Consensus still limited on EU climate package

Negotiations between governments and the European Parliament to finalise the EU’s proposed climate package began in November. However, major areas of disagreement persist.

With six weeks left until agreement is due on the EU’s climate package, major areas of disagreement continue to exist between member states and between the Council of Ministers and the European Parliament.

At the start of October, European leaders agreed to stick to a deadline for reaching agreement on the package by the end of the French EU presidency in December (ENDS Report 405, pp 46-47  ).

The European Commission released its climate package in January (ENDS Report 397, p 46 ). The package is designed to cut EU greenhouse gas emissions by 20% on 1990 levels by 2020 and includes plans to expand the bloc’s emissions trading scheme (EUETS) and encourage carbon capture and storage (CCS).

It also includes a draft renewable energy Directive requiring 20% of the EU’s energy supplies to come from renewable sources by 2020 (ENDS Report 397, pp 48-50 ).

In late October, the Council of Ministers, which represents member states, reached a "broad consensus" on the draft renewable energy and CCS Directives. The Council issued compromise texts,1,2 and negotiations with MEPs started in November.

But as the ENDS Report went to press, member states had still not reached consensus on proposals on the EUETS including how to deal with ‘carbon leakage’. Carbon leakage is the risk that the cost of carbon trading will make energy-intensive industries uncompetitive with plant in countries with fewer climate controls (ENDS Report 403, pp 32-35 ), resulting in production relocating to those countries.

A bloc of central and eastern European countries, led by Poland, appears to be preventing agreement. They want free carbon allowances for power plants under the EUETS. They fear energy prices will increase too sharply if plants are made to buy all allowances to cover emissions from 2013, as proposed by the Commission, making their energy-intensive industries uncompetitive.

The bloc is also pushing for carbon price controls, limiting the potential cost of allowances to €38 (£30) per tonne. A more generous "solidarity mechanism" is also needed, they say. This is a payment to newer EU states to recognise carbon reductions achieved since 1990 and their lower GDP. Reports have said they are calling for up to 30% of money generated from auctioning allowances.

The compromise texts on CCS and renewables indicate there is also a lot of work to be done in these areas before the Council and MEPs reach agreement on the climate package.

The Council opposes an emission limit for new power plants, according to the CCS text. In October, the European Parliament’s environment committee said that from 2015 new power plants should not be allowed to emit more than 500 grams of CO2 per kilowatt hour of electricity generated. This would effectively make CCS mandatory for new coal-fired plant.

However, the Council’s text says "all combustion plants of a specified capacity" should simply be required to be ‘CCS ready’. This means they need to allocate enough space to install CCS equipment.

This requirement only applies "if suitable storage sites [for CO2 ] are available, and CO2 transport and retrofit for CO2 capture are technically and economically feasible."

The Council also opposes MEPs’ plan to finance CCS demonstration projects by selling carbon allowances from the EUETS’s new entrants reserve, which is a fund to allocate free allowances to installations built after 2012. Member states feel this would compromise the reserve’s purpose. But the text fails to include an alternative funding mechanism.

In November, it was revealed that the Commission also opposes funding CCS projects in this way. In an informal paper it said support should be provided to stimulate investment in CCS, not pay for projects entirely.

In terms of the draft renewables Directive, the Council calls for a clause to review progress towards the Directive’s targets in 2014. This review would also look at aviation’s ability to use biofuels.

MEPs have previously opposed such a review and the Council’s proposal received an angry response from environmental NGOs. Friends of the Earth said the uncertainty caused by a review clause could prevent business investing in renewables.

Member states also want to change the sustainability criteria that will apply to biofuels, according to the compromise text. Biofuels should achieve a minimum 35% greenhouse gas saving compared with the fuels they replace when the Directive enters into force, rising to 50% in 2017, it says.

The Council of Ministers’ text allows fuel suppliers to use default values developed by the Commission’s Joint Research Centre (JRC) to calculate savings. In contrast, MEPs want fuel suppliers to have to measure the greenhouse gas savings their biofuels achieve.

The JRC’s figures have been criticised as optimistic, but they appear to generally be more conservative than the greenhouse gas savings being declared by fuel suppliers under the UK’s renewable transport fuel obligation (see table). The most controversial feedstocks such as palm oil and soy also do not achieve the minimum saving.

The JRC has yet to release the data on which its figures are based, although these figures are simply updates of a 2006 report (ENDS Report 382, pp 26-29 ).

The compromise text contains no mention of how the greenhouse gas figures will take account of indirect land-use change. This is where using cropland for biofuels displaces existing food production leading to further land-use change.

The UK government had proposed that the Commission develop factors to take account of this by 2011. However, the text does not mention this proposal.

The compromise text also leaves the door open for member states to meet their renewables targets by investing in renewables projects abroad. The Council of Ministers has inserted several articles on the development of joint projects between member states and between member states and non-EU countries. It is expected that some MEPs will oppose these plans.

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