Global Economics

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

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.

Mr Turmes agreed with President Barroso that the world was watching Europe closely, but told EUobserver that in fact, "This is an impossible message to send to the third world. We're only going to make a fifth of the effort ourselves at home and get everyone else to do our work for us?"

He said he and Ms Hassi will "try to right this situation in Strasbourg [when the whole sitting of the parliament votes on the deal] next week."

"We'll see if we can't organise a political majority against it."

EU leaders also agreed to funding carbon capture and storage projects by committing revenues from the auctioning of some 200 million emissions permits.

UK Liberal MEP Chris Davies, the leading advocate in the European Parliament of the experimental technology—which would see carbon scrubbed from the emissions of coal power plants and steel factories—warned that only an allocation of 350 million permits would be sufficient to test the full range of CCS technologies.

"For me this is the bottom line," he warned. "I will halt the legislation if the Parliament's demand is not met."

CCS technology is opposed by the majority of European environmental organisations, who say the technology will not be delivered in time to aid the battle against climate change, encourages the use of coal and is a very water and energy intensive process.

How ETS revenues are spent

Member states will get to spend the revenues resulting from the auctioning of emissions permits as they wish. MEPs had preferred that a certain percentage of the ETS revenues be dedicated to green measures and adaptation to climate change in the developing world.

In the final deal, the member states simply "note a willingness" to spend half the ETS revenues on green measures, while "part of this amount" will be spent on third world adaptation, without specifying how much or that countries must do so.

Finally, the EU's commitment to make the shift from a 20 percent cut in emissions to a 30 percent cut as long as an international agreement had been reached that would see other western powers making similar cuts has been dropped.

Development NGOs said that the EU had in effect abandoned its targets. Matt Grainger, of Oxfam told this website: "The 20 percent target is a mirage. Europe is not going to reach its targets by domestic cuts."

His colleague, Elise Ford of the group's Brussels office, said: "Europe's package looks too much like business-as-usual tied up in a green ribbon."


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