EU adopts blueprint for climate fight

BRUSSELS - The European Union's executive adopted plans on Wednesday to slash greenhouse gas emissions, seeking to push the world into tough climate action, but delayed key decisions on how to soften the impact on industry. The plans will transform Europe's energy supply by 2020, with a 10-fold increase in renewable energy production in Britain for example, and raise power bills by 10 to 15 percent.

The European Commission said the measures were a vital step in the fight against global warming and other countries must now join the effort. "Europe and the rest of the world have to act fast, and act boldly, if we are to prevent this catastrophe," said EU Environment Commissioner Stavros Dimas.

The measures would also curb the bloc's rising dependency on imports of fossil fuels. "We do not want to be dependent on regimes that are not our friends and want to protect ourselves from them," Commission President Jose Manuel Barroso told the European Parliament in presenting the plan.

The renewables targets would wean the 27-nation bloc off coal and oil, as would a decision that power generators must pay from 2013 for all permits to emit carbon dioxide, most of which they now get for free, likely to slash coal plant profits.

German utility RWE said it called into question the future of coal -- "Coal is threatened in its economic viability," RWE's head of power generation, Ulrich Jobs, told Reuters. The measures implement an EU-wide target which EU leaders agreed last March to get a fifth of energy from renewable sources and curb greenhouse gas emissions by 20 percent by 2020. They still need approval by EU leaders and the EU Parliament.

Environmentalists urged the EU to cut emissions unilaterally by 30 percent by 2020. The head of the Nobel Prize-winning U.N. climate change panel said the EU plans may prove too lax. "I see no reason why some of these targets may not become stronger, may not become more stringent," Rajendra Pachauri told reporters at the World Economic Forum in Davos.

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The U.N. panel last year warned that tough climate action required global greenhouse gas emissions to peak by 2015 and detailed looming global warming threats including higher sea levels and more floods and droughts. The Commission's proposals included a major overhaul from 2013 of the EU's flagship Emissions Trading Scheme, which allocates a fixed quota of emissions permits to heavy industry.

Airlines and oil refineries will have to pay for one-fifth of emissions permits in 2013, rising to 100 percent in 2020. But Brussels delayed until 2010 a key decision on which industries most vulnerable to global competition, such as steel, aluminium and cement, can get all their quota for free.

"The conditions for companies to have access to free allowances ... are left uncertain until 2010," Europe's main industry lobby, BusinessEurope, complained in a statement. "Significant electricity price increases will result from this package," it warned.

Industry leaders are worried higher energy costs will tilt competitiveness further in favour of China and India, which have no emissions limits, at a time of record oil prices.

If there were no global deal to curb emissions, succeeding the Kyoto Protocol on climate change after 2012, the EU said it would also consider forcing importers to buy permits. Power bills for industry and households will rise as the bloc gets more energy from expensive clean technologies, and as the supply of CO2 permits to power generators shrinks from 2013 on. Utilities will pass the extra costs on to consumers.

But Barroso dismissed cost concerns, telling parliament: "The additional effort needed to realise the proposals would be less than 0.5 percent of GDP by 2020. That amounts to about 3 euros (2.25 pounds) a week for everyone."

Resistance is expected over targets for each country to cut greenhouse gases and install renewable energy, but the EU executive talked up potential business benefits. "(It) gives Europe a head start in the race to create a low-carbon global economy that will unleash a wave of innovations and create new jobs," said Dimas.

Brussels tried to shore up the environmental credibility of a target to get one-tenth of transport fuels by 2020 from biofuels made from plants, setting detailed criteria to avoid unwanted side effects such as tropical deforestation. EU carbon prices fell nearly 10 percent earlier this week, mostly on falling oil prices, and slid further by 3 percent on Wednesday, closing at 19.70 euros.

(By Paul Taylor and Gerard Wynn, Reuters, 23/01/2008)
*additional reporting by Darren Ennis in Brussels, Michael Szabo in London and Peter Dinkloh in Frankfurt.