23 January 2008

Tough European targets on cutting emissions to cost Britain £6bn a year

Robin Pagnamenta and David Charter in Davos

The Times - January 23, 2008

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Britain may face a bill of more than £6 billion a year to meet tough new emissions targets due to be published today by the European Commission.

To try to tackle global warming, all 27 European Union countries will be set targets for renewable energy use to ensure that 20 per cent of EU energy comes from renewables by 2020. The UK’s renewables target is expected to be set at about 15 per cent by 2020.

José Manuel Barroso, the European Commission President, said this week that the cost of the proposals across all member states would be €60 billion (£44 billion) a year, or 0.5 per cent of gross domestic product.

Ben Warren, of Ernst & Young’s renewable energy team, said that Mr Barroso’s comments indicated that “the investment to be made in the UK alone based on 2006 GDP would equate to £6.5 billion per year”. He said the EU targets would be “extremely challenging” to meet but were needed to create a sustainable and long-term market for renewable energy.

The European Commission measures represent an ambitious attempt to force through an agreement made by EU leaders last March to cut emissions of the gases that cause climate change by 20 per cent by 2020, against 1990 levels. However, the announcement has triggered fierce argument over the effects on European jobs and competitiveness.

The Commission’s draft plan for the next phase of its emissions trading scheme is expected to include an auction for permits to emit carbon dioxide. Industries using a lot of energy could be forced to spend ever-higher sums and critics fear that the plans could lead to a loss of jobs and investment.

Mr Barroso said that doing nothing was not an option. The price of inaction on climate change “could even approach 20 per cent of GDP”, he said. As well as a rift with industry, Mr Barroso is facing criticism from the United States. An attempt to mend trade relations with the US will be made at the World Economic Forum in Davos this week after tension arose over suggestions that US exporters may face “carbon tariffs” from Europe. The rift opened after Mr Barroso said that border charges could be used to protect European industries facing higher production costs as a result of buying permits for greenhouse gases.

British households face a long-term rise in energy bills to cover the cost of cutting carbon emissions, Paul Golby, chief executive of E.ON UK, said. E.ON was interested in participating in “more than one” new nuclear power station, while windpower would be the main focus of a £1 billion investment programme in low-carbon energy over the next five years, he said.

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