The EU must do more on climate change

Written by Stephen Tindale [1], 01 February 2006

The EU, like the rest of the world, faces no greater threat than climate change. There are two – equally bleak – scenarios for Europe if greenhouse gas emissions are not cut quickly and substantially. A gradual rise in temperatures could bring most of the continent within the range of tropical diseases such as malaria, and push southern Europe’s regular shortages of fresh water to crisis levels. Global water shortages would affect perhaps three billion people, driving many millions of environmental refugees to mass at EU borders. Alternatively, the Gulf Stream could fail, tipping Europe into a new ice age. The branch of the Gulf Stream that brings warm water to Europe’s shores has already weakened by 30 per cent, according to the Southampton Oceanographic Institute.

The beginnings of European integration were a response to the great challenges of the post-war years: securing peace between France and Germany, and rebuilding Europe’s shattered economy. In the 1980s, Jacques Delors championed the single market, when economic stagnation again appeared the major threat. Now, a concerted effort to tackle climate change, built around new energy policies, could provide the EU with a much-needed new impetus.

The idea of using energy policy as the motor for integration is not new. Two of the three founding treaties, those establishing the Coal and Steel Community and Euratom, dealt with energy. But coal and nuclear power were the two most polluting and least sustainable sources of energy. EU countries must now develop clean sources: renewables, such as solar, wind and water; efficient combined heat and power plants; and (for the next few decades, at least) natural gas, which produces only half as much carbon as coal.

The EU has the policy levers to achieve such a shift. First, the Union should ban subsidies to polluting energy sources. Market-distorting bailouts of the nuclear industry are still legal under the Euratom treaty, while the Commission has lacked the nerve to tackle massive subsidies to coal industries, particularly in Germany. Second, governments should target EU research and regional development funds on promoting renewables, redressing the past imbalance that favoured nuclear power. Third, the EU should revise and strengthen the renewable energy directive, currently a weak measure setting only aspirational targets for member-states. New targets for the proportion of energy generated from renewables should be binding. Most importantly, the EU should transform its Emissions Trading Scheme (ETS).

The ETS is in theory a ‘cap and trade’ scheme. A maximum limit is set for carbon emissions and each firm covered (currently those in the industrial and energy sectors) is given a number of permits to pollute, which can then be traded. This is a cost-effective way to reduce pollution, and it helps track the overall level of carbon emissions. The problem is that the cap is not agreed centrally: each member-state decides how many permits its industry needs. Hence the overall emissions ceiling is too high and the price of permits too low. If the EU set the cap centrally, on the basis of scientific advice, the scheme would become a powerful tool for driving down emissions. It would also become a model for the rest of the world. Other countries, and even those US states with their own cap and trade schemes, could join.

A reformed ETS could also help to deal with burgeoning aviation emissions. Britain has argued that aviation should be brought within the ETS. But extending the current scheme to aviation would simply lead to the member-states allocating a larger number of permits. Although aviation would have to account for its emissions for the first time, the industry expects that it would get enough permits to allow for continued expansion, pretty much as usual. This would lead to only a marginal reduction in emissions. If the ETS is not reformed, a Europe-wide tax would be a better way of tackling aviation emissions.

The EU also needs to deal much more effectively with road transport pollution. At present the East Europeans are spending a lot of public money on new road construction while at the same time closing ‘uneconomic’ railways. They are repeating the mistakes of the West European development model, which the older member-states are now having to unpick. The only EU measure that counters growing traffic volumes is a weak, voluntary agreement with vehicle manufacturers to increase fuel efficiency. Because the agreement lacks sanctions its lax targets will not be met.

Yet the EU has already shown that regulation can lead to significant changes in the way cars are made. In the late 1980s, following the lead of California, EU governments adopted a regulation that required manufacturers to fit catalytic converters. This reduced toxic emissions from each vehicle by a round 90 per cent, contributing to a major reduction in air pollution, although it still kills thousands of Europeans every year. A further regulation on fuel efficiency could easily slash carbon emissions from vehicles by as much as 30 or 40 per cent.

Industry will protest. But experience shows that well-designed policy instruments can cut costs, improve economic efficiency and boost competitiveness. As the rich world’s biggest single market, the EU can demonstrate how to combine prosperity with a low-carbon economy. Such a stance would strengthen the EU’s external diplomacy. The EU has consistently led in international environmental negotiations, and did so again in last year’s climate change talks in Montreal. It should now commit itself to reducing emissions by at least 30 per cent by 2020 – the upper end of the range of commitments already made by governments. It should also step up efforts to transfer clean technology to emerging economic giants such as China and India.

The EU could take a whole range of practical and affordable measures to help Europeans rise to the challenge of climate change. Sadly, Britain championed none of them during its EU presidency. Now, under the Austrian presidency, governments are still searching for a political project that can bring Europeans together and revive the EU. Tackling climate change should be that project.