Keeping it clean: The EU summit
The EU sticks to its plans to battle climate change
The Economist.com, Dec 12th 2008
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OVER to you, President Obama. That was the message from European Union leaders at a summit on Friday December 12th, as they agreed that Europe would take a global lead in fighting climate change. But they also agreed to protect local heavy industry if the world’s biggest polluters did not follow suit, starting with America.
In theory, the Brussels summit for government chiefs from the 27 EU states was merely a tidying-up exercise. It was intended to spell out how Europe will fulfil promises already made back in March 2007 to make deep cuts in EU carbon emissions, to use energy more efficiently, and increase the use of energy from renewable sources, like wind, wave power and the burning of plant waste. Those promises—inelegantly dubbed the 20-20-20 plan—would involve cutting greenhouse-gas emissions by 20% over 1990 levels, obtaining 20% of energy from renewables and making 20% savings in energy use over forecast levels, all by the year 2020.
That was then. In the intervening months, leaders have seen booming economies slip into a nasty slump, prompting fears that they might slide away from their 2007 deal. In the end, the final summit conclusions preserved those headline promises, as well as a pledge that the EU would make 30% cuts in emissions if other big polluters agree to their own binding carbon limits at an important international meeting to be held in Copenhagen at the end of 2009. But political bosses agreed to make hefty concessions to countries with industries that emit lots of greenhouse gases, such as Germany and Italy, as well as ex-communist nations like Poland, that burn large amounts of coal to produce electricity.
The summit’s host, President Nicolas Sarkozy of France, rejected complaints from some environmental campaigners that the concessions granted had weakened European plans to fight climate change. No other continent on earth had imposed such tough rules on itself, Mr Sarkozy said. A failure to reach a deal would have sent a “historically” dreadful signal, he added, just at the moment that Americans had “finally” elected a president for whom the environment was a core priority.
The European Commission president, José Manuel Barroso, was in a still more expansive mood, inviting Barack Obama “to join Europe and with us lead the world” in fighting climate change. Mr Obama has expressed interest in market-based emissions trading schemes, such as the one adopted by the EU in 2005. In such schemes, companies in carbon-intensive sectors are awarded allowances to emit greenhouse gases which they can then trade (profitably if they are cleaner than the average and have allowances to spare—expensively if they are dirty and need extra permits to pollute).
A trading scheme remains at the heart of the next wave of EU action on climate change. Initial plans were to sell allowances to firms at auction, rather than give them away free, as mostly happens now. With recessionary winds swirling, the summit agreed big concessions to countries that worried about spiralling electricity bills for consumers, or job losses through “carbon leakage”: jargon for factory owners shutting up shop and relocating to parts of the world that do not penalise greenhouse gases.
A new clause allows the EU’s poorest, most coal-dependent countries to receive up to 70% of their allowances for industrial carbon emissions free initially. By 2020, however, their firms will have to buy all permits at auction.
Concerns over carbon leakage were met with a promise that, if other big polluters do not sign up to binding curbs at Copenhagen next year, heavy industrial sectors vulnerable to foreign competition would receive up to 100% of their allowances free—but only if they meet “benchmarks” for using the cleanest available technology. There will also be funds for developing carbon capture and storage (CCS) technology.
Eurocrats say that awarding free allowances will not harm Europe’s drive to reduce emissions, noting that allowances will be capped, and then steadily reduced in number each year. There will still be high costs for non-compliance with the plan, they argue. The concessions mean there would be no costs for firms complying with the plan, and in many cases windfall profits, as they pass on the nominal costs of allowances to consumers, despite receiving them for free. Such windfall profits have already earned some power generators in Europe billions of euros, sparking rows.
As the EU has already learned, fighting climate change is an intensely political business. Mr Obama is about to experience this for himself.
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