Speech Yomiuri International Economic Society, Tokyo 17 April 2008
Fredrik Reinfeldt, Prime Minister

Combining a Climate-Friendly Policy with Economic Growth

Check against delivery.

Thank you for the honour and opportunity to address the Yomiuri International Economic Society.

It is a real pleasure for me and my delegation to visit your country. I hope my visit will lead to a further strengthening of the ties between our countries.

It was an tremendous honour for my wife and me to have lunch with Their Imperial Majesties yesterday. It was also a great honour for Sweden that their Imperial Majesties visited Sweden last year.

Today, we live in a world of many challenges and opportunities. However, if I am to focus on one issue that will have an impact - not only on us - but on future generations - it is climate change.

My speech here today will rely on one fact and one statement: that our climate is changing and that economic growth can help us tackle it.

We know a few things for sure.

We know that the climate is changing. It is a global change that affects all of us. It means that, step by step, our world is getting warmer.

And we know that mankind is the major cause of this development.

Even if we do not fully understand the exact consequences climate change will have in different parts of the world, we do know that in some parts of our world global warming will result in water shortages, drought and deserts spreading.

In other parts it will lead to more extreme weather conditions, such as storms and flooding.

We refer to this as something that will happen in the future. But the fact is, it is already happening today. And while some of us only witness it when we turn on the news, others experience it at first hand.

Last year, at the UN climate conference in New York, I heard the appeals from leaders of small island nations for assistance to help them cope with flooding.

I heard how leaders from developing countries bore witness to the effects of climate change on their countries.

So the fact that the climate is changing is independent of the measures we take today. It is already a fact. Does this mean there is nothing we can do?

There is a tendency in the climate debate to resort to doomsday prophecies.

Some might find that constructive - but it doesn't appeal to me. I believe such rhetoric triggers nothing but inaction.

I am convinced of three things.

I am convinced that we should listen to people's worries about what is happening to our world.

I am convinced that we should listen to the analyses and conclusions of leading scientists.

I am convinced that when people worry about climate change and leading scientists tell us that this thing is for real - then we must not just listen - we must take action.

According to the IPCC, emissions of greenhouse gases need to be reduced by at least 50 per cent by 2050. Even larger emissions reductions may be required.

Recent scientific findings indicate that the increase in global temperature will be larger, and the effects of global warming will be greater, than previously anticipated.

The consequences of climate change and anticipated temperature increases will significantly impair our capacity for economic growth.

This is the case simply because they will affect basic factors such as access to water, food production, health, and the environment.

It is with great interest that I read Prime Minister Fukuda's speech at the World Economic Forum in Davos. A speech where he focused on many of the challenges we are facing in our world today.

At my meeting with Mr Fukuda yesterday, I commended him on his insights on the issue of climate change. As the chair of the G8 Hokkaido Toyako Summit in July, Mr Fukuda has a key role in preparing the G8 countries for the agreement on a new climate regime after 2012.

There is no time to lose in addressing climate change, Mr Fukuda stated in his speech. I agree. We already have the available means and the technology to take action today.

In line with this, I applaud Mr Fukuda's climate initiative on national targets. But at the same time, I urge Japan not to see new technology as the only solution. New green technology is necessary, but it will not be enough.

If governments are serious in tackling the issue of climate change, they also need to make the public aware of the need to promote an environmentally-friendly society.

I firmly believe that pricing mechanisms are needed to promote a sustainable society.

Setting an appropriate carbon price is essential for the transition to sustainable energy use. This is something that is applied both at EU level, through the EU Emissions Trading Scheme, and nationally through Sweden's own carbon tax.

Undoubtedly, the leverage for the climate would be vastly more effective if similar cost-efficiency schemes could be introduced more widely at international level. I welcome initiatives underway in Japan in this respect.

I am a firm believer in flexible solutions - when circumstances change drastically, policies cannot stay the same.

If we fear change and deny the need for it, we may find ourselves forced into a new situation under less favourable circumstances.

If instead we look ahead and decide to act on our own initiative, we will find tremendous potential for new activities based on bringing new efficient energy technology and renewable energy to the world market.

However, technology is only part of the solution.

Advanced clean technologies cannot provide the full answer to the challenge of climate change.

We also need cost-effective technologies. These we find to a large degree in the field of energy efficiency.

Are we, for example, seeing the full potential of simple solutions such as proper insulation and double glazing as well as efficient power generation technologies?

The transfer of technologies will be an important topic for the upcoming negotiations.

As Mr Fukuda stated in his speech in Davos: "A global framework, establishing effective instruments on an international level will be absolutely necessary".

In the autumn of 2009, when we wish for such an agreement to be signed in Copenhagen, Sweden will be holding the Presidency of the EU. Therefore I am grateful for Japanese support in the important task of moving towards an agreement.

One thing I learned from the New York conference on climate change was that if we really want to make a difference and tackle global warming efficiently and effectively, we must act together.

I say this, because global issues of this kind cannot be addressed by nations alone. They demand global solutions and concerted global action.

This need for global action becomes obvious if we take a look at the world around us.

Today, emerging rapidly growing economies are taking giant leaps towards development and prosperity.

More and more people in our world have access to modern technology and welfare.

This is something we should welcome.

But with development and prosperity based on rapid industrialisation come increased emissions.

The aspirations of many countries for an increased and reliable energy supply are still based on fossil fuels, with greater emissions as a result.

Thus the question is: Can we manage, through smart approaches and determination, to 'turn the curve' and truly begin decarbonising our economic growth?

I believe we can.

We know that if current emissions trends continue, we will alter the global climate and significantly change the living conditions of people all over the world.

To avoid these unacceptable consequences, we have strong indications that global emissions need to be reduced by at least fifty per cent by 2050.

To take responsibility for the current situation, developed countries need to reduce their emissions by much more than fifty per cent.

But developing countries will also have to increase their efforts.

Let me say a few words about China's role in climate change.

I can see that China is starting to recognise the scale and urgency of the problem of climate change.

However, the problems are huge and pressing.

And the rapidly increasing demand for energy is still largely being met by new coal-fired power plants. This has recently put China's CO2 emissions on a par with those of the United States.

To accelerate all efforts, I believe we need an international agreement of sufficient ambition post-2012, based on common - but differentiated - responsibilities.

This could mobilise further international investment and help developing countries transit to a low carbon economy.

There is no such thing as a free lunch.

But I would argue that the cost of reducing emissions to avoid the worst impacts of climate change can actually be quite low.

In March last year, the leaders of the EU Member States clearly linked energy and climate policy through a milestone decision on ambitious targets in both the climate and energy field.

The EU objective consists of a twenty per cent reduction in greenhouse gas emissions by 2020 compared to the 1990 level.

And this target will be raised to thirty per cent if other developed countries also commit themselves to comparable reductions and some action is also taken by key developing countries.

In addition, by 2020, the EU is to make energy consumption savings of twenty per cent compared to projections and the share of renewable energy in overall EU energy consumption is to be twenty per cent.

At the same time, at least ten per cent of the fuel used for transport is to be made up of biofuels.

In January 2008 the European Commission introduced draft legislation to make sure that the objectives will be achieved. The aim is to adopt this legislation no later than at the beginning of 2009.

I respect the principle of common but differentiated responsibilities. Thus developed countries will need to continue to take the lead.

The EU is willing to shoulder its share and take on even deeper cuts to provide for a global agreement in line with the efforts required.

Thus the EU has signalled its willingness to explore emissions paths for the group of industrialised nations in the order of 15-30 per cent by 2020 and in the order of 60-80 per cent by 2050.

If climate change is to be tackled, I believe that large and existing flows of investments have to be steered towards technologies that are long-term sustainable and conducive to substantial global emission reductions.

Unless we manage to steer these investments - and as long as we confine our efforts to the public domain - our efforts will be futile.

This is a difficult issue that needs to be thoroughly addressed in the upcoming negotiations.

Building a global carbon market is essential in this context - both to redirect financial investments and to deliver sufficient funding.

A global carbon market, however, will not be sufficient.

We will need both national policies and the creation of a fertile environment for the development of a low carbon economy.

Adaptation will, of course, be one of the cornerstones of any post-2012 agreement on climate change, a fact that is well manifested in the decisions from last year's climate conference in Bali.

This issue will require serious and perhaps innovative solutions as to financing and integration in development strategies for all countries, in particular those developing countries that are most vulnerable to climate change.

I know Japan is eager to help assisting developing countries that are aiming to achieve both emissions reductions and economic growth.

In 2007 the Swedish Government decided to contribute to international efforts in adaptation and risk reduction by launching the international Commission on Climate Change and Development. Through the Commission, expertise on development, disaster risk reduction and climate change can help identify a way forward.

It is my hope and wish that Sweden and Japan can work closely together on this important issue of adaptation and climate-secure financing.

Earlier I made the statement that reducing CO2 emissions can be quite cheap. Let me now show you that it is possible to make substantial emission reductions while watching the economy grow.

Let me turn to the Swedish example.

In the last sixteen years, Sweden's emissions have decreased by nine per cent while our economy has grown by forty-six per cent.

This achievement was made without any quick fixes. It can be attributed to a number of policies and measures.

Sweden has a long tradition of an energy policy aimed at reducing emissions. This is done both by developing and promoting the use of alternative technology.

But also, and perhaps more importantly - if we count actual reductions in the tons of emissions so far - we use market-based instruments such as green certificates and energy and carbon taxes to steer market actors' behaviour towards more sustainable patterns.

I am not especially fond of taxes.

But I am convinced that they can make an important difference if you want to promote one type of behaviour over another.

Therefore I am also convinced that we should put a price on emissions as a way of making emitters reconsider their actions and changing their behaviour.

In Sweden, electricity and fuel have been subject to energy taxes for several decades.

One of the most important is the carbon tax on all fossil fuels, which Sweden was one of the first countries in the world to introduce in the early 1990s.

The carbon tax has proven effective, but we also need other incentives.

Last year my Government introduced a government grant for buyers of new cars fulfilling set environmental criteria, which, together with other policies and measures, has led to a rapid increase in the number of cars running on alternative, non-fossil fuels - now, almost half of the new cars sold in Sweden are environment-friendly.

Also, under new legislation, all large petrol stations in Sweden are required to offer renewable motor fuels, such as biogas or ethanol.

Another aim is to broaden the scope of emission trading within the European Emissions Trading Scheme to include transport and aviation.

Apart from the obvious need to reduce emissions, these measures also offer some potentially significant economic benefits.

The carbon dioxide tax has had a particular impact on the heating sector, where the use of fossil fuels has decreased dramatically - mainly due to a transition from oil to district heating based on biomass and increased efficiency in the use of energy.

In Sweden, the use of oil has decreased by forty-seven per cent since 1970.

Over the same time period, the supply of bioenergy has increased by sixty per cent.

As a consequence, Sweden's energy supply mix is now much more differentiated than it was thirty-five years ago, and our security of supply is much more robust.

The transport sector still remains a challenge. But in the past few years hopeful signs have begun to show even in this sector.

Sweden has taken important steps to tackle global warming, but we can do more.

But as I said earlier, our country - one country - can only make a small difference. That's why international action is necessary.

As I have stated earlier, based on our own experience and many serious economic studies, it is possible to combine economic development with a stabilisation - and decrease - of emissions.

This will however require determined and enhanced action not only by the developed but also by more advanced developing countries - I mentioned China earlier - in accordance with their common but differentiated responsibilities and respective capabilities.

Such action will be facilitated by an international post-2012 regulatory framework that provides the necessary instruments and tools to achieve global reductions of greenhouse gases.

We stand ready to work together with you over the next 20 months to find the appropriate ways and means for this.

Once again I want to thank you for the opportunity to speak before this distinguished audience.

Thank you.