In early 2008, the European Commission presented its highly ambitious plan to reduce greenhouse gas emissions. Two stumbling blocks stand in the way: industry’s obvious reluctance, and the unanswered but crucial question of how to fund the proposed measures.

The European Commission presented an important series of measures on energy and the climate in late January. It even described the plan as “historic”. Included are measures to reduce energy consumption, increase the share of renewable energies and boost energy efficiency. But controversy surrounds the proposed plan.

Nuclear power ignored in the EU document

The main goal is to cut greenhouse gas emissions by at least 20% by 2020, compared with 1990 levels. Brussels even promised a 30% cut if an international agreement is reached. Member states would have to ensure that renewable energies represent at least 20% of their energy consumption by 2020 (average for the 27 countries), compared with 8.5% in 2005. So that the EU’s poorest countries are not penalized, the directives propose to distribute the effort among the 27 member states based on per-capita gross domestic product (GDP). Thus, France must raise its share of renewable energies from 10.3% to 23% of the total. Nathalie Kosciusko-Morizet, the French minister for the Environment, said at the end of January that “France is a special case because of its reliance on nuclear power.” She added: “France has requested greater recognition of the specific nature of its energy production and consumption system.” Nuclear power is ignored in the EU document and is not considered a renewable source of energy. Hoping to include nuclear power, France had previously argued in vain in favor of quotas on energy with “low carbon emissions”.
In transportation, 10% of all fuel used in European vehicles must be biofuels such as ethanol and biodiesel by 2020. Many consider this an unrealistic target, with potentially harmful consequences for the planet. “For the first time in history, we propose to promote sustainable biofuels,” said Energy commissioner Andris Piebalgs. To be consistent with the EU’s environmental goals, plant-based biofuels will have to reduce greenhouse gas emissions by 35% compared with gasoline or diesel fuel. They may not be manufactured with raw materials obtained from virgin forests or natural preserves.

Plan price tag: 90 billion euros in 2020

For EU Commission President José Manuel Barroso, “this is the most comprehensive package in the world”. It tackles the issue of climate change at an estimated cost of “3 euros per person per week.” Oil and gas imports would drop by 50 billion euros, or 0.3% of GDP. Brandishing the report by Nicolas Stern, who attempted to calculate the cost of global warming (5-20% of the world’s GDP), Commission President Barroso considered that the “cost of doing nothing” would in any event be higher than the cost of the recommended measures. The tab for Europe is estimated at 0.6% of GDP, or 90 billion euros in 2020. CO₂ emission credits received under Kyoto Protocol mechanisms would reduce it to 0.45% of GDP.

Businesses required to buy CO₂ emission quotas

One of the landmark measures of the Commission’s plan is to require the European Union’s most pollution-intensive industries to pay for previously free “rights to pollute” starting in 2013. The power generation sector, particularly coal-, gas- and oil-fired plants, which generate a large share of the CO₂ emissions, will have to pay in full for these rights to pollute, to be sold at auction as of that date. The Commission stressed that this pay-to-pollute system will “gradually” include other economic sectors, such as the aluminum industry, ammonia production and air transportation. Commission president Barroso nonetheless indicated that Europe would “take action” if an international agreement on the climate is not reached, particularly with the United States and emerging countries, to reduce CO₂ emissions. What this means in practice is that the most “energy-greedy” industries would be able to obtain permits to pollute “free of charge”, while importers of competing non-European products would have to pay for them.

Seven member states ask for clarification

“No member state considers its target to be unattainable,” affirms José Manuel Barroso. Energy commissioner Andris Piebalgs tempers that, without naming the dissidents, with “I would say that at least 20 of the 27 member states have accepted their national targets so far.” In fact, reactions from the leaders of the 27 member states are mixed. At the end of February, seven EU countries asked for clarification on future rights to pollute for Europe’s heavy industry, concerned that the proposed measures might weaken their companies. The ministers in charge of Industry in Austria, the Czech Republic, Finland, France, Germany, Hungary and Luxembourg argued that “Our industries need clarification concerning their contribution to the fight against climate change.” In a joint letter sent to the Slovenian presidency of the EU council and to EU Industry commissioner Günter Verheugen, these countries wrote that “medium and long term investment planning requires certainty on the future system as soon as possible.” They also requested, “before 2011”, a review of specific risks to certain industries that must reduce pollution while competing with imports from less responsible countries. The seven countries recalled the “fundamental” importance of the “European Union’s resolve” to establish rules on unfair competition, if necessary by way of a carbon tax on imports from outside Europe. “We must be careful not to weaken the competiveness of our companies and the employment of our workers unilaterally with these measures,” stated the seven governments. “We cannot accept a relocation of jobs and production centers because of increased costs incurred to reduce CO₂ emissions,” they added.

Commission hoping for approval of its plan before the end of 2008

The EU Parliament and the Commission must approve the draft directives as soon as possible if Europe is to influence international negotiations at the next climate conference in Poznan, Poland in late 2008 or, at the very latest, at the next conference in Copenhagen at the end of 2009. The president of the Commission hopes to receive a green light from Parliament and the member states by the end of the year. He gave assurances that Slovenia, currently presiding the EU, and France, which takes over in July, are both “determined to act expeditiously.”