EU reaches final agreement on Climate and Energy package

12 December 2008

The Climate Group's policy director Mark Kenber gave a cautious welcome to the Climate and Energy package agreed by EU Heads of Government in Brussels on December 12th.

The leaders of the 27 EU Member States met last week to discuss a coordinated economic stimulus to head off looming recession and to secure final agreement on the rules governing implementation of the so-called 20-20-20 package. This aims to cut the region's emissions by 20% below 1990 levels, increase the share of renewables in energy supply and reduce energy demand through energy efficiency emissions by the same amount, all by 2020.

In the context of worsening economic conditions, many EU countries, notably Italy, Germany and those from Eastern Europe had been looking for ways to diminish the perceived cost of achieving the targets, citing threats to jobs and output and potential unfair competition from countries without equivalent policies. This led to watering down of some key provisions, most notably an increase in the number of permits that companies covered by the European Emissions Trading Scheme will receive for free and the number of carbon credits that can be imported from projects in countries outside the EU.

The final package of targets and policies agreed is certainly not as tough as many businesses, governments and civil society groups had hoped for. As it stands, it will is unlikely to lead to emissions reductions in line with the cuts recommended by scientists or provide enough of a stimulus to drive a new generation of low carbon clean energy technologies.

Nevertheless, it represents the most ambitious piece of domestic climate legislation on short-term emissions reductions seen to date and as such will help give momentum to talks on a new international climate treaty that are due to be completed in Copenhagen next year. With positive commitments by US President elect Barack Obama, a new target from Australia, the UK's recent climate change legislation and increasingly ambitious policies in large developing countries such as China and Brazil, the chances of a positive outcome have improved significantly.

The EU agreement also created a fund to support the implementation of a dozen Carbon Capture and Storage (CCS) projects, using revenues generated by auctioning carbon allowances to participants in the ETS. As a potentially key technology for cutting medium term emissions in the power sector and industry, it is essential that it is tested at commercial scale. The new support should make this happen more quickly.

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