David Cameron: Time for innovation to tackle Climate Change

He will also argue for a new carbon pricing framework which would apply right across the British economy, using the tax system and market mechanisms to encourage investment in clean new technologies which will transform the way we do business and reduce our impact on the planet. The Quality of Life Policy Group will be looking at options for such a framework but the overall effect would be fiscally neutral - activities which produce more carbon emission will cost more; those that produce fewer emissions will cost less.

David Cameron will also address the arguments of climate change sceptics, outline the scale of the climate challenge facing Britain and the world, and set out his six essential principles for an effective long-term strategy for tackling climate change:

• International partnership – challenging Tony Blair to make clear his support for "an effective, equitable international agreement to succeed the current Kyoto targets from 2012", with "binding targets."

• The need for targets as well as technology – "without the incentive provided by political frameworks and international agreements, the investment needed in new technology will not come fast enough on a sufficient scale."

• A belief in green growth – "it is simply not true to say that tackling climate change will inevitably lead to a reduction in our standard of living or quality of life. In fact, it's the other way round…That's what I mean by green growth."

• Faith in the power of markets – Government to give a clear lead to business and consumers through "price signals that enable people and organisations to make rational decisions"; supporting the EU Emissions Trading Scheme and developing a domestic emissions trading scheme "that works."

• Political consensus – for example the cross-party agreement between the Conservative, Liberal Democrat and Scottish and Welsh nationalist parties including "binding year on year reductions in carbon emissions"; "the impact of the decisions we make today will last vastly longer than the lifetime of any one government or political leader…we can't let short term political calculation get in the way. That would be a betrayal of future generations."

• Shared responsibility – "we have a shared responsibility to tackle climate change. Government – national and local – business, the voluntary sector, families and individuals all must play their part."

David Cameron will say:

"Tackling climate change is a key part of my ambition for the Conservative Party to lead a new green revolution…I want to recapture climate change from the pessimists. Of course it presents huge challenges. Of course the issues are complex. Of course it will require us to change. But when I think about climate change and our response to it, I don't think of doom and gloom, costs and sacrifice. I think of a cleaner, greener world for our children to enjoy and inherit. I think of the almost unlimited power of innovation, the new technologies, the new products and services, and the progress they can bring for our planet and all mankind. And I think of the exciting possibilities that may seem a distant dream today – changing the way we live to improve our quality of life. We've all got to get positive about climate change."

"To those who say that nothing serious is happening to our climate. See what is happening to the glaciers. See how the summer and autumn arctic ice sheet has thinned by 40% in recent decades.

"This is not a natural phenomenon. It has been caused by the way we live. To those who say it is too late to avert catastrophe, I say that it is our duty to try. It is possible to take a lead and make a difference. We can change how we get around; we can change how we build our homes; we can change our lifestyles, change our industrial processes, change our working practices. It's called progress. It's what mankind has always done. And if we press ahead in tackling climate change, we'll be accelerating progress, not holding it back. So to those who say that it's too costly to tackle climate change, that the risks aren't worth it and we should try to live with it, I say this. We have the ingenuity and the creativity to make this work to our advantage. We can turn the costs of tackling climate change into benefits – not vague benefits way into the future, but real benefits, right here, right now.

Carbon pricing

"Tackling climate change will require genuinely fresh thinking. We must not be afraid of using the tax system and market mechanisms to encourage investment in, and take up of, clean new technologies which will transform the way we do business, create new markets, and reduce our impact on the planet.

"We must make sure that the various methods we use amount to a coherent whole, ensuring the carbon is priced effectively. It isn't the job of government to pick technologies. It isn't the job of government to tell people how to live their lives. It is the job of government to set a rational framework within which producers and consumers recognise the environmental cost of carbon because it comes home to them as an actual money-cost. I have asked our Quality of Life Policy Group and those involved in our Energy Review to develop just such a framework for carbon pricing right across the British economy, ensuring that the overall effect of the framework is fiscally neutral. Activities which produce more carbon emission will cost more; those that produce fewer emissions will cost less. And the net effect will be neutral.

The Climate Change Levy

"One particular aspect of our new framework for carbon pricing will be the development of a more effective replacement for the UK's Climate Change Levy. When I point out that UK climate change emissions have risen under Mr Blair's Government, all he ever says is that we opposed the Climate Change Levy, as if the Climate Change Levy were the complete and only answer to climate change.

"The Climate Change Levy is a tax on energy consumed by business. It fails to make sufficient distinction between energy produced from low carbon sources and energy produced from high carbon sources. The Climate Change Levy should therefore be replaced by a Carbon Levy which better distinguishes between high and low carbon production of energy, and which retains fiscal neutrality.

"I have asked our Quality of Life Policy Group and those involved in our Energy Review to recommend what form the new Carbon Levy should take, as part of a package of measures to price carbon and to deliver lower carbon emissions across the economy. In particular, I have asked the group to consider whether the Carbon Levy should operate as a business tax (like the Climate Change Levy) or as a market mechanism, in which low carbon energy production and business use is encouraged through tradeable credits.

"So let me make it clear: under a Conservative Government, the Climate Change Levy will be replaced by a more effective method of reducing carbon emissions, as part of an overall framework of carbon pricing right across the economy."

Decentralised Energy

"Unlike Norway, which is blessed with so much hydro-generation, in Britain, the electricity sector is the biggest single contributor to UK carbon dioxide emissions. Globally, this sector contributes close to 40%.of climate change emissions, and therefore has to be a major focus for our efforts to tackle the problem.

"We must support international initiatives, such as Kyoto's Clean Development Mechanism, to encourage cleaner energy projects in developing countries. But I believe that Britain will only be able to credibly show international leadership on energy if it does so at home. The British model of electricity generation and supply was devised in the 1930s and 1940s around remote coal plants; these survived the reforms of privatisation almost intact. This system wastes two thirds of primary energy inputs and perversely rewards increased energy consumption.

"Research suggests that Decentralised Energy may offer the best way to unlock and harness the potential of renewable energy technologies.

"It's generated on a smaller local scale, is closer to, and could even be produced by, the communities and consumers it serves, and also has the benefit of delivering energy to consumers in a far more efficient method. There is a large family of technologies currently at our disposal including: gas-fired Combined Heat and Power, biomass Combined Heat and Power (including syngas and biogas), photovoltaic technology, hydrogen fuel-cell Combined Heat and Power, wind turbines (on and offshore), small-scale hydro, and in development, wave and tidal energy.

"Decentralised energy also includes dedicated heating technologies such as solar thermal, and the geo-thermal borehole technology such as the one at Nydalen Business Park which I will be going to see later today. Geo-thermal power is just one of many emerging sustainable technologies which countries across Europe are adopting and developing, and which could play a far greater role in the provision of UK energy.

"However, our Government has singularly failed to match its words with deeds, and Britain is lagging behind. This is crazy…we should be viewing this sector as an opportunity for British industry to lead the world. It should be a time of huge excitement and expansion for green energy suppliers; with attractive innovations turning into real commercial benefit for individual companies and real competitive advantage for our economy as a whole."