The door to a new global climate convention is open again

Torsten Jeworrek, CEO of reinsurance operations for Munich Re on the world climate summit in Cancún

2010/12/13

The outcome of Cancún brings an important and surprising success. But we still have some way to go towards effective climate protection. Cancún sets a target but no concrete measures for achieving it. At the same time, it is clear that we will have to substantially convert our electricity supply from fossil fuels to renewable energy in the next few decades. Global conversion of the electricity supply will require considerable effort but also open up vast opportunities for countries and companies that prepare for it in good time.

Munich. The outcome of Cancún brings an important and surprising success. I am very pleased about the breakthrough achieved by the negotiations in Mexico: the Kyoto protocol can be continued, the 2°C goal has been recognised by all countries for the first time, the international climate protection process has regained its leading role under the aegis of the UN. I am also very glad consensus has now been reached on setting up an adaptation fund for developing countries which will receive annual funding to the tune of US$ 100bn from 2020. This fund could also finance the risk management concept for developing countries proposed by the Munich Climate Insurance Initiative.

However, despite our relief, we should not overlook the fact that the agreement to continue the Kyoto Protocol is still not binding on the USA, whilst China, the world’s biggest emitter of carbon dioxide, continues to be classified as a developing country with no binding reduction targets. If that situation persists, the protocol to be negotiated in South Africa next year will be a toothless tiger. Consequently, we still have some way to go towards effective climate protection. Cancún sets a target but no concrete measures for achieving it. And Cancún presents the same dilemma as before: although minimum targets have been achieved, a full and strict climate agreement bearing the signature of all 192 countries without exception still seems a remote prospect. It is already looking as if there will be a gap when the Kyoto Protocol expires, during which there will be no regulations.

At the same time, it is clear that we will have to substantially convert our electricity supply from fossil fuels to renewable energy in the next few decades. Global conversion of the electricity supply will require considerable effort but also open up vast opportunities for countries and companies that prepare for it in good time. In this respect, besides the official negotiations, Cancún showed some very encouraging signs. Accordingly, the World Climate Summit, a parallel event attended by over 600 people from different companies, sent out a clear signal: large sections of the economy are calling on the politicians to formulate suitable political framework conditions.

Many companies expect climate protection to be worth it in the long term, and I too am sure of that. Ecology and the economy are not contradictory. Currently, the cost of electricity from renewable sources is in some cases three to four times that of conventional electricity. Experts believe the lines representing rising fossil fuel costs and falling renewable energy costs will cross in the next ten to 20 years. That is not a very long time in terms of investing in energy generation, so it comes as no surprise that China has set very ambitious targets for increasing energy efficiency and promoting rapid development of renewable energy in the five-year plan that will be in force from next year, and would like to play a leading part. China, like other countries, has recognised that it will benefit as much from greater energy efficiency and developing renewable energy as from export opportunities for innovative environmental technology.

Climate change is of major significance to Munich Re in two respects: on the one, hand we are grouping all the challenges involved under the heading “risk of change”. This risk would affect us particularly with regard to the reinsurance of natural hazards. But we believe it is a risk that can be calculated. On the other hand, we want to seize the economic opportunities and consistently support the development of renewable energies in the coming years as well. This may take the form of tailored insurance solutions, that in many cases ensure investment in renewable energy is possible in the first place. Furthermore, we will maintain our commitment to the Dii GmbH desert-power project to ensure it progresses as quickly as possible. But we will also invest directly in renewably energy, and have set ourselves the target of €2.5bn for the coming years.

Following Cancún, it is now up to the politicians to support and/or further speed up the conversion process needed to achieve the 2°C limit. But it has been under way for some time now, and large sections of the economy have long been committed to this task.

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