The European Union pushed ahead with legislation today that solidifies it’s position as a global leader in the climate change fight, at the estimated cost of 60 billion euros a year, or 0.5% of its gross domestic product (GDP).
The European Commission approved proposals to cut greenhouse gas emissions by 20% and increase renewable power sources by 20% by the year 2020–targets that were set by EU leaders in March 2007.
The last few days have seen intense lobbying on the part of European industries, who claim that a restructuring of the Emissions Trading System (ETS) places them at a competitive disadvantage to China, India and the U.S. and could cause production to move to cheaper locations.
EU Enterprise Commissioner Guenter Verheugen, who represents the interests of heavy industry, told German television, "I am all for setting an example for the rest of the world. But I am against committing economic suicide."
The Commission made last minute concessions, adjusting measures to appease the interests of these industries, including steel, cement and aluminum, who will continue to receive a fixed quota of free emissions permits in 2013, to be gradually phased out.
The aviation industry–as well as oil refiners–will be phased into the ETS, a decision that has drawn threats of legal action from the White House, who opposes mandatory participation of U.S. airlines.
Under the new proposal for emissions trading, which will go into effect after 2012, the trading scheme will expand to include more industries and will end the giveaways of free emissions permits, a practice that created windfall profits for many industries and drew harsh criticism from environmental groups.
Revenues from the auctioning of permits will be split among member states with 20% being allocated for combating climate change and promoting clean technologies and renewable energy.
The new scheme will put an overall cap on the level of emissions for industries, but it is yet to be seen if the system will be effective in reducing emissions. The price of carbon credits fell 11% over the past two days on the expectations that a weakened regime would be put in place.
Renewable Energy Targets
The 20% renewable energy target will be split among member countries at differing rates, and is sure to be the center point of much disagreement as targets are set for individual countries–some above and some below 20%. The proposal says the targets will be set based on a country’s current level of renewable power production and it’s ability to reach higher levels.
Sweden for instance already produces more than 40% of it’s energy from renewable sources, whereas the U.K. produces less than 5%. Under the proposal, both nations will have to achieve higher percentages by 2020.
Power bills are expected to rise approximately 10% across the board, as utilities turn to more expensive renewable sources.
Paul Golby, chief executive of the British arm of the German utility E.ON said, "The time of a cheap energy world is over."
In addition to electricity production, the proposals call for 10% biofuels to be used in road transportation fuels by 2020. According to reports the measure includes strict criteria to ensure the biofuels produce less carbon dioxide than petroleum-based fuels and that their production does not harm the environment.
Other aspects of the new proposals include rules and economic incentives to govern carbon capture and storage, as well as state aid for environmentally friendly power generation projects.
The proposals are expected to reduce European energy imports by 50 billion euros a year and avert the harmful costs of climate change by as much as 20% of global GDP.
European Commission President Jose Manuel Barroso said the package of proposals are "the right policy framework for transformation to an environment-friendly European economy and to continue to lead the international action to protect our planet."
The plans now require approval by member states and the European Parliament.
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