EU walks business tightrope in climate plans

The European Union’s exective commission fine-tuned a blueprint to slash the bloc’s greenhouse gas emissions amid fierce lobbying on Tuesday over details which environmentalists said over indulged oil companies and airlines.

The commission will walk a tightrope between green ideals and industrial interests when it adopts detailed proposals on Wednesday to cut emissions by one-fifth by 2020, boost renewable energy usage and promote mandatory use of biofuels in transport.

The EU is trying to lead the global fight against climate change, with unilateral emissions targets, without harming a fragile economy by raising energy costs for industries facing rising competition from China, India and the United States.

Brussels appeared to heed business warnings that production would flee to less environmentally demanding areas of the world if it seeks too radical steps, scaling back planned emissions charges on airlines and refineries, according to EU sources.

Environmentalists derided that concession and a likely softer treatment of energy-intensive industries such as steel, aluminium and cement which face international competition.

“This is an immediate result of oil companies’ scare-mongering and their effect on commissioners such as {EU Enterprise Commissioner} Guenter Verheugen, who dance easily to their tune,” said Mahi Sideridou of Greenpeace.

On the other side of the argument, the steel industry warned Brussels against taking its climate crusade too far.

“We have very strong concerns that if the proposal is not properly drafted, it could have a very damaging impact on our industry,” said Philippe Varin, president of the European Confederation of Iron and Steel Industries.

Varin, chief executive of Anglo-Dutch steelmaker Corus, owned by India’s Tata Steel, travelled to Brussels for a last-ditch effort to lobby Environment Commissioner Stavros Dimas before Wednesday’s decisive meeting of the EU executive.


The keenest haggling centres on permits to emit carbon dioxde, the main gas blamed for global warming, and whether businesses will have to buy them or get them for free in an overhaul of Europe’s emissions trading scheme from 2013.

That scheme puts an overall cap on CO2 emissions from energy-intensive industry, airlines and power generators, but allows companies to trade emissions permits among themselves.

Until now most were given away, but power generators passed on the cost to electricity consumers regardless and pocketed huge windfall profits as a result.

Under the draft proposals, utilities will have to buy all permits from 2013 in a shift that may slash coal plant profits.

But airlines and oil refineries face a phased introduction of permit auctioning, starting at 20% in 2013 and rising to 100% in 2020, EU sources told Reuters.

Aluminium, steel and cement makers would initially get their quota of permits for free and auctioning would be phased in. Other energy-intensive industries such as chemicals and pulp and paper were still battling to have their needs recognised.

The EU wants to include all airlines flying into Europe in its emissions scheme. US opposition to this move may have moderated the proposed auction level.

The draft proposals also signalled phased cuts in the overall industry cap on carbon emissions from 2013 to 2020.

That implied a lower initial demand for carbon emissions permits than previously expected, said Deutsche Bank carbon analyst Mark Lewis. But a softer regime would raise emissions and so feed back to higher demand for permits later on, implying no overall change in the expected carbon price, Lewis added.

European carbon prices have fallen 11% in the past two days, partly on a feared weakening of the climate proposals. - Reuters



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