‘Climate, Responsibility and Risk’ – REMARKS BY MR TOM BURKE CBE AT THE ESG INVESTMENT FORUM

 

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REMARKS BY MR TOM BURKE CBE AT THE ESG INVESTMENT FORUM, AMBA HOTEL, CHARING CROSS, OCTOBER 26TH 2016.

 

‘Climate, Responsibility and Risk’

 

Thank you for inviting me to speak to you this morning.

It is just over forty years since I came to work for Friends of the Earth in London. Then, as now, my main goal was to make the world go round differently.

It took me a while but eventually I did learn that money really does make the world go round. That set me a new challenge. I now had to find out what made the money go round.

There are few better places in the world to learn about what makes the money go round than the city of London. I had no difficulty at all in finding a large number of people eager to make sure that I really understood what they did to make the money go round.

What I learnt, in short, was that it is gossip that makes the money go round, albeit gossip of a particularly sophisticated kind. If I put that more politely, it is conversation that makes the money go round and very often it is the conversations that precede the mobilisation of the City’s vast analytic capacities that make the most difference.

So it is particular pleasure for me to be invited to join this conversation at such a crucial juncture. Changing the way the money goes round to meet the world’s need for affordable energy is perhaps the single most urgent aspect of our response to climate change.

The urgency of this task was underlined by the announcement earlier this week that concentration of carbon dioxide in the atmosphere passed the 400 parts per million mark in 2015. This is the level beyond which our chance of keeping the eventual rise in global temperatures below two degrees falls away from evens.

Few now doubt the magnitude, and the urgency, of the developing crisis in the climate. That the world is beginning to wake up was clearly shown by the Paris Agreement and the more recent agreement on HFCs in Rwanda. These were extraordinary examples of global cooperation at a time when confidence in multilateral policies elsewhere is falling.

Nor do many doubt the depth of the current problems with the global economy. The rise of trump, the Brexit vote, popular support for authoritarian regimes in places as far apart as Poland and the Philippines are all indicators of falling public confidence in the ability of governments everywhere to restore vitality to the global economy.

The prospect of a vicious spiral of decline is becoming visible. Climate change adds further stress to a struggling global economy. This undermines global cooperation and triggers a retreat into nationalism and protectionism which in turns slows, or even halts, efforts to tackle climate change. As the temperature rises stress on the global economy worsens.

You get the picture.

What I want to argue this morning is that it is not only possible, but an urgent imperative, to make the money go round differently so as to turn this vicious spiral into a virtuous circle.

To do this we have to build a bridge between the climate crisis and the economic crisis.

The Paris Agreement is one pillar of the bridge. In Paris nations agreed a goal to keep the global temperature rise manageable. They also agreed that the commitments they were ready to make would not achieve that goal. So they put in place a mechanism to regularly ratchet up their ambition.

But more significant than the formal text of the agreement is the political dynamic that took us to such a big success. At Paris the world turned two political corners on the path to a safe climate.

It is now clear to governments everywhere that the political risks of not acting on climate change are growing while the political risks of acting are falling.

This change is being driven by events. It is no longer new scientific knowledge that is driving governments to act. It is the events that climate science has forecast already starting to happen.

At the same time the political risk of acting is falling as the costs of low carbon technologies continues to fall dramatically. This means they are replacing fossil fuels at a far faster rate than has been forecast by the International Energy Agency and similar bodies.

What we are seeing is a change in the fundamental political equation as seen by governments. Until Paris the equation looked like a choice between today’s winners (dividend and revenue rich fossil fuel companies) and tomorrow’s losers (companies hit by a changing climate) plus tomorrow’s possible winners (the low carbon technologies).

For most politicians that’s a no brainer. Whatever gestures you might make publicly, in private you back today’s winners.

This equation is morphing into one in which governments face a different choice. Now it is between today’s winners (fossil fuel companies) and today’s losers (companies already being hit by a changing climate) plus today’s winners (renewables are now attracting the bulk of global investment in electricity generation).

This is a much more difficult choice for politicians to make without thinking it through. Voters everywhere prefer renewables to fossil fuels and worry increasingly about extreme weather.

Secondly, the broad public narrative is also beginning to morph. since we first began discussing climate change some forty years ago the dominant debate was over how best to constrain the economy so as to keep the climate safe. The focus was on measures to prevent the economy putting carbon into the atmosphere,

This led to a rather sterile debate which kept economists busy over whether the costs of dealing with climate change were bigger or smaller than the costs of not dealing with it. This framing posited the question as a false choice between the economy and the climate.

What we are seeing now is a public narrative increasingly about how best to take the opportunities of building a low carbon economy. Saying ‘yes’ to something is always more politically attractive than saying ‘no’. As the low carbon technologies move out of the laboratory and into the market so the nature of the climate policy debate is changing.

The focus is now increasingly on how to make the economy work better – be smarter, cheaper and cleaner – and pick up all those climate benefits on the way.

One of the most encouraging sights in the run up to Paris was that of central bankers getting involved in climate change for the first time. They had not previously been notable participants in the debate.

There have been few stronger signals to governments of just how serious a problem climate change is becoming than Bank of England Governor Mark Carney’s speech last September. In it he warned of what he called the tragedy of the horizon – something climate policy makers have long understood – the danger that by the time it had become obvious that something should be done about the climate it would be too late to do it.

In his recent Arthur Burns Memorial Lecture Carney returned to climate change. In doing so he erected the second pillar of the bridge we need to build between the climate crisis and the economic crisis.

In the speech he sets out three ways in which climate change represents a threat to financial stability. First, the physical risks of a changing climate could over time threaten the ability of the insurance market to provide the coverage necessary to sustain corporate investment.

Second, there are liability risks flowing from the desire of those suffering loss from climate change seeking compensation from those they hold responsible. Some companies are already facing legal actions over their failure to disclose climate risks of which they were aware,

Third, there are the so-called transition risks. These are the risks that policy changes, or technology changes, or the physical risks of a changing climate, could lead to, sometimes abrupt, changes in asset values.

I would add a fourth category of risk to financial stability that is indirect. These are second order effects. Climate change is a stress multiplier. It is already clear from Syria that it can play a key part in creating failed states. Clearly companies with investments in states with a high vulnerability to climate change and weak governance will need to price these risks well.

It would take several such failures simultaneously to precipitate financial instability globally. But we should not overlook the possibility that should such failures lead to regional conflict, in South Asia for example, then the impacts on financial stability could quickly become global.

Carney sets these risks in the context of a stuttering global economy that has failed to restore global growth. He then argues that a rebalancing of effort between monetary, fiscal and structural policies as essential to restoring growth to the economy.

In this context’, he says, ‘green finance is a major opportunity’. he goes on to contend in a crucial passage ‘by ensuring capital flows finance long term projects in countries where growth is most carbon intensive, financial stability can be promoted. By absorbing excess savings, equilibrium interest rates can be raised and macroeconomic stability enhanced. And by allocating capital to green technologies, the prospects for an environmentally sustainable recovery in global growth will increase.’

Or, put in human rather than central banker speech, Mark Carney believes that saving the climate can help save the economy.

Central bankers are not, for the most part, renowned for their starry eyed optimism. So if building a bridge between the climate crisis and the economic crisis is desirable, as Carney thinks, how is this to be done.

In E3G, we have been giving some thought to how the EU could help forge a strong alignment between the needs of the climate and the needs of the economy.

The Commission has already begun by doubling the financial capacity and duration of the European Fund for Strategic Investment. This will make at least €200 billion available for climate action. Also, its Capital Markets Union refresh will establish an expert group to develop a comprehensive strategy for sustainable finance.

It could go further by explicitly linking the CMU to the Energy Union by asking member states to develop national capital raising plans as part of their national energy and capital plans.

To further help crowd in private capital the Sustainable Finance Plan 2030 should ensure that all European financial public sector risk sharing tools are fully aligned with the EU’s climate targets.

Next, the Commission needs to take the lead in developing comprehensive and widely accepted industry standards for green bonds.

Furthermore, it is past the time when the Commission should have issued guidance to Member States on how they should re-interpret fiduciary responsibilities in relation to ESG risk in their national legal contexts.

In addition the Commission should develop legislative proposals to require asset owners to consult their beneficiaries on their preferences for the sustainability of their savings.

These steps would be complemented by the Commission developing a mandatory requirement for all asset owners to disclose information about their responsible investment policies and how those policies were being implemented.

These are just some of the steps that would help construct a robust solutions bridge between the world’s climate crisis and its economic crisis. We have set them out in more detail in a report we will publish on Friday 28th October. They are all ways to make the money go round differently. I have described how we could begin to do them in Europe but there is no reason why similar measures cannot be adopted everywhere.

When I began my career as an environmentalist my passion was to change the economy so as to protect endangered species and human health. There is a nice balance in finding myself now using my knowledge of the environment to help protect the economy.

 

 

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BBC World News – Carbon emissions rise to a new record

 

 

BBC: The biggest companies in the world have helped carbon emissions rise to a new record, according to the UN.

Tom Burke: If you are, for instance, the motor industry, you can change your technology and use electricity instead of petrol for your fuel.  But if you are the actual fossil fuel producers, really there isn’t anything else that you can do.

 

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HFC deal signed – Channel 4 News – 15 Oct 16

 

 

 

Tom Burke: What we are seeing (with HFCs) is exactly what happened with CFCs with the ozone hole, which is when the big countries got in and developed the alternatives, and began to develop them in large quantities, that drove the price down, and made it easier for the developing countries to join in. I think that we are going to see exactly the same thing happen again here.

 

 

 

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Will flood exercises better prepare us? – Sky News – 12 Sep 16

 

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Sky News: The Environment agency is beginning to prepare for the winter months ahead, they are training with new barriers, pumps, vehicles and drones to test their flood responses. Well, joining me now is the Chairman of Third Generation Environmentalism, Tom Burke […..] Will flood exercises better prepare us?

Tom Burke: Yes they will, and it’s important to be doing this, not the least because we know from the way that the climate is changing that there are going to be more extreme weather events. There are going to be more floods, and indeed as we go on, there is going to be sea level rise to cope with as well. So it is absolutely right for the Environment Agency to be preparing in the way that it is doing for these emergency events. But what is much more important than being ready for the emergencies, is to make sure that we are doing the right sort of planning, to cope with the fact that this problem is going to go on getting worse for some time.

Sky News: And what is the right sort of planning? What would that right sort of planning be?

Tom Burke: I think three things: First of all, when people have been flooded then there is a higher probability that they will be flooded again, so you need to make sure that their insurance cover will allow them not simply to replace what they had before, but to upgrade their own local flood defences. I think that the second thing that is really important is that when we drive forward with building the new homes that people need, we don’t put them on flood plains, making them more vulnerable to flooding. So you have got to make sure that your planning system is connected properly to your flood defence system. And then in the longer run we really do need to have much more strategic planning, and much more investment in how we protect all of our infrastructure from a changing climate and from the way that will manifest itself in people’s lives, very often as floods.

[…..]

Sky News: How important is it that there is an ultimate focus on the effects of climate change, both on a national stage but also on a global scale as well?

Tom Burke: Well I think that it is very important that we do everything that we can to slow down the rate that the climate is changing, and to stay below the agreed goal of limiting that change to two degrees, and that means that if Britain wants to make sure that other countries do their bit, we have to be doing our bit, and frankly at the moment there are real signs that the government isn’t doing enough to meet the target that we have set ourselves, and that weakens our ability to get other countries to do more, because no country can solve this problem on their own. And if we don’t do that, then we are trying to shoot at a moving target for the level of resilience that we are need to build to floods, and of course that ends up being not only a big interruption to people’s lives but a big waste of money as well.

Sky News: Off the back of the floods that we saw over the Christmas period last year, in cities like Manchester, Leeds and York, there were promises of more government investment, 2.5 billion pounds being invested by 2021. Is that going to be enough?

Tom Burke:  I doubt it. I think that the Bonfield Report, the report that came out fairly recently, was very careful in what it said, but it pretty clearly indicated that we are not investing enough now, to protect ourselves from the kinds of stresses that we are likely to see in the future.  It’s not only about money, as I said, it is also about planning. Don’t make the problem worse by putting buildings and things in the wrong place.

Sky News: On the point of planning, is it more important to focus on the current barriers and systems that are currently in place, or to think big and look at the huge projects in the future, in the coming months and years?

Tom Burke: Well you have got to take a long term view, and you mustn’t only think of civil engineering. The kinds of things that The Environment Agency is testing out today are fine for emergencies, but in the longer run you want to be thinking about how you use investment in natural capital. In the way, for instance, you use land upstream as catchment areas to divert water to, the way in which you use forests and woods as a way of slowing down the rate at which water flows off the hills, and then becomes a problem when it gets into urban areas. You want to make sure that you don’t straighten out all of your rivers, so that you keep the natural environment, and you make use of the natural infrastructure, to help you to manage the problem.  So there are lots of different things to do, so only focusing on the engineering and what you have got to spend, means that you will miss some of the more effective ways to address the problem.

Sky News:  On that point, the Deputy Chief Executive of The Environment Agency, just after the flooding that we saw over the Christmas period was calling for a radical new approach, and a real focus on new alternatives. Can you just give us a little bit more detail? I mean what would you be suggesting right now?

Tom Burke: Well, for instance, exactly what I have just said. I am sure that is what he had in mind. You want to be holding water upstream. What happens when you get these very dramatic events that do so much damage to people’s homes, and to our infrastructure, is that you get a very rapid flow of water off the high ground into the low ground. If you have tarmaced the low ground, and if you have straightened your rivers, then what you get is these massive flows of very fast water, which is very damaging. So you want to slow the water down, so you do that by keeping natural vegetation in the waterways, by not straightening them and canalising them, and by planting trees and vegetation upstream. That just holds the water so that it comes down more slowly. Where you have got some areas where you are going to have to have land that you can divert water to, very much as flood plains always have done, you can divert water on to those plains, so that it doesn’t flow so quickly into the cities and urban areas where it is so disruptive to life. Now, quite a lot of that is management. Will you need some cash to help you manage it? Yes. The danger with the wrong kinds of engineered things is that you just shift the problem around, you don’t actually really solve the problem. And you have got to consider that, not only because you have more moisture in the air as a result of climate change that you are going to get heavier rain, as we get to 2030 and beyond you are going to be seeing sea level rise, which means that you have got to think about managed retreat from parts of the coastal zone that are vulnerable to flooding, now not from rain coming down from the high ground, but from sea level rise and winter storm surges actually coming off the sea. So there are quite a lot of different thing to be done and those are the kinds of thing that the Deputy Chief Executive had in mind.

[…..]

Sky News:  How do you allay the fear of member of local communities who have seen flooding happen time and time again?

Tom Burke:  I think a really critical point is that you have to involve the communities in the planning for how you are going to deal with floods. It can’t just be done for them; it has really to be done with them, so that people understand. Firstly, so that they see the things that are being done that aren’t always obviously visible. Secondly, they get some real learning about how this is going to happen. You can’t do this by ignoring the communities, and that means local government has to play an increasing role in this, particularly in the cities.

[…..]

Sky News: Thanks very much for joining us.

 

 

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Hinkley will leave Britain behind the curve on energy policy

 

This blog first appeared in Business Green

 

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Hinkley is a 20th Century solution to a 21st Century problem. Bigger is no longer better. There are faster, cheaper, cleaner and smarter ways to deliver affordable, secure, low carbon electricity to Britain’s businesses and consumers.

Nothing about this deal is good for Britain’s hardworking families. They will pay the bill for decades but most of the jobs will go abroad. It is a bad deal for consumers, for the climate and bad for the country.

The Prime Minister has missed a real opportunity to set Britain on course to a more productive and secure future. Instead she has committed us to an expensive and anachronistic energy policy that will leave Britain behind in a rapidly changing world.

Digitisation is increasingly making it possible for people to be both consumers and producers. It does this by allowing them to connect directly to each other. Through Uber and AirBnB this has begun an accelerating revolution in the taxi and hotel businesses. This is happening in energy too.

The falling costs of renewables and batteries and our growing capacity to manage big data are now making a similar rapid transition in the way we generate electricity. Large centralised power stations of any kind are a barrier to this transition. This is particularly so when they are as big, 3.2GW, as Hinkley.

May’s decision to go ahead with Hinkley will slow down, and increase the cost of, making this transition in Britain. It will mean we will fall behind the rest of the developed world in building a flexible electricity system fit for purpose in the 21st Century.

But this is not the only problem with Hinkley. The Investor Agreement that Greg Clark will sign with EDF is an irrevocable index-linked ‘take or pay’ contract to purchase 35 years’ worth of electricity from EDF at more than twice the current wholesale price.

This will cost British consumers £37 billion in subsidy, four times that originally forecast.1 It means Britain’s electricity consumers will pay more than £1 billion/year in subsidy to EDF for 35 years. It will prevent Britain’s consumers buying cheaper electricity if it would displace that from EDF. Furthermore, this deal binds future governments.

It is a treasured feature of British constitutional and democratic practise that one Government cannot bind its successors. This raises important constitutional as well as economic and energy policy questions.

Despite these profound implications the business case for the deal with EDF has never been subject to informed public scrutiny. Indeed, the Government has consistently refused to publish the analytic documents underpinning it.

The National Audit Office has already raised doubts that Hinkley represents value for money in the light of developments, including significant reductions in electricity demand forecasts, since it was first proposed.2 The National Infrastructure Commission has identified a package of other measures that could provide affordable, secure, low carbon electricity at lower cost. More recently, the National Grid has cut its forecast of the need for new centralised generation capacity in Britain by more than 50%.

The truth is that Hinkley is a ponderous white elephant at a time when the pace of change in technology is accelerating and putting a bigger premium for electricity systems on flexibility rather than size. No-one has ever suggested Hinkley will be flexible. Fortunately, Hinkley still has to overcome a number of obstacles before the elephant escapes.

The State Aids clearance for the UK subsidy is under challenge by the Austrian Government and others in the European Court. We are still waiting for the court to decide but if it annuls the European Commission’s decision then the current deal will fail and the UK will have to think again about how to pay for Hinkley.

EDF is already in such financial difficulties that it is being bailed out by the French Government in order to be able to afford Hinkley. Greenpeace has obtained a robust legal opinion that any such bail out will trigger a State Aids inquiry by the Commission. This will take time and even if the Commission does grant approval there is a high probability of its decision also being challenged in the European Court.

Even in the most optimistic scenario, Hinkley is unlikely to produce electricity until 2030. There are cheaper, faster, cleaner and more reliable options available to deliver affordable, secure, low cost electricity to British consumers.

These options include:

–      energy efficiency has reduced electricity demand by 25TWh ( 7% – the same as Hinkley will produce ) since 2010. A McKinsey report for the Government estimates that by 2030 demand could be reduced by a further 23% while reducing consumers bills;

–      the National Infrastructure Commission reports that additional interconnectors could supply 2-3 Hinkleys by 2025;

–      another National Infrastructure Commission report proposed investment in storage and smart grids that would provide the equivalent of 4 Hinkleys by 2030 and save £8 billion;

–      Dong Energy, the world’s largest wind energy company, could replace all Hinkley’s electricity sooner and at lower cost. Offshore wind costs are continuing to fall;

–      electricity from solar power is now also cheaper than Hinkley, having fallen by half in the last five years. From almost no solar panels in the UK, a third of a Hinkley has been added since 2010. Half of that was delivered in just 18 months.

So what about when the sun doesn’t shine and the wind doesn’t blow? As the former CEO of National Grid pointed out two years ago, ‘baseload’ is an outmoded concept. The fact is that no generator runs all the time, not even nuclear. Changes in renewable availability are highly predictable. This allows smarter management of the grid to cope with their variability.

Nuclear reactors fail, or in industry terminology suffer an ‘unplanned shutdown’, regularly. About a quarter of Britain’s nuclear fleet have unplanned shutdowns each year. Unlike the weather which we can predict days or weeks in advance a Hinkley outage is not predictable which means you have to be able to switch on 3.2 GW of spare power instantly. Because they come in big, unpredictable lumps, they are more of a problem than renewables variability. In any case, as the fast falling costs of batteries follows down those of wind and solar, the intermittency of renewables becomes even less of a problem.

The decentralised energy system that is the alternative to Hinkley has one other advantage. With Hinkley electricity bill payers will receive an ever bigger bill through their letter box. In the renewable energy future that is better for Britain they will not only get a smaller bill, they’ll also receive a cheque.

 

Tom Burke

London

September 22nd 2016

 

Tom Burke is the Chairman of E3G

 

Footnotes

1.   This is also twice the largest figure presented to Parliament in the Departmental Minute of October 2015 that sought authorisation to take on the liabilities of the Agreement. This raises the question of whether the Government has the authority to sign the Agreement at this time.

2.   The NAO will produce a report on the deal ‘once EDF has taken its final investment decision to build HPC’ NAO July 13th 2016. Unfortunately, this report will be after the Investment Agreement has been signed and so can have no impact on the deal itself.

 

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Hinkley is a very expensive strategic mistake for the country – TRT World News

 

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TRT News: Joining me now from London is Tom Burke, Chairman of the environmental think tank E3G , and a former government advisor on climate change.

Hinkley Point, what’s your biggest problem with it?

Tom Burke: It’s a very expensive strategic mistake for the country. It’s going to produce electricity at more than twice the current wholesale price for 35 years. It’s going to cost 37 billion pounds in subsidies from the British consumer, and all of that for an untried reactor, no example of which is working anywhere in the world.  So it’s a very bad deal, there are cheaper, faster, cleaner, and more reliable ways to meet a low-carbon, affordable and secured electricity supply for the future. So what you are really seeing is a 20th Century solution to 21st Century problems.

TRT News:  Just to be clear, Tom, you are emphasising cost over security? How big are your security concerns?

 Tom Burke:  I am not very worried about the prospect of taking Chinese money, and the way that you fit nuclear power stations into your grid, doesn’t give them access to the kind of software that would expose you to security worries about crashing you grid. I think that the government is right to have taken a golden share, in order to prevent the reactors from being sold on, but the security worries aren’t really the biggest worries. There are of course other worries about what happens to the radioactive waste at the end of its life, and there is no available solution to that problem yet in the United Kingdom, or indeed anywhere else in the world.

TRT News:  Is the price you have to pay 24 billion dollars to have warmer relations with the Chinese?

Tom Burke:  I certainly agree that, that looks like it was a major factor in the decision. In a sense it was a white elephant that got so big that nobody could shoot it. That doesn’t make it anything like a good deal. It’s just, you’re basically selling out you energy policy for some marginal gains in the headlines. The really strategic problem is that is begins to point Britain in the wrong direction in term of the future architecture of it electricity system. We are moving into a world in which digitisation makes available all kinds of strategic and structural change in industry, that’s true of the electricity industry as well. What it means for Britain’s electricity consumers is all that they will continue getting through their letter box for the next 35 years will be big bills, and actually the world that we are moving into in for  electricity systems is one in which consumers won’t only be getting bills through their letterboxes, they will be getting revenue cheques as well.

TRT News:  Tom, post-Fukushima there was a taboo connected to nuclear energy, might a deal like this begin the process of reversing that taboo?  Reversing the questions that people have been asking about whether nuclear energy is the way to go?

Tom Burke:  I don’t think so. I suspect Hinkley will be a one off. Rather like Sizewell was in a previous government when there were big nuclear ambitions. Ten nuclear power stations were promised, but only one was actually built. I think that the economics are a real killer for nuclear. If you are worried about safety, what you should be more concerned about is the Chinese government proposing to build sixty nuclear power stations in the next few years. The idea that you can maintain the necessary level of safety and quality of build in order for those programs to be successful, I think that is a very, very big question mark.

TRT News:  Tom, 25,000 jobs will be created between now a 2025, aren’t you at least a little bit excited about that?

Tom Burke:  I’m not at all excited about it, I’m much more concerned about the 14,000 jobs in energy efficiency that the British government destroyed by an arbitrary change in its policy, and the 12,000 jobs in the solar industry that were also destroyed by an arbitrary change in policy. We could have got more than that number of British jobs, that would be long-life jobs, if we had continued with those policies and we simply wouldn’t have needed Hinkley at all for our secure supplies of affordable electricity. The thing to remember is that the cost of renewable, and the cost of batteries that allow you to deal with their variability, those cost are going down consistently.  Nobody has ever built a program of nuclear power stations where the cost didn’t go up over time.

TRT News:  Ok, good points. Unfortunately, we are out of time. It’s been great to talk to you. Thank you so much.

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Hinkley is a bad move for Britain – BBC News – 15 Sep 16

 

 

 

What we really need to be doing right now is investing in renewables.  We need to invest in wind, which is already available, and offshore wind is already cheaper than Hinkley will be. We need to invest in solar, so that people can have this on the rooves of their houses, put that together with batteries, and they could be getting revenues as well as bills.

 

 

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HINKLEY GREEN LIGHT A MASSIVE STRATEGIC MISTAKE, SAYS CLIMATE CHANGE THINK TANK

 

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FOR IMMEDIATE RELEASE : Wednesday 14th September 2016

 

E3G Press Release

 

Following reports today that the Government is about to give the green light to the Hinkley Point C nuclear power station, E3G, a leading climate change think tank said it would be a hugely expensive strategic mistake, using expensive 20th century technology that would soon be obsolete.

 

E3G Chairman, Tom Burke said: “It is a 20th Century solution to 21st Century problems. Bigger is no longer better. There are faster, cheaper, cleaner and smarter ways to deliver affordable, secure, low carbon electricity to Britain’s consumers.

 

Nothing about this deal is good for Britain’s hardworking families. They will pay the bill for decades but the jobs will go abroad. It is bad for consumers, bad for the climate and bad for the country.

 

The Prime Minister is missing a real opportunity to set Britain on course to a more productive and secure future. Instead she has committed us to an expensive and anachronistic energy policy that will leave Britain further behind in a rapidly changing world.”

 

Available for comment

Tom Burke, Chairman of E3G, is available for comment: please contact him on

Mobile: 07710 627616

Email:  tom.burke@e3g.org

Tom Burke is a former Government advisor and previously the Director of Green Alliance and Friends of the Earth.

 

Notes to Editors

  1. E3G sets out below ten reasons why this is a bad deal for British consumers and documents the range of cheaper, smarter, options for low carbon energy security that are better value for money.

 

HINKLEY POINT : The 10 Mistakes

 

  1. The Investor Agreement that Greg Clark will sign with EDF is an irrevocable index-linked ‘take or pay’ contract to purchase 35 years’ worth of electricity from EDF at more than twice the current wholesale price. This will cost British consumers £37 billion in subsidy, four times that originally forecast[1]
  2. This deal binds future governments as well as the current Government. It will prevent Britain’s consumers buying cheaper electricity if it would displace that from EDF.
  3. It means Britain’s electricity consumers will pay more than £1 billion/year in subsidy to EDF for 35 years.
  4. The business case for this Agreement has never been subject to informed public scrutiny. The arguments for HPC and the rest of the nuclear programme have never been stress tested.
  5. The National Audit Office has already raised doubts that it represents value for money in the light of developments, including significant reductions in electricity demand forecasts, since it was first proposed[2].
  6. The National Infrastructure Commission has identified a package of other measures that could provide affordable, secure, low carbon electricity at lower cost.
  7. The National Grid has cut its forecast of the need for new centralised generation capacity in Britain by more than 50%, announcing its estimate of growth for decentralised generation was 50 times too low[3]
  8. EDF’s unions will argue in the French Courts that delaying a Hinkley decision until 2018 would allow for a design review to be completed that would reduce the subsidy needed from £92.50/MWh to £75/MWh[4].
  9. State Aids clearance for the UK subsidy is under challenge by the Austrian Government and others in the European Court. A further State Aids challenge is likely to the French Government’s re-financing of EDF. If either is successful the deal will fall.
  10. Hinkley will not produce electricity until 2030. There are cheaper, faster, cleaner and more reliable options available to deliver affordable, secure, low cost electricity to British consumers. These include:
  • energy efficiency has reduced electricity demand by 25TWh ( 7% – the same as Hinkley will produce ) since 2010. A McKinsey report for the Government estimates that by 2030 demand could be reduced by a further 23% while reducing consumers bills;
  • the National Infrastructure Commission reports that additional interconnectors could supply 2-3 Hinkleys by 2025;
  • another National Infrastructure Commission report proposed investment in storage and smart grids that would provide the equivalent of 4 Hinkleys by 2030 and save £8 billion.
  • Dong Energy, the world’s largest wind energy company, could replace all Hinkley’s electricity sooner and at lower cost. Offshore wind costs are continuing to fall.
  • electricity from solar power is now also cheaper than Hinkley, having fallen by half in the last five years. From almost no solar panels in the UK, a third of a Hinkley has been added since 2010. Half of that was delivered in just 18 months.

 

  1. E3G is an independent global think tank, working to accelerate the transition to a low-carbon economy. E3G specializes in climate diplomacy, climate risk, energy policy and climate finance.
  2. In 2016, E3G was ranked the number one environmental think tank in the UK by the Go To Think Tank Index, second in Europe and sixth in the World.

 

Footnotes:

[1] This is twice the largest figure presented to Parliament in the Departmental Minute of October 2015 that sought authorisation to take on the liabilities of the Agreement. This raises the question of whether the Government has the authority to sign the Agreement at this time.

[2] The NAO will produce a report on the deal ‘once EDF has taken its final investment decision to build HPC’ NAO July 13th 2016. Unfortunately, this report will be after the Investment Agreement has been signed and so can have no impact on the deal itself.

[3] Daily Telegraph August  18th 2016

[4] Le Journal du Dimanche August 7th 2016

 

 

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Sky News – How significant is it that the US and China have ratified the Climate Deal?

 

Sky News:  Two of the world’s biggest polluters the US and China have ratified the Paris agreement on climate change. The move is being hailed as a major breakthrough, but does it go far enough? Tom Burke is the chairman of environment think tank E3G, and former British government advisor and he joins us from Central London. Good Afternoon, and thanks for joining us Tom.

So you’ve got the two biggest polluters and they have signed up to this accord, how significant is that?

Tom Burke: I think that it’s very significant. When the first agreement was made in Paris last year, the momentum for it was built by exactly this sort of thing, by America and China, as the biggest polluters, getting together, and they really created a big momentum. So the agreement was made in December, and now that we are going to ratify that agreement, it’s the same thing happening again. And that means that around half the countries that need to ratify before that deal comes into force have ratified it. So we are really on our way to having this agreement coming into force by the end of the year, which is real progress, especially when you think that this is likely to be the third year in a row that it will be the warmest year ever, so we really do need to get on with things.

Sky News: So when they sign this accord, what actually are they agreeing to Tom?

Tom Burke: What they have agreed to is that they will reduce emissions so that we keep the rise in temperature “well below” 2 degrees Centigrade, and if possible try to keep it below 1.5 degrees. So it’s a very, very ambitious agreement, to move from a high carbon economy to a low carbon economy, and to do it very rapidly indeed.

Sky News: And who is going to hold these countries to account once it all kicks in? Ban-Ki Moon is saying by the end of the year it should be ratified, so once this happen who is going to hold these countries to account?

Tom Burke: One of the things that is important about this agreement is that there will be a ratchet mechanism that keeps both lots of transparency of what countries are actually doing, and then gets them to meet every few years and wind up their ambition. But the important piece about this agreement is that we are changing from a position where the political risks of doing something about climate change are now going down, and the political risks of not doing anything are going up, so the underlying equation is changing. So it’s easier for governments to get agreement to do the things that are necessary. Also we are seeing that the focus of the debate is shifting away from being a debate about how do you stop carbon, a bad thing, coming out of our economy, to how do you actually take advantage of the falling cost of renewables, and the falling cost of batteries, to take the opportunity of building a cheaper, cleaner, faster energy system. I think that what we are going to see is much more competition between countries to take advantage of the economic opportunities, rather that people trying to cheat on the commitments that they have made.

Sky News: So do you think that there is going to be quite a big impact on industry? That all these positives that you’re talking about will actually outweigh the negatives?

Tom Burke: I think that is exactly right, and I think that is a very important message for the fossil fuel industries to take on board so that they don’t become barriers to what is really a better world that we are building for the future. And it’s also important for governments to understand that you can’t just switch off the existing fossil fuel industries, you have got to help them adjust. As we saw Mrs Clinton doing recently in coal country in the US, talking about what you do with the coal miners that you no longer need. We can’t just walk away and abandon them. So we have to start going beyond the piece where we’re just thinking about how do you reduce emissions, to how do you cope with the social consequences of the large scale transition that we are undergoing?

Sky News: And just finally Tom, Obama said that it’s “the day we decided to save the planet”. Do you think that we are past the point of no return when it comes to emissions? Or do we still have hope?

Tom Burke: I think that we still have hope. We have lots of reason to hope, largely because technology and markets are really delivering for us. We don’t really have any technological obstacles to staying below 2 degrees, and there are no economic obstacles to doing it. It’s really about the politics. It’s about the change in the pattern of winners and losers that will occur, and how you make sure that the losers don’t get in the way of the winners.

Sky News: Thank you so much. Tom Burke, the Chairman of Third Generation Environmentalism (E3G).

 

 

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BBC News – China and US ratify Paris Climate Deal

 

 

BBC News: It’s been reported this morning that China has announced that it will formally ratify the Paris Climate Change Agreement, paving the way for a joint US / China statement on global warming later today. The country is the largest emitter of harmful C02 emissions. To discuss this we are joined from our London Studio by Tom Burke, from the Environmental Think Tank E3G.

Morning, It’s difficult to know where to start on this isn’t it, because there is so much for them to get through, and certainly at this point, there are several people on the global stage trying to put their name against this aren’t they? President Obama, for example, is one of them.

Tom Burke: That’s right, but it’s important to remember that the agreement that we got in Paris was better than most people expected, partly following a joint initiative by Obama and Xi in the middle of last year, and I think that’s what they are planning to do again this afternoon. So I don’t think it should be seen it as a misalignment between the Chinese and the Americans. I think that there is a real sense that if they speak together on this issue they are going to add real momentum to the process of getting ratification to complete.

BBC News: So the significance of the Paris agreement was “to keep any temperature increase globally to below 2 degrees” how are they suggesting that can be achieved?

Tom Burke: What is really important about the Paris agreement is that it didn’t only set that goal, but it also set up a mechanism to keep countries rolling forward towards achieving it. In a sense, Paris represents the turning point. We are moving from a situation in which all the focus was on how dealing with climate change would constrain your economy, to a situation in which we are increasingly focused on how dealing with climate change creates amazing opportunities to kick your economy back to life. We are seeing also that the political risks of not doing something about climate change are growing. This year will be the hottest year ever for the third consecutive year. Whereas the political risks of actually dealing with climate change are falling very rapidly as the costs of renewables, and the costs of all the alternatives, of a low-carbon economy, go through the floor.

BBC News: How easy will it be to police this agreement? And how legally binding might it be?

Tom Burke: I think people are concerned about whether other countries will perform their part of the role. There is no international police force in the way that there is an international court that can force you to do things, in that sense, you can’t put a gun to people’s head and force them to do it. But what you are seeing in the Paris Agreement is that you can create real transparency, and reporting on what people are actually doing. So that you have a very transparent process and everybody can see what everybody else is doing, and you have a ratchet mechanism, for every few years, lifting up the targets that people have set. But if you only think about this as people being forced to do something that they don’t want to do, you are missing the trick about the extent to which this is now increasingly opportunity driven, rather than constraint driven.

Sky News: Tom Burke, thank you very much.

 

 

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