"A key challenge will be to ensure that the transition to a low-carbon economy is handled in a way that is consistent with EU competitiveness, sound and sustainable public finances and that contributes positively to broader growth objectives consistent with the Lisbon Strategy for Growth and Jobs," states a draft version of an Ecofin Council note to the Spring European Council, scheduled for 13-14 March.
"Any policies that have significant budgetary implications should be considered by finance ministers," says the note, which argues that decisions on how to spend revenues obtained from CO2 permit auctioning in the EU Emissions Trading Scheme (EU ETS) should be left to member states.
Funds from auctions should not be subject to any "mandatory earmarking or hypothecation at EU level".
Citing a "wide range of costs" related to cutting greenhouse gas (GHG) emissions in EU countries, the Ecofin Council considers energy efficiency improvements as among the cheapest options for reducing GHG emissions, with renewables tagged as the more costly option in the short term "even if the cost of renewable energies can be reduced in the longer term".
Market-based instruments, such as the EU ETS and environmental taxes, as well as more 'clean' technologies, should be the "centrepiece of Europe's efforts to reduce its greenhouse gas emissions," says the note, which is based on a 30 page report "on the efficiency of economic instruments for energy and climate", adopted by the Council's Economic Policy Committee.
The EU's finance ministers will press their case during the March summit along with their presentation of the Ecofin Council's broader conclusions on the EU's competitiveness.
In addition to their focus on climate change, the conclusions deal at length with the challenges facing EU economies and labour markets in light of "increasing uncertainty" caused by the recent turmoil in global financial markets.
"Solid fundamentals" will underpin growth in 2008 despite a global slowdown and high oil prices, say the ministers.
But "it is important to improve risk management - in particular regarding liquidity issues, market transparency and valuation standards of complex financial instruments and vehicles - examine the role of credit rating agencies, consider possible improvements to Deposit Guarantee Schemes in the EU and enhance the co-operation with international partners," stated the draft.
