“The price of carbon: getting a bearing on climate”
With nine months until the COP21, the CEO of ENGIE Gérard Mestrallet reflected of the initiatives the Group has undertaken in favor of the energy transition and spoke on the need to start a low-carbon transition at an international level.
Gérard Mestrallet’s article for Le Monde
In December, Paris will host the 21st Climate Conference. One hundred and ninety-six States will decide on long-term commitments to deal with climate change. If we don’t take action, we will also be leaving an outstanding invoice for our children and for future generations, since the UN has estimated that the cost of climate change could reach €450 billion per year by 2050.
More than just a diplomatic agreement, the Paris Conference will also be a chance to provide bold and sustainable solutions to fight against climate change within a clear and stable framework,which can help direct the investment choices made by [businesses and other] private stakeholders. This is the key issue.
Let’s not just be worried onlookers. Don’t forget: the private sector represents over 70% of worldwide investment in preventing and limiting climate change. Through their finances, technology and people, businesses in particular can and must be fully involved.
It is even more essential for the energy sector: 60% of greenhouse gas emissions are linked to energy, and energy consumption is set to triple by 2040. The energy transition transforming our sector must be a low-carbon transition. ENGIE has made a firm commitment to this initiative. In 2015, we will meet our aim of increasing the share of renewable energies in our electricity generation capacity by half, with the aim of doubling this share by 2025 in Europe. Our aim is to reduce our CO2-specific emissions by 10% by 2020 and to increase our turnover from energy efficiency activities by 40% between 2013 and 2018.
To do this, however, there needs to be a clear and stable framework. Despite their importance in achieving international objectives, businesses are operating in political and regulatory environments which are extremely unequal across the world’s regions.
We first need to establish coherence at a global level, and make sure that green investments are dealt the trump cards. In this respect, the 2015 Paris Climate Conference offers a remarkable window of opportunity.
Businesses need visibility and a consistent long-term agreement to set out their priorities. However, they also need clear price signals to help them choose low-carbon solutions.
Generalising carbon pricing is one such signal. This is the price paid to cover the environmental impact of greenhouse gas emissions.
Paying a price for carbon when making investment choices helps to tip the balance towards renewable energies, energy efficiency and green R&D. This signal is even more necessary now that falling fossil fuel prices and the shale gas revolution are creating a renewed preference for abundant and competitive fossil fuels, at the risk of failing to meet international greenhouse gas reduction commitments. Today, we are seeing coal replace gas and other low-carbon energy sources in the European energy mix.
These carbon pricing mechanisms should not be considered as a brake on the world economy. On the contrary, they will help to boost growth by building trust and stimulating investment and innovation while creating the conditions required for fair competition.
Many businesses are already including a carbon price in their investment plans and are setting themselves aims to reduce their energy intensity. An increasing number of the shares held by institutional investors are subscribing to environmental principles. Thus, in May 2014, ENGIE issued the largest ever Green Bond for a private company, worth some €2.5 billion to finance projects such as wind farms, hydroelectric stations and energy efficiency measures. The support of some 1,000 companies, including the company I head, for the World Bank’s Declaration for Carbon Price Signals, also bears witness to this new state of mind. In Paris, global representatives have a historic opportunity to transform this awareness into a driver for action.
So what might a decision look like?
Humanity is like Magellan
- Generalising carbon pricing measures, which China, Brazil, Mexico, South Africa and South Korea have just done, and which has the support of an increasing number of countries.
- Researching flexibility and coordinating national initiatives calling for market systems, which are now found in thirty-five countries.
- Fixing, without delay, Europe’s carbon emissions market, as we have been requesting for two years as part of the Magritte group alongside ten leaders of Europe’s largest energy companies.
Given the immense challenge that the climate poses, humanity is like Magellan on the eve of his first circumnavigation of the globe. He would never have been successful if he shied away from bold decisions, or without the invention of the compass. There is no lack of ambition – so let’s not deprive economic stakeholders of their compass in the fight against climate change!