EU: A 30% CO2 cut would be cheaper than we thought

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Raising the European Union's 2020 emission reduction target from 20% to 30% would be much less costly than was assumed in 2008, and the effort could be shared fairly among governments, according to a draft EU document.

The analysis could reignite the debate over whether the EU should boost its climate ambitions. The economic downturn has made emissions cuts easier to achieve but also has reduced the ability of governments and companies to make the necessary investments.

The EU currently has a binding target to reduce emissions 20% from 1990 levels by 2020. The idea of unilaterally pushing the level to 30% has been heavily debated, but a formal proposal in the European Parliament was defeated last year.

The financial crisis has virtually guaranteed that the bloc will meet the 20% target, according to a European Commission Staff Working Paper – seen by EURACTIV – and ensured that “the 30% reduction scenario has also become considerably less costly.”

But the Working Paper says that the additional cost of going to 30%, previously estimated by the Commission at €33 billion, would hit poorer EU states in Central and Eastern Europe proportionally harder than those in the richer West.

Poland, others opposed

Opposition to tougher climate targets is strongest in newer EU states such as Poland, and the Commission analysis sets out ways in which the costs of going to 30% could be shared more evenly.

One way would be to adjust the bloc's Emissions Trading System (ETS), under which member states are allocated carbon allowances, which they can distribute to their industries.

The analysis suggests reducing the number of carbon allowances rich countries can sell to their industries by 38%, equivalent to removing 341 million allowances from the ETS in 2020, while leaving the number for less wealthy countries unchanged.

A proposal allowing Eastern European member states to bank some €3.2 billion of unused carbon credits if they agree to extend the EU’s emissions reductions target from 20% to 30% was made in a policy paper at the 2011 Durban Climate Summit, EURACTIV reported on 10 January.

Martin Lidegaard, Denmark’s climate and energy minister, said that “steadying up the ambitions on the CO2 reduction targets” was one of several inter-linked issues that the Danish presidency of the EU had to look at.

Carbon prices

Benchmark EU carbon prices are currently trading at near record lows of about €7 per metric tonne.

But “the analysis suggests that if only the higher-income member states were to set aside allowances earmarked for auctioning, the lower-income member states would see auctioning revenues rise by as much as 80% in 2020,” thanks to the expected rise in carbon allowance prices, the Commission paper said.

Moving to a reduction target of 30% would also require an extra 6.5% cut in emissions from sectors not included in the EU ETS, such as ground transport and buildings, the analysis showed.

The Commission has said that carbon emissions last year were already down 17% on 1990, and with expected increases in energy efficiency, are on course to reach a 25% reduction by 2020.

However, data from the US National Academy of Sciences in April 2011 showed that when increases in ‘outsourced’ imported goods from the developing world were counted, European emissions barely fell at all between 1990 and 2008.

The EU has offered to increase its target to 30% if other countries commit to deeper cuts in a global climate deal. But some EU governments such as Britain and Denmark believe Europe should raise its target unilaterally to create green jobs and boost growth.

The debt crisis has eroded support for a 30% target amongst EU governments, while industry groups vehemently oppose the idea.

A Danish presidency spokesman said the country would include the Commission's analysis in planned discussions on the EU's climate policies.

The EU has agreed a unilateral target to reduce its greenhouse gas emissions by 20% from 1990 levels by 2020. But it has pledged to increase this to 30% if other countries make comparable commitments.

In May 2010, the European Commission presented a communication arguing that increasing the EU's 2020 climate goal to 30% would be both affordable and technically feasible.

It estimated that as a result of the economic downturn, the cost of meeting the current 20% target has dropped to €48 billion per year until 2020, down from an initial estimate of €70 billion when the package was agreed.


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