(Agencies)
Updated: 2008-01-17 22:51

Design Flaw

Brussels responds that the 27-nation EU is prepared to raise its target to a 30 percent cut by 2020 if other major industrialised and emerging economies join in reductions.

Under the Commission plan, half the EU's emission reductions are to come from the ETS, which almost collapsed when the price of carbon crashed in 2006 after it turned out member states had allocated too many permits to emit to their industries.

To overcome what Brussels sees as that design flaw, the Commission will in future set EU-wide emissions limits for all sectors covered by the trading scheme, and most permits will be auctioned off instead of handed out for free.

Representatives of big utilities, oil refiners and industries such as steel and aluminium have warned that making them buy permits at auction will force up energy prices and could drive heavy industry out of Europe.

Brussels is set to shrug off many of those protests, pointing to the utilities' healthy profits, although last-minute wrangling continues over the scope of auctioning and pace of its phasing-in, EU officials say.

The other half of the EU's emissions cuts will have to come from buildings, heating and cooling and transport, with each country receiving a target for CO2 reductions and a separate goal for increasing renewable energy use.

The Commission's main yardstick in setting national targets is gross domestic product per capita.

The richest EU countries will be expected to cut emissions by 20 percent from 2005 levels while the poorest new member states will be allowed to emit up to 20 percent more by 2020 to allow them an economic catch-up.

Some countries such as Sweden fear a double blow because they are rich and already use a lot of renewable energy.

With its many hydroelectric dams, Sweden is top of the EU class, drawing 39.8 percent of power from renewable sources, while Britain, despite its green preaching, is second-bottom with just 1.3 percent.

France meanwhile is demanding special consideration because it gets most of its electricity from low-carbon nuclear plants and its emissions are 25 percent lower than the EU average.

Germany and Spain object to tentative plans to allow companies to trade renewable energy, which they argue could wreck their successful schemes that provide a guaranteed price and grid access to renewable power generators.

But Berlin endorsed the EU's expected renewable target on Thursday, when Environment Minister Sigmar Gabriel told parliament: "For us in Germany it means roughly doubling our use. The grand coalition and the cabinet already agreed ... that we will meet this goal for renewable energy and this was a great success for cooperation in this coalition."

Despite all the special pleading from utilities, heavy industry and member governments, Commission officials say the EU targets will not be very hard to achieve.

One official involved in preparing the package said that according to Brussels' projections, the EU will already have cut emissions by 15.9 percent in 2010 from 1990 levels.

It should not be too tough to achieve the extra 4.1 percent cut over an entire decade, especially since aviation and car emissions will be cut under other EU policies now in the works.

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