COMMENT: Will industry hijack EU climate policy?

Posted: 5 March 2004

Author: Jennifer Morgan

When it comes to tackling climate change, the lines seem to be clear. The European Union (EU) is with the good guys - countries that have signed the Kyoto Protocol and are seriously looking at how to reduce CO2 emissions. Right? Well, maybe not, says Jennifer Morgan.

Paper mill in Sweden. © WWF-Canon/Edward Parker
Paper mill in Sweden. © WWF-Canon/Edward Parker
The EU's Emissions Trading Directive will cap CO2 emissions from a range of industrial sectors, including paper manufacturers such as this paper mill in Sweden.© WWF-Canon/Edward Parker

The last few weeks have seen several industry-led attacks on the EU's forward-looking policy on reducing CO2 emissions. From lobbying for unrestricted growth in CO2 emissions to an attempt to have all climate policy reviewed by potentially unsympathetic economic ministers, these attacks threaten the EU's climate change credibility and have global implications for efforts to reverse human-induced climate change.

So far the EU has been the world leader in taking action to reduce greenhouse gas emissions. Member states have ratified the Kyoto Protocol, under which they have promised to cut the EU's CO2 emissions by 8 per cent from 1990 levels by 2012. Several member states have set even higher national targets for CO2 cuts, and some have already started reducing their emissions. Germany for example, has already cut greenhouse gas emissions by 19 per cent since 1990.

Pressure from industry

Perhaps the EU's most progressive move has been to create a new law - the Emissions Trading Directive - to help all member states start reducing CO2 emissions from next January.

The law has two parts. The first is a binding, absolute cap on CO2 emissions for a range of industrial sectors, including electricity producers, oil refineries, and steel, cement, and paper manufacturers. The second is emissions trading - an economically efficient way for companies to meet their caps by either reducing their own emissions or buying "carbon allowances" from other companies whose emissions are below their caps. This approach has been widely supported by industry because it will minimize compliance costs and, in some cases, allow companies to boost revenues.

However, the nitty gritty of implementing this Directive has prompted serious assaults by some industry groups.

As national governments started debating caps for sectors and individual companies - the so-called National Allocation Plans that must be decided by the end of March - some industry groups started lobbying against the Directive, and even the need to reduce their CO2 emissions at all.

In Spain, industry groups led by power company Endesa complained that meeting Kyoto targets will put them at a disadvantage to competitors in countries not bound by the protocol. Instead of standing firm, the Spanish government responded by saying it wants to open a debate on whether the Emissions Trading Directive should be retained.

The German industry lobby group BDI (Bund der Deutschen Industrie) is similarly claiming that the law will lead to job losses and relocation of some business outside the EU. The German environment ministry caved in, removing most barriers that industry was concerned about from the German National Allocation Plan, and basing the cap on a previously agreed voluntary target. However, as the plan still does not allow unlimited growth of CO2 emissions, power giants RWE and E.ON and other industry representatives continue to fight it.

A second assault has been to bring in the EU's economics ministers, presumably in the hope that these ministers will be less sympathetic to climate concerns than environment ministers.

At the EU Competitiveness Council meeting on 11th March, economic ministers will push for a stronger a role in scrutinizing future climate policies, including individual National Allocation Plans. The danger is that they will prefer the short-term economic benefits of the status quo - where companies can effectively pollute at will - over long-term strategies to promote renewable energy and reduce greenhouse gas emissions.

Nature under threat

One need not look far to see how irresponsible this would be. In January, a report in Nature predicted that human-induced global warming could result in the extinction of over 1 million terrestrial species. Extreme weather events are on the rise, threatening not just the poor and vulnerable but rich countries as well. Even the Pentagon is calculating the global political consequences of climate change over the next 10-15 years. The evidence for the potential disaster that we and our planet face is becoming ever-more apparent.

This is what the EU's Emissions Trading Directive is really all about - taking action now to curb species extinctions, stop damaging climate-change impacts, and help maintain a decent quality of life. The Directive, covering nearly half of Europe's CO2 emissions, is a balanced, cost-effective, and market-led means of achieving this.

But for this to happen, EU member states must produce National Action Plans that show a serious intent to reduce national CO2 emissions. These plans are key to driving investments in clean energy, ensuring that new industrial infrastructure like power and steel plants are low carbon, and ensuring that the Directive makes a significant contribution to meeting the EU's Kyoto Protocol commitments. The UK has already developed a strong National Allocation Plan. It's time for other member states to follow suit.

This is the moment for the EU to show that climate protection can be achieved effectively and at low cost. If implemented properly, European emissions trading will be a model for the rest of the world to follow and will confirm the EU's leadership in tackling climate change.

Short-term interests led by industry groups must not be allowed to undermine the Directive. If it fails, other countries are unlikely to take the climate protection path. This will not only damage the EU's climate change credibility, but also life as we know it on our planet.

The stakes are high - but surely the EU's leaders will put the debate to rest and ensure that the Directive remains a progressive and informed road to the future.

Jennifer Morgan is Director of the Climate Change Programme at the global conservation organization WWF.