Worries remain on industrial effects of climate-change package

EU: There is no major breakthrough on addressing economic concerns, but some concessions have been made, writes Jamie Smyth

EU:There is no major breakthrough on addressing economic concerns, but some concessions have been made, writes Jamie Smyth

A YEAR after EU leaders signed up to a goal of cutting greenhouse gas emissions by 20 per cent by 2020, they were back in Brussels debating how to achieve the ambitious target.

Everyone around the summit table gave their broad support to the European Commission's draft climate package, which seeks to cut emissions, boost the use of renewable energy and promote energy efficiency.

Leaders agreed to wrap up their discussions on new EU legislation to impose binding targets on states to curb emissions by the end of 2008. They also agreed to finalise a controversial plan to open Europe's gas and electricity networks to competition by June.

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However there was no major breakthrough on how to address real concerns that the package will damage the economy and hurt energy-intensive industries.

Taoiseach Bertie Ahern was one of several EU leaders to warn about the dangers of "carbon leakage", which could cause heavy industries such as the cement or aluminium sectors to relocate their operations overseas to avoid binding cuts in CO2.

He also said that Ireland's large agricultural sector, which generates 28 per cent of the State's total emissions, should be taken into account when considering its ability to meet the targets.

"The 20 per cent target will be a stretch," Mr Ahern admitted when discussing the burden-sharing emissions target given to the Republic by the European Commission.

The Taoiseach refused to speculate on whether the Republic could reach a 30 per cent target, which may result if the EU can persuade the US and China to sign up to a global climate deal next year.

The commission's climate-change package unilaterally commits the EU to reduce its overall CO2 emissions by 20 per cent by 2020 when compared to 1990 levels. But if a global deal is secured, Europe has committed to curb its own emissions by 30 per cent under a burden-sharing agreement that allocates CO2 targets based on relative wealth.

Commission president José Manuel Barroso told the summit that this methodology would not be changed as rich states were better able to meet the cost of tackling climate change.

However, the summit conclusions did emphasise the need for EU states to be able to use more cost--effective and flexible mechanisms to meet their CO2 targets "to avoid excessive costs".

This is good news for Irish industry. It has been lobbying to loosen restrictions in the commission's strategy that prevent states from offsetting their domestic CO2 emissions by investing in clean-energy projects overseas.

The political signal in the conclusions suggests that this element of the package will be revised in negotiations this year to give more freedom to governments to buy carbon credits rather than cut their domestic emissions.

German chancellor Angela Merkel also won a key concession by getting EU leaders to agree to publish the specific measures they can take to protect Europe's energy-intensive industries from competition from regions that do not cut emissions.

The commission and several EU states such as the UK argued that publishing a list of possible retaliatory measures would weaken the EU's hands in global climate talks next year, but Germany warned that EU industry could be hurt by uncertainty. "We need a fast regulation for the energy-intensive industries . . . [ the issue is] whether we say already in 2009 how trading works after 2012 so that investors know what they are facing," said Dr Merkel.

Energy-intensive industries could now be offered free permits to emit CO2 rather than having to pay for them, or importers could be included within the EU's emissions trading scheme to create a level playing field for European companies if there is no global deal.

A Franco-British plan to introduce a system of reduced VAT rates for "green" products such as low-energy light bulbs or fridges got little support from other EU leaders. Mr Barroso said the commission would study the idea but admitted that several member states did not agree that tinkering with Europe's complex VAT system was appropriate.

In this matter, as with the wider climate-change package, much technical work needs to be undertaken by officials to ensure that a draft law can be approved by the end of 2008 ahead of a UN summit on climate change in November 2009.