Speech by Federal Chancellor Angela Merkel at the Sixth Petersberg Climate Dialogue

Mr President, my dear François,
Minister Fabius,
Minister Hendricks,
Ladies and gentlemen,

I am happy that I can be here with you and the French President at this year’s Petersberg Climate Dialogue. This is a very special event, which definitely whets our appetite for the annual climate conference and makes clear what needs to be done. That is particularly important this year, as one aim of the 2015 Petersberg Climate Dialogue is to play a part in ensuring that France can hold a successful climate conference this year. Germany and France want to work closely together at both the ministerial and heads of government level to make the conference in Paris a success.

The aim is to achieve a binding climate agreement in Paris – no more and no less. Everyone who is familiar with the topic knows what that means. There is no doubt that the word “binding” is ambitious. But this is what must be achieved. It is no exaggeration to say that we have been working towards the goal of a binding climate agreement for a very long time indeed.

I launched the Petersberg Climate Dialogue in 2010 after the outcome of the Conference of the Parties in Copenhagen in 2009 fell short of expectations. In the meantime, it has become a good tradition to spend several days working with representatives of many countries in a pleasant working environment. At the time, our aim was to lend new impetus to the climate debate. I believe that we have largely achieved this. As early as 2011, the members of the UN Climate Framework Convention on Climate Change agreed in Durban to draw up a binding agreement for all States Parties by 2015. This agreement is due to enter into force by 2020 at the latest.

It is now 2015, and the final spurt lies ahead of us. Behind us lie four years of many small and large steps – but if I may say so, steps in the right direction. One example is international climate financing. Over $10 billion has been pledged for the initial capitalisation of the Green Climate Fund. The first projects are due to be selected, and ideally also launched, before the conference in Paris. However, I would like to add that this is also urgently needed, as many countries that need funding are constantly hearing about huge sums, but when you ask what funding has actually arrived, you hear that the implementation still leaves a lot to be desired. That is why it is important, particularly as regards building confidence, that the first projects be selected without delay.

Pioneering programmes have been created and further developed to protect forests and ensure they are used in a climate-friendly way. The global partnership REDD+ is an excellent example of this. It provides funding for measures to protect rain and moist forests in developing countries, with a focus on results. Voluntary initiatives such as the cities alliance Compact of Mayors, in which over 2,000 cities have signed up to ambitious goals and measures, also show us how climate protection can be put into practice locally. And last but not least, wind and solar farm costs have decreased dramatically worldwide, while competitiveness has increased significantly. All countries can make use of the enormous potential.

These are all encouraging examples that show us we can make Paris a success.

The big question is how to achieve the great transformation to an emissions-free development in the long term and how to reach an agreement that creates a launching pad for this development. The agreement must forge a framework for our future actions. We need an agenda for the next steps. Our guideline remains – and must remain – the 2°C target. We agreed on this limit for global warming at the climate conference in Cancún. And we need to adhere to it in order to at least mitigate the worst effects of climate change.

The first step involves concrete reduction targets. All countries are to announce their national contributions to the new agreement as soon as possible before the conference in Paris. In other words, we are now in the crucial phase. So far, around 40 States Parties have done so. Germany is supporting a large number of nations in this work, that is, around 30 countries in different parts of the world.

The European Union already sent a clear political signal last autumn. The Member States agreed to reduce greenhouse gas emissions by at least 40 per cent compared to 1990 levels, to raise the share of renewable energies to at least 27 per cent of total energy consumption, and to increase energy efficiency by at least 27 per cent compared to the reference figure, all by 2030. These targets form the basis for the European Union’s contribution to the international climate protection agreement. In any case, the words “at least” keep the door open to considering in the light of the international negotiations whether we can also go beyond the EU’s internal targets, for example by using international emissions allowances.

Here in Germany, our aim is to reduce emissions by 40 per cent compared to 1990 levels by as soon as 2020. Our reduction road map sets a target of as much as 80 to 95 per cent by 2050. In order to actually achieve our aim of reducing greenhouse gas emissions by 40 per cent by 2020, the German Government approved an action programme last year. The idea is to undertake additional measures and reach concrete reduction targets in the transport, buildings, electricity generation, industry, waste and agriculture sectors. We are currently working at full speed on implementing this programme, as we have not yet quite reached our goal. We constantly need to find ways to combine economic productivity with ambitious climate targets.

And this means we also have a problem, which we in the European Union need to discuss: the more integrated our electricity market becomes and the more our grids are interconnected, the more difficult it will become to set national targets, as there will be a great deal of power exchange in the electricity sector. However, so far we are adhering to our national targets.

We want to combine climate protection with growth. We also feel it is our duty in the European Union to play our part in creating worldwide innovations. After all, we, the industrialised countries, caused much of global warming for many years, and it is now our duty to show those still awaiting development more efficient technologies by creating innovations. This is an act of justice and reflects the differentiated responsibilities we have in this shared world of ours.

Ladies and gentlemen, we must not lose sight of the goal. We can already tell that Paris will show us how we will need even more commitment than we have today in order to achieve the 2°C target. We need a long-term vision to guide us, but also to spur us on, so we do not lose sight of the goal.

Scientists have provided clear guidelines on what needs to be done. We must achieve decarbonisation this century, that is, we must make the transition to a carbon-free economy in the 21st century. Germany and France share this vision and also advocate it together to our partners. The Intergovernmental Panel on Climate Change (IPCC) calls for greenhouse gas emissions to be reduced by 40 to 70 per cent by 2050 compared to 2010 levels as a medium-term goal on the path to decarbonisation.

We now need a concrete target to guide us clearly on this path. With a view to the conference in Paris, we are advocating a reduction of at least 60 per cent compared to 2010 levels as a long-term global target. This would equate to a global reduction of at least 50 per cent compared to 1990 levels. There is no doubt this is highly ambitious. However, it could be achieved if we join forces. We also need a mechanism that allows us to verify whether our measures are really enough to limit global warming to a maximum of 2°C. This is why it will be very important to agree on this mechanism as precisely as possible.

It will be crucial that we steer investments in a climate-friendly direction worldwide – this does not mean foregoing growth, but rather generating it differently to the way we have so far. In its study, “Better Growth, Better Climate”, the Global Commission on the Economy and Climate made it clear that the next 15 years will be critical for this. This aim is supported by truly renowned individuals from the worlds of business, science and politics who have joined forces under the chairmanship of the former President of Mexico, Felipe Calderón. They believe that the global economy will grow by more than half in the next 15 years and expect the world’s urban population to increase by a billion people. They predict rapid technological advances, which will further change our lives. This transformation will be accompanied by high investments in infrastructure, energy systems, urban development and land use. The report talks about investments of $90 trillion. If we succeed in directing these new investments to low-emission projects, this will safeguard both prosperity and climate protection. These two things can go hand in hand.

It is now a matter of setting incentives in the right way. We believe that carbon pricing, for example through emissions trading, is a way forward. Last year, the World Bank launched the initiative, Putting a Price on Carbon, which it is continuing to develop. It is thus promoting greater cooperation between governments, companies and other actors in order to bring about suitable measures. Carbon pricing has already been introduced in 40 countries and over 20 sub-national legal systems. This covers 22 per cent of global emissions. Further countries will follow. For example, China has announced the introduction of a national emissions trading system in 2016, which will surpass the European Union’s system, the largest in the world so far.

We have already gained some experience of emissions trading in the European Union. We have seen that reforms are now urgently needed. On the one hand, we have seen that low economic growth in the past years has led to high surpluses of certificates. On the other hand, a large number of allowances has been generated by international projects. These two things have brought about a drop in certificate prices, which is why we are now setting up a market stability reserve and withholding certificates from the market. This will prevent severe fluctuations in amounts and prices, thus providing greater planning certainty. I am very pleased that this market stability reserve will come into effect before 2020.

The next step will be to adapt the EU Emissions Trading System Directive to the new target of reducing greenhouse gases by 40 per cent. In doing so, we must take care that the competitiveness of Europe’s economy is not compromised. Of course, the more non-EU countries that have an emissions trading system, the easier it will be for us in the European Union, as competition conditions will become more similar once again. Our aim must be to have a global carbon market with a robust and reliable CO2 price signal. Then we could set incentives worldwide for achieving our climate targets in a cost-effective way. We could also tap into additional sources of financing to fund climate protection measures.

This brings me to a crucial point, which will have a major impact as regards making the conference in Paris a success or a failure, that is, international climate financing. Developing countries must also follow a climate-friendly path. However, they need our financial support to do so. They also need this support in order to be able to adapt and react to current climate change in the first place. These are challenges that the developing countries cannot overcome on their own.

I recall the negotiations in Copenhagen very clearly. We did not manage to agree on everything there, but we did agree that $100 billion should be raised from public and private sector sources every year from 2020 to help developing countries. Germany stands to this pledge. We will take on our fair share. Since 2005, we have quadrupled climate financing from our budget to a total of around €2 billion in 2013. On top of this, KfW Group has provided €1.5 billion in loans for climate protection and adaptation measures in developing countries. We have allocated increased funding in our financial planning up to 2019. As a result, we will be able to increase our spending on development aid by a total of €8.3 billion between 2016 and 2019. And for this reason, I can now say that Germany aims to double its international climate financing by 2020 compared to 2014 figures.

We know that industrialised countries will have to provide more funding if we are to adhere to the pledges of $100 billion from 2020. According to the World Bank, only around a third of the pledged funding has been raised so far. There is a shortfall of some $70 billion. As regards reaching an agreement that finds general consensus, this means it will be very important to draw up a clear road map to breach this gap. Doing so depends both on public sector pledges and private sector investors. In turn, this means that attractive investment conditions must be created. This will involve tackling a wide range of issues – the legal and political parameters, the choice of investment projects and financing costs. To this end, we certainly also need new financing instruments, which should keep the concrete financing risks in the relevant developing countries at an acceptable level.

There is no doubt that the industrialised countries must take the lead here. As Germany currently holds the Presidency of the G7, I hope that we will be able to send an ambitious signal before the Summit Meeting of Heads of State and Government in Elmau. However, we still have a little way to go. I am very happy that newly industrialising countries are also increasingly taking on their international responsibility. Countries such as Chile, Colombia, Indonesia, Mexico, Panama, Peru and the Republic of Korea are contributing funding to the Green Climate Fund’s initial target, thus underlining their willingness to take on a share of global responsibility beyond their national borders.

International climate financing must increasingly focus on the poorest countries, which are often the nations most adversely affected by climate change. On the other hand, newly industrialising countries are more likely to be able to fund the necessary investments on their own. The investment climate for environmentally friendly technologies has improved significantly in many of these countries. I would like to mention just one example. In the meantime, developing and newly industrialising countries have reached almost the same volume of investments in renewable energies as industrialised countries. China, India and Brazil are outstanding examples of this. In fact, some of these countries are using innovative instruments on a grand scale – instruments that are still in the testing phase in industrialised countries. South Africa, which has had good experiences with tendering renewable energy capacities, is a notable example. Germany is currently only trying this out on a small scale.

In other words, when it comes to introducing and expanding new technologies – be they renewable energies, electromobility or other technologies – many countries are facing very similar challenges as regards the environment and the economy. This is why target-focused partnerships will make even more sense in the future than has been the case so far.

Ladies and gentlemen, the challenge of climate protection is easier for all of us when we can trust that our partners in the world are pursuing the same goal. This is one of the reasons why we need a comprehensive agreement that shows us how we can adhere to the 2°C target, sets fair and binding regulations for industrialised and developing countries, provides incentives for investments in low-emission development all over the world while making adjustment and risk management properly into account in the poorest countries, and above all provides poorer countries with financing support and offers incentives for low-emission development via carbon pricing and markets. This simply means that the people on this planet can hope that climate protection and individual prosperity can be achieved in equal measure, even if we have to take new paths to do so.

I am happy to be able to be here today and would like to assure French President François Hollande that Germany will stand shoulder to shoulder with France to do everything it can to ensure the conference is a success. But without you and, even more so, those who are not here today, this will hardly be possible. We can only reach an agreement for our shared world if we work together. And that should be our goal.

Thank you very much.