EU Climate Policy Update

by William Yeatman on November 4, 2008

The European Union’s climate agenda further disintegrated this week after member states watered down a major renewable energy law. In 2007, EU countries agreed to ambitious greenhouse gas emissions cuts of 20% below 1990 levels by 2020. In early 2008, the EU Commission developed a comprehensive strategy to achieve the emissions targets, which must be accepted by member states before it is implemented. Like all policies that call for significant greenhouse gas emissions reductions, the EU Commission’s climate plan is economically harmful—Open Europe, an independent think tank, estimates that the Commission’s policies would cost the EU $93 billion a year by 2020. With that much at stake, member states have spent all of 2008 protecting their economic interests by weakening the Commission’s strategy with exceptions and exemptions.

First, Germany and France agreed to weaken the fuel efficiency standards in order to protect Germany’s powerful auto industry. Next, Germany unilaterally declared that it would exempt its energy-intensive industries from the most onerous provisions of a continent wide cap-and-trade scheme. Last month, Poland led a group of coal-dependent states including Greece, Hungary, Slovakia, Romania and Bulgaria, opposing the Commission’s proposal to price coal out of the electricity generation market by 2013. These rebellious states have since been joined by Italy, which fears that the EU’s climate plan would harm the competitiveness of Italian industry on the international market. Together, these states won the right to amend the Commission’s plan to make it more “cost-effective.”

And this week, member states significantly weakened a directive to generate 20% of the EU’s energy from renewables by 2020 by allowing for a progress review in 2014. The review would allow member states to pull the plug on the directive if the directive proves too expensive because the technology is not yet there.

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