As part of its push to reach an agreement, France is putting forward a compromise that includes free emission rights for coal plants, financial compensation for energy-intensive industries and extensive use of third country emissions reductions to meet CO2 'effort sharing' targets.
Countries that use coal for more than 30% of their power generation portfolio could receive free CO2 emissions permits for several years once the revised EU ETS is launched in 2013. This would cut in half the 60% threshold originally proposed by Poland, which remains highly dependent on coal for power generation.
If adopted, coal plants in most EU member states would benefit from the scheme. Only Ireland, the UK and France would be excluded from the scheme due to their relatively low use of coal for power generation.
Anything goes
France, which holds the presidency of the European Council until the end of the year, is currently in 'trialogue' talks with representatives of the Commission and Parliament. The last trialogue on the EU ETS was held in Brussels on 25 November.
Details of the behind-closed-doors talks, which were established in an effort to agree to a deal on the package in advance of the 11-12 European summit, have been slow to emerge. Scattered reports from sources close to the negotiations, however, indicate that EU member states may dismantle some of the basic architecture of the Commission's original proposal in order to reach a deal before the end of 2008.
A financial compensation mechanism for energy-intensive industries that face higher electricity costs due to the EU ETS, for example, is on the table.
The mechanism is allegedly being proposed by the French EU Presidency in response to pressure from the German delegation. Berlin has reportedly reacted with a large degree of 'disappointment' to Paris's apparent acquiescence to all manner of demands being put forward by the Polish delegation. The implication is that France's willingness to accept Polish requests has in turn led Germany to push for its own set of exemptions from a future EU CO2 reduction regime.
There is also some speculation that Paris has modelled the mechanism on the subsidy scheme that underpins the EU's Common Agricultural Policy (CAP), of which France is a main beneficiary.
External offsets
Meanwhile, a separate proposal that outlines how member states must share the 'effort' of reducing CO2 emissions in sectors that do not fall under the scope of the EU ETS is also being watered down, according to sources. If approved, member states would be able to book up to 70% of emissions reductions credits by investing in clean development projects in third countries.
Green groups worry that, if adopted as such, the climate package would effectively be 'dead'. The financial compensation scheme for energy-intensive sectors would also "wreck" the EU ETS and require a rethink of the entire system, according to Sanjeev Kumar, ETS coordinator at the WWF in Brussels.
There are also concerns that a weak compromise deal would seriously undermine the EU's credibility in international climate change negotiations. "Everyone is looking for the EU to fail," Michael Zammit Cutajar, former head of the UN Framework Convention on Climate Change (UNFCCC), said in Brussels on 19 November.
The next round of UN-led climate talks will take place in Poznan, Poland, from 1-12 December.
A critical stage in the process will be the plenary session of the Parliament on 17 December. Many MEPs say the EU's co-legislator will refuse to accept a weak compromise, raising the prospect that the EU would need to enter into a 'second reading' process on the climate and energy package, which would delay the adoption of the plans considerably.
