Ministers of Finance, Denpasar, Bali, Indonesia
[check against delivery]
Ladies and gentlemen,
It is an honour for me to speak here today. As a minister of a country situated in a low lying delta, with approximately one-third of my country below sea-level, the Netherlands is and has always been very aware of the enormous power of natural forces. Farmers, fishermen and engineers all make and made decisions based on their knowledge of the expected environment change. But climate change is urging us to change and adapt more than ever in our history. The rising sea-level in combination with subsidence due to climate change, will pose a new threat to us. It will no longer do to rely on past experience. We have to make new, different and radical choices. The Netherlands is one of the frontrunners in the field of adaptation –we started with our dykes- and it was one of the first countries in the world to take measures to stimulate energy-aware producing and consuming.
Yet, the Netherlands is very much aware that it's the developing countries that will be hit hardest by climate change while they have contributed the least to global warming and pollution. The economic costs and the magnitude of the problems are huge.
There is no doubt that the time to act is now. The right framework for action, sound mechanisms to fight global warming and a fair agreement on the costs of adaptation and mitigation, can make a crucial difference.
The problem and let me state it frankly - is that the challenge is complicated politically. The likely effect of climate change will not be felt to its full extent until after the time for the political decisions that need to be taken, has passed. In other words, there is a mismatch between the environmental and electoral calenders. And it is hard for a country to make a difference on its own. Public opinion will have to see the rest of the world as an opportunuty, not just as a risk. This requires political leadership.
Our major challenge is us.
To tackle the obstacles is not only a matter of political will. It also is a matter of economic reason. Postponing action is more costly than taking prompt actions today. The Stern report has done the mathematics. Actions on mitigation as well as on adaptation simply make common economic sense. The price for inaction now may cause an overstretched budget in the future. As a global community we have to prevent climate change from seriously hampering development efforts. Actions to promote development and actions to address climate change should go hand in hand.
[development & climate change: international mechanisms and fiscal measures on the basis of the polluter pays principle]
Ladies and gentlemen,
Climate change is already affecting our development efforts. Over the past few days, I travelled through Aceh and Kalimantan where the effects of climate change already are dramatic. Investments in development efforts should take climate change into account. Adaptation and mitigation should be mainstreamed in development. The cross-cutting nature of climate change requires a holistic approach and therefore the involvement of various disciplines, including finance.
Costs of adaptation will increase sharply over the coming years. It is ironical to note that many countries which contribute very little to global warming will be hit most and development will be slowing down as a result of global warming. There is a pressing need to enhance our understanding of adaptation. Which sectors will be hit, which groups will suffer most and what action can be taken. Quantifying costs and benefits of adaptation, from low cost ‘no regret’ measures to future climate-specific infrastructure. Today, the Netherlands, the UK and the World Bank will launch a global study to supply this information. At the same time an important step is to integrate the phenomenon of climate change in national development planning. Advanced planning will help to avoid large future costs.
Affected countries can and should integrate the phenomenon of climate change into their development planning. Advance planning can help avoid future costs. International support -both financial and technical- should be mobilised for these countries so they can make the right investments.
In my view, we should not ask the poorest countries to pay for something that is caused mainly by the industrialised world. Quite the contrary: it makes perfect sense to ask the polluter to pay for negative effects of pollution. Adaptation costs are additional costs and should not limit development finance needs to reach the MDGs. That would be a wrong choice.
Successful adaptation requires major efforts from the international community in a fair way. And new and additional financing mechanisms could be part of a levy on CDMs or carbon emissions trade. But adaptation to climate change is not sufficient. The goal of not more then 2 degree temperature change requires actions to reduce first and foremost the emissions of greenhouse gasses. The more successful we will be in mitigating climate change, the cheaper adaptation measures will be.
We have to put an international regulatory framework in place, which should ensure a high enough carbon price to provide incentives for green investment, including in mitigation and offsets. We also need efficient and expanded carbon markets to ensure that mitigation efforts will be prioritised as efficiently as possible. Deforestation is a key area for our consideration. This system should include incentives to avoid deforestation and to improve the quality of forests. Here urgent action is required, and I saw the last couple of days visiting the poor people living around the peat fires in Kalimantan. Deforestation currently accounts for 20% of greenhouse gas emissions. We need to agree on a global mechanism providing incentives to avoid deforestation and to promote sustainable forest management. Funding for adaptation could also be generated through carbon markets.
Last but not least, we should focus most on private capital flows, which far exceed public financial flows. Ministers of finance have an important role to play in this field. Fiscal measures can help by introducing financial incentives where costs of climate change are insufficiently incorporated in market prices. There is an urgent need to address measures that are currently hampering green investment. We should repeal measures that reduce the costs of behaviour contributing to global warming, especially fossil fuel subsidies and trade measures against environmentally friendly goods. And we need to introduce measures that foster sustainable behaviour. For example, the Netherlands is currently introducing a tax on air travel and an increased differentiation of car and motorcycle tax based on CO2-emissions.
[conclusion]
Ladies and gentlemen,
Many have already said that addressing climate changes is the greatest challenge of this century. I would add to this: fighting climate change and fighting poverty must go hand in hand. This approach should become part and parcel of any post Kyoto agreement. The challenge ahead of us is how to formulate the right policy mix. This meeting is about equity, just burden sharing and ecology. Climate change is an economic, development and investment challenge, not just an environmental challenge. Involvement of all sectors of public and private actors is required, particularly financial institutions. I hope our meeting will mark the beginning of such an inclusive process in which ministers for Development and ministers of Finance will continue the joint dialogue we started today.
Thank you.