Green Energy/Technology Companies

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Landmark agreement on renewables, but EU climate change package underwhelms

BRUSSELS, BELGIUM, December 12 2008. News coming out of Brussels sees the renewables industry breathe a sigh of relief as EU Heads of State leave the renewables directive largely untouched, but other parts of the EU's package that are supposed to deal with climate change - namely carbon trading or "cap and trade" - will not be so lucky.

While the headline 20% reduction in Greenhouse Gases by 2020 was always considered untouchable, the cost of achieving this has led to fierce negotiation and self-interest from Eastern European countries such as Poland, not to mention the huge industrial lobby in Europe. And in a stunning u-turn from earlier versions of the Bill, industrial sectors such as cement, chemicals and steel will now receive free carbon emission permits at least up to 2020, instead of having to buy them under an auction scheme, as previously planned.

The concession represented a victory for Germany, by far Europe’s largest manufacturing nation. It means that revenues from the EU’s auction procedures – once forecast to hit €50bn a year by 2020 – are now expected to be closer to €30bn. This will minimise the incentive for cleaner technologies, not to mention give a huge windfall to recipients of the free permits, argue many experts. And for central and eastern European countries such as Poland that are burdened with highly polluting power sectors from the communist era, a deal was struck that will ease the financial pain of switching to a low-carbon economy.

When it comes to the renewables directive however, the news is far better. The main 20% by 2020 target is still in place, and all of the original Member States' burden sharing targets have survived. There had been fears that last minute mischief making from the Austrian Government - who had decided to question the Austrian national objective of 34% of renewable energy share in final energy consumption by 2020 - would put at risk the agreement on the RES Directive reached by the Council, the European Parliament and the European Commission.

But this was resolved, along with some other major sticking points that came to the fore in the last few weeks: A controversial 2014 "review clause"- demanded by the Italians and the source of much anger from renewables activists who saw this as a potential red light to those that would invest in the renewables sector - did make the final cut, but crucially all individual Member State targets (not to mention the headline 20% by 2020 target) are set in stone and cannot be changed, regardless of the clause.

On renewables trade, Member States will also be able to decide themselves whether (and to what extent) they will engage with other Member States, rather than have mandatory trading forced upon them, something that could have endangered national support schemes. And also on the thorny issue of biofuels a compromise of sorts has been thrashed out, say sources: the 10% transport target has been retained, but this will include cars and trains running on electric power (electric cars count 2.5 times towards the target due to increased efficiency), while the European Commission is to report within two years on the impact on land use of biofuels and on their "sustainability."

"The Renewables Directive is a breakthrough for the deployment of renewables in the EU providing binding EU targets and a stable long-term investment framework," highlights Dirk Hendricks, Director of the EU Liaison Office of the World Future Council.
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