In early draft conclusions prepared by the French EU Presidency in advance of the 15-16 October European summit, EU countries reaffirm their commitment to reaching a deal on the main elements of the climate and energy package before the end of the year.
But member states also want to ensure that "appropriate solutions" are in place so that costs related to reducing industrial CO2 emissions do not drive Europe's heavy industries to take their operations, jobs and emissions outside of the EU's borders to countries where production and pollution are cheaper. Concerns about this sort of 'carbon leakage' have been a focal point in discussions about the best way to meet EU commitments to realise a 20% reduction in CO2 emissions by 2020.
And as the financial crisis deepens and the economic outlook for the EU 2009 worsens, key member states like Germany and Poland have raised the tone of the debate, warning that they may not give their backing to climate change policies that would undermine the main industrial interests of their national economies (EurActiv 26/09/08).
The Copenhagen conundrum
In the summit conclusions, member states are therefore putting pressure on the Commission to finalise, in 2009, criteria for identifying sectors that could benefit from 100% free EU ETS allowances due to their high risk of exposure to 'carbon leakage'.
The Commission agrees that European industries need to be protected from unfair competition by third-country producers in the event that no international deal on climate change is reached during a highly-anticipated UN summit in Copenhagen in December 2009.
But while the EU executive has already started drawing up criteria to determine which industries could benefit from 100% emissions allowances if global talks falter, Brussels wants to wait to release a list of potentially exempt sectors until after the Copenhagen summit. This position, which is based on the notion that early identification of the sectors would undermine the EU's negotiating mandate at the talks, was recently backed by MEPs in Parliament's environment (ENVI) committee (EurActiv 08/10/08).
The issue is likely to remain a key bone of contention between the Council, Commission and Parliament.
Sharing the spoils
Another issue that is likely to ruffle legislators' feathers at the end of 2008 is how the revenues from EU ETS permit auctions, which are collected in national coffers, are to be spent.
While member states are set to endorse spending in support of CO2 reduction efforts, national governments remain adamant that they, not Brussels, should decide on precisely how the monies should be spent. The draft conclusions specifically refer to the issue.
MEPs, meanwhile, want the money to be spent on clean technologies and other climate change-related investments, with at least 50% of the funds to be used in support of developing countries that lack the funds to catch up with developed states in a clean manner. Rapidly growing economies like China and India in particular remain heavily dependent on coal and other fossil fuels for meeting growing transportation and power generation demands.
Irish Christian Democrat MEP Avril Doyle, who shepherded the EU ETS file through the ENVI committee, said she expects a "battle royale" over the matter.
30%?
The Council and Parliament also disagree on at least one further building block of the EU's climate agenda.
Member states are reluctant to commit to an automatic increase in the EU's target for reducing greenhouse gas emissions by 2020 from 20% to 30% in the event that an international climate change deal is reached in Copenhagen.
MEPs have come out in support of the mechanism. But, according to the draft summit conclusions, EU governments want any such increase to be agreed on the basis of a regular legislative debate between Council and Parliament under the EU's co-decision procedure. Some member states like Poland and Italy are said to be particularly nervous about an increase in the target, according to one EU diplomat, who said Rome had now backed down from its initially favourable position on upping the target in view of the economic crisis.
Breaking the habit
Despite significant disagreements on key points of the package, EU legislators do appear to see eye-to-eye on the need to increase the energy efficiency of the EU's economy while becoming less dependent on foreign fossil fuel suppliers like Russia.
The draft conclusions call for specific measures to boost energy efficiency, including the use of financing backed by the European Investment Bank (EIB). Member states also want a greater diversification of the EU's energy supply through pipeline projects agreed with countries other than Russia. Existing liquefied natural gas (LNG) infrastructure should also be upgraded, since LNG can be shipped to EU ports from a variety of supplier countries.
Official statements on the need for greater energy independence are likely to be criticised, however, following a deal reached last Friday (10 October) by energy ministers, who rejected a Commission proposal to impose strict reciprocity conditions on third country firms, like Russia's Gazprom, that are buying up energy delivery infrastructure within the EU (EurActiv 13/10/08).
A second EU strategic energy review, to be tabled by the Commission in November, will address energy security and efficiency issues in greater detail, with member states expected to adopt conclusions on the review during the Spring European Council in March 2009 (EurActiv 10/10/08).
