As of 17 January 2008

• Title: Outcome of the Bali Climate Change Conference

• Speaker: Federal Minister Sigmar Gabriel
• Occasion: Policy statement
• Date/Location: 17.01.2008, Bundestag, Berlin

Ladies and Gentlemen,

The facts are indisputable. The global temperature is rising, the world population is increasing, the global economy and industrialisation are reaching every corner of the globe. Consequently, global energy demand is growing and - across the board - energy prices are rising.

The good news is that we can effectively combat both challenges - climate change and the growing energy demand of the world economy - with a bold twin-track strategy:

1. By significantly increasing energy and resource efficiency in production and consumption.
2. By switching to renewable resources which must, to an increasingly large extent, come from sustainable production.

At the same time, these are the only peaceful strategies with which we can supply the growing global economy with enough resources while remaining innovative and competitive. And these are the only strategies with which we can stop the destruction of nature and dramatic climate change.

Undoubtedly, the climate-friendly restructuring of industrialised society that is needed is still in its infancy. But in Bali the world community launched the process towards a new climate agreement.
What is more: Bali marked a clear path for the negotiations beginning in 2008. The conference in Bali was ultimately about finding a balance between the reduction commitments of the industrialised countries on the one hand and the contributions from developing countries on the other.

In view of the unambiguous warning signals from the scientific sector, Europe and Germany urged industrialised countries to commit to a 30 percent reduction in greenhouse gases by 2020. Despite the fact that it wasn't possible to reach consensus with key industrialised countries, Bali was still a success.

The results of the Bali Climate Change Conference form a solid basis for the negotiations marathon over the next two years. They are an important framework for achieving a future-oriented global climate agreement at the Climate Change Conference in Copenhagen in 2009. The key elements of this are:

1. Industrialised countries must lead the way and drastically cut greenhouse gas emissions already by 2020.
2. However, developing countries, especially newly industrialising countries such as China and India, should also switch to a climate-friendly development path.
3. For the first time a concrete and comprehensive programme of work has been adopted to enable the necessary technology transfer to developing countries.
4. Developing and newly industrialising countries such as Brazil that are fighting deforestation will receive financial support.
5. The adaptation fund adopted in Bali aims to help developing countries cope better with the impacts of climate change.

However, we must beware of being overoptimistic: in view of the diverging interests, a new climate agreement is by no means a done deal.

What are the crucial political prerequisites to ensure we can sign a new global climate agreement in Copenhagen in 2009? And what must be achieved this year in 2008 after Bali?

I believe that in the end, one key question will decide the future of climate protection: is it possible to combine effective climate protection with successful economic development?

And in Europe and Germany we are able to provide a positive and successful answer.

First of all we have to implement the European climate and energy strategy adopted last year in a credible way.

It was primarily the European Union and Germany which, through their credible leading role in climate protection, were able to mediate constructively in the dispute between industrialised and developing countries. We can only continue in this important mediating role in international negotiations if we reinforce our leading position with credible action.

In spring 2007 the European Council adopted ambitious targets for climate protection and the expansion of renewable energies. This year these targets have to be implemented in practice. Next week, on 23 January, the EU Commission will outline its plans for this. The Commission has spelt out what the implementation of these targets means in concrete terms in all areas of action. Even though we may not be happy about the likely outcome in some areas, this courage deserves respect.

The German government expressly supports the Commission's aims on the following points:

1. Developments in the emissions trading scheme are putting an end to individual national strategies and solutions. In future the same rules will apply for all companies throughout Europe. This will create equal competitive conditions in the European internal market. This includes dispensing with 27 different ceilings for CO2 emissions from electricity production in the Member States and instead introducing a uniform cap for CO2 emissions from electricity production for the whole of Europe and the goal of a 100 percent auctioning in the third trading period.
2. The Commission clearly states which targets the individual Member States have to comply with for renewable energies to ensure that the European expansion target of 20 percent by 2020 is achieved.
3. The incorporation of aviation into emissions trading.
4. The legislative framework proposed for CCS is a good basis for the planned pilot projects.

However, as things stand the German government also has reservations concerning the following points:

1. To ensure the European Union remains credible in international negotiations it is important that its programmes of measures do not only reflect the target unilaterally declared by the EU of a 20 percent reduction in greenhouse gas emissions by 2020 compared with 1990. To remain credible these programmes must also contain measures that enable the EU to reach the 30 percent reduction target of industrialised countries in the case of a successful conclusion to international negotiations. The German government will therefore also be guided by this target in setting objectives and stands by its target of a 40 percent reduction in greenhouse gases in its national climate protection policy in order to ensure the EU target of 30 percent remains achievable.
2. So far there are a lack of proposals as to how we plan to achieve the target of a 20 percent increase in energy efficiency in Europe. The EU Commission must present proposals on this that facilitate particularly dynamic efficiency standards such as the top runner model in Europe.
3. Successful national support instruments such as Germany's Renewable Energy Sources Act must not be threatened by artificial trade in renewable energies.
4. In the automobile industry, the target of achieving a reduction to 120g CO2 per kilometre on average for all European vehicles from 2012 must be achieved. This target was already laid down in the coalition agreement between the SPD and CDU/CSU in 2005. However, it is also clear that it would be in no-one's interests if a manufacturer of large vehicles were to buy a manufacturer of small vehicles with the sole aim of getting closer to this average value for its own fleet of vehicles without actually reducing a single gram of CO2. But this is precisely what the consequence would be if the concrete implementation of the 120g target is not carried out in a competition-neutral way. The Commission needs to revise its proposals for implementation in this area.
5. When it comes to emissions trading, the EU Commission cannot leave the question unanswered as to how distortions in competition for energy-intensive companies in international competition are taken in consideration. Branches of industry not belonging to the electricity sector that face international competition and that have achieved state-of-the-art with CO2 avoidance through benchmarks must receive free-of-charge allocation of emission allowances as long as international climate agreements do not prescribe equal competitive conditions. This applies, for example, to the steel industry, the cement industry, the chemicals industry and other extractive industries. With the current EU CO2 reduction target of only 8 percent, it may be possible to ignore this problem. But with reduction targets of 20, 30 or 40 percent, as we plan to achieve between 2013 and 2020, answers must be found to the questions of the international competitiveness of these sectors.

In fact, in Europe we achieved success in climate protection in 2007 because the German Council Presidency and the European Commission worked in accord. It is certainly not the case that all Member States in Europe are equally enthusiastic about ambitious climate protection. Germany wants to continue this shoulder-to-shoulder stance from 2007 with the EU. However, the prerequisite for this is the willingness of the EU Commission to observe the specific economic prerequisites that our country needs to continue in its pioneering role in climate protection. If Germany is to remain strong in the field of climate protection we must also remain economically powerful!

Without our country, without Germany, the European Union would not have a positive balance as far as climate protection is concerned. Without us, the EU 15 that signed the Kyoto Protocol would not have achieved a reduction of 2 percent in its greenhouse gas emissions compared with the base year 1990; in fact there would have been a 4 percent increase. Germany alone has achieved 75 percent of the total reduction in greenhouse gas emissions required in the EU for compliance with the Kyoto Protocol commitments.

We want to continue in our leading role in Europe in climate protection. But to achieve this our country must remain economically powerful. We need a strong industry that is successful in international competition in order to finance investments in the climate-friendly restructuring of industrialised society. And we have to strengthen our innovative powers! It is therefore not a contradiction in terms that in the case of consumption standards for cars we make it very clear if massive distortions in competition are created to the detriment of German industry under the guise of climate protection!

One thing is clear: only if this succeeds will industrialised countries take on far-reaching reduction commitments in a global climate agreement that can prevent dangerous climate collapse. Newly industrialising and developing countries will not make substantial contributions if they have the impression that climate protection is hindering their economic development. And the German workforce will only actively support this course if climate protection is integrated into an economic growth and modernisation strategy.

Implementing the German government's integrated climate and energy package

Contrary to all expectations, the German government put together a comprehensive climate and energy package with its decisions at the Cabinet meeting in August 2007 in Meseberg. This programme complies with the government's goal of creating an optimal link between ecological and economic issues. On 5 December the Cabinet already adopted the first 14 pieces of legislation. The second part of this package will follow on 21 May this year. Never before in the history of environmental policy have such solid foundations for a new course been laid in such a short space of time.

The key elements of this package are:

• Increasing the share of renewable energies in the electricity market to up to 30 percent by 2020. With our Renewable Energy Sources Act we are now expanding our support for renewables.
• Doubling the energy productivity of our economy, in particular
• • by increasing the share of highly efficient combined heat and power plants to 25 percent by 2020,
  • and with grants from the Transport Ministry's buildings modernisation programme.
  For new buildings we now prescribe the use of renewable heat technologies. Regarding the modernisation of existing buildings, we are increasing grants to up to 500 million euro per year for the use of heat from renewable sources.
• Increasing the share of renewable energies in the fuel market to 17 percent by 2020. In doing this we will make sure that only sustainably produced biofuels are credited.

But the most important thing is that the German government's energy and climate programme is solidly financed: from around 870 million euro which the federal budget provided for climate protection in 2005, funds will increase to more than 2.6 billion euro this year and almost 2.8 billion euro in 2009! This is more than triple! And this figure does not even take account of the funds from the Federal Development Ministry for international climate protection (around 700 million euro).

This is currently the biggest climate protection programme worldwide. It is now up to the German Bundestag to make this programme a reality as quickly as possible.

Our target is to reduce Germany's greenhouse gas emissions by 40 percent compared with 1990 by the year 2020 in the framework of an ambitious international climate protection agreement. Germany is thus the only industrialised country in the world to formulate and implement such ambitious targets.

Incidentally, this is one of the key reasons we were able to take such a convincing stance in Bali!

In view of the drastically rising oil and gas prices, the German government's energy and climate programme is also a strong programme for economic growth. In Germany too we are feeling the impacts of our dependence on climate-damaging energy forms whose prices are constantly rising: German industry has to struggle with increasing resource and energy prices. Since 2000 the price of oil has tripled and the price of gas has doubled.

Against this background, increased energy efficiency in commercial production, the modernisation of energy systems in buildings and reduced fuel consumption in vehicles are becoming the driving force for innovation, growth and employment in our industrialised society. And completely new sectors of industry are emerging with new and secure jobs: 235,000 jobs in the renewables sector alone. We want to increase this figure to 400,000 by 2020 with our programme.

The momentum for this programme for economic growth comes from a broad-based support programme for the ecological modernisation of our industrialised society. Alone with the buildings modernisation programme and the market incentive programme for renewable energies we are triggering investments in Germany of well over 10 billion euro. There is scarcely a better programme that combines investment and innovation so well.

The consequences of energy and raw materials development and climate change have an impact on us all. However, climate change hits the poor and weak especially hard. This is particularly the case in Africa.

That is why I say that climate protection and energy policy go hand in hand. We will only be able to help the climate and at the same time contribute to the security and sustainability of our energy supply if we succeed in reducing our dependence on fossil energies. Achieving access to ecologically sound energy sources must not fall at social hurdles. This means that in essence ecological justice is social justice - globally and nationally.

The truth is that only the rich can afford weak climate protection. But we cannot allow that! Both in our society and worldwide, especially the poor and weak rely on strong climate protection. Otherwise they alone will have to bear the burden which an unchecked increase in the price of energy entails.

Here in Germany too, rising energy costs for the fossil climate killers create social inequality. Not everyone in Germany will appreciate the argument put forward by many environmental policymakers that rising energy prices are a good thing because they force people to manage resources efficiently. With the energy costs of a three-person household rising by more than 70 percent between 2000 and 2007, while nominal wages increased by only about 18 percent, climate policy soon finds itself on the defensive. That is why we have to tackle the issue this year and discuss possible solutions.

The most important answer to this challenge is that climate protection pays off! Those investing in efficiency and renewables have the right response to rising energy prices. Everyone can cut their heating costs by modernising their building, reduce their electricity bill by purchasing low-energy household appliances, or lower their fuel costs by driving fuel-efficient cars. In such efforts, the German government's energy and climate package and our broad-based support programme provide major support for both private households and industry.

For example, on 1 January this year new funding guidelines entered into force for the market incentive programme for renewable energies. We have massively increased the funds for this. I will mention just one specific example: if the owner of a single-family house installs a new pellet boiler with a solar power system, the government will provide support of over 4,300 euro. That is around 17 percent of the investment. In addition, avoided fuel costs save at least 1,000 euro per year.

In 2008 we must place energy price development and the threat to hard-earned income at the heart of our integrated climate and energy policy.

At the beginning of this week the media reported that in the first weeks of 2008 the electricity prices of 437 suppliers will rise on average by a good 7 percent. It is evident that above all average earners in Germany will have to spend an ever increasing proportion of their disposable household budget on electricity, heating and petrol.

• Since 2000, the electricity price for private households has risen by 46 percent.
• The gas price has even risen by 100 percent.
• Heating oil has become 70 percent more expensive.

The result of this is that since 2000 the annual energy bill of a three-person household has risen from around 1,300 euro to over 2,200 euro. The average net salary of a nurse, for example, is 1,440 euro, while a person employed in road construction earns around 1,200 euro net. For people with this sort of income it most certainly makes a difference if they have to spend an extra 75 euro on energy rather than saving it for their children or putting it towards a pension.

In view of these figures, this price increase is a serious problem for people on low incomes. Those on low incomes cannot make the most of the state support for modernising buildings because they do not have any capital of their own. They cannot afford a new car with lower fuel consumption. We have to tackle these issues if we want to keep the support of these people for our energy and climate policy.

The German government cannot simply stand by and watch this development: it is therefore only right that the President of the Federal Network Agency plans to take a very close look at the price calculations of the 437 energy utilities. At the same time, the expansion of combined heat and power generation and of renewable energies is leading to greater competition on the energy markets.

However, this alone will not be enough because greater competition and stronger competition controls take time. As a first step I see three measures that can be used to redress the balance somewhat regarding the distorted situation that has resulted from increased energy prices.

1. We need solutions that enable landlords and tenants to profit from investments in building modernisation. So-called energy contracting is a very promising approach. The German government will assess proposals for regulations on this with the second part of the energy and climate package.
2. If property owners do not comply with minimum standards for buildings and simply do not invest, this must not be at the expense of tenants. In its energy and climate programme the German government has therefore decided to look into whether tenants should be entitled to reduce their heating cost payments in such a case. I consider this a good idea. We intend to scrutinise the proposals from the tenants' association and to take a decision on 21 May.
3. In my view it is essential that energy utilities take on responsibility. With rising energy prices and by pricing in allowances allocated free of charge in the emissions trading scheme they have made billions. Our Basic Law does not state "Property entails the obligation to strive for the highest possible stock exchange quotations," it states "Property entails obligations. Its use shall also serve the public good."

The new head of RWE, Jürgen Grossmann, has proposed an energy pact for Germany. Essentially this is a good idea. However, the topic of energy prices must also be on the agenda in an energy pact. This is particularly the case as regards low-income households. Today, a three-person household pays 75 euro more per month than in 2000.

E.on's regional branches have, for example, taken a first step and offer social tariffs - but these are unfortunately restricted in numbers and to certain period of time. If this is supposed to be more than just PR, further steps must now follow. All energy utilities should offer a social tariff permanently, as also prescribed in the European Energy Charter. The EU Energy Services Directive also makes this possible. In such a wealthy country as Germany energy or fuel poverty is simply unacceptable.

To conclude I would like to once again sum up the prerequisites for internationally successful climate protection:

• In view of the disputes between industrialised and developing countries, it is crucial that the European Union and Germany remain resolute in their leading role in climate protection, and can thus credibly fulfil their mediating role in the negotiations just launched. At this point I would like to thank Chancellor Merkel for her active engagement over the past year.
• The negotiations will only lead to a substantial outcome if a major industrialised country such as Germany can demonstrate how effective climate protection can be successfully combined with positive economic development. We must remain an economically powerful industrialised country if we want to be a convincing example of climate protection! And I direct this in particular at the Green opposition party!

It is clear that we need a new quality to the cooperation with newly industrialising and developing countries. We have to help them switch their energy supply and production methods to a sustainable and thus climate-friendly development path. Every euro invested in these countries in cooperation with German environmental technology companies not only benefits the global climate, it also secures jobs here in Germany. This is why the German government is working closely with countries such as China and India. From the auctioning funds, the German government is making available 60 million euro which can be used to finance pilot projects - to ensure that these countries do not make the same mistakes that we in Europe have made over the decades since the beginning of industrialisation!

To reiterate: in the field of climate protection, Europe and Germany have a leading role. Many people in industrialised and developing countries are counting on us to be a driving force and mediator for the negotiations marathon up to Copenhagen in 2009. We should not disappoint them or ourselves, we must take our responsibility seriously!

We will be all the more successful if we are the first large industrialised country to prove that modern climate protection policy promotes innovation, opens new markets, strengthens companies and provides practical assistance for people - with secure jobs and support for the efficient use of increasingly scarce resources.

Let us act together, let us ensure that social inequity is also combated worldwide - with intelligent and modern climate protection policy which ensures that climate protection, economic prosperity and social equity become reality.

Thank you.