ISIS Report 22/02/08
Europe Unveils 2020 Plan for Reducing C Emissions
Europe’s lead generally welcomed but will others follow? Dr.
Mae-Wan Ho
A fully
referenced version is posted on ISIS members’ website. Details
here
A package of measures to encourage reducing C emissions
The European Commission
unveiled a ’20 20 by 2020’ action plan to tackle climate change on 23
January 2008: how to reduce C emissions by 20 percent and to have 20 percent
of all energy coming from renewable sources by 2020 [1].
This sets a clear medium-term goal for cutting C emission
that is also a minimum [2], and if other major economies sign up for comparable
C cuts, the EU will be willing to step up its efforts. That is to prevent
carbon emissions simply being moved offshore. If European cuts are too high
compared with elsewhere, the energy-intensive industries will simply relocate.
Europe’s
2020 plan may encourage other major economies to follow its lead and put in
place similar statutory requirements in reducing emissions. The plan is a
package of market and regulatory measures proposed to the European Parliament
and Council of Ministers by Commission President José Manuel Barroso. The
proposals could become law in the EU’s 27 member states as soon as 2009 [3].
A major change is in the
EU’s emissions trading scheme (ETS) in that free allowances for C emissions
will be abolished. Other proposal include sectors not covered by the ETS,
such as transport, agriculture and buildings, which will on average have to
reduce emissions by 10 percent of 2005 levels by 2020 [4].
The Commission also
calls for a 10 percent biofuel component in vehicle fuel by 2020; and to allay
environmental concerns, it will outline stringent sustainability criteria
for the use of biofuels.
There will be new
rules on carbon capture and storage, and on environmental subsidies.
Major change to emissions trading scheme
Under current rules, which
will remain valid until 2012, the 10 000 or so facilities that participate
in the ETS get free emission allowances from national packages negotiated
by governments every year [3]. If a plant emits in excess of its free allocation,
it must buy additional allowances. An allowance to emit one extra tonne of
CO2 costs around €21 on Europe’s carbon-future markets
in January 2008.
Because governments
have tended to over-allocate free allowances in the past, the Commission suggests
doing away with national allocations and introducing instead a single cap
throughout the European Union based on historic emissions and expected trends.
Under the new rules,
which come into effect 2013, power plants and energy-intensive industries
will no longer receive a generous allocation of emissions allowances free
of charge. Instead, they will have to buy all allowances at auctions organized
by the member states. But heavy industries that face strong international
competition, including steel, aluminium, concrete and paper, will still get
free allowances; although a consultation in 2011 will review this exemption.
In addition, the
overall number of emissions allowances will be substantially reduced during
the third trading phase starting in 2013: 1 974 millin tonnes compared with
2 080 tonnes today, reducing further yearly to 1 729 million tonnes by 2020.
This would mean that emissions by all participants in the ETS – which account
for about half of the EU’s total CO2 emissions – would be reduced
by 21 percent relative to 2005. The price of emissions allowances is expected
to rise as they become scarcer, making it increasingly profitable for plant
owners to switch to cleaner fuels, or to invest in clean-energy technologies.
Cross party support for Barosso
The Commission’s proposals get cross-party
support in the European Parliament, even though the cost of the package is
estimated at €90 billion, or 0.6 percent of European Union’s gross domestic
product in 2020 [3]. Barroso told parliament that implementing the package will cost €3 per week per EU
citizen, but inaction will cost them €50-60 per week. The Commission estimates
that by 2020 a household’s overall energy bill would rise by an average of
€150 per year.
The package was generally
welcomed by member states. British parliamentarian Graham Watson called the
package “the most important act of the Barroso commission so far.”
Stefan Kleeberg,
a carbon-market analyst with the 3C group near Frankfurt, Germany
said, “Knowing the post-2012 trading rules early will stabilize the market
and will ultimately make it more efficient.” He forecasts a price of €24-30
per tonne of CO2 at auctions.
Different national targets
The overall share of renewable
energy in the European Union’s final energy consumption is to increase from
the present 8.5 percent to 20 percent by 2020, with specific targets for each
member state [4]. Countries that fail to deliver the legally binding target
might face financial penalties. UK’s target is 15 percent from
its present value of 2 percent, while Sweden’s target is 49 percent from its
present value of 28 percent.
The national targets for
emissions not included in the ETS also vary considerably, Latvia, Poland and
Romania can increase C emission
by 17, 14 and 19 percent respectively, while Denmark, Sweden and the UK must
decrease emissions by 20, 17 and 16 percent respectively.
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