Oct. 30 (Bloomberg) -- European Union leaders failed to approve climate aid for the developing world as poorer EU nations balked at the costs, highlighting the hurdles to a new United Nations accord to reduce emissions from fossil fuels.

EU government heads missed a self-imposed deadline to sign off on a pledge of as much as 15 billion euros ($22 billion) a year starting in 2020. An eastern European group headed by Poland derailed the plan at a Brussels summit today by demanding a breakdown of contributions by EU country and financial relief.

The EU has led the campaign for a global treaty to tackle the heat waves, storms and floods tied to climate change, saying rich countries must cut greenhouse gases such as carbon dioxide by 2020 and offer aid for the most vulnerable nations. The UN aims to reach an accord in December in Copenhagen.

“Eastern Europe is blocking an EU deal on climate financing because they are poorer,” said Daniel Gros, director of the Centre for European Policy Studies. “They’ll have to fight over it, possibly as part of a package deal linked to other EU budget matters.”

The standoff within the 27-nation EU over how to divide the cost of European climate aid signals the potential for discord at the UN level over financial transfers. The EU says no agreement is possible in Copenhagen, where almost 200 countries will meet, without climate aid.

Cost Concerns

The cost concerns of ex-communist eastern European countries, in the EU since 2004, challenge the bloc’s habit of figuring out how to divvy up a common bill after the pledge rather than before it. Enlargement has made it harder for the EU to count on trust among member nations when acting globally.

“The poorer countries just have to pay less,” said Polish Prime Minister Donald Tusk. His minister for European affairs, Mikolaj Dowgielewicz, said: “We want concrete criteria.”

The East-West standoff in Europe mirrors a 2008 dispute over European legislation that put the EU on track to cut greenhouse gases 20 percent in 2020 from 1990 levels. The price of that agreement included letting dirtier eastern European power plants receive for free emission permits that competitors in western Europe will have to buy as of 2013.

“We understand the legitimate concerns of the eastern members of the EU, while understanding of course that everybody has to contribute,” said Italian Foreign Minister Franco Frattini. U.K. Prime Minister Gordon Brown said: “There’s got to be internal discussions within Europe.”

EU Deadlock

The EU deadlock over a pledge prompted European leaders, who traditionally have boasted about forging ahead on global climate policy, to shift the focus by urging the rest of the developed world including the U.S. to act on financing.

“Other countries have to take on similar financial obligations as well,” said German Chancellor Angela Merkel.

A European climate-aid contribution of up to 15 billion euros annually would cover part of the 50 billion euros a year in public aid that poor nations may need by 2020 to tackle global warming, says the European Commission, the EU’s executive arm, which put the pledge on the table in September.

Developing World

The developing world faces total annual costs of 100 billion euros by 2020 to cope with climate change and limit emissions blamed for it, according to the commission, which says the rest of the funding could come from domestic sources and international emission markets. The European leaders endorsed this scenario on general financing needs.

The EU is willing to provide “its fair share of public support,” the heads of government said in a statement. In June, the leaders used similar language while saying they would aim in October to decide “on all aspects of financing.”

Marianne Fay, chief economist for the World Bank’s sustainable development network, said the EU must overcome its divisions to maintain Europe’s leadership role and bolster the chances of a Copenhagen accord.

“It’s very important that the EU makes a substantial contribution to the effort; that would really help to get the U.S. to the table,” she said. “The biggest danger right now is that everyone’s waiting to see what the others are going to do.”

The EU split over any pledge extends to smaller climate-aid needs projected for the period until 2020.

Developing countries may need “fast-start” international public aid of 5 billion euros to 7 billion euros a year in 2010- 2012 to counter climate change, according to the commission.

Aid Needs

The poor world’s international-aid needs could increase to between 9 billion euros and 13 billion euros a year as of 2013 before reaching 22 billion euros to 50 billion euros annually by 2020, says the commission.

On a separate climate issue, eastern European governments reiterated demands to be able to use U.N.-sponsored emission credits established under the 1997 Kyoto Protocol after it expires in 2012. Western European governments want these emission rights -- known as Assigned Amount Units -- cancelled after 2012 because of the risk of a surplus.

The summit statement couches this dispute in diplomatic language, saying “a significant amount of unused Assigned Amount Units is likely to accrue” and “this issue must be addressed, in a non-discriminatory manner” and “so that the handling of the AAU surplus does not affect the environmental integrity of a Copenhagen agreement.”

To contact the reporters on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

Last Updated: October 30, 2009 11:24 EDT