Costs of Stricter CO2 Goal for EU Nations Drop, Study Shows
The costs of tightening the European Union’s carbon-reduction targets are smaller than previously estimated, an analysis by the EU regulatory arm showed.
The bill for moving to a 30 percent emissions-reduction target in 2020 from the current goal of cutting greenhouse gases by 20 percent would range from 10 euros ($13.10) per capita in the Czech Republic to 136 euros in Luxembourg, according to the EU document published today. Four out of 27 nations in the bloc -- Estonia, Latvia, Bulgaria and Romania -- would observe a profit from 7 euros to 54 euros per capita, it showed.
“The analysis shows that the 20 percent emissions reductions target will be less costly, for the EU as a whole as well as for each member state individually, than was assumed in 2008 when the legislation was negotiated,” the commission said on its website. “This means that the 30 percent reduction scenario has become also considerably less costly too.”
Environmental lobbies and companies including Royal Dutch Shell Plc (RDSA) have been urging the EU to adopt a more ambitious climate goal and curb supply of allowances in the bloc’s emissions-trading system, the world’s largest, after carbon price slumped to a four-year low last year. EU governments, which demanded the cost analysis at national level before any decisions on future greenhouse-gas targets, are set to discuss the document at a meeting of environment ministers on March 9.
70 Billion Euros
Member states remain divided on whether to raise the stringency of the EU’s climate policies, a step that would cost the bloc a total of 70 billion euros, according to the analysis. While western European countries have voiced support for tighter pollution caps on companies, eastern nations have in previous years tended to favor a more cautious approach and said a more ambitious approach could hurt their economic competitiveness.
“Last year saw massive flooding and wildfires, punishing lives and costing hundreds of billions of euros,” Joris den Blanken, climate policy adviser at Greenpeace in Brussels, said by e-mail. “Europe cannot continue coasting towards a cushy climate target. This is also an opportunity to cut out ruinous fuel costs that are sapping our economic strength.”
To encourage low-income countries to tighten the goal to 30 percent, a target that would involve a 25 percent reduction in domestic emissions and the use of imported credits to account for the remaining 5 percent, the EU may withhold some carbon permits from high-income member nations after 2012, the commission said.
Price Increase
“In the extreme case where only higher income member states contribute to a set aside, revenues for lower income member states may rise by as much as 80 percent in 2020,” according to the analysis.
Higher-income countries including Austria, Belgium, France, Germany, Italy, Luxembourg, the Netherlands and the U.K., wouldn’t lose out under such a scenario thanks to a price increase that a set-aside would cause, the commission said.
The EU emissions trading system, or ETS, is the bloc’s key tool to achieve its climate policy goals. It imposes pollution curbs on more than 11,000 companies, which will have to buy an increasing share of their allowances at auctions in the next phase of the program that begins in 2013.
The 30 percent emission-reduction scenario analyzed by the commission assumes a reduction in the number of allowances to be auctioned in 2020 to 944 million from 1.285 billion under the existing target, or a cut of 341 million, the analysis showed.
Stricter Target
“If the 30 percent target in the ETS would be implemented by a reduction in auctioned allowances, it is estimated that overall auctioning revenues for member states in the year 2020 would be up to 7 billion euros or around one-third higher than with the current 20 percent target, increasing auction revenues to around 28.5 billion,” according to the document.
A shift to a stricter emissions-reduction target would require additional investment that would be “proportionally higher” in the group of lower-income EU nations, including Bulgaria, Romania, Latvia, Lithuania, Poland, Slovakia, Estonia, Hungary, Czech Republic, Malta, Slovenia and Portugal, the commission said in the analysis today.
In addition to the partial set-aside of permits, the EU has at least two other mechanisms that would “balance out” differences between member states: funds from the bloc’s 2014- 2020 budget and transfer of emission allocations in non-ETS sectors, the commission said in the analysis.
Long-Term Goals
Carbon permits for delivery in December pared early losses and traded 1.6 percent down at 8.10 euros a metric ton as of 1:05 p.m. on London’s ICE Futures Europe exchange.
The commission analysis is a strategy paper to be presented to member states for consideration and does not constitute a legislative proposal. Denmark, which holds the bloc’s rotating presidency, vowed to stimulate a debate on the EU long-term carbon goals at the March meeting of environment ministers.
In a policy paper presented last year the commission said the EU may cut greenhouse gases 25 percent by 2020 compared with 1990, as long as it steps up energy-saving measures. The most cost-effective way to achieve the 2050 goal of reducing carbon by at least 80 percent would be to lower discharges by 40 percent in 2030 and 60 percent in 2040, according to the paper, known as the Low-Carbon Roadmap.
Denmark, which will chair the March meeting of ministers, proposed that member states “recognize” the commission’s findings and “invite” the EU regulator to “present timely options for delivering the reductions in the Low Carbon Economy Roadmap to 2050 for the period to 2030,” according to a draft document obtained by Bloomberg News.
The draft conclusions are subject to talks by diplomats from member states and may be changed before the meeting.
To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net;
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