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Industry realism curtails EU's long-term climate ambitions

Barbara Lewis and Charlie Dunmore
Monday, 20 Jan 2014 | 8:00 AM ET

* European Commission to announce new climate targets on Jan. 22

* EU executive expected to pare back its climate ambitions

* Aim likely to be reduction in CO2 emissions by 40 percent

BRUSSELS, Jan 20 (Reuters) - Seven years after it set some of the world's most stringent environmental targets, the European Union is about to revise its long-term goals to take more account of industry and changed economic circumstances.

Following years of economic turmoil, low growth and rising energy costs, the EU is looking to strike a balance between tackling climate change and giving industry room to manoeuvre as it prepares to unveil new targets on Wednesday.

Instead of the "Holy Trinity" of goals laid down in 2007 - a 20 percent reduction in carbon dioxide emissions from 1990 levels by 2020, 20 percent use of renewable energy sources and 20 percent gains in energy efficiency - the new targets for 2030 are likely to be simpler.

As the United States enjoys an energy boon because of the exploitation of vast shale gas reserves - its natural gas prices are roughly a third of EU levels - Europe will also avoid putting obstacles in the way of its own shale exploration.

But while the targets are less ambitious and the atmosphere more realist, the expected headline goal would demand effort.

EU officials say they expect the European Commission, the executive arm of the 28-nation bloc, to suggest cutting CO2 emissions by 40 percent from 1990 levels by 2030 - still a higher benchmark than any other industrialised region.

"We still have a responsibility of leadership, but we should not believe we can do this alone," one of the officials involved in drafting the policy paper said, acknowledging that the EU cannot afford to be as ambitious as it was in 2007.

While the shift reflects realism at a time when the EU's biggest trading partners, including the United States, Japan and Canada, have scaled back their climate commitments, it is also a nod to the lobbying influence of European industry.

Major companies and utilities have said that overly stringent targets will drive business out of Europe, making it harder for the continent to compete. With growth negligible and unemployment at record highs, that is an argument that has found traction in Brussels.

"The high cost of non-competitive technologies to decarbonise the power sector cannot be borne by our companies in addition to already uncompetitive energy prices," heads of industry said in a letter to the Commission this month.

The 14 signatories, who asked for "one single, realistic target" plus a goal on industrial growth, included top executives from chemical companies BASF and Dow , and steelmaker Arcelor Mittal.

ECONOMICS FIRST

Roger Pielke, a professor of environment at the University of Colorado at Boulder, says it is an "iron rule" that economics dominates climate goal-setting.

"When politics focused on economic growth confronts politics focused on emissions reductions, it is economic growth that will win every time," he wrote in his book "The Climate Fix".

Or, as analysts Andrei Marcu and Christian Egenhofer at Brussels' think-tank CEPS put it in a paper this month:

"The economic crisis, which has contributed to achieving EU greenhouse gas emissions reduction targets, has also made industry margins shrink, and so too the industry's ability to invest in existing and new facilities in the EU. Most governments' fiscal room for manoeuvre was strongly reduced."

The adjusted attitude has many detractors including Germany, the EU's largest economy and most influential country, which is shifting from nuclear power to renewable energy.

It is intent on having tough targets not just for overall CO2 levels, but for renewables in each member state. It wants individual binding targets, not the loose EU-wide one expected to be proposed, which critics say could never be enforced.

German industry finds itself pulled two ways. Many of its companies are involved in the solar and wind sectors, but it also has major utility companies, which would prefer a single target on cutting emissions.

Europe's emissions-cutting goal will form the basis for the EU's negotiating position at U.N. climate talks, which have a 2015 deadline for agreeing a successor to the 1997 Kyoto Protocol, the current global pact to combat climate change.

According to Commission data, a 40 percent cut in EU emissions of CO2, leading towards an 80 percent cut by 2050, is the least the bloc must do to help prevent global temperatures from warming by 2 degrees Celsius (3.6 Fahrenheit) compared with pre-industrial levels.

United Nations climate change experts say a rise of more than 2C would lead to catastrophic effects, including a sharp rise in sea levels.

Many scientists disagree with the Commission analysis and say the EU needs to go further than announcing a headline cut of 40 percent on Wednesday, arguing it must deliver at least 50 percent by 2030. And developing nations, which argue at U.N. talks that the industrialised world must carry a greater share of the burden, are unlikely to be impressed by the EU offer.

Wednesday's Commission announcement will be followed by debate at EU summits in March and June and a draft law, probably early next year.