Economist slams EU climate policy as ineffective

The EU’s climate legislation risks turning into a “grossly distorting and expensive policy” unless it is seriously revamped, a leading British academic has warned.

In a paper released on 3 September by the Smith School of Enterprise and the Environment at the University of Oxford, Professor Dieter Helm argued that the EU’s climate change and energy package is little more than “a politically neat but economically inefficient set of targets”.

The design of the package is “inevitably flawed”, Helm wrote. It is “based on carbon production, not consumption, thereby sidestepping Europe’s responsibilities towards the developing world,” the paper argued.

In practice, the EU could meet its climate target by shifting its energy production overseas, which may even increase global emissions, both by requiring more shipping and aviation and less efficient production techniques in developing countries, Helm claimed. Considering the global dimension of climate change, it is not even obvious that the most cost-effective way of cutting emissions lies in the EU in the current timeframe, he suggested. 

“There may be much cheaper ways, for example by preserving tropical rainforests or decarbonising China and India’s rapid coal-based economic growth,” he added.

The economist argued that EU climate policies have been “gradually emaciated by the politics”. The “random” 20% emissions cut target by 2020, which underlies the whole package, is not backed by credible evidence and is unlikely to be reached, he added.

The review of the bloc’s flagship policy, the emissions trading scheme (EU ETS; see EURACTIV LinksDossier), fell prey to industrial lobbying, Helm argued. “The EU has therefore landed itself with a complex and relatively inefficient tradable permits system which maximises the scope for vested interests to pursue the resulting economic rents,” he said.

Moreover, the short timeframe means that new technologies will not be available to help the EU tackle its emissions, meaning the bloc will have to rely instead on cutting demand and increasing the supply of renewables. 

But the 20% target for renewable energies in the EU’s energy mix is “unlikely to be met,” as these alternative energy sources are still underdeveloped and costly (see EURACTIV LinksDossier), the paper stated. In addition, demand could go up with higher incomes, it pointed out.

An overhaul of the package to make it efficient would have to include a long-term carbon price, Helm concluded, suggesting a floor price as one possible solution.

Equally importantly, the EU should give other low-carbon technologies like nuclear and carbon capture and storage (CCS) a level playing field. If complemented by a border carbon tax, this would make an “appropriate” climate package for the EU, according to Helm.

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