Brussels, 23/01/2008 (Agence Europe) - On Wednesday 23 January, the European Commission presented the packet of concrete measures it has been preparing for months. This has seen some bitter negotiations with member states, in an effort to translate them into texts that are as binding as the objectives of the European Council of March 2007 on energy and climate (EUROPE 9583 and 9581).
It embarked upon a real balancing act to respond to the urgent need of providing an effective response to the challenge of climate change and promoting renewable energy and getting the right dose in sharing efforts by each member state, without harming European competitiveness. The Commission was put under much pressure, which is testimony to the complexity of the stakes at play. The cost/efficiency relationship and the principle of equity as a guarantee to fairly distribute proportional efforts to be made by member states, guided the elaboration of the package, consisting of five proposals whose architecture and details were presented to the press on 23 January. The European Parliament got a taster of it at the special plenary session the same day (EUROPE will be returning to it).
The president of the Commission, José Manuel Barroso said that this involved, “the most complete package of measures in the world”, which would provide the EU with tools to reduce the 1990 (reference year for Kyoto Protocol) level of its emissions by 20% by 2020 - multilateral objective on which the EU made a firm commitment and which it is prepared to increase to -30% if an international agreement can be concluded before the end of 2009 on a global system for post-2012, involving efforts comparable to those of other industrialised countries. At the same time, the package gives the EU the means to increase the renewable energies share to 20% by 2020, including 10% for sustainable biofuels (see other article) and to now examine toll and carbon storage technology development and to have updated guidelines to frame state aid for environmental protection (see other article). Mr Barroso said that the objective of developing the global carbons market was at the heart of their proposal to establish a world carbon price. He highlighted the opportunities to European by way of these “ambitious measures in terms of innovative investments that had potential for growth and jobs” but which were also attainable. Barroso recognised that although implementation had a cost, this should not go over 0.5% of European GDP a year by 2020. he added that this should be compared to the cost of doing nothing, which the Stern report put at between 5 and 20% of annual GDP.
Stavros Dimas, the Commissioner for the environment said that he was very happy that the measures, “still unimaginable three years ago” had been adopted and which strengthen the EU's position in international negotiations for a global agreement on the post-2012 regime. Pre-empting criticism from all those who, following the line of the Greens at the Parliament and environmental NGOs, deplore the fact that the EU is at this stage satisfied with the low level unilateral objective, Dimas explained, that they would unilaterally reduce EU emission by 20% but there was a trigger mechanism in their proposals to adjust the mechanism to -30% if it is concluded internationally. The Commission said that the revised emissions trading system was a key instrument to reduce greenhouse gas emissions and would serve as a model to other countries to elaborate comparable systems. Dimas was also convinced that tolls and carbon storage would prove absolutely necessary in the future, especially for reducing global emission by 2050 by half.
The Commission's proposals aim to set up a legal framework to guarantee the safe and ecological practice of tolls and carbon stocking in geological mines under the sea. It also seeks to encourage member states to develop the potential in this technique and in pilot projects.
Revision of the Community emissions trading system (ETS) proposed by the Commission for the third period of trading beginning 2013, aims to improve environmental and economic efficiency in an instrument that is well developed (ETS transactions in 2006 represented more than 80% of the monetary value of carbon trading on the world market and more than 60% of their total volume) but efficiency has been undermined by the over-allocation of quotas practised by member states over the first experimental period (2005-07) and the subsequent collapse in carbon prices on the market.
National ceilings for quota allocation will be replaced by a European ceiling which will allow a 21% reduction in emissions by 2020, compared with 2005, the only year for which the EU has verified data on the real emissions of all member states. In 2005, the EU stood at -6% of emissions (compared with 1990). A further 14% reduction on 2005, therefore, will be needed.
Currently limited only to CO2, the ETS will be extended to include the six greenhouse gases covered by the Kyoto Protocol/ Methane (CH4), nitric oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).
The Commission also proposes to extend the scope of the scheme (which currently covers 10,000 major industrial installations including electric power plants, refineries, steel plants, paper mills, chemical plants) to all activities, such as aviation, the emissions of which can be monitored, reported and verified reliably. Small industrial installations emitting less than 10,000 tonnes of CO2, will be exempt from the system, in order to limit the administrative burden.
The Commission's desire to put an end to free “pollution permits” by putting them up for auction from 2013 is another major innovation. These auctions could generate between €25 and 50 billion per year, the Commission estimates. Member states will be encouraged to use this revenue wisely, by investing in R&D or in innovative technologies (such as renewable energy, carbon capture and geological storage) which will help the EU to move towards being an environmentally friendly economy. The Commission also wants to encourage member states to invest a proportion of the revenue in technology transfer towards developing countries.
The electricity sector, which is responsible for most of the EU's emissions, will have to pay for its permits from 2013. For the other sectors, such as aviation, the proportion of the quotas put up for auction will increase gradually reaching 100% in 2020.
Sensitive to the arguments of the industries which are heavy users of energy (such as steel making, the petrochemical industry, the production of ammonia and nitric acid), which threatened to relocate if they have to pay the cost of competition from third countries which do not have the same constraints, the Commission finally gave itself the room for manoeuvre to leave the decision until 2011 on what will happen in 2013 to energy intensive industries facing strong international competition , depending on whether or not an international agreement has been reached creating fair competition conditions at global level.
If there were to be no agreement, the Commission reserves the right to act. There are three options: the free allocation of all quotas; international sectoral agreements on emissions reduction; or the inclusion of similar imports in the ETS - a form of carbon import tax.
“We have various options for the industries which are heavy consumers of energy if there is no agreement on post-2012, but our aim is to get an international agreement. We will do all in our power to achieve this. One of the elements of this international agreement will be precisely how to deal with energy intensive sectors,” said Commissioner Stavros Dimas. He said that “free allocations should not prevent us from achieving our ceiling”, which will remain a 21% in emissions by 2020.
On how efforts are to be shared for all the sectors not covered by the ETS, the Commission proposes that sectors like transport, buildings, agriculture and waste, which currently are the responsibility of national governments, should also have a larger share in the collective effort by working to reduce their emissions by 10% compared with 2005 levels.
The objective is set out in ceilings for each member state, as a function of its GDP per inhabitant. There will be a range of effort from -20% to +20%. Here are the figures proposed: Austria: -16%; Belgium: -16%; Bulgaria: +20%; Cyprus: -5%; the Czech Republic: +9%; Denmark: -20%; Estonia: +11%; Finland: -16%; France: -14%; Greece: -4%; Hungary: +10%; Ireland: -1%; Italy: -13%; Latvia: +17%; Lithuania: +15%; Luxemburg: -1%; Malta: +5%; the Netherlands: -16%; Poland: +14%; Portugal: +1%; Romania: +19%; Slovakia: +13%; Slovenia: +4%; Spain: -10%; Sweden: -17%; the United Kingdom: -16%. If, as the EU hopes, there is an international agreement requiring the EU to set a 30% reduction in emissions by 2020, national ceilings will be amended. The European Commission recommends the increased use of market instruments such as the clean development mechanism (CDM) and joint implementation, giving the right to emissions credits against technology transfer to developing countries or investment in third countries with economies on transition. (A.N.)