Hanging in the balance: The EU's climate agenda

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The EU's ambitious climate change policy agenda could become a casualty of the economic crisis, argues Simon Tilford, chief economist at the Centre for European Reform (CER), in a December paper.

EU governments have agreed that by 2020 the EU will "cut greenhouse gas emissions by 20 percent, improve energy efficiency by 20 percent and draw on renewable sources for 20 percent of its energy," recalls Tilford. 

The Union must now agree on the precise policies needed to meet these targets, the author states, fearing that failure to do so would "undermine the EU's negotiating position ahead of the UN summit in Copenhagen in December 2009 and make it much harder to secure an international climate agreement". 

Indeed, if Europe is to persuade the US and emerging economic powers like China and India to take similar action, then "it has to back up its rhetoric with action," the author declares. 

One of the most contentious issues in the climate change talks is a proposal that from 2013, "there should be full auctioning of permits for energy generators and a progressive shift to full auctioning for all other industries," the paper argues. 

Whilst some believe this would force industry to shift production outside the EU, the author maintains that there is "no evidence that auctioning would have a significant impact on the vast majority of manufacturers," including carmakers. 

Central and Eastern European countries also object to the climate change package, arguing that greater allowances should be made for them due to "their disproportionate dependence on coal to generate electricity," the paper says. 

Nevertheless, the economist argues that the European Commission's proposals already allow for financial compensation to poorer member states, because industries based there would "receive relatively more emissions permits than the same industries based in wealthier ones". 

While these issues cast doubt over the possibility of clinching a European climate change deal, Tilford nevertheless believes "there is a real chance that EU governments can reach a compromise".

The CER paper predicts that the concerns of new member states will be addressed by additional financial compensation, while those of Austria, Germany and Italy will be assuaged by "postponing the move to full auctioning". 

Under these conditions, the "credibility of the EU's claim to environmental leadership would survive," Tilford concludes. 

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