Europe’s lead generally welcomed but will others follow? Dr. Mae-Wan Ho
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 .
This sets a clear medium-term goal for cutting C emission that is also a minimum , 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 .
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 .
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.
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 . 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.
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 . 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.
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 . 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.
Article first published 22/02/08
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