European Commission Vice-President for Energy Union Maroš Šefčovič was in Dublin, where he gave a keynote speech at the 2018 Climate Innovation Summit in Dublin Castle this morning.
The summit focuses on the finance needed to accelerate climate action.
During his visit, the Vice-President is also meeting Richard Bruton, Minister for Communications, Climate Action and Environment of the Republic of Ireland. Their talks will focus on the Clean Energy Package and the preparations of Ireland’s 2030 national energy and climate plan.
The Vice-President will also meet members of the Irish parliament, and key stakeholders.
Vice-President Šefčovič said: “Ireland has invested significantly into renewables integration and interconnections. Now that economic growth is back, Ireland must make sure to decouple it from greenhouse gas emissions. Upon this visit I will be keen to discuss with Irish authorities and key stakeholders what further benefits the Energy Union can bring to Ireland, together with our unaltered support to Ireland’s climate and energy policies.”
Vice-President Šefčovič’s Speech
Dear Kirsten Dunlop, EIT Climate KIC CEO, dear Sandrine Dixon Declève, moderating, dear Andrew McDowell, dear Alex Raguet, Lumo CEO, ladies and gentlemen, it is an honour for me to be present at this 2018 Climate Innovation Summit focused on Mission Finance.
I understand that in the past two days, you have already had forward-looking debates, tested disruptive ideas, pitched innovative projects and embarked on bold action.
All this comes at the right time.
The recent UN IPCC Special Report was a wake-up call.
Sadly, extreme weather events are also reminding us on a repeated basis that we stand on the brink of a precipice.
We need to act urgently to be able to limit global warming to 1.5°C.
This requires rapid, far-reaching and unprecedented changes in all aspects of society.
It requires a paradigm shift.
In a few weeks’ time, the European Commission will publish our long-term EU strategy for the reduction of greenhouse gas emissions, before COP24 in Katowice.
We need to review possible pathways to achieve an 80% reduction in greenhouse gas emissions by 2050, as well as possible pathways to achieve net GHG neutrality by 2050.
The latter would mean a deeply transformative agenda, including full decarbonisation of many sectors – energy, buildings, transport, industry, agriculture – accelerated disruptive innovation and patient capital, and a ‘just’ transition to address the social consequences of change, so that no one is left behind.
But above all it will require collective efforts.
Collective ownership by policy makers, businesses, investors, innovators, scientists, academics, NGOs, etc.
All gathered here today.
Knowledge and innovation communities in general, and the EIT Climate-KIC in particular, are instrumental in connecting the actors of the knowledge triangle – startups, established companies, research organisations, universities, local government and investors.
EIT Climate-KIC is conducting impressive activities in the area of green finance, urban transition, sustainable manufacturing and land-use.
Let me thank you Kirsten – and your team – for the amazing job you are doing in ‘energising’ our ecosystem.
Where do we stand on the energy transition?
Remarkable strides have been made in recent years in our transition to a low-carbon economy.
From onshore wind power to solar energy, from EV batteries to LED lighting, costs have plummeted and deployment is exceeding all expectations.
We are increasingly witnessing clean energy solutions in our daily lives and getting a glimpse of the exciting innovative technologies of tomorrow.
The clean energy transition offers a compelling opportunity for investors.
To achieve the EU’s 2030 climate and energy goals, around €180 billion of additional investments per annum are necessary, most of them being private sector investments by companies or private households.
This requires developing and deploying breakthrough innovation on a massive scale.
This will require public and private investment to scale up, fast.
For the next Multiannual Financial Framework 2021-2027 the Commission has proposed a 25% climate mainstreaming, meaning that more than €300 billion of our funding would contribute to climate objectives.
This is quantitatively important of course, but insufficient. We must better blend or combine our funding and financing instruments to incentivise, de-risk and leverage private investment.
What we need to do is to better mobilise bank finance and capital market resources from a variety of long-term oriented, ie patient, investors.
I like the focus of this year’s summit: Mission Finance as a key enabler to Climate Innovation.
I would like to address three dimensions related to Innovation – technologies, governance and finance.
As I said, breakthrough technologies have to be adopted and deployed on a massive scale, and faster than ever before.
All clean energy technologies have benefited from steady R&I financing over the last seven to eight years; some more than others, with sustainable transport and renewable energy technologies coming first, in terms of both public and private money.
Private investment in clean energy technologies has also increased, from €10.3 billion in 2007 to €16 billion in 2014.
Over the period 2007 to 2014 private investment represented about 80% of the total money poured into innovation.
As for public investment, we have proposed to step up our game under the EU next Research and Innovation programme – Horizon Europe 2021-2027 – with at least 35% dedicated to climate, that is around €30 to 35 billion.
This equates to more than four billion per year – a large part of which will be going to clean energy innovation challenges in: electricity, transportation, agriculture, manufacturing and buildings.
We have worked very closely with Professor Mariana Mazzucato, who was here with you two days ago. As a result, we – in the Commission – have established a mission-oriented approach for Horizon Europe.
Missions are a key novelty of this programme.
They aim to reconnect EU research with citizens by setting bold yet achievable ie impact-driven goals to address key societal challenges.
Missions should speak to the public at large and engage it where relevant. They will be co-designed with Member States, the European Parliament, stakeholders and citizens.
Our decarbonisation agenda lends itself very naturally to such mission-based innovation.
As we agreed with Bertrand Piccard after a thought-provoking session in Brussels: whereas in the 1960s US mission was to conquer the Moon – the famous “Moonshot” mission – our challenge in the twenty-first century is rather to focus on saving our planet, or “making it great again” as was coined last year in response to President Trump.
Work is ongoing at the Commission level to design the implementation aspects of missions. And we need your bright minds to contribute creatively!
Only inspiring missions related to our smart and green cities; our decarbonised, automated and connected transport, with a triple zero vision: zero emission – zero congestion – zero accident; our circular economy… will be a catalyst to showcase our leadership, engage with our citizens and leverage much-needed private investments.
The global reach – Mission Innovation
Let me say a word on the global initiative called Mission Innovation.
This project launched at COP21 by the former US President, with one objective: to accelerate the pace and uptake of clean energy innovation globally.
Twenty-three countries and the European Commission have joined – representing 58% of the world’s population and over 80% of global clean energy research budgets. We have all committed to double public investments in clean energy research and innovation over five years.
The European Union has taken the lead, clearly. In May, together with our Nordic friends, we hosted and chaired the Ministerial for Mission Innovation, in Copenhagen and Malmö.
And we have worked flat out with all Members to secure fulfilment on their commitments, as a result, over USD 4 billion of additional public sector funding in clean energy innovation has been invested in the first two years alone.
So in a nutshell: there has been no void created by the new US federal administration – quite the contrary: under our leadership, the world’s biggest economies have reaffirmed and started implementing forcefully their commitment to double clean energy R&I over five years.
A number of additional countries are in the pipeline to access the initiative (fyi only Morocco has applied; candidatures expected from Argentina and South Africa but this is not official).
We look forward to continuing the discussion about the future of clean energy at the next Mission Innovation Ministerial meeting in Vancouver (Canada) in May 2019.
I understand MI-4 at Vancouver will also be the occasion to report on the initiative you launched yesterday – that of the “100 low carbon solutions”.
Congratulations on this partnership with MI!
That brings me to the Governance Challenge
At the last MI Ministerial, we succeeded in engaging directly with non-State Actors, to accelerate the transition.
First, with the “cities”. At Malmö, we jointly agreed on a joint research and innovation agenda agreed with the Global Covenant of Mayors – Innovate4Cities – that I presented with Mike Bloomberg at the One Planet Summit in NY.
Mike Bloomberg has also agreed to partner with us on our coal regions in transition initiative.
The Commission is now working with EU regions in seven countries to help entire communities that must switch from older, carbon-intensive economic models, derived from the previous industrial revolution, to new ones.
As I said before one of the biggest challenges of the transformative agenda is to make sure no region, no sector, no worker, no citizen is left behind.
The process has to be owned and steered by the region and its stakeholders, but we are working with the private sector to provide all the support we can, to help accelerate their transition and mitigate the social impacts of this transformation.
Let me give you another example of partnership with the private sector – in this case investors.
Over the summer we have put into place, at speed-light (for the Commission!), one of the main “bold ideas” put from the World Economic Forum: the creation of a co-investment vehicle with the private sector.
On 17 October, the European Commission signed a Memorandum of Understanding with Breakthrough Energy Coalition (BEC), a group of investors led by Bill Gates, to create a new public-private instrument – Breakthrough Energy Europe (BEE) – to drive innovation from lab-to-market through the investment of ‘patient’ capital.
The intention is to address major energy-related challenges in: electricity, transportation, agriculture, manufacturing and buildings.
The initial input is EUR 100 million, split equally between Breakthrough Energy Coalition (BEC) members and the European Commission (Innovfin EDP instrument).
I would insist that this approach is radically different from anything we have done in the past. We place our trust directly in private investors and agree to create an agile joint vehicle, the first-of-a-kind, to co-invest in the most promising innovations.
We eliminate bureaucracy.
We are convinced it will create a precedent.
And are already looking into expanding its resources.
Moving on to the thrust of “Mission Finance” (or funding the energy transition)
The energy transition is a growth opportunity for non-bank financing models, including energy cooperatives, crowdfunding or peer-to-peer lending.
Supporting innovative ways of connecting savings to growth and diversifying the funding sources for European businesses is crucial to improving growth and job creation in Europe.
Crowdfunding is still small but growing fast in Europe. Based on available data, in 2015, around EUR 4.1 billion was raised through crowdfunding models that entail a possible financial return for those contributing the funds – for example, through equity investments or loans.
The Commission has proposed a new EU regulation for crowdfunding (8 March). Thanks to this new EU label, crowdfunding platforms will benefit from an EU passport and will be able to scale up more easily across the EU.
The proposal establishes a one-stop-shop access to the EU market and therefore should help crowdfunding platforms in overcoming the barriers they face operating cross-border.
It provides tailored rules for European crowdfunding services providers covering both investment-based and lending based business models.
And it gives more opportunities to European investors while safeguarding a high level of investor protection in relation to crowdfunding services.
It also provides a single point of entry for authorisation and supervision by a single authority, the European Securities and Markets Authority (ESMA).
I am very keen to hear about Lumo experience so far.
Conclusion : what next?
Let me conclude on our joint work to help build financial systems that are future-proof.
The European Commission’s March 2018 Action Plan on Financing Sustainable Growth stems from the EU commitment for a more sustainable economy and society.
It ascertains that the current levels of investment are not sufficient to support an environmentally sustainable economic system that fights climate change and resource depletion.
The Action Plan aims to achieve 3 policy goals:
reorient private capital flows towards sustainable investment in order to achieve sustainable and inclusive growth;
manage financial risks stemming from climate change, resource depletion, environmental degradation and social issues;
foster transparency and long-termism in financial and economic activity.
Through the Action Plan the EU intends to help the finance sector integrate sustainability in its mainstream activities.
In a nutshell, the objective is to help investors who often do not have enough information about what is green and what is not.
Let me flag some of the 10 main actions to be launched or delivered by 2019:
The creation of a unified EU classification system – a common language – to define what activity is sustainable, and identify areas where sustainable investment can make the biggest impact.
This will help clarify the duty of asset managers and institutional investors and enhance their disclosure and reporting on climate and environmental activities or risks.
Among the next step is to create EU labels for green financial products based on the EU classification system, so investors can tell which investment are green.
Requiring insurance and investment firms to advise clients and provide suitable products and services on the basis of clients’ well identified sustainability preferences.
The legislation (Regulation) proposed by the Commission in May 2018 are a first important step to implement some of the actions of the Action Plan, setting out the necessary legal framework.
These measures are expected to lead to more investments in sustainable activities in the EU.
The Commission has also established a Technical Expert Group (TEG) on sustainable finance with a very wide membership base (I know some of you are members). It will reach out to all relevant stakeholders and I would therefore encourage you to be in close touch.
This group should conclude its work through reports to the Commission by mid-2019. And the Commission will launch an open public consultation on the final reports.
Again, this must be a collective endeavour.
I would like to use this opportunity praise EIT Climate KIC and Sustainable Nation Ireland for the launch of the European Hub for UN Financial Centres for Sustainability (FC4S).
This will play a major role in supporting accelerated growth of green and sustainable finance.
FC4S is set to become a defining force in driving the net zero carbon economy.
I look forward to its development.
The global financial system plays a “make or break” role in this fundamental transformation. Provided it does not only focus on maximising short-term profit, but also recognises the longer-term costs and opportunities related to the energy transition.
We have a huge potential to unlock to stay ahead of the curve.