EU recommendation to move to 30% blocked by member states

Foto: Wikimedia Commons

Publish date: May 27, 2010

Written by: Veronica Webster

BRUSSELS – A communication adopted on May 27th by the European Commission has shown that the economic crisis has made it cheaper to adopt higher CO2 emission reduction targets. The document explains that a move from the current EU pledge of reducing CO2 emissions 20 percent between 1990 and 2020 could be extended to 30 percent at a much lower cost than initially calculated.

However, opposition to this conclusion from key member states including Germany, Poland and Italy made the climate commissioner Connie Hedegaard not recommend an immediate move to 30 percent.

The communication explains that to hit the 30 percent target, it will cost the EU economy €81bn in 2020. That compares to a cost of €70bn estimated two years ago, when the EU energy and climate package was adopted, to reach the 20 percent target. In other words, the global recession and other recent developments have reduced the price of a 30 percent emission reduction target to virtually the same level as EU leaders thought the existing 20 percent target would cost when they adopted it. The benefits of such a move would be multiple – better air quality and public health as a result of more investments in cleaner power plants, higher security of EU energy supply and – if carbon tax revenues are used to cut taxes on labour – a net creation of jobs.

The document puts forward an array of policies, which could achieve the 30 percent target. These include a tighter EU Emissions Trading Scheme (ETS) cap, as a result of which there would be a gradual reduction in auctioned allowances; and the introduction of CO2 taxes in key sectors not covered by the ETS. It is assumed that a price of €30 per tonne of CO2 emitted across all sectors would be sufficient to achieve the target.

With the present 20 percent target, prices for emission allowances in the EU will not rise above €16 by 2020, which means investments in new low-carbon technologies over the next decade will be low and will need to be compensated – at a higher cost – by more investments after 2030.

The communication also addresses the implications of stepping up to 30 percent for the risk of carbon leakage. Carbon leakage refers to the risk that domestic action leads to emission-intensive industries moving production abroad. The document finds that the effect would be limited, with extra estimated production losses of around 1 percent for the ferrous and non-ferrous metals, chemical products and other energy intensive industries compared to the 20 percent target.

At a press conference on May 27th, Hedegaard explained that although the time may not be ripe to pursue a 30 percent target, Europe should pursue the step-up in due course.
“Whether to increase our reduction target for 2020 from 20 percent to 30 percent is a political decision for the EU leaders to take when the timing and the conditions are right,” said Hedegaard.

“Obviously, the immediate political priority is to handle the [financial] crisis. But as we exit the crisis, the commission has now provided input for a fact-based discussion. The decision is not for now, but I hope that our analysis will inspire debate in the member states on the way forward,” she said

Various member states, led by Germany, Poland and Italy, have expressed opposition to a 30 percent target. As a result, the adopted communication is one third shorter than an earlier leaked version. Notably, a reference to an ongoing Commission impact assessment of CO2 emission performance standards was deleted.

The UK, on the other hand, spoke in favour of a 30 percent target.
“We will push for the EU to demonstrate leadership by supporting an increase in the EU emissions reduction target to 30 percent by 2020,” said Chris Huhne, the new UK energy and climate change secretary.

The analysis set out in the communication will be reviewed by member state environment ministers next month.

Access the communication here.