Pay Eastern Europe to cut emissions and move to 30%

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

Europe can increase its emissions reduction target if it finds ways to redirect funding from Western to Eastern European countries, which oppose the move to a more ambitious commitment to fight climate change, writes David Buchan from the Oxford Institute of Energy Studies.

The following commentary was exclusively sent to EURACTIV.

"Sooner or later Europe is going to have to ratchet up its emission reduction target from 20 to 30% by 2020, if the long-term goal for all developed countries to cut emissions by 80% by 2050 is not to slip out of reach forever.

In its May communication, the European Commission pointed out that recession has made it easier, and relatively cheaper, to go to 30%. The environment ministers of Germany, France and the UK have since jointly endorsed moving the emission reduction target up to 30%.

In any ratcheting up of EU climate ambitions, the Commission has also made it clear it will be looking to Eastern Europe for much of the extra emission reduction. It has identified the 10 new member states as having 'proportionally higher potential' (relative to the size of their population and economies) to cut emissions than the older member states.

This is hardly surprising. The 10 new members in Central and Eastern Europe have made enormous improvements in energy efficiency over the past 20 years. They have shed that indifference to energy waste that was the hallmark of their previous 40 years under communism. They now have cost-reflective energy prices. But their economies are still far more energy-intensive than Western Europe in terms of the amount of energy they need to generate a euro of GDP.

Moreover, in the EU energy and climate package, adopted last year, all the new member states were deliberately given easier renewable energy targets than old member states, because of the higher cost of renewables. Yet none of these targets will be a stretch for East European states as half of them predict they will exceed their targets.

Land-locked Eastern Europe does not have the wind resources of the EU's Atlantic-facing member states, but its broad forests and farms have big untapped biomass potential and, in South-East Europe, considerable solar power capacity.

In present circumstances, all 10 eastern members of the EU are dead set against the EU raising its 2020 reduction goal to 30%. But if they are to be asked to contribute proportionately more, in terms of emission reduction, in the fight against climate change, they are entitled to expect commensurate extra financial aid.

In a new study for the Oxford Institute for Energy Studies, I suggest two ways this can be done. 

First, re-direction of structural funds in the EU budget. These stand at a projected EUR 344bn for the current 2007-2013 financial period. Most of these funds (nearly one third of the total budget) go to the new member states, but only 10.8bn will be spent on energy. Yet what could be more 'structural' than permanent transformation to a low-carbon economy?

At the same time, Eastern European governments need to improve their administrative capacity to absorb EU funds. In particular, they would need to give as high a priority to EU spending on energy efficiency projects like building insulation and on renewable energy as they have given to EU spending on energy security projects such as gas interconnectors and gas storage.

Currently many Eastern European politicians seem to feel they get a better political return in asking for EU money for a new highway, on which they can erect a sign proclaiming their success in getting pork barrel money from Brussels, rather than for installing invisible insulation.

A second way to direct more money to energy would be the 'Europeanisation' of national renewable subsidies. The scale of some national subsidies dwarfs any EU contribution.

Germany, for instance, gives to its own renewable energy producers in one year the equivalent of what EU structural funds spend on energy in seven years. What is needed is a pan-European system in which renewable subsidy money could freely flow from the richest Western Europe to the region with, proportionally, the most potential, probably in the East.

The Commission did propose in 2008 a system of pan-European trading of guarantees of origin for renewable energy, akin to the ETS system of trading carbon allowances across Europe.

The proposal was shot down by a number of member states that feared losing control of the operation and cost of their national subsidy schemes. The renewables industry also feared a downward harmonisation of national subsidy levels. But de facto a downward harmonisation of national subsidy rates or feed-in tariffs in Western Europe is already taking place, as renewable technologies mature and as governments have become more cost-conscious.

Part of that cost-consciousness ought to be a willingness by West European governments to transfer some of their renewable energy subsidies to the east, in order to get a better EU-level return in reduced emissions.

Far from losing jobs to the east, most West European states would gain employment through increased East European demand for their companies' wind turbines and solar panels.

There is some stirring for change in Brussels. Energy Commissioner Günther Oettinger recently (EURACTIV 09/07/10) suggested an EU-wide harmonised feed-in tariff to boost renewable investment.

In a parliamentary draft report on the Commission's future energy strategy (tabled on 13 July before the Industry, Research and Energy Committee), Polish MEP Lena Kolarska-Bobinska calls for re-examination of the Commission's original pan-European renewable trading plan.

Any such change might result in re-negotiation of national renewable targets. Does that matter? Indeed how important are the precise individual targets (hard to enforce anyway) that all EU-27 states have been given?

The one renewable target on which Europe's credibility will be judged in the court of international opinion is its collective goal to raise the renewable share in Europe's overall energy use to an average of 20% by 2020.

The best way to deliver that would be through a Europe-wide green energy system, marrying Western Europe's financial resources with Eastern Europe's natural resources."

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