EU Calls for 40% Reduction in Greenhouse-Gas Output by 2030

The European Union proposed cutting the region’s greenhouse-gas emissions by 40 percent in 2030, accelerating its efforts to fight climate change.

The European Commission’s strategy to reduce pollution, curb rising energy costs and overhaul renewable-energy policies in the next decade would require an average annual investment of 38 billion euros ($52 billion) in the 28-nation bloc, the region’s executive arm said today in a statement. The current goal is to cut emissions by 20 percent in 2020 from 1990 levels, a pace that would lead the EU to a 32 percent reduction of greenhouse gases by 2030.

The proposed design of future policies pits nations including Germany and the U.K., who are seeking stronger efforts to protect the atmosphere, against Poland and its allies, which rely mainly on fossil fuels to keep their economy humming. It also highlights the divide between energy intensive companies, whose gas and power costs are more than double their U.S. and Asian competitors, and green lobbies such as Greenpeace seeking deeper emission cuts.

“The 40 percent greenhouse-gas target is probably the maximum of what can be achievable if you want to unite all these forces,” EU Climate Commissioner Connie Hedegaard said in an interview in Brussels. “This is the common denominator that we’ve been looking for for years.”

The strategy is the start of a debate among member states, which may lead to a draft law in early 2015. It also includes an EU-wide target to boost the share of renewables in energy consumption to 27 percent by 2030 and may include a pledge to boost energy efficiency later this year, the commission said.

First Step

The proposal is an important first step to restoring investor confidence in the EU’s vision for a low-carbon energy future, according to Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change in London, which represents more than 85 companies with assets of 7.5 trillion euros. The EU’s long-term goal is to cut greenhouse gases by at least 80 percent in 2050.

“Investors need policy fixed for the long-term to plan multi-decade energy investments,” Pfeifer, whose group includes Kleinwort Benson Investors and PensionDanmark, said in a statement. “The longer policy is delayed the more severe Europe’s energy investment challenge becomes.”

The spending required to meet the targets will be to a large extent compensated by fuel savings, according to the commission’s President Jose Manuel Barroso.

Global Action

“We show that European leadership in global climate action is beyond doubt and we show that we can do that in a way that is beneficial for economy,” Barroso said at a conference in Brussels. “What we’re proposing today is ambitious and affordable.”

The commission asked member states to consider a 2030 framework that focuses on the carbon-reduction target to avoid conflicts with policies subsidizing renewable energy, according to the strategy document. The EU won’t extend legally-binding renewables targets for individual member states beyond 2020, instead setting an EU-wide goal, according to the document.

Scrapping renewable energy targets is “good news” for the economy and environment, according to Robert Stavins, director of Harvard University’s Environmental Economics Program. The renewables goal conflicts with the EU emissions trading system and removing it would lower the cost of achieving the pollution cap, he said.

Binding Target

The European Environmental Bureau, the region’s largest federation of environmental citizens’ organizations, has called on policy makers to reduce carbon discharges by at least 60 percent, set a binding target for renewables at 45 percent.

“The Commission’s proposal falls well short of what science tells us is needed to address the devastating consequences of climate change and shows a serious lack of vision and leadership by President Barroso,” Jeremy Wates, EEB Secretary General in Brussels, said by e-mail.

The commission also seeks to strengthen its emissions trading system from 2021 by making the supply of permits fall when there’s an accumulated surplus of at least 833 million metric tons. That’s less than half of the glut estimated to be about 2.2 billion permits by the end of last year, according to Bloomberg New Energy Finance in London. If the surplus drops below 400 million, the bloc would begin returning allowances from the reserve to the market, according to the document.

12,000 Companies

To align the cap-and-trade system, which puts emission limits on about 12,000 companies, with the proposed 2030 climate target, the annual pace of carbon cuts in the ETS would accelerate to 2.2 percent from 2021 from 1.7 percent currently, according to the commission. No international credits would be allowed in the program after 2020 unless negotiators worldwide reach an ambitious deal at a climate summit in Paris next year.

The cost of emitting a ton of carbon dioxide in the EU’s $53 billion carbon market slumped to a record low of 2.46 euros in April and traded at 5.16 euros today on the ICE Futures Europe exchange in London.

EU heads of state will discuss the package at a meeting in Brussels starting March 20. Energy and environment ministers may take up the debate in May in Athens. The commission’s ambition is to have a political decision on the direction of future policy in time for a Sept. 23 summit, where UN Secretary General Ban Ki-Moon is seeking pledges that can underpin a global treaty limiting emissions to be approved in 2015.

The EU’s regulatory arm may then propose draft legislation by the first quarter of 2015, in time for the UN global warming talks that culminate in December of that year.

(Updates with EU commissioner comment in 4th paragraph.)
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