Examination of Witnesses (Questions 440-454)
PAUL DAWSON,
LOUIS REDSHAW
AND CHARLES
DONOVAN
12 JANUARY 2005
Q440 Chairman: You are beginning to sound
like a politician!
Mr Dawson: With respect to the
Contraction and Convergence thing, that was used as an illustration
rather than us advocating that necessarily. Clearly it has consequences
that can prove contentious.
Mr Redshaw: Contraction and Convergence
ideas are not completely parallel with ours and the first one
is contraction. We do not suggest quite how the world or countries
achieve and what objective they are looking for, we are saying
that if you want to have an emissions reduction an efficient way
to achieve that would be to have a convergence. But to say that
we should have contraction in the first year is perhaps not seeing
the full picture. The key here is inclusion of as many countries
as possible and potentially some other mechanisms to incentivise
that inclusion. It would not be a sensible negotiating standpoint
for the UK government or for Barclays Capital to stand on a soap
box and say that the US should reduce its emissions by half overnight
because that simply will not happen because (a) the US will refuse
to do so, and (b) it would have such ramifications on their economy
that the world would suffer. What needs to happen is that there
is a very long-term certainty for all countries and companies
within those countries that CO2 is going to become a cost of production
like oil and coal and gas is today, and that with that information
companies can make informed investment decisions and other companies
will innovate with new technologies. The reason that the fuel
efficiency of the of the transport, the vehicle fleet in the UK,
Japan and Europe is much more efficient than the US is because
of cost—the cost of fuel is much higher over here, and technical
directions come on the back of that.
Q441 Chairman: Can I quickly ask you
about the CDM arrangements—and we touched on them very briefly
earlier? How do you view the CDM is a mechanism to promote financial
investment in less developed countries?
Mr Redshaw: It is a positive development
because it does encourage some investment in developing countries.
You cannot argue with that because that investment is taking place
right now, and Charlie has some examples. But the blueprint that
we put together actually solves all of what we see as the inherent
problems with the CMD mechanism. The first point was Paul's earlier,
that the CDM is a relative reduction not an absolute reduction,
and so you can go and build the most dirty, polluting lignite
fire and coal fired power station in one corner of the country
and then do a highly efficient project in another corner—
Q442 Chairman: And collect the difference,
as it were?
Mr Redshaw: The dirty one pays
nothing and the clean one makes some money. The other problems
with CDM are the additionality rule whereby you have to prove
that you are doing something above and beyond what you would have
done normally, and you have the Executive Board who register the
projects and issue the CDM certificates, the CERs. There is a
bottleneck with that Executive Board and there is a problem with
proving additionality. If you put a cap on developing countries
as much as you put a cap on developed countries you take away
that bottleneck. The methodologies are useful and can be used
as benchmarks and the Executive Board can help the process, but
if you put the allocation responsibility on the government of
the country and if they have made a project that is more efficient
than business-as-usual, then the government is in a position to
allocate allowances to that project, and that project can then
determine what it wants to do with those allowances. Our blueprint
suggests that developing countries have an increasing cap and
developed countries have a decreasing cap and that allocation
would come from that cap that is given to that country, and it
bypasses all of those problems.
Q443 Chairman: Do you have some examples,
Mr Donovan, of some of the projects that are being invested in?
Mr Donovan: Yes, we have been
involved in a number of CDM projects. In the large majority we
have seen very, very important developments come from them, both
in investment in a country that needs it, but perhaps a bit more
selfishly for the UK really motivating some people to go out and
do the kinds of projects that simply three years ago if you told
someone there was an interesting renewable energy opportunity
in Vietnam they would have considered that to be way off their
radar screen in terms of the kind of things that they want to
do. So we have created a UK industry that can capitalise upon
that and that is a legitimate benefit we are seeing, that now
we have a best of class, a leading global industry that wants
to go out and do these kinds of projects. Now, whether we are
getting the right kind of emissions benefit out of it is probably
a separate issue but I do think that there are a number of examples
where you are seeing a sustainable development occurring through
the CDM, but let us not forget that the CDM was intended to do
that and not just be a source of cheap emission reductions.
Q444 Chairman: If we can attempt not
to try your patience overmuch it might be helpful to have a very
short supplementary memorandum from you on precisely that point,
setting out some of the projects you have been involved with and
the benefits that you have perceived there. Would that be possible?
Mr Donovan: What I would propose
to you is that through the London Climate Change Services Group
there are a number of organisations that are involved in developing
these projects and I would be happy to canvass them and ask them
to put something together to address that exact issue.
Chairman: Thank you very much indeed.
Simon Thomas.
Q445 Mr Thomas: Just to conclude—and
I apologise for missing the beginning of your evidence session,
but it has been fascinating—I would like to invite you to
come even further towards the political side, as this is a year
in which the government has two key leadership roles within the
EU and the G8. What specific priorities and objectives would you
like to see the government set up for 2005, looking to the future,
as you have sketched out in both your documents?
Mr Donovan: There are three points
that I would advocate. One is to have recognition of the economic
benefits of what we have done already, that this is a powerful
tool for a number of reasons, not least of which it is bringing
benefits into the UK and we want to keep on it and preserve it.
The second though is that we really need to urgently address some
of these fairness concerns that have been raised by you and by
my colleagues here. They are potentially detrimental to the success
of the scheme; if those are not ironed out we are looking at a
problem down the road. The problem that we are looking at, for
example, with over allocation in the EU is the same exact problem
that we are looking at with international emissions trading—how
do we get people with one big leap to all move forward together
and not seek to take some profit opportunity by doing the least
amount possible? So the leadership opportunity is to say that
it is inexcusable not to step with us. Now, maybe the steps are
larger for some people than they are for others but everybody
needs to step together. The last one is this idea of a durable
long-term strategy and that is where, as I had said previously,
we are talking about a massive, massive undertaking that is not
just about funding projects and doing all that but convincing
people that there is a 21st century project that we have to get
on with and that all levels of society support doing that, and
that is probably the hardest point because we need to go beyond
just this group of people who have chosen to inform themselves,
but to people who are consumers of energy and really get them
to feel that there is a reason that we have to solve the climate
change issue. So those would be the three issues I would say would
be come up in that long-term strategy.
Q446 Mr Thomas: And Barclays, would you
agree?
Mr Redshaw: Absolutely and in
the Presidency of the EU, more specifically, is to get Phase 2
organised now. There is no reason not to have this sorted out.
Any problems that have come about now in Phase 1 were foreseen
in 2004. I think that we can get certainty very quickly if the
push comes from the right sources. So a continuation of that—sorting
out post-2012 and that is probably the key push for Tony in the
G8. The blueprint that we put together gives the opportunity to
have a fresh dialogue perhaps. Clearly there are many other ideas
out there—ours is just one of them—but the political
will is there and the public will is there, and there must be
political will otherwise we would not have got to Kyoto in the
first instance. So, yes, we have problems with Kyoto, but it does
not include developed countries and it does not include the US
and it has no prospect of doing so in the near future, and a fresh
dialogue that takes a practical look at a global solution we think
would be a useful thing to push for.
Q447 Mr Thomas: And in terms of that
fresh dialogue and particularly the question of fairness and equity—although
you may not want to use the words Contraction and Convergence—how
important is it, would you say, that the Prime Minister actually
talks about those principles during this year?
Mr Dawson: I think the benefits
of Kyoto and the EU scheme represent massive achievements currently,
but they are only a partial solution to a global problem. If you
follow them to their logical conclusion you have to have a global
solution and that global solution has to be all nations accepting
their responsibilities to reduce carbon dioxide.
Q448 Mr Thomas: From your perspective,
if there was one thing that we could this year that would get
the US on board, what would that be? If there is anything indeed
of course.
Mr Dawson: Getting them on board
from when? I think talking post-2012 I would be perhaps unwisely
optimistic about moving beyond Kyoto and trying to work out a
broader consensus. I think getting them on board before then is
a much trickier problem.
Mr Redshaw: The public in the
US, I spoke to one of Senator McCain's aides at COP10 in Buenos
Aires last year and I asked the same question, and he said that
75% of the US public not only agreed that there is an issue of
global warming but that actually something should be done about
it. It obviously was not at the top of their agenda in the recent
election but the majority of global warming science comes out
of the US and most people believe in it—and I am sure even
George does really. The key would be to give them something that
was palatable. If you take SO2 trading, the very first emissions
trading market in the world came out of the US and if you listen
to the Environmental Agency equivalent in the States, when they
talk about SO2 trading they say that it was way more successful
than they first anticipated. They had a lot of objection to it
in the first stages; people abated the emissions of SO2 in ways
that had not been envisaged before the trading scheme started.
The economic cost was much lower than anticipated; the trading
was much greater than anticipated, and the benefits to health
measured in dollars were also much greater than anticipated; and
then the US does not trade CO2—so it is at odds with that
policy.
Mr Donovan: I think the only problem
in drawing too much conclusion that was referenced in terms of
Americans' beliefs about global warming is that that same percentage
probably thinks that global warming is what happens when the air
conditioning goes down in your SUV. It is the same problem that
we are facing across all levels of society, that there fails to
be a deep recognition of what it is, what gases are these. I cannot
tell you the number of times I hear even informed people say "carbon
monoxide". It is a very difficult thing for people to understand
how pervasive this issue is, how deeply entrenched in our economy
the use of fossil fuels is and the use of energy is. So while
we want to address that it is a bit of a mirror to what we have
to do in the UK as well as in Europe and other countries, is to
really start to engage deeply with people about what this issue
is and why it is important.
Q449 Mr Thomas: And it needs government
leadership?
Mr Donovan: I would agree with
that, yes; I do not see who else could possibly do it.
Q450 Joan Walley: Finally, when I was
in Johannesburg at the World Summit on Sustainable Development
I was very conscious that at that summit there was very much a
sense that the governments internationally and business and commerce
as well should be part of the partnership to deal with these global
issues, and I think my final question is to Mr Donovan to say
that you have articulated very passionately the need in the 21st
century for this mission that gets people who are not yet informed
about global warming, what can be done. What is your company,
your consultancy doing in terms of being part and parcel of bringing
about that change? It is not just for governments to change public
opinion, is it? In terms of the companies that you are dealing
with—and Barclays as well—what are you doing to be
part of the solution of bringing about that wider informed general
public which will in turn push governments and maybe even at some
stage the US government to take this more seriously?
Mr Donovan: First, thank you for
saying that about what I put in the memo. In a lot of ways my
passion about it is simply because I have had enough time to sit
and think about it. Like a lot of other people that I see in London—and
you will notice that this is not a North Yorkshire accent that
I am putting to you!—I worked for the US Environmental Protection
Agency when Kyoto was signed; I had a sense of enormous optimism
that we were on to something at that point, and then eight, nine
years later seeing that things have not moved on a lot, but the
problems continue to get that much bigger, it instils in a person
that, wow, we really have a lot to do. So in terms of what I can
do as an individual or what my company can do are some of the
basics. Enviros has an environmental management system; Enviros
has a corporate policy on environmental management. I bicycle
to work; I try to do other things; I have low watt fluorescent
bulbs in my house, but any of that of itself is not going to be
enough. But I do agree with what I think is your underlying point,
that there is a certain amount of top-down actions that government
can take to encourage people but at the end of the day they have
to choose to take up those opportunities. So there is a twin challenge
both to have the leadership at a governmental level but also to
create individual leadership amongst everybody who contributes
to this problem.
Q451 Joan Walley: My question as well
is how can a company like yours play that leadership role with
other companies, like Michelin in my constituency, to help to
involve more companies in putting this whole agenda further forward?
Mr Donovan: I do not have the
answer to that unfortunately. I think the starting block is dialogue.
We only really have one process going and that is the United Nations
Framework Convention on Climate Change—that is the only
really major talking shop that we have going at the moment, and
this idea about bringing in the US and all of these things is
not going to happen by banging heads together in meetings that
happen once a year at some far off location, it is a sustained
engagement with dialogue, and I would be very, very pleased to
see that, where companies such as Barclays could sit down with
companies who they do not serve, say industrial companies, and
just go through issues and have that facilitated. I think that
would be a very reasonable starting point.
Q452 Joan Walley: Mr Redshaw?
Mr Redshaw: I think the education
that Charlie refers to is useful for shareholder pressure because
corporations are at the mercy of their shareholders and asking
a corporation to pay for its CO2 consumption when it is used to
getting it for free, as the saying goes, is like asking turkeys
to vote for Christmas. You come across issues with companies like
Michelin, why would they want to pay more money in costs? What
has happened with companies like Michelin is that the UK government,
as part of the EU, has said to them, "You have to limit your
emissions. If you do not want to limit your emissions you have
to pay." So the government has forced them to limit their
emissions. The same can actually be done of the public but indirectly.
So by including the sectors we have talked about like transport
and supply of fossil fuels to end user customers in the Emissions
Trading Scheme, what you actually do is you increase the cost
to that consumer and the consumer then makes the choice. The consumer
can be helped with education so it can make an informed choice
but the key driver from a trader's perspective is that people
should be responding to cost and if there is no cost incentive
then they will not respond.
Mr Dawson: In terms of what Barclays
is doing, Barclays, as with Enviros, has an environmental management
system and has reduced our emissions by 21% since the year 2000
and there is quite a strong commitment there to investigate sources
of energy efficiency and mitigating over that.
Q453 Joan Walley: So you are on track
with Kyoto!
Mr Dawson: We are, but unfortunately
we represent a very small proportion of global emissions.
Q454 Chairman: That is one of the problems,
is it not, at the risk of extending the conversation beyond its
natural life? Even if we in Britain did everything it is only
2% of the global total of the problem?
Mr Redshaw: But if we in Britain
did nothing.
Chairman: Still adding 2%. Thank you
very much indeed. It has been fascinating and really very helpful
and we are all most grateful to you.
| 
