A unique investment opportunity

- Det talte ord gælder -

Ladies and gentlemen, thank you for the opportunity to speak here today –  it is not every day you get the chance to be stand-in for the Prime minister!

As minister, this is my first official speech in front of an international audience.

So, as you can imagine, it is connected with some excitement.

History is rich with evidence that the first speech is not always that easy.

Take Lyndon B. Johnson. At his inauguration, his speechwriter missed deadline so much that there was no time to feed the speech into the tele-prompter. So the poor president was forced to hold the first part of his speech from a bunch of loose papers, while the speechwriter was lying on floor – out of sight from the audience – desperately trying to feed the rest of the speech into the tele-prompter.

Luckily, we don't have a tele-prompter here today, so at least, we don't have that problem! 

It is no wonder that climate is on the top of the political agenda.

Climate policy is foreign policy. It is security policy. And it is – not least – economic policy.

And let me stress: It is not about limiting growth and economic activity. Greening our society is how we preserve a thriving market economy.

And when I look out at this audience – asset managers and leaders from the financial sector – I am reassured that I am not the only one with that opinion.

As Benjamin Franklin has said many years ago: "time is money". This is as true in relation to climate change as anywhere else.

Since the Stern report from 2006, we have known that acting now is significantly cheaper than waiting.

And earlier this year, the International Energy Agency provided new evidence for this.

In its annual report World Energy Outlook 2009, the IEA showed that every year of delay adds an extra USD 500 billion to the investment needed between 2010 and 2030 in the energy sector.

But even if we don't wait, launching a high-speed transition to low-carbon society will require capital. And lots of it.

As they say in Pentagon: A vision without resources is an illusion!

Essentially we are talking of the largest transformation of the world economy since the industrial revolution two centuries ago.

We need to develop new technologies. 

But even more importantly, we will have to diffuse and deploy existing technologies – at an unprecedented pace.

The scale of investments we need in new energy infrastructure is almost impossible to grasp.

We will need thousands of new green power plants, millions of wind turbines, and millions solar panels.

The bulk of investments for this transition must come from private sources. According to the UN, more than 85 percent of global financial flows are private.

This means that public funds will not solve the problem alone. And this is where you and other private investors come in.

The political challenge is this: how do we channel large sums of private capital in a certain direction without strangling private initiative and creating a global Soviet style plan economy?

The backbone of liberal climate policy is the "polluter-pays principle".

Economic incentives should make it attractive to do the right thing.

So: protection of the climate should be closely linked with market forces.

This is essentially what "cap and trade" is about. A politically defined cap on emissions that puts a price on emitting carbon. And thereby gives businesses and investors incentives and a choice:

Either they invest in energy efficiency and new, clean technologies. Or they spend the same money paying for their pollution!

A crucial precondition for this is a strong and stable policy framework with long-term certainty for investors.

Especially in relation to energy infrastructure investments where incremental costs are high, predictability of the policy framework is essential.

As one American energy company CEO has put it: Big companies don't make 40 year bets on a 15 minutes prices signal.

The other dimension of cap and trade is the trade part. Essentially this is an acknowledgement of the fact that it makes sense to reduce emissions where you get the most bang for the buck. In many cases that will be in developing countries. But then that will also require clear rules and transparency. And that the return to investments is in a reasonable proportion to the risk investors take. But this will no doubt be a major challenge as 6 out of nine billion people will live in what we today call developing countries.

The Danish government hopes that COP 15 will provide an ambitious framework that sets clear targets for reduction emissions in industrialized countries, and launches mitigation actions in developing countries. 

If we succeed, that will send a clear signal to businesses and investors across the globe that emitting carbon will come at a cost in the future.

Will the fact that we may not sign a legally binding treaty in Copenhagen make the signal weaker? No. A politically binding is how we make sure that all countries can sign up to an agreement. And it will launch immediate action.

Moreover, it will hopefully include a clear deadline for when the political agreement is transformed into a legally binding and ratifiable deal.

No matter what kind of agreement we get, you need to make investments. The more you invest, the more likely the political system is to deliver a long-term framework.

It is a matter of trust. You have to trust our political intentions. We have to trust that you play your part in solving the climate challenge. I would like to stress that I think you have taken a very constructive step in doing your part with the climate fund.

But here in Denmark, you also have every reason to trust our political intentions.

Next year, the government will present a plan for how to make our country independent of fossil fuels.

That will be an enormous challenge. It will require enormous investments. And at some point, other countries will walk the same way.

So: let us collaborate on tackling this challenge.

Because as Lyndon B. Johnson has said:
"There are no problems we cannot solve together, and very few that we can solve by ourselves"

Thank you!