The French government, which is set to take over the EU's six month rotating presidency on 1 July, says the EU should decide now in favour of imposing special import duties on products made in third countries with lax climate change regimes. Such duties, to take effect after 2013, would send a reassuring signal to Europe's heavy industries, such as cement and steelmakers, who are likely to face tougher emissions restrictions as the EU tightens its carbon 'belt'.
Berlin, meanwhile, says it is "urgent" for select industries to be guaranteed free emissions rights after 2013 in order to prevent them from fleeing the continent in search of countries where emitting CO2 is cheaper or free.
The Commission has already given assurances to concerned industries that special measures would be adopted in case ongoing international climate talks fail to produce a successor to the Kyoto Protocol, which expires at the end of 2012 (EurActiv 28/02/08).
But the EU executive does not want to preclude the outcome of the talks. It wants to decide on specific safeguard measures and eligible industries sectors only in 2010, meaning after the Copenhagen climate summit of December 2009, the current deadline for an international climate change agreement.
"The time to decide is after Copenhagen," Peter Zapfel of the Commission's environment service said on 17 June.
MEP Avril Doyle agrees. "It would be detrimental to the chances of international negotiations reaching an international climate agreement, if certain sectors were to be named outright in the proposal."
Doyle, an Irish Christian Democrat, is Parliament's rapporteur on the Commission's proposal for a revised EU ETS. Her views on the issue are outlined in an explanatory statement to her report, dated 11 June, which has now been submitted for consideration to fellow MEPs, who will vote on the file in committee in October and in plenary in December.
Clean tech transfers
In addition to diverging views on the carbon leakage issue, a debate is also heating up over the extent to which EU companies should be allowed to finance 'clean' development projects in third countries in exchange for emissions reduction credits within the EU.
The so-called Clean Development Mechanism (CDM), introduced in the 1998 Kyoto Protocol, is designed to transfer money and technology from developed states struggling to reduce greenhouse gas emissions towards developing states that want to industrialise but lack money for modern low-emissions technologies.
But the CDM has been heavily criticised recently amid concerns that many of the projects being financed are not producing additional emissions reductions since they would have been built anyway.
Doyle wants to expand but tighten the CDM system. "Almost half" the CO2 abatement effort between 2013 and 2020 could be achieved through CDM, says her report, but only in cooperation with countries that have signed up to an international climate deal. In addition, only 'gold standard' projects that have passed a UN quality control assessment should be eligible, her report says.
Sharing the spoils
Other elements of Doyle's report are likely to raise controversy in the coming months as EU legislators scramble to finalise the climate and energy package before March 2009.
The MEP wants a "substantial" amount (up to half) of revenues obtained through EU ETS auctioning to be placed into a special fund to help developing states combat deforestation, adapt to climate change or buy clean technologies. In addition, 60 million emissions allowances normally given to new entrants to the EU ETS should be offered as an incentive to the first 12 fossil fuel fired power facilities - either within or outside the EU's borders - to "have begun to commercially capture and geologically store carbon dioxide emissions".
The EU is currently looking at ways to finance carbon capture and storage (CCS) technology, and Doyle's proposal is one among several currently being considered by the Commission (EurActiv 04/06/08).
But member states have already indicated that they are opposed to being told how to use the revenues obtained from EU ETS auctions, setting the stage for a potential dispute over the issue.
Full speed ahead?
Finally, Doyle wants the shipping sector to be included in the scope of the EU ETS "no later than 2015".
The Commission has not put forward any specific proposal to include the shipping sector in the EU's carbon market, although it has indicated that such a move could come "at a later date".
