John Cridland Deputy Director General, CBI Economic growth – driving sustainable investment

Context Challenging environmental targets are here to stay...

UK emissions will grow & miss targets under BAU UK total GHG emissions (MtCO2e) Business as usual abatements Targets 0 1, Frozen 2002 technology Source:Global abatement model; U.K. abatement model; team analysis

Context Challenging environmental targets are here to stay Challenging environmental targets are here to stay Business increasingly recognises that targets are justified on their own merits Business increasingly recognises that targets are justified on their own merits But if public support for such environmental goals depends on combining growth with environmental progress But if public support for such environmental goals depends on combining growth with environmental progress CBI believes that political momentum behind environmental targets can be catalyst to create a policy response that drives business investment in sustainable development CBI believes that political momentum behind environmental targets can be catalyst to create a policy response that drives business investment in sustainable development But even smart policy in this area not always cost-free – trade offs must be recognised and made But even smart policy in this area not always cost-free – trade offs must be recognised and made

November two major reports Report of CBI Climate Change Task Force Climate change: everybody’s business Report of CBI Climate Change Task Force Climate change: everybody’s business Report of Commission on Environmental Markets and Economic Performance Report of Commission on Environmental Markets and Economic Performance

...together creates space for business response smart environmental policy framework investor and consumer demand Innovation policy Building blocks

Getting environmental policy right ‘Loud, long and legal’ policy framework Credible goals that give business clear sense of direction of policy Credible goals that give business clear sense of direction of policy Market mechanisms/price signals Market mechanisms/price signals Regulation: Avoid over-specifying the solution Regulation: Avoid over-specifying the solution Level playing field Level playing field

Nurturing investor and consumer demand Investors: Growing investor interest Growing investor interest Reliable, clear disclosure on environmental impacts (CBI project) Reliable, clear disclosure on environmental impacts (CBI project)Consumers: Rising consumer awareness Rising consumer awareness But clearer information and support needed to convert interest/good intentions into purchasing action But clearer information and support needed to convert interest/good intentions into purchasing action

Combination of: Should create the conditions for a significant business response. But for some markets not enough – innovation policy interventions may be needed as well + Right environmental policy framework Increasing consumer and investor demand for green products / services

Innovation policy: market pull Public procurement Public procurement Local action – innovative, cost-effective solutions to local environmental needs Local action – innovative, cost-effective solutions to local environmental needs Deployment support – for products (e.g. centrally generated electricity) that are hard to differentiate and need extra support (e.g. RO) Deployment support – for products (e.g. centrally generated electricity) that are hard to differentiate and need extra support (e.g. RO)

Innovation policy: supply push UK public funding of energy R+D only 1/3 of EU average vs ‘picking losers’ UK public funding of energy R+D only 1/3 of EU average vs ‘picking losers’ Need for better co-ordination of public funded green R+D capability Need for better co-ordination of public funded green R+D capability Govt should prioritise technologies for support which have greatest potential economic and environmental benefits Govt should prioritise technologies for support which have greatest potential economic and environmental benefits

The business response... global market could be worth $1 trillion in early years global market could be worth $1 trillion in early years opportunities in climate change adaptation as well as mitigation opportunities in climate change adaptation as well as mitigation range of UK strengths e.g.: range of UK strengths e.g.: financial services AIM, insurance, emissions trading financial services AIM, insurance, emissions trading high VA engineering transport, energy high VA engineering transport, energy system-wide applications ICT system-wide applications ICT adaptation climate science, pharmaceutical adaptation climate science, pharmaceutical SMEs as well as big business - £3 billion market in UK by 2010 eg: SMEs as well as big business - £3 billion market in UK by 2010 eg: commercial buildings commercial buildings renewable electricity renewable electricity renewable road transport fuels renewable road transport fuels domestic energy efficiency & housing domestic energy efficiency & housing

Costs and scale of additional UK greenhouse gas reduction measures

Action needed across all sectors to cut emissions *Major contributors are lighting, PCs/other office appliances, stand-by losses, water heating, washing and drying Key insights from analysis 4 main areas for cutting carbon – buildings, power, transport, industrial processes Abatements roughly 50/50 energy efficiency + low carbon energy Cost by 2020 €60- €90/tMtCO 2 e falling to €40 /tCO 2 e in 2030 This equates to £100 per household per year by 2030 MtCO 2 e Source: McKinsey UK cost curve; team analysis Building structure improvements Appliances and lights * Nuclear CCS Wind Fuel efficient technology Biofuels, plug-ins and hybrids Motor systems Non-CO 2 gas emissions Fuel substitution Buildings Power Transport Industry 02040

Green tech: UK potential

Green tech: UK potential contd

Northern Ireland Avoid target one-upmanship Avoid target one-upmanship Renewables – opportunity but also cost issue given NI energy prices = tricky balance Renewables – opportunity but also cost issue given NI energy prices = tricky balance In a small economy, can’t do everything. But imported green technology still benefits economy, e.g. enhances energy efficiency. In a small economy, can’t do everything. But imported green technology still benefits economy, e.g. enhances energy efficiency.