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EU Energy Savings Deal On A Knife-Edge: Denmark

Date: 12-Jun-12
Country: LUXEMBOURG
Author: Barbara Lewis

The European Union has made progress towards a deal to reduce energy use by improving efficiency, Denmark's Energy Minister Martin Lidegaard said on Monday, as the debate enters what should be its final stage.

He added any agreement is not likely to include language on setting aside carbon permits to prop up the EU's Emissions Trading Scheme (ETS), which has sunk to record lows.

The Danish EU presidency, with backing from the European Commission, has made energy saving a priority for its six months at the head of EU debate, which expires at the end of June. The last session of talks to hammer out a text begins on Wednesday.

"We have made some progress on the Energy Efficiency Directive. I am a little more optimistic. We have made serious progress, but we are still not there," Lidegaard told reporters.

"My mandate on the Energy Efficiency Directive (EED) does not include the ETS. Member states feel it should not be there. I don't consider it realistic to put it there."

The EU previously set a target of a 20 percent cut in energy use by 2020 through measures such as renovating buildings and improving technology. Without a new law, the 27-member bloc is likely to achieve only around 10 percent.

Even if it can be agreed, the bloc might only achieve 15 percent because so many member states have raised objections that have watered down the Commission's original text.

Opponents say there is no money available for upfront spending and that proposals to improve insulation in public buildings, for instance, are impractical.

Advocates of the proposed legislation say it is the most obvious way to cut emissions, improve energy security, create jobs in building renovation and save debt-ridden member states billions of euros on imports of fossil fuel.

"All the governments of Europe say they want growth and they want something that can create jobs in the short term. No matter how hard they think about it, it will be very difficult to think of better ideas," EU Climate Commissioner Connie Hedegaard said.

Last year, the EU spent a total of 573 billion euros ($716.9 billion) on imports of coal, oil and natural gas, she said, citing Commission figures.

ETS TANGLE

The already complicated efficiency argument, dominated by mathematical formulae and haggling over percentage points, has also been tangled in debate on how to raise prices on the ETS.

The theory, which some dispute, is that improved energy savings would add to an already huge surplus of carbon permits, which has resulted from the recession in the euro zone.

After a vote from the European Parliament earlier this year called for some carbon permits to be set aside, the European Commission announced it was re-assessing the ETS auctioning timetable to try to tackle the surplus of permits.

Hedegaard reiterated on Monday that she hoped the results of a carbon market review would be made public before the Commission summer recess, which takes place around August, and that changing the auctioning timetable could be a swift process in EU terms.

No-one raised objections at Monday's Luxembourg meeting when she mentioned the change, referred to as backloading, she said.

A more structural reassessment of the ETS law would be far more complex and would have to be tackled as "a second step", she said.

Although analysts say permit prices at less than 7 euros are far too weak to drive low carbon investment, Hedegaard said the ETS was still helping to tackle climate change by setting limits on how much big emitters can pollute.

"We should not forget that the ETS is doing its job of reducing emissions," she said.

Consensus is building on the need for the ETS to be robust, she added.

"Finance ministers have started to realize it's in their interest to have a robust price if they want the revenues."

Very strong opposition to the ETS has come from non-EU governments and airlines because of the EU's decision to require all flights in and out of Europe to buy carbon allowances.

At a meeting in Beijing, the head of the International Air Transport Association (IATA) said all parties shared the view that a global agreement was needed to head off the threat of a trade war over the EU's ETS.

"We would very much like to solve it," Hedegaard said of the aviation row. "We need people to engage in the ICAO process."

The U.N.'s International Civil Aviation Organization (ICAO) meets this month to assess progress on a global scheme to curb airline emissions.

The EU has said the only reason to modify its law would be if ICAO could deliver a viable alternative.

(Editing by Jane Baird and David Gregorio)

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