EU Climate Deal Slammed as 'Mirage'

Critics charge concessions will undercut the EU's plan to cut emissions 20% by 2012, and say the big winners are European industry and Eastern Europe's power-generating sector

By Leigh Phillips

European industry and the power generation sector in eastern Europe are the big winners coming out of deliberations between EU premiers and presidents on the bloc's climate package.

EU leaders were keen to trumpet that despite hard-hitting negotiations they had committed themselves on Friday (12 December) to maintaining their original target of a reduction of 20 percent of carbon emissions and an improvement in energy efficiency of 20 percent—both by 2020.

Calling the deal "historic", French President Nicholas Sarkozy said: "You will not find another continent that has given itself such binding rules."

"The objectives remain the same," he added. "Europeans can say: 'Look: We delivered. We did it.'"

Deliberately echoing the campaign slogan of US president-elect Barack Obama, European Commission President Jose Manuel Barroso told reporters: "We knew the world was watching us closely and they can now see that yes we can meet our targets, and yes you can too."

But on the road to 2020, at the level of detail, much has indeed changed and many of the concessions that member states such as Germany and Poland were demanding on behalf of their manufacturing and power sectors have been delivered.

Carbon leakage

Germany, Europe's manufacturing heartland, was worried that energy intensive sectors such as cement and steel production would be badly hit by the EU emissions trading system, under which originally they would be scheduled to pay for all their permits to emit carbon dioxide from 2013.

Such a development would force firms to move outside the EU to produce such goods and emit the carbon elsewhere—an alleged process known as "carbon leakage". Figures from environmentalists surveying such sectors dispute that carbon leakage is a significant phenomenon.

Under the deal agreed to on Friday, those sectors "at significant risk of carbon leakage" will be given their emissions permits free of charge. Significant risk is defined as producing a five percent increase in costs. Around 90 percent of European manufacturing thus falls within this category.

The quid pro quo is that such companies must first already be using the cleanest technology available in their particular production process. What defines what is the best technology will be benchmarks established by the member states themselves alongside the European Commission.

For those not at risk of carbon leakage, four fifths of emissions permits will be allocated for free in 2013, moving down to 30 percent in 2020. Only in 2025 will all such pollution permits be put up for auction.

Electricity in the east

Poland, which produces some 90 percent of its energy from coal, and much of eastern Europe were less worried about the effects of the EU's emissions trading scheme (ETS) on manufacturing than they were that the system would massively increase electricity prices.

In a concession to the eastern states, the EU leaders agreed to put up for auction only 30 percent of permits to pollute for their electric companies. By 2020, all emissions permits will have to be auctioned.

As an additional cushion for eastern Europe, 12 percent of emissions permits will be allocated to these countries.

Offsets

However, the bulk of emissions reductions will not be made in Europe. Polluters will be able to continue to emit but through Kyoto Protocol mechanisms pay for others in the developing world to make the reductions on their behalf.

All told, an expansion in the use by member states of these carbon "offsets" in the EU summit deal means that around 80 percent of European carbon emissions, say Green MEPs Claude Turmes of Luxembourg and Satu Hassi, of Finland—two of the MEPs who were responsible for shepherding parts of the climate package legislation through the European Parliament. They make their calculations based on European Commission figures.

The final figure for the amount of emissions reductions to be made through offsets is however much disputed.