Last January the European Commission has taken the call of the European Council and adopted a package of measures aiming at tackling climate change. The package contains several legislative proposals on emission cuts, renewable sources, carbon capture and revision of the emission trading scheme.
The EU is seeking a united front on how to address climate change at the international conference at Copenhagen in December 2009 before putting pressure on other countries to sign up for an international climate change agreement to replace the Kyoto Protocol.
The October European Council has given to the EU lawmakers a mandate to conclude the climate package before the end of 2008 in order to allow for its adoption before the end of the current legislature.
Taking into account the financial crisis and the 2009 worsen economic outlook several Member States were not willing to give their backing to climate change policies as that would undermine the industrial interests of their national economies. Roger Helmer has said that we are facing a "greatest crisis” and that "The threat is not posed by global warming, but by our policy responses to global warming" because "they will have a devastating economic effect.” According to the Italian Prime Minister, Silvio Berlusconi, it was ''absurd'' to be talking about carbon emissions in the face of the more pressing financial crisis, he said ''It's like someone with pneumonia thinking about having a hairdo.''
Nevertheless, the European Council has reached agreement on the energy and climate change package. On 12 December, the EU heads of state and government approved, more easily than expected, the energy-climate change package proposed by the Commission. Nicolas Sarkozy has said "It is quite historic what has happened here (…) No continent has given itself such binding rules that we have adopted with unanimity." In the other hand, Czech President Vaclav Klaus has complained about the way Nicolas Sarkozy had "pushed" the deal.
The EU leaders reiterated their commitment to keep their original target of cutting greenhouse gas emissions by 20% compared to 2005 and an improvement in energy efficiency of 20 percent, both by 2020. The European Council has confirmed the European Union's commitment to increasing this reduction to 30 % within the framework of a global agreement in Copenhagen, on condition that the other developed countries committee themselves to achieve comparable emission reductions.
The European Council has welcomed the outcome of the trilogies meetings which have lead to a broad agreement on the energy/climate legislative package. In order to the climate and energy package to be adopted by the end of 2008, an agreement between Parliament and Council needs to be reached at the first reading. Hence, the French Presidency, the European Parliament’s rapporteurs and the Commission have been holding intensive negotiations, behind closed doors, on the Energy and Climate Package. They reached, even before the European Council meeting, an agreement on the draft directive on renewable energies including biofuel targets.
This draft Directive puts forward mandatory targets for the overall share of energy from renewable sources in energy consumption and for the share of energy from renewable sources in transport. It establishes two binding goals, an overall target of a 20% share of renewable energy sources in energy consumption and a 10% minimum target for biofuels in transport, to be achieved by each Member State. Member States would be required to substantially increase the contribution of renewable energies to its energy mix.
The UK share of renewable energies in 2005 was 1.3% and under the Commission proposal by 2020 it is required a share of 15%. The Government has admitted that such proposal would have serious implications to the UK. The UK has a lower proportion of its energy coming from renewable sources than any other EU Member State. Nevertheless, the UK Government is determined that the UK will meet its fair share of the overall EU target which will increase in costs for consumers. According to the energy consultancy Pöyry “The cost to the UK in 2020 of meeting this burden share is between €5.0bn (least cost trading) and €6.7bn (domestic constrained) (…) and the lifetime costs are in order of €59.obn, whereas under domestic constrained scenario they are €93.1bn.” Moreover, according to a report by Professor Ian Fells of Newcastle University such target is unattainable as it implies that 40% of electricity will have to come from renewables and currently renewables produce just 4.5%. The EU leaders have addressed the outstanding issues.
As regards the EU ETS Review the main controversial issues have been the allocation method, use of auctioning proceeds, rules for auctioning. Whereas presently 90% of pollution allowances are given to installations for free under the Commission’s proposal auctioning will be the basic principle for allocation. The Commission has proposed to introduce full auctioning in 2013 for electricity generation, and for other sectors a gradual introduction until 2020.
Germany has been showing its concern that heavy industries, such as cement, chemicals and steel would be seriously hit by the EU emissions trading system, under which they would have to pay for all their permits to emit carbon dioxide. Hence, such industries would be forced to move their factories, jobs and CO2 emission to third countries to keep prices down and in this way producing “carbon leakage.” The European Council has agreed on a calculation method to determine which industrial sectors are exposed to a significant risk of carbon leakage.
The EU leaders unanimously agreed, in order to please Germany, that industries considered to be exposed to a significant risk of carbon leakage will be granted up to 100% of their CO2 allocations free of charge “at the level of the benchmark of the best technology available.” Such industries must first already be using the cleanest technology available in their production processes.
As regards the industrial sectors not exposed to the risk of carbon leakage the auctioning rate is set at 20 % in 2013, 70% in 2020, with a view to reaching 100% in 2027. The European Commission initially proposed that other industrial sectors would have to buy 30% of their carbon allowances in 2013 with 100% to be reached by 2020.
Under the agreement reached at the summit, Member States where more than 30 % of electricity was produced from a single fossil fuel and whose gross domestic product per capita at market prices did not exceed 50 % of the average gross domestic product per capita of the EU may be granted derogations. Poland has got its derogation to the setting the auctioning rate at 100 % in 2013 in the electricity sector. The EU leaders have agreed that for those Member States the auctioning rate in 2013 will be 30 % and will be gradually raised to 100 % in 2020. Hence, Poland and Hungary as well as other central and east European countries would be allowed to grant to their electricity companies 70% of their CO2 allowances for free after 2013.
Under the European Council deal 88 % of the total quantity of allowances between 2013 and 2020 to be auctioned will be allocated between Member States in equal proportions, 10% will be allocated between certain Member States in the “interests of solidarity” and 2% will be allocated between “the Member States which had achieved in 2005 a reduction of at least 20 % in greenhouse gas emissions compared with the reference year set by the Kyoto Protocol.” The European Council has already broken down the 2 % between Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia.
It was agreed that 12 per cent of the share of proceeds from all auctioning of emissions trading allowances are to be reserved for a "solidarity fund" intended to compensate Central and Eastern Europe new member states for the cost of meeting the greenhouse-gas emissions targets. The Commission has proposed 10% however those Member States were able to secure an agreement on the increase of the fund. Such fund has been opposed by the UK and Germany which have been arguing that the ETS is not a suitable way to help poorer member states to tackle the cost of fighting climate change but they decided to lift their reservations.
The main controversial issue between the European Parliament and the Council concerning the ETS revision has been how to spend revenue from auctions. Obviously, the Member States do not want Brussels to decide how they should use that money. Whereas the Commission has proposed that 20 per cent of the ETS auction revenues should be allocated for climate change protection measures in developing countries and inside the EU, the Environment Committee has proposed 50 per cent.
The European Council has stressed that “Member States will determine, in accordance with their respective constitutional and budgetary requirements, the use of revenues generated from the auctioning of allowances in the EU emissions trading system.” The European Council has noted the Member States “willingness” to spend half of this amount on actions to reduce greenhouse gas emissions, for measures to avoid deforestation, to develop renewable energies, energy efficiency in Europe and in developing countries.
The European Council deal was immediately discussed by members of the European Parliament over the weekend. Hence, informal negotiations between Parliament representatives and the French Presidency have immediately started after the EU summit in order to find an agreement on the outstanding issues. The European Parliament rapporteurs and the French Presidency reached an informal agreement on the last details of the climate change package such as the EU’s emissions trading scheme, the proposal on carbon capture and storage and on the draft decision on Member State’s efforts to reduce their greenhouse gas emissions to meet the Community’s greenhouse gas emission reduction commitments. The European Parliament negotiators have therefore approved the climate change deal reached by the EU leaders. The informal compromise was supported by the European Parliament's bigger political groups. The European Parliament voted on the agreement on the climate package on 17 December. The agreement reached in secret trilogues was presented to the plenary who just confirmed it. Then, it will be formally endorsed by the Council.
