Mayor's Report Update

MQT on 2007-05-23
Session date: 
May 23, 2007
Question By: 
John Biggs
Labour Group
Asked Of: 
The Mayor



Answer for Mayor's Report Update

Answer for Mayor's Report Update

Answered By: 
The Mayor

One thing I wish to report on is the outcome of the meeting in New York last week. You will recall that Nicky Gavron [Deputy Mayor] had the idea about four years ago that we should create a group of major cities which come together to discuss climate change and what we, as cities, could do to drive this agenda forward. This is against a background of the Kyoto Treaty, which set a target for a 5% reduction in carbon emissions. I think the vast majority of governments have failed to achieve that.

When the meeting took place we had over 34 major cities gathered. I have been to conferences all my life. This was not just the most productive; it was more productive than every conference I have ever been to put together. The concentration of mayors was crucial to securing the deal that former President Clinton had negotiated.

The deal is that we have a dramatic increase in the retro-fitting of non-residential buildings in the cities concerned. At the moment it is a very messy process; there are too many contractors involved, no one really has a package, and there are upfront costs that incur borrowing as most of the cities, like London, have difficulty getting governments to raise money.

What Bill Clinton has effectively been able to broker between banks and the energy services companies in these cities is the sort of deal he did with HIV drugs; that there is a massive expansion of the numbers of people taking them and the price is brought down. The people who could not get the drugs got them, and the drug companies got their profits. That is exactly the template.

The cities who have now agreed that all their municipal buildings will be available for this work are Bangkok, Berlin, Chicago, Houston, Johannesburg, Karachi, London, Melbourne, Mexico City, New York, Rome, Sao Paolo, Seoul, Tokyo and Toronto. On the back of that potential contract, four of the largest energy services companies in the world have agreed to step in with a dramatic reduction in their prices and offer an audit on each of the buildings. They are Honeywell, Johnson Controls, Siemens and Trane. To fund this work, five banks have each agreed to put up $1 billion worth of loans, available immediately; the loans are repayable over 10 to 15 years, paid out of the savings each of these buildings makes in its energy bill. In the initial first year, 80% of the saving will be paid to the energy services company to start to recoup the cost of the work they have done, and then gradually, as that is paid off, the body responsible for the building will keep more and more of the saving. In the event of the energy saving not being adequate to cover the loan, the energy services company will carry the loss. This is a complete win/win for everybody.

The reason it has worked is because, at the moment, the entire industry globally is worth about £4 billion a year. We have effectively increased that by 120% at a stroke. We have created economies of scale that mean this will now move forward.

Other cities will continue to come forward. We had just five cities signed up for this ten days ago. Other banks will come forward, and I suspect other energy services companies will come forward. The next stage of this will be that the GLA will issue an OJEU (Official Journal of the European Union) contract - it will take about two months to draft and go through the legalities - inviting bids to retrofit all 900 buildings under the control of the GLA, TfL (Transport for London) and the MPA (Metropolitan Police Authority). It will include a clause that allows every other local authority, the health service, and government to step in and join the contract without a further OJEU process. This will broadly be the position in all the European cities involved. We have to go through an OJEU process for this. That will take six months. So about eight months from now we should start to see practical work on the ground.

Many of you will have been to conferences, as I have, and you are lucky to find any big city mayors at them; they are usually not around. This conference was a series of practical working groups where the leading city in the world in whichever area - so we led on the congestion charging, others led on renewable energy, others led on energy from waste and so on - led the working group, and mayors who were not speaking went to them, sat there, and took notes. We have all come away thinking we have learnt vast amounts because we found what is happening in the best city in each area of energy conservation and the climate change struggle around the world. I led the plenary session on congestion. Nicky [Gavron] led the session on decentralised energy. Mark Watts [senior adviser to the Mayor on climate change] chaired the session on energy from waste. We had a major input in this.

This is just the first of many contracts. We are within two months of a similar global-wide contract to replace all our traffic lights. Traffic lights are incredibly energy wasteful. We can get new traffic lights that will use only 20% of that energy. At the moment we cannot afford them - they are too expensive - but if we sign up perhaps 15 or more cities' and get them all to agree to take them on and to transform the traffic lighting in their city, the prices will tumble down and so on. We are working on about another half a dozen similar contracts.

If you look at London, 38% of our carbon emissions come from buildings that are not residential. If we can achieve a 25% reduction - and that is modest, given the scale of technologies - it is effectively a 10% reduction in London's carbon emissions over the decade to come. If you multiply that around the world - because other cities will get involved in this ' that is a big impact. The municipal buildings are there to provide the bedrock on which we base it. The private sector can step in and access exactly the same sort of deal. There is the real potential that virtually any non-residential building anywhere in the world can, over the next decade or more, become part of this programme.

There is real potential here for a 10% reduction in carbon emissions globally, doubling what Kyoto sought to achieve, and all the Mayors and the companies coming together - working around governments because they are still arguing about who is to blame - just to get on with the work. I think many more contracts will come out of this that are going to drive the whole question of carbon reduction dramatically forward. We refer our final communiqué to the G8, with the suggestion that they stop talking about who is to blame and start doing similar things.