The EU's climate chief unveiled a new communication arguing that increasing the EU's 2020 climate goal to a 30% emission reduction from 1990 levels would be both affordable and technically feasible.
The European Commission estimates that as a result of the economic downturn, the cost of meeting the current 20% target has dropped to €48bn per year until 2020, down from an initial estimate of €70 billion when the package was agreed.
Consequently, making the extra effort to reach 30% would now cost just€11bn more than what EU governments signed up to two years ago, it argued (EurActiv 03/05/10).
The crisis has also taken its toll on the EU emissions trading scheme (EU ETS), the bloc's flagship tool for cutting global warming emissions, by bringing down carbon prices.
Hedegaard warned that carbon prices might not automatically go up when Europe exits the crisis, requiring greater carbon-cutting ambitions to stimulate green investment.
But despite making the case for moving to 30%, the commissioner did not lend her support to unilateral EU action, saying that the shift would remain conditional on progress towards a new international climate treaty.
"Are the conditions right now? Would it make sense at this moment? My answer would be 'no'," she said.
Hedegaard said the next step would be to analyse the impact of raising the targets for individual member states so that they can revise their positions. The Spanish EU Presidency is planning to hold preliminary discussions on the issue at a June meeting of environment ministers, she added.
The ambiguity may have been an effort to manage expectations, as many member states are opposed to any move by the Commission to impose further carbon restraints on their industries. They will ultimately make the call if the target is to be raised.
On Tuesday, French and German industry ministers told journalists that Paris and Berlin would only back a move to -30% if other nations were to make comparable efforts (EurActiv 26/05/10).
Hedegaard insisted that the conditional offer remains the best strategy to leverage further commitments from other countries in the international negotiations, despite accusations that the strategy has so far seen few results. She said the EU could review the situation ahead of the Cancún climate conference to see how it could play its cards most effectively.
Safeguarding industrial competitiveness
The communication also assessed the risk of businesses relocating from the EU to countries with less stringent carbon constraints, known as 'carbon leakage'.
It concluded that the unused free allowances accruing to companies struggling with falling orders make it "less likely" that energy-intensive industries will lose ground to foreign businesses as a result of EU climate policies.
The extra effort required to move to a 30% target would only result in extra production losses of 1% for energy-intensive industries, with the chemicals industry worst hit, it added.
Hedegaard said that current measures to combat carbon leakage in the form of free allocations of emission allowances and the option to use offset credits thus "remain justified and should remain in place".
The Commission is continuing to look into border tariffs as an option, she said, before warning that it would be "extremely difficult" to create a system without placing a huge bureaucratic burden on industries.
A flux of recent studies have argued that the risk of carbon leakage has been hugely over-estimated and in fact only a few sectors are affected.