Brussels, 12/12/2008 (Agence Europe) - “Historic” was the word on everyone's lips in the European Council in Brussels on 12 December. With no resistance, EU heads of state and government approved the ambitious targets of the energy/climate change package, which seeks to reduce greenhouse gas emissions by 20%, to have 20% of the EU's total consumption made up of renewable energy and to achieve 20% saving through energy efficiency by 2020.
But it was the unanimous agreement on the arrangements for implementing the package, ensuring fairness and solidarity among all 27 member states with such different economic conditions and energy situations that so enthused both French Presidency and Commission. Inevitable there were concessions: Polish power plants will not pay for all their allowances until 2020 (a clause will bring a review in 2018), and 70% of allowances to be granted free until 2013, 100% free allowances to be granted to manufacturing industry at greatest risk of carbon leakage, and a financial solidarity clause based on the award of 12% of allowances to be put up for auction with the revenue to be used for the least wealthy member states. Managing to achieve political consensus in record time on a raft of measures presented only in January 2008 and of great economic consequence was quite a feat and involved the skill of both a marathon runner and a balancing act. Everyone has paid tribute to the energy shown by the outgoing French Presidency. There was none of the expected hue and cry. Of course, bilateral meetings were needed between the Presidency and the Commission and each of the delegations that had pressing specific demands (Hungary, Poland and Germany), opposed to the delegations which fully supported the package (United Kingdom, Netherlands, Denmark and Spain). Through the night of Thursday to Friday, expert debate was relentless to be able to submit a new compromise text, on which heads of state and government were finally able to agree on Friday afternoon. Germany was able to agree to the solidarity mechanism increased by 2% of additional allowances for the new member states that were catching up economically since it was given exemptions to the pay allowances for all non-relocatable industry. Belgium, which was determined to hold on to its chemical industry, without formally requesting free allowances, was satisfied with the solidarity clause which was of benefit to it. Poland said it got what it had been asking.
“This Council will remain in the annals of Europe. There is no other continent in the world which has adopted such binding rules unanimously. The targets haven't changed: they are the same three 20s. We have shown that the crisis could not be used as an excuse; on the contrary, it strengthened our desire to go further towards sustainable, green growth and change our energy sources,” Sarkozy told press. He opined that, at the end of the day, “negotiations were much easier than had been predicted”. The reason for this was that, “the only thing we did was to negotiate exemptions for countries like Poland which are 95% dependent on coal for their electricity production” or Hungary which has considerable economic and energy problems. This was nothing more than what was to be expected, opined Sarkozy, stressing that if things hadn't been done to help that country, the package would have seen a 200-300% increase in electricity prices: “That is not socially acceptable”. He added, “The Poles and the others have the same obligations, but they have been allowed to channel some of the free allowances towards electricity generators according to a sliding scale that will take them to zero by 2020”. Just as the UN climate conference in Poznan, a springboard to the Copenhagen conference in December 2009, was drawing to a close, Sarkozy hailed the positive signal that the European Council has sent the rest of the world. He said that, at a time when the US has “a President elect who has put the environment at the heart of his priorities”, to have had to announce that the EU was about to give up its priorities would have been “terrible”. The message the EU was sending to its partners was, “We've done it, now you do it,” said Sarkozy, suggesting that Europe can only expect to be listened to if it sets the example.
When asked about the attitude of Italy, Sarkozy praised Silvio Berlusconi, since the agreement with Italy (which had requested a one-year delay in setting the figure underpinning the agreement) had ultimately been “quite easy”. Sarkozy added that Germany would be allowed to assist new less-polluting power stations between 2013 and 2016 to avoid competition distortions with Polish power stations. Polish Prime Minister Donald Tusk had been “a tough, demanding negotiator, but fair, and he had been true to his word,” said Sarkozy, before adding that the European Parliament, which has co-decision powers, “has been of great assistance to us”.
European Commission President José Manuel Barroso spoke of an historic unanimous agreement on the most ambitious raft of measures ever brought forward. “Yes, Europe has come through this test of its credibility with flying colours. Our message to our international partners is, 'Yes, we can do it, so, then, you can do it',” he said alluding to Barack Obama's campaign slogan. “We ask the United States to join us in leading the world in this global effort: let us create a transatlantic plan for climate, for the world,” Barroso said, hoping that other would follow Europe's lead on the march to a low-carbon, innovative and job-creating economy driven by new technology.
In the conclusions document, the European Council confirms the EU's commitment to increase its greenhouse gas emissions target to 30% as part of an ambitious, global fight against climate change for post-2012 to be decided upon by the United Nations in Copenhagen in December 2009 as long as other developed countries pledge to make similar cuts and emerging economies also contribute in line with their own responsibilities and capacities. The European Commission will make a detailed analysis of the outcome of the United Nations talks in Copenhagen and report back to the March 2010 European Council.
Concerned to express respect for the European Parliament as co-legislator, the European Council welcomed the work carried out with the European Parliament that made it possible reach agreement in principle on the four legislative proposals in the package and full agreement on the draft renewable energies directive, the draft directive on fuel efficiency and the draft directive on reducing car CO2 emissions. The leaders urged the EU Council of Ministers to seek agreement with the European Parliament based on these political guidelines in order for agreement to be reached in first reading on the entire package before the end of 2008! The final three-way meetings between the European Commission, European Parliament and council will be held on Saturday 13 December 2008, the day after the European Summit, in order for it to be possible for the European Parliament to study the heads of states' guidelines and decide on them in Strasbourg on 17 December.
Carbon leakage. If no international deal is forthcoming, then at-risk industrial plants that may leak a lot of carbon would be granted 100% free quotas from 2013 to 2020 based on a benchmark of the best available technology (10% of the lowest carbon footprint plants in the EU). Beyond which, quotas would have to be paid for. This would mean everyone being covered (Finland for its wood and pulp industry, Germany for cement, lime and chemicals and Italy for glass, paper, and steel mills with electric furnaces.)
The criteria used in drafting the list of industries and sub-sectors at risk of carbon leakage will be 5% of extra-EU trade and more than 10% of direct and indirect additional costs arising from the auction process, with one of these two criteria sufficing if it exceeds 30%.
For industries not at risk of carbon leakage. The auctioning rate to be reached in 2020 is set at 70% with a view to reaching 100% in 2027, bearing in mind that the initial level in 2013 is set at 20%. Germany and Italy were calling for 80% of free quotas right the way through. A deadline for the introduction of 100% of paid quotas has been set as 2025, five years later than initially foreseen in the European Commission proposal.
Solidarity Mechanism. 88% of the total quotas allocated for auction will be distributed among the 27 EU Member States with the remaining 10% being allocated to the 19 poorest nations (including the new EU Member States) or the countries with high growth potential. The 2% of additional quotas to be allocated to the new Member States is a kind of subsidy for the work they carried out from 1999 to 2005, when they cut their greenhouse gas emissions by at least 20%.
The alternative proposal negotiated by Angela Merkel and Donald Tusk to set up an Energy Fund of €40 billion to €50 billion from the EU budget to fund investment to ensure security of supply in the EU did not win the backing of other countries in central and Eastern Europe that are part of the 9-nation coalition.
The reference year for the allocation of emissions quotas per Member State will be the higher of the following: the year 2005 or the period 2005-2007.
Upon Germany's request, a paragraph in the conclusions documents stipulates that between 2013 and 2016, Member States will be authorised to use money raised at auction to provide up to 15% of the investment costs of building high performance electric power stations.
If closure of the Ignalina power plant leads to a sharp rise in emissions, Lithuania will be entitled to additional emissions quotas.
Funding for geological carbon capture and storage. Europe's leaders agreed that 300 million quotas (the European Parliament was calling for 350 million) can be used to fund geological carbon capture and storage measures.
Pre-allocation of part of auctioning revenues: The European Council notes the will of member states to devote at least half of the manna thus generated to action in favour of combating climate change. In the case of the international agreement on post-Kyoto, those who so wish will devote part of these receipts to addressing the global warming problem in development countries.
“This is a great decision not only for EU countries but also for global partners”, said Jean-Claude Juncker who consistently argued in favour of future generations.
Brian Cowen, Irish Prime Minister, stressed that his country supported the Presidency and the Commission in pushing for a package that was stronger than the one finally agreed but said that the agreement is a good one as it gives Ireland the flexibility that it wanted for achieving its objectives. Ireland wants to see an acceleration in the process to see a deal next year and says that “today, the European Union has shown the way”.
Although he considers that “it's a very important outcome” as it shows Europe's leading role, Hungarian Prime Minister Ferenc Gyurcsany “criticises the decision-making process” which allows the Commission and the Presidency to change the calculation basis approved in 2007 for the reference year “without any high level debate”. Hungary “can accept this compromise” but notes that the solidarity mechanism, increased from 10% to 12%, gives nothing to Hungary which only receives 0.001% of GDP (one billion euro for 8 years).
“Europe is leading the way toward a global agreement that is more ambitious, more far reaching than the Kyoto agreement”, José Luis Zapatero, Spain's Prime Minsiter, was pleased to say, recalling that the agreement will demand an effort from all member states. In his view, the agreement on renewable energies and biofuels is a good compromise for his country and will provide the “base for reducing Spain's energy dependency”.
With this agreement, “Europe is in the forefront and is carrying the banner for action on climate”, welcomed Silvio Berlusconi. The Italian prime minister stressed the importance of the “revision clause” which, from March 2009, will make it possible to review European measures on the basis of the results obtained in Copenhagen. While the EU wants to set an example, there is no question of its being on its own to pay the bill if China and India do not commit themselves to it too! If derogations to pay quotas for manufacturing companies, like textiles, had not been granted, “Italy and Germany would have been faced with decades of difficulties”, said Franco Frattini, Foreign Minister, delighted that Mr Sarkozy had understood what was at stake. Also, 300 million quotas for CSC financing - that is over €10 billion (therefore far more than the 4 or 5 billion corresponding to the value of the 100 million quotas called for by the Council of Ministers), Mr Frattini was pleased to say. He is also pleased that the intermediary targets for renewables are indicative and no longer binding, which gives transitional flexibility for programming investments, facing up to the urgency of the crisis.
Polish Prime Minister DonoldTusk did not conceal his satisfaction at seeing the crucial question for the Polish energy sector resolved as well as the interests of Polish consumers resolved. “For a state that depends on coal at 95%, it was a matter of to be or not to be”, he said. The PLN 60 billion that Poland will receive between 2013 and 2020 under the solidarity mechanism will serve to modernise the energy sector. “We have been given (…) an enormous opportunity”, said Mr Tusk.
Chancellor Angela Merkel said she was very satisfied that the objectives established under German Presidency will be fully met even if some minor adjustments have been made. She stressed that Germany was very constructive in helping the eastern countries. “If Poland benefits from a transitional derogation to auctioning for its electric power plants, the world will not collapse”, she told the press. From the point of view of environmental NGOs, it is the ambition of the package that has been shattered with all the exemptions granted. (A.N./M.B./Aby/H.B./C.D./transl.jl)