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EU gets closer to landmark climate deal

Source:  Copyright 2008, EurActiv
Date:  December 11, 2008
Original URL: Status DEAD


European Union diplomats were edging closer to a deal on the bloc's ambitious climate change and energy 'package' of legislation on the eve of a two-day EU summit starting today (11 December), according to a draft version of the summit conclusions obtained by EurActiv.

Background:

On 23 January 2008, the European Commission presented a series of proposals designed to transform into law the political commitments made by EU member states in March 2007 to reduce the EU's emissions of CO2 and related greenhouse gases (GHGs) by 20% by 2020, while boosting the bloc's share of renewable energy use to 20% over the same period.

A proposal to revise and strengthen the EU's Emissions Trading Scheme (EU ETS; see EurActiv LinksDossier), the 'flagship' EU policy to tackle climate change, as well as a proposal that outlines how member states should divide the 'effort' of sharing CO2 reductions in sectors not affected by the ETS between themselves, is the mainstay of the so-called 'climate and energy package'.

A proposal on a legal framework to regulate the geological storage of CO2 captured during power generation is also part of the package, which EU member states hope to finalise during their annual end-of-year summit, scheduled for 11-12 December 2008.

Diplomats immersed in marathon negotiations have paved the way for a compromise deal on the EU's climate package during the summit. But despite progress on key points, a deal is still not certain and will eventually hinge on final negotiations between heads of state and government at the summit today and tomorrow, it emerged yesterday (10 December).

King coal

According to the draft summit conclusions, obtained by EurActiv, power plants in countries that rely on coal for more than 30% of their electricity production could receive limited free pollution rights between 2013 and 2016.

And industry sectors allegedly threatened by exposure to third-country competition and higher electricity prices due to the bloc's rules on carbon emissions could receive up to 100% of their CO2 allocation permits for free after 2013.

Meanwhile, member states may be allowed to book up to two-thirds of their obligations to reduce CO2 emissions in non-ETS sectors like agriculture by investing in 'clean development' projects in third countries through a UN-coordinated system known as the Clean Development Mechanism (CDM), according to the draft.

The price of solidarity

Central to any deal will be the issue of a 'solidarity fund', whereby up to 10% of sums collected from EU-wide ETS auctions would be redistributed to help poorer member states update to cleaner energy production (EurActiv 08/12/08). Speculation is rife that the figure could be raised to 12%.

Paris has been taking pains to downplay divisions and disputes between member states during the discussions on the climate package. But instruments such as the solidarity fund have irked member states like the UK, which is "not enthusiastic" about the mechanism, the UK's Permanent Representative to the EU Kim Darroch told journalists in Brussels yesterday (10 December).

There are also concerns that France's determination to seal a deal on the package before the year's end has led to an 'anything goes' negotiation, in which member states tabled all manner of demands for special interest derogations (EurActiv 27/11/08).

Stopping 'carbon leakage'

Among the most vocal of these special interests have been EU energy-intensive industries like cement, steel and aluminium producers. Germany's heavy industry in particular has warned that the EU ETS would raise electricity and production costs to such an extent that operators would be forced to move their factories, jobs and emissions beyond the Union's borders, leading to a 'leakage' of carbon or CO2 (EurActiv 04/12/08).

If adopted in its current architecture, the climate package would include provisions to allow heavy industry sectors and select sub-sectors at 'significant risk' of carbon leakage to emit CO2 free of charge. The risk factor will be determined based on a complex methodology outlined in nearly three pages in the draft annex, involving percentage figures pertaining to the expected level of electricity price increases and likely levels of exposure to competition with less stringent CO2 reduction laws.

Fossil future

The proposed three-year derogation from EU ETS permit-purchasing for coal plants, meanwhile, is based on a demand by Poland, which relies on coal for up to 90% of its power generation. The measure could be accompanied by an obligation to invest in diversification "of their energy mix and sources of supply for an amount at least equivalent to the market value of the free allocation," according to the draft.

Up to 200 million EU ETS allowances normally reserved for new entrants to the scheme could also be diverted to finance 'clean' CO2 capture and storage (CCS) technologies and other next generation renewable energy technologies, it says.

Three shirt summit?

The final deal remains subject to the summit negotiations, which many observers expect to drag into the early hours of Friday morning (12 December), and some of the provisions contained in the draft text could change significantly.

But sources close to the talks indicate that any deal is likely to include concessions to Poland and Germany.

German Chancellor Angela Merkel and Polish Prime Minister Donald Tusk on 9 December signalled that the "possibility of a veto has become smaller," leading to further speculation that Warsaw and Berlin could 'get their way' during the talks.

The EP wild card

Any deal agreed by member states will have to be approved by the European Parliament, which is scheduled to hold a plenary vote on the package on 17 December. The key MEPs involved in the talks have already indicated their frustration with the direction of the talks.

The offer of 200 million ETS allowances to fund CCS, for example, is unlikely to impress UK Liberal MEP Chris Davies, Parliament's rapporteur on the CCS framework directive. Finnish Green MEP Satu Hassi, rapporteur on the effort sharing proposal, has also slammed what she considers a 'neo-colonialist' policy of crediting up to 70% of domestic CO2 reduction credits through third-country projects. Environmental groups like the WWF are urging the Parliament to reject the package unless the effort-sharing element of the package is strengthened and heavy industries are obliged to purchase more emissions permits.

Meanwhile, Irish Christian Democrat MEP Avril Doyle, rapporteur on the EU ETS proposal, has said she will not accept a 'fait accompli' from member states, and has made assurances that she will push for limited industry derogations based on strict criteria.

But many Brussels insiders doubt whether a majority of MEPs, many of whom are vying for re-election in 2009, will be willing to block a compromise deal agreed between EU member states.

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