 Climate change is the greatest challenge faced in the world community. It's caused by, simply, by burning too many fossil fuels. And expressed in these terms is a simple question to answer. How do we get people to stop burning coal, oil and gas, and turn them on to making electricity, and having energy come to us in different formats? In this presentation, I will argue that the EU and China should develop a complementary approach on setting economic price for carbon and jointly adopt a leadership role at COP 21 next year in pursuit of a global agreement on carbon pricing. If this is achieved, then the switch from fossil fuels to renewable energy will be assured. And we have some chance of keeping the temperature of the planet to two degrees and we can accomplish this change, but if we can accomplish this change by 2050. And this would, you know, be a tremendously important thing and the big event that's happening in our lifetimes, at least going forward, is this COP 21 which is being hosted by President Hollande in France in December of next year. At present the prospects of a complementary European-Chinese approach to carbon pricing look promising. The lead has been taken by China in devising a cap-and-trade scheme that is currently being tested in five major cities and in two regions. If successful, as is expected, the scheme will take the best working scheme and they'll apply that nationally. Within Europe there's a widespread recognition that the emissions treaty scheme needs major revision and that the price of carbon must act as a market signal spurring the transition to a low-carbon society. With intensified dialogue between the EU and China, their respective policies could be aligned and presented to the rest of the international community as a template for global agreement. So far there's every reason to believe that this can be achieved in time for COP 21. COP 21, by the way, means Conference of Parties and it's all the nations that are present in the United Nations. And they do report every so often and the latest one is called AR5 and it's part of the IPCC, the International Climate Change. That such an agreement is essential as a foundation for effective mitigation strategy. You had confirmation of that last Friday in the presentation by Richard Klein on the findings of Working Group 2 of the IPCC. In summary, a high price for carbon will lead to a low-carbon economy. I take this approach because while there are a number of ways to tackle greenhouse gas emissions, carbon pricing has many economic and political advantages over alternative schemes. From the economic perspective, the following are the most decisive. The first is the power of the market to motivate. We have to motivate ourselves into taking common action at the COP negotiations against a background where there's mutual distrust between the developed and the emerging world. Where the emphasis is on differentiated responsibilities. Where the US would not even sign the Kyoto Accord. Where others are dragging their feet and who are vested interests, as they always will, will sabotage such feeble attempts as we've made already to arrive at a global price for carbon. We can use price signals as a means of creating change in human behaviour. Put a price on carbon and let the markets react by doing what they always do when they get the correct and appropriate price signal. Resources will be allocated to sectors in which it's profitable and they will refuse to invest and deny money to sectors where it's not profitable. The second benefit from putting a price on carbon is that the social or external costs will be included in the price of coal, oil and gas. And these social or external costs are of course pollution, environmental degradation and global warming itself. The failure to do so distorts the pricing of competing energy sources and results in an actual subsidy for the very forms of energy that are destroying the planet. Now there are two forms of subsidy going to fossil fuels at the moment is about $600 billion a year being paid out by governments to in fact encourage people to use fossil fuels. And if you include the actual unseen or hidden cost in other words that they don't pay for the pollution they create there's something like a trillion of the world's resources flowing to the use of fossil fuels. It would be hard to conceive of a more warped way of managing our affairs. A further advantage in using pricing as a policy instrument is that markets react with speed. All the collective intelligence is gathered and people act at speed and we need speed if we're going to meet 2050 targets. If allowed to operate freely in response to a level playing field the market will achieve a complete transition from fossil fuels to renewables. We've spoken a lot here about how we're now competitive and we don't need to do so again today except press by questions afterwards. This is a challenge because major technical innovations are needed to affect the energy transition to renewables. We need big grids, we need utility grid and distributed storage and we need demand side management. Big grids are necessary because wind and solar resources are variable in their output and there's nothing we can do about that. You take the power when it arrives. And usually a lot of the wind and solar is a long way from where the big centres of population are. So we need a big grid to carry the power from where it is, where it can be captured to where it will be consumed. And of course there's a geographic portfolio effect as well. If you capture the output of a storm along its entire length you have a very good chance that you'll have a very much more even output at any one part along that grid if the grid is big enough. By way of a technical solution we have proposed the building of the super grid which will not only cover the seas around our coast but also the great continental landmass of Europe and will incorporate solar PV from around the Mediterranean region. The super grid will collect, transmit and distribute the electricity generated from wind and the sun. Most of the technology already exists such as high voltage direct current as distinct from what lights are lights which is alternating current. You can transmit power over great distances without hardly any losses if you use direct current. But wind and solar have to be collected over wide geographic areas then converted from AC to DC and distributed to wherever the demand is where the customers are. For this to happen we need a piece of technology that doesn't exist yet and it's called the super node. In practical terms the super grid will operate on the basis of hundreds of these super nodes linking generation in a meshed grid and connecting up with the distribution systems on a continental scale. A model of this super node has been developed in our company and along with some help from the Dublin Institute of Technology and this is it here. This is the first time we're presenting this. This is capable of handling 2,500 megawatts of direct current. That would be about a 1 to 150 scale I think. That should be about the size of the playing fields at Groke Park. This is actually quite a proud thing for me because not only do we have to think up what this super grid was but how do you actually make it work as a real electricity trading system? And the guys who, anybody has any questions of this, we have Joe Corbett here who would be delighted to explain the detail of how it works. Anyway, we'll be showing this at the DeLore Institute and in Beijing and in Brussels as well. So prices drive markets and markets can stimulate innovation whenever it's allowed to operate free from distortion. We in mainstream are head of the curve in that we believe that transition from fossils to renewables is inevitable and that big grids are essential and that supernode is indispensable. We're responding to the future by becoming first movers in the technology that will be absolutely fundamental to the electricity era ahead. And I call the era that's in front of us the enhanced era for electricity and we believe that gradually electricity will replace many of the forms of fundamental energy that we have today. Similar developments are essential in building utility-grade storage capacity, allied to distributed car batteries we need to, we need to actually have a lot of things the size of this building based on chemicals which will store electricity and even out the variability in wind and in solar. The trend in patent applications proves that business is anticipating fundamental change in the generation distribution, sale and storage of electricity and it's interesting that China leads the league table in the number of patent applications. From the perspective of stimulating entrepreneurship, all that's needed now is the right price signal to be given. The other big advantage associated with carbon pricing arises from the logic of carbon pricing. If the price is sufficiently high to induce real change then economies will put on the same price path and carbon prices will tend to bunch together over time so we'll actually get a convergence. As a result a global price range will emerge which will be broadly neutral in terms of its effects on national economies and will neither penalize nor benefit any particular economy. There will be no big winners and no big losers except those who bet on a fossil fuel future. On the other hand the perceived absence of neutrality is a political weakness in the COP form of negotiations. Invariably it produces winners and losers and has up to now. Governments seek to protect their own self-interest and the problem with intergovernmental negotiations is that the parties are never equal in terms of negotiating power. That is the cloud hanging over the COP process and we believe that carbon pricing dispenses it. In addition to the economic advantages I've just outlined carbon pricing also has a number of political strengths as a negotiating framework. It gets us away from the failed intergovernmental approach in which diplomats try to work out a global agreement as to which country should do what in terms of reductions. That was the approach taken at COP 19 in Copenhagen and by common consent it was regarded as a disastrous failure and a diplomatic disaster. COP 20 has given little hope for progress I think that happened in Poland and it's no surprise that the expectations for next year's COP 21 are low in some quarters. Einstein is supposed to have said that madness consists in trying the same thing over and over again and expecting a different result each time so it's a good rule in life that more of the same will probably produce more of the same. Bilateral and even multilateral burden sharing has been proved not to work so let's get on with the global agreement otherwise temperatures would keep on rising. Carbon pricing would get us away from a failed approach and open the door to progress by changing the context for devising a solution. It was Manet who advised that the way to find a solution to a political problem is to change the context. He didn't believe in the madness of sticking to failed formulae. The second political advantage arises from the fact that world opinion is actually moving in the direction of carbon pricing. Since it's always a good negotiating rule to reinforce the positive and build on what is common let us concentrate on what unites instead of focusing on what divides and what unites the world community is the common threat caused by burning fossil fuels. This has produced at least three encouraging developments. One at the international level the World Bank has explicitly called for greater international cooperation in bringing forward carbon pricing policies and for strengthening them where they already exist. It has issued a draft statement on the fifth of this month entitled Putting a Price on Carbon in which it says that the latest report from the IPCC makes clear the importance of putting a price on carbon to help limit the increase in global mean temperature to two degrees Celsius above pre-industrial levels. Secondly, the impetus for carbon pricing has been further strengthened by the UN Secretary-General's decision to convene a climate summit this September to build what he called a solid foundation for successful negotiations on reducing emissions. Using unusual language for an international diplomat he has challenged world leaders to come to the summit with bold pledges and concrete action that will close the emissions gap. The summit is not to be part of the current negotiating process rather what he's trying to do is to create a cultural climate in which we can bring about this change we're referring to. So carbon pricing fits in with the latest international thinking on how to get progress on climate change. But the strongest political argument in favour of carbon pricing is that it aligns with a series of measures recently taken by the Chinese government. The most significant initiative is the introduction of the cap and trade scheme on an experimental basis in five cities and in two regions in China which account for 30% of the country's emissions. It first started in Shenzhen last year and it's of profound significance because it means that the Chinese authorities have chosen a cap and trade scheme as their preferred policy instrument for reducing emissions. Those who have studied China have a further reason for regarding this move is significant. They know that an experimental approach is the way China always prepares for a major shift in economic policy. It is their unique planning methodology an example of which is their special economic zones. The Chinese authorities have indicated they will apply the lessons of these experiments to the whole of the economy by the end of next year which incidentally would coincide with the opening of COP 21. That expectation should be taken at face value because it follows from a long period of policy gestation. As far back as the 10th five year plan the Chinese authorities signaled their concerns about environmental damage and in the current plan they developed ambitious measures to combat climate change. Preparatory work on the 13th five year plan indicates that this will be one of the top priors for China over the next three to four decades. As I said in previous lectures here the Chinese planning system is unique in terms of the way it mobilizes the collective intelligence of that great society and applies it to devising and implementing long term development strategies. For example, China set out on a path to renewables future and by 2008 had become the world's largest solar panel producer and the largest producer of wind towers. Today it produces approximately 25% of the wind tower by rotor blades according to the US Energy Information Administration, the EIA. China is the world's largest and fastest growing market for renewables with the cumulative capacity of 91,400 megawatts of wind installed and 20,300 megawatts of solar installed and this is confirmation of its economic capacity to deliver on political commitment. Put it in simply, if the Chinese authorities decide on a course of action and commit themselves to stated goals it should be accepted that the necessary resources will be mobilized and that the goals will be achieved and that is what history tells us. But let's say that there are some delays in introducing a national cap and trade scheme. That's not important. What is important is that China has chosen its pathway to a low carbon economy since it is already the world's largest economy as measured in terms of purchasing power parity. That decision has created an irreversible momentum in favor of the mission trading schemes. According to the World Bank, countries operating cap and trade schemes already cover 22% of world emissions and that figure will rise to over 50% when they are joined by China. Even the US would have to, and I believe is taking note. And this is more than wishful thinking in the United States, I'm happy to say. Because Americans distrust international organizations and don't like outsiders telling them what to do, it follows that warnings about climate change have to come from insiders in the United States itself if they're to be taken seriously. That's why the Climate Assessment Report just published by the US government is so important. It sets out a state-by-state examination of the damage being inflicted by climate change on the people and on the economy of the United States and it looks to a future and speculates as to what will happen under a business-as-usual scenario. And it's an alarming prognosis of widespread devastation and got a lot of media coverage. And then NASA held a press conference on expert reports confirming the urgency of the IPCC findings, which you've all been reading about recently. Because its credibility is so high and media reaction was extensive in particular, reflecting the growing public concern of the threat posed by rising sea levels to coastal cities such as New York, New Orleans, Miami, Tampa, and Boston, to name but five of the most vulnerable cities. That concern has been highlighted, heightened, by the huge losses of the Western Antarctic ice shell and by the realization that no matter what we do in a recent article by Michael E. Mann in Scientific American, he pointed out that if we stop putting up another ton of carbon with the atmosphere, we've already locked in 1.5 meters of sea-rise. Now, didn't say when this is going to happen, but it's absolutely now inevitable. And that explains why President Obama has indicated he may take executive action on reducing emissions if Congress fails to act. And this is great to see that this, his ability to do this has been challenged in the Supreme Court of the United States and by a judgment of four to three, the Supreme Court found that he was entitled to use the EPA Act of 1972 introduced by Nixon to actually introduce attacks on carbon. They said the Supreme Court of the United States said carbon is a pollutant and you can act to combat it. So the United States is in a different frame of mind than it was when under President Clinton, Al Gore, negotiated the Kyoto Agreement. And this has been confirmed by the climate change talks going on in Washington between the United States and China, which one of the Chinese negotiators described as making good progress. And, of course, this process has helped by John Kerry, the Secretary of State's commitment to combating climate change. As things stand now, the world community can be separated into four groups on reducing carbon emissions. Those that have already introduced a cap and trade scheme, such as the EU, those that are proposing to introduce one such as China, those who are waiting for a lead and would most likely follow the majority. And this would include most of the developing world. And finally, those who have yet to take a position. These are the refused nicks, to quote Reagan, such as the United States, the coal users and the oil producers. If the first two groups were to come to a joint position, that would account for over half the world's carbon emissions. And were they to agree on using an emission trading scheme as the way to reduce emissions, then they would have created a de facto global carbon price which others could follow. There's a consensus within Europe. Well, actually, this is an important technical detail. How much should a ton of carbon dioxide cost? In the research that I've done on the Chinese economy, they reckon that 23 euros per ton of carbon dioxide would actually change human behavior. I've heard the IEI say that the International Energy Agency say that a price of $45 would be needed. But actually, those figures aren't too far apart. If we're talking about some figure like 30, 25, 30, 35 euros per ton of CO2, we will see a dramatic effect in terms of the world moving away from coal, oil and gas. And my proposal is that the EU and China should build on a policy convergence and develop a common approach to COP 21 based on a shared cap-and-trade framework. Commissioner Connie Hedegard, she who tried to organize the failed COP 19, has said she's impressed by the action China's taking domestically to cut emissions. And this is a proper starting point. We Europeans should take China's political commitment to carbon reductions at face value and enter into a strategic partnership with the aim of jointly providing global leadership at COP 21. For reasons of history, China's reluctant to play a leading role. It feels that if it were to do that, it would be asked to carry too much of the burden. So it can't be out in front, but it certainly could collaborate, and this is what we're urging it, would collaborate with Europe to act as joint leaders. And I believe that we're looking at a totally different body language in a lot of places like Japan. We've already talked about the United States and Canada. And the way to address this impasse is to broker a European deal at Paris. I've heard President Hollande speak twice on this occasion, and he said, you know, his biggest concern is, like I said at the start, the world's biggest problem is human-induced climate change. And so I see him as getting ready to lead strongly in this regard. Europe has a strong starting position. France will chair the conference. It'll be in Europe, and so I believe we'll see an outcome. And there are good reasons for approaching the one world power that could help turn COP 21 into success rather than another installment in global failure. If the Europeans and Chinese Accord gathered momentum, then it would strengthen the hand to light the United States administration, which would become a party to the new agreement in Paris. The economic route to political objectives was pioneered by Manet, as was a strategy of finding a solution by changing the context. Europe can apply the Manet method by proposing carbon pricing as the most effective means of reducing emissions. Manet famously said that nothing happens without individuals, but nothing endures without institutions. In this instance, Europe can be the individual who takes action. If COP 21 is a success, then a new institution would emerge, one that would endure for decades. We have little time to make this happen. Already the carbon concentration of the atmosphere has gone up beyond 400 parts per million. Our species emerged at 270 parts per million. This is increasing at an annual rate of 2.5 parts per million by volume. That means we have about 20 years before we get to 450 parts per million. Beyond that point, the damage to our planet would be catastrophic and probably irreversible. The best way to prevent this is to tax the thing that is killing our atmosphere. Put a price on carbon and let human engineers do the rest. Thank you very much.