Commission unveils EU climate strategy

Carbon emissions trading to be "major pillar" of plan to combat global warming

The European Commission today set out policies and measures it intends to pursue as the EU's response to the threat of global warming. The strategy will create a European climate change programme, with an EU-wide emissions trading scheme as a "major pillar". The Commission separately published a green paper sketching out potential elements of the scheme.

The EU is committed to an 8% reduction in greenhouse gas emissions between 1990 and 2008-2012. In today's communication, environment commissioner Margot Wallström said emissions would actually increase by 8% over the period unless the EU takes action. "The picture is not rosy...most [member states] are not on track for reaching their targets," she told journalists.

The strategy aims to "reinforce" agreed policies, including voluntary agreements by manufacturers to reduce vehicle emissions and "development of energy markets... incorporating environmental considerations." Further initiatives due shortly include a directive to promote renewable energy and a paper on integrating sustainable development into enterprise policy.

Among new measures, the Commission foresees transport pricing and economic instruments in the aviation sector, a fiscal framework for reducing carbon dioxide from cars, improvements in energy efficiency standards, and carbon dioxide (CO2) "capture" in underground reservoirs. State aid rules will be changed to reduce their climate impact. EU energy taxation is not listed in the proposals; the paper complains that progress would have been "far more pronounced" had ministers "more actively pursued" the idea.

The Commission suggests creating an EU-wide greenhouse gas emissions trading scheme from 2005, to provide experience before global rules are introduced, probably from 2008. It says the EU scheme should start by trading CO2 only, and cover large fixed-point sources in the energy supply and energy intensive sectors regulated by EU directives on large combustion plants and integrated pollution prevention and control. These account for around 45% of total CO2 emissions, it says.

An economic analysis done for the Commission shows that EU-wide trading would slash euros 2bn off Kyoto protocol implementation costs of euros 9bn annually if member states operated closed national trading schemes. The analysis predicts that permits would cost euros 33 per tonne of CO2 emitted. With no trading at all, compliance costs would be euros 20bn, it says.

The paper leaves open the politically fraught question of distributing emission permits among companies qualifying for the scheme. Although member states have shared the Kyoto burden among themselves at national level, the Commission says permit distribution must not lead to distortions of competition.

The interaction of an EU scheme with trading regimes in large multinational organisations such as Shell and BP Amoco has also yet to be resolved, an official said. He confirmed, however, that a country buying or selling permits across borders would have its emissions target raised or lowered accordingly.

Follow Up:
European Commission, tel: +32 2 299 1111. See also the "Green paper on greenhouse gas emissions trading within the European Union" and "Communication on EU Policies and Measures to Reduce Greenhouse Emissions: {Towards a European Climate Change Programme} ({ECCP})".

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