Fiona Harvey Interview: Tony Blair on US cap and trade and green stimulus spending

Tony Blair, the former UK prime minister, argues in an interview with the FT (transcript below) that now is the time to kick-start investments in a green economy. The stimulus packages being rolled out around the world should focus on green measures, he says, if we are to avoid an unsustainably high-carbon future.

When in office, Tony Blair did much to raise climate change higher on the political agenda. In 2005, he made the topic the focus of the UK’s presidency of the European Union, and of the G8 summit, which the UK hosted. From that G8 summit came a new forum for international climate change discussions, the Gleneagles Dialogue. He used his relationship with George W Bush to try to persuade the US president to take a more conciliatory approach on climate change, especially with regard to carrying on negotiations on climate change under the auspices of the United Nations.

Since leaving office, Mr Blair has worked with the Climate Group, a not-for-profit group dedicated to bringing businesses together to tackle climate change, and has travelled the world to talk to leaders and politicians in many countries to try to form a broad coalition for action on the climate. I spoke to him while he was visiting the US to talk to a group of senators and businesses about the importance of setting up a US federal cap-and-trade system.

FT: A proportion of the stimulus packages around the world is green – roughly 10 per cent in the US, less in the UK – is that really going to be enough considering the other money will be spent on non-green activities and infrastructure?

TB: First of all, by my rough calculations of President Obama’s package, I think anything up to about $100bn if you add it all together is going to go on green or green related things and that’s a very substantial investment.

In the UK I’m not sure of the exact figure, but if you take it all round Europe there is going to be a big investment in green energy. Now, obviously the stimulus is there for other reasons as well, primarily for reasons of jobs, but I think if you take the potential of this and you aggregate it there’s going to be a significant upscaling of all investment in green technology around the world over the next two or three years and that course will be followed by the private sector – particularly when you introduce a cap and trade scheme here [in the US] – will be following suit.

Look, what I said to [a group of US] Senators this morning, I think we have all taken a decision that we are going to act on this issue.

There are really tough challenges – challenges to do with technical questions around cap and trade, challenges to do with the balance between what countries like America do, countries like China do, and obviously a big political challenge is the economic crisis.

On the other hand, with the commitment by the Obama administration now, every major industrialised country, every major developing country is now committed to a programme of substantial action on greenhouse gas emissions so my view is, yes you can argue about the precise amounts going in but there is in total a major commitment to act.

FT: What do you see as the biggest challenge that people face convincing the Senate, as there does not seem to be support for the reductions?

TB: It’s more that there are serious practical questions people are asking about the impact on competitiveness and jobs. There is a major question which is how is America’s relationship with China going to impact on this, but I think we if can provide answers to these questions – and I believe there are answers – then… nobody is turning up to these meetings as they were a few years ago and saying I don’t think this it’s a problem, nobody’s coming to these meetings now and saying I don’t accept climate change.

The questions are all on the practical consequences of action. It’s the how not the whether that people are now focused on.

FT: You say this is just the beginning of green spending – are we going to see more in the future?

TB: Yes. Also, if you take the amount that’s going to be spent on energy infrastructure, over the next few years, the next decade or whatever, it runs into trillions of dollars. Once you set a direction for the low carbon economy you are going to generate massive investment from the private sector as well as the public sector, in these types of technologies.

So I would expect to see investment in solar, carbon capture and storage, I think there will be a renaissance of nuclear power, and I think in respect of energy efficiency as well.

So I think there are a whole set of investments that will be made and I think there is a very strong case for action on the transmission systems as well, that was a very strong part of the discussions we had today and that is a debate that is also going on in Europe – how do you achieve the increase in the efficiency of the system.

FT: Can you tell us some of the answers you shared with the Senators over their concerns?

TB: One of the things about having Europeans there as well as Americans was that there was an interaction there between people and how we [Europeans] have found this experience, how the emissions trading scheme works, how there were problems at the beginning, how we can work together. There were some very senior business people there as well, like Jeff Immelt of General Electric, John Chambers of Cisco. The politicians are very much asking the business people to say this is how it works.

FT: What about the concerns in the US over the cap-and-trade system in Europe?

TB: I think the bottom line is the system is going to work and is going to deliver the reductions expected of it. You can see that it is going to do it at the same time as economic growth or if there isn’t economic growth in the next few years, if there is an economic downturn, it is not because of action on the environment. So I think what the Europeans have shown is that it is possible to have economic growth and a substantial reduction in emissions

FT: We are all worried about the green stimulus at the moment because we have just had a huge financial crisis, the reverberations of which are still being felt. Could we have seen it coming?

TB: The financial crisis you mean? I don’t think anybody spotted the scale of it.

FT: But we had built up up huge amounts of debt; shouldn’t governments have realised the risk?

TB: I guess you could say it would be good if everybody had spotted it and the scale it was going to be. Obviously how we work through that is another matter but one of the things we should do is use this opportunity where there is going to be a stimulus we should promote clean energy and therefore make sure that when the economy recovers and starts to grow again it can do so sustainably. One of the other things we did this morning was explain the adverse effects of climate change on the economy.

FT: Wasn’t building up such huge debts irresponsible of us?

TB: Are you asking me about the economic crisis or climate change? I know – that’s an interview I’d love to give you, but for another time.

FT: As America begins to discuss what sort of cap and trade to adopt there is a lot of anxiety about what has happened in Europe, and about Germany and Scandinavian countries and Canada and others missing their targets.

TB: When we introduced the system in 2005, yes there were problems in the first couple of years. And there are bound to be in a way. But actually from 2008 when we made the adjustments, this system is delivering and it is going to deliver. So yes, of course, it is difficult but perhaps the single most important thing that the emissions trading system is doing is creating a framework within which business has got a strong incentive to go green.

FT: One other questions is that while everyone is thrilled that President Obama is engaged on this there is some concern that the EU itself is struggling to commit to more ambitious goals. What is the European perspective right now and what are the dynamics in Europe?

It would be extraordinary at a time of economic downturn if there wasn’t anxiety and concern about this. However, I think that the path has been set and my view and the overwhelming consensus view is that we should continue down that path. That is the principle. Though the circumstances of our economy may have changed, the financial crisis, the science of climate change is more unequivocal than ever, so I think when you analyse it that way, there is no alternative but to press ahead.