Ambitious New Energy Policy Proposed for EU
The EU announced on 10th January an ambitious new energy policy: EU member states will be required to reduce CO2 emissions to 20% below 1990 levels by 2020. The more ambitious goal of 30% was compromised based on the very valid argument that if the EU unilaterally pushes up costs for local factories/energy suppliers, the economically and strategically important industries will go offshore--while the product of the offshore companies will prance back to European consumers without penalty after having been produced in a much less environmentally friendly way than the already tightly controlled EU factories would have done. The hammer in their argument: a ton of CO2 is a ton of CO2 whether it comes from the EU or elsewhere. The EU policy does hold open the option to return to the 30% commitment if international support for the proposal can be gathered, and a 60-80% reduction by 2050 will be the EU's target in international negotiations.
In spite of its groundbreaking optimism, the EU plan failed to satisfy eco-advocacy groups like WWF, which emphasizes that the 20% goal is not sufficient to ensure that catastrophic global climate change will be deterred, and Greenpeace, which criticizes the emphasis on sequestration technologies such as pumping excess CO2 deep underground, rather than on alternatives and efficiency. The nuclear question was left open, and many questions are raised by the new policy, including: Can the course be held as the presidency of the EU transfers from Finland to Germany? Can a unilateral energy policy bring advantages, or does economic disaster loom larger than the climate change threat? The EU's new policy rests on three pillars: Liberalization of the energy market; Increased use of renewable energy sources; and Increased energy efficiency.
Liberalization of the energy market
The policy proposes to enhance freedom of consumer choice but falls short of the vision of an EU-wide integration of control over the energy sector. With Member States varying from the French market, 80% supplied by nuclear plants, to the Polish market, overwhelmingly dominated by coal-burning facilities, the national governments strongly resisted the idea of a single seat of control in Brussels. France and Germany united to fight the proposal for breaking up the vertical integration of national giants like Éléctricité de France and E.On, but a late U-turn by the Germans finally passed the proposal to require that distribution networks be unbundled from the power plants, ultimately to be managed by independent operators. If the independence is not demonstrated, the power companies will face mandatory break-ups. The German support is critical to the policy as a whole, with the EU Presidency transitioning from Finland to Germany.
Increased use of renewable energy sources
The commission has committed to increasing annual spending on R&D; by 50% (574M/year to 886M/year). Additionally, the Intelligent Energy-Europe Programme will benefit from the doubling of its budget (from €50M/year to €100M/year) for the period 2007-2013. Matching funds from the Member States and industry will be sought to further extend the development capacities for new technologies.
Increased Energy Efficiency
A unique aspect of the EU policy is that the mandatory caps on emissions apply to nations rather than to business sectors. This angle leads to innovative ideas about how consumer emissions can be minimized alongside the traditional thinking about emissions trading markets and industrial or energy sector controls. Proposals targeting a 20% improvement in energy efficiency recognize the importance of changing transportation behavior in addition to setting efficiency standards for vehicles, buildings and appliances; promoting energy services; and creating incentives for more efficient products.
Will Leadership Create Change?
But can leadership in the EU really encourage international commitment to similarly abmitious goals? The controversial Kyoto protocol calls for only a 5% reduction in CO2 emissions, while exempting developing economies likely to have the greatest influence on the emissions trends. The USA has declined to endorse the Kyoto agreement; however, on 12 January, two presidential hopefuls, Republican John McCain and Democrat Barack Obama joined forces with Independent Senator Joe Lieberman to propose a bill in the US Congress setting an enforceable but modest goal of returning to 1990 levels by 2020 in industry, oil refineries and power plants (For more see the New Scientist). While leadership may bring breakthroughs in international negotiations, the fact remains that a unilateral climate policy is a very risky economic proposition. One must put the question forward: Is there value in leadership if no one is following?
Competitive Europe or Continental Economic Disaster?
A critical factor in the success of the new energy policy will be its ability to stimulate competitiveness. The argument that environmental protection reduces societal costs for clean-ups and health problems is difficult to sustain in the face of a global economy in which citizens can benefit from cheap products while displacing the environmental costs to developing lands. Incentives for technological innovation may be created, but if the infrastructure to build and market the innovative new visions has moved to the country of cheapest production, the innovations will be quickly vulnerable to copy-cats. Perhaps the most interesting argument, set forth by Stavros Dimas (EU Commission Member responsible for Environment), is that unified environmental policies underpin the single-market approach of the European Union, a recognized success estimated to have created 2.5 million new jobs and €800 billion in new wealth for Europeans. Ultimately, Dimas correctly recognizes that for the effort to function, the companies that make the investments must also reap the benefits. This is the real challenge for policy makers, and it will be the point upon which success or failure turns.