Thank you for inviting me here this morning to present the Commission's climate action and renewable energy package. Let me start by placing it where it rightly belongs, namely in the international context.

The EU's top priority is to get a comprehensive and ambitious new international agreement on climate change by the end of 2009, as agreed in Bali at the end of last year. Europe alone cannot solve climate change, this is a global problem which requires collective action with the broader international participation. The agreement reached in Bali was an important breakthrough. All countries, including the US, are now on board for the negotiations that will start next month, and we have a roadmap for the key issues to be discussed.

I am optimistic about the possibility to reach a global agreement by 2009. This will evidently require an intensification of our efforts and work in the next two years. It will require us to cooperate more closely and strategically with key partners. For this, we have to use all available platforms, including the G-8 and the Major Economies Meetings, but also bilateral dialogues with key partners. All these opportunities should be used strategically to support and complement the UN process, which should clearly remain the negotiating forum for a post 2012 climate change agreement.

A key element of the challenge ahead of us will be to mobilise additional funding for the battle against climate change. How can we step up and green finance, investment and trade streams to support access to clean technologies, to adapt to the unavoidable impacts of climate change and to tackle deforestation ? The use of public/private partnerships as well as the contribution from the private sector to these challenges, and in particular to the urgent deployment of climate friendly technologies will need further consideration. These are issues that I would like you to think about, particularly those of you who represent think tanks.

To succeed in this, I believe it is crucial that the EU continues to show leadership, and that is what we are doing with the climate and energy package adopted by the Commission on 23rd January.

By implementing the most ambitious set of climate and energy targets anywhere in the industrialised world, we are showing our developed country partners that making the deep emissions cuts that are necessary is fully compatible with continued economic growth and prosperity and can even boost our economy and competitiveness. It is an example they could follow by tailoring the measures to their national circumstances.

Now let me now get into the details of our proposals, which are based on two key principles: cost-effectiveness and fairness.

As you know, the backbone of EU Climate change policy is the EU Emission Trading Scheme. The proposal amending the EU Emissions Trading Directive is therefore the key stone of the package. In shaping our proposal we have benefited from experience with the Emissions Trading System so far.

We have focused on two aspects: firstly, ensuring that the scheme is made more efficient, from both an environmental and economic standpoint and, secondly, increasing harmonisation since this also leads to increased predictability for participants and a better level playing field within the EU.

One of the main changes is that there will be an EU-wide cap on the total number of allowances in place of the current system of national allocation plans. The cap will be reduced annually in a linear way to 2020.

This is the easiest and most transparent way to ensure that the scheme contributes effectively to the EU's overall emissions target. Additionally, the proposal foresees that the cap can be adjusted to a stricter reduction target as soon as the international agreement is agreed upon.

The second major innovation relates to the distribution of the allowances : we believe auctioning is the easiest, most transparent and effective method. It is also the method which best avoids unwanted distributional effects and creates the greatest incentive for investments in a low-carbon economy.

The Commission is therefore proposing that from the beginning of the third trading period there will be no free allocation to electricity generators. For the remaining sectors, free allocation will be phased out gradually and phase out entirely in 2020.

This being said, we recognise that there may need to be exceptions to this move to full auctioning. Certain energy-intensive industry sectors operate in a highly competitive international market and hence may not be able to pass on the cost of CO2 allowances to their customers without the risk of losing market share. There could therefore be a risk of some European industries moving production abroad, notably in the case of absence of an international agreement. This 'carbon leakage' would not only cost European jobs but most likely also lead to higher emissions globally since the production moved abroad would be subject to fewer carbon constraints.

To prevent this, the Commission is proposing, as a first step, that sectors or sub-sectors potentially at risk be identified in an objective manner. In a second step, we will conduct a review of the impact of the international negotiations once they are completed and make appropriate proposals if necessary. These could involve adjusting the proportion of free allowances or requiring importers to purchase allowances for their products.

I am convinced that with these modifications, the EU ETS can be a solid building block for a future international agreement on climate change and for the global carbon market that is needed to ensure that global emission reductions are achieved at least cost.

Let's now turn to the proposal on "effort-sharing" which includes legally binding targets for each Member State to cut greenhouse gas emissions in the sectors that are not covered by the EU Emissions Trading System. Effort sharing is also being done for the proposal on renewable energy.

These national targets are fully based on the principle of fairness between Member States and the need for sustainable economic growth across the Community. As a result, the effort is being shared among MS based on the GDP par capita criterion.

Member States that currently have a relatively low per capita GDP and thus high GDP growth expectations will be able to increase their greenhouse emissions from 2005 levels. Nevertheless the targets will still require them to make a serious effort to limit their emissions growth compared with the business as usual scenario. Member States that currently have a relatively high per capita GDP will need to reduce their greenhouse emissions compared with 2005.

To further ensure a fair contribution by each Member State, no country should have to reduce - or indeed be able to increase - its emissions in 2020 by more than 20% compared with the 2005 level.

The emission reductions should take place in a linear fashion between 2013 and 2020 so that annual progress can be monitored more easily, while allowing for some degree of flexibility from one year to the other.

I would also like to briefly touch on the use of Clean Development Mechanism and Joint Implementation credits, which is both valid for the ETS and the non ETS.

The Kyoto Flexible mechanisms – CDM and JI – can make an important contribution to the much needed deployment of clean technologies. But we need to manage the inflow of these credits if we are to provide the necessary incentives for innovation and action within the EU, including as regards renewable energy, while also sending the right signal to our international partners that we are ready to be more open in the case of an international agreement. This is why the Commission proposes a limit for the use of CDM and JI credits, which would be significantly raised once an international agreement is in place.

A few words on carbon capture and storage: we will not succeed in more than halving global emissions by 2050 if we do not also take advantage of the possibility to deploy carbon capture and storage, which is true in the EU but even more so in countries like China or India since fossil fuels, and notably coal, will continue to constitute a significant part of world's energy consumption.

Last year the Council called for a regulatory framework for carbon capture and storage in Europe. In response, the package includes a robust framework that will enable the environmentally safe deployment of CCS technologies. By doing so the European Union is taking an international lead in managing the risks of CCS.

The framework establishes detailed requirements to ensure the safety and security of storage as well as the long-term stewardship of the sites. The stored carbon dioxide is recognised under the ETS as not having been emitted, which will stimulate uptake of the technology. But operators will have to surrender allowances for any leakages and will be responsible for remediating any local environmental damage.

CCS technologies are expected to make a major contribution to meeting our climate and energy objectives, in particular after 2020, and to reduce costs involved by about € 60 billion in 2030.

Let me now conclude with a few words on the next steps for the package. As you know, the draft legislation is presently being discussed in the European Parliament and the Council under the co-decision procedure. In this regard, two things are very important.

First, that the proposals are not watered down in the legislative process. This would otherwise inevitably endanger the EU's leadership and credibility.

Second is the timing. We need the package to be adopted as soon as possible and by all means well before the end of the present legislature. This is notably essential for ensuring the EU leadership at the international level and make sure that we best influence the negotiating process that, if I may recall, shall be finalised by the end of 2009.

The climate action and renewable energy package has therefore a crucial role to play in future climate policy, both in the EU and externally, and I would therefore like to encourage those of you here today who represent Member States to do what you can to ensure its speedy adoption.

Thank you for your attention.