Europe Leads the Way: 30% Emissions Cuts By 2020?
The United Kingdom, Germany and France have launched a new push for the European Union to commit to a larger reduction in greenhouse gas emissions by 2020 in a bid to aid economic recovery and shore up energy security, in a move that is likely to stir debate throughout the continent and make the rest of the world sit up and take notice. The UK Government is also committed to reforms to the Climate Change Levy to provide more certainty and support to the carbon price, as well as proposals for the creation of a Green Investment Bank to stimulate low-carbon investment.
By Selina Williams of Dow Jones Newswire (15 July 2010):
LONDON – The U.K., Germany and France Thursday launched a new push for the European Union to commit to a larger reduction in greenhouse gas emissions by 2020 in a bid to aid economic recovery and shore up energy security, in a move that is likely to stir debate in the EU.
In articles published simultaneously in newspapers in the three countries, U.K. Energy and Climate Change Secretary Chris Huhne, Jean-Louis Borloo and Norbert Roettgen–his counterparts in France and Germany respectively–said cutting emissions 30% by 2020 instead of the targeted 20% would encourage more low-carbon investment.
Such a move would also help European companies take a lead in the sector and not lose out to other global competitors, they said.
While the U.K. has supported a unilateral increase by the EU to the 30% target, the articles show a bigger policy shift for France and Germany, which have traditionally only been in favor of the higher emissions goal for the EU as a whole if other countries commit to similar efforts.
“The current target of a 20% reduction now seems insufficient to drive the low-carbon transition. The recession by itself has cut emissions in the EU’s traded sector by 11% from the pre-crisis levels,” said the jointly written article that was published in the Financial Times.
Partly as a result of this, carbon prices are too low to stimulate significant investment, the article said. Carbon is trading at around EUR14 a metric ton on the European Emissions Trading Scheme, which is estimated to be around EUR15 to EUR20 a ton too low to stimulate the investment required for larger and more costly low-carbon projects.
“Moving to a 30% target would provide greater certainty and predictability for investors,” they said in the article.
In the U.K., companies have been struggling to see how they will be able to finance large and costly low-carbon energy projects in offshore wind, nuclear power and carbon capture and storage while the carbon price is so low.
“The ‘wait and see’ policy of sticking to 20% risks putting Europe in the global slow lane of maximizing low carbon economic opportunities,” they said.
The move by the three ministers is likely to stir the debate in the EU, with business lobbies usually opposed to more ambitious greenhouse gas reduction targets.
“The European business community still thinks that a unilateral target increase would be counterproductive,” said Folker Franz, who is responsible for climate change policy at BusinessEurope, the European business lobby group.
“There is indeed increasing evidence that countries like China or the U.S. are becoming more competitive in “green” sectors like renewable energy, but none of these countries has a binding absolute emission target,” he said.
The European Commission–which called the move a “positive contribution” to the climate change debate–has estimated that the economic downturn would make the cost of meeting a 30% cut in 2020 EUR11 billion more than the pre-recession cost of meeting the 20% target of EUR70 billion.
The initiative is part of the U.K. government’s wider moves to encourage low-carbon investment.
In the recent budget the U.K. government announced plans to consult on reforms to the Climate Change Levy to provide more certainty and support to the carbon price in the U.K., and further reforms of the energy market to promote low-carbon energy generation will follow in the Energy Bill.
The government has also said it will put forward detailed proposals on the creation of a Green Investment Bank to stimulate low-carbon investment.