tonne) Carbon tax, industry level (euro/tonne)

General level for 2010 level in figure