Climate change and the EU

Whilst the EU is committed to ratifying the Kyoto Protocol, greenhouse gases at European level have been increasing rather than decreasing. In March 2000 the European Commission produced two documents aimed at tackling greenhouse gas emissions and stimulating stakeholder debate. The documents were a Communication on "EU Policies and Measures to Reduce Greenhouse Gas Emissions: Towards a European Climate Change Programme" and a Green Paper (the consultation period for which closes on 15 September 2000) on "Greenhouse Gas Emissions Trading".

Some of the key issues raised in the documents are:

• Whilst to date there have been positive measures taken at both domestic and EU level, there simply has not been sufficient progress towards meeting the Kyoto requirements.
• The objective of the European Climate Change Programme is to identify and develop all those elements of a European Climate Change Strategy that are necessary for implementation of the Kyoto Protocol. The Commission will follow a twin-track approach, namely reinforcement of EU-wide policies and measures, and the development of an emissions trading system within the EU.
• The Communication lists a number of proposed EU policies and measures on climate change in the following categories: (1) energy supply, (2) industrial sector, (3) energy consumption in the domestic and tertiary sector, (4) energy consumption in the transport sector, (5) transport policy and infrastructure, (6) waste, (7) research and (8) international co-operation.
• The Commission recognises the need for ensuring cost-effectiveness of the "flexible mechanisms" set out in the Kyoto Protocol (of which emissions trading is one). Competition and market mechanisms will be the keys to achieving a cost-effective system.
• The Commission also recognises the limited experience in the EU in setting up and running an emissions trading system. Whilst international emissions trading is due to start in 2008, the EU should prepare itself by commencing a trading scheme within the EU by 2005. The EU should be "learning-by-doing".
• A pan-EU coherent and co-ordinated framework for emissions trading is preferable to a set of uncoordinated national schemes, and is likely to result in significant cost savings.
• An EU-wide trading scheme is necessary to ensure that competition is not distorted (particularly perhaps in the context of EU enlargement).
• Obviously, any emissions trading system will be based upon emissions allowances to companies that emit the greenhouse gases. Not surprisingly, the Commission recognises that "it can nevertheless be expected that negotiations concerning the allocation of allowances will not be easy".
• In developing the emissions trading scheme the EU should first confine itself to large, fixed point sources of carbon dioxide (one of the six greenhouse gases). The Integrated Pollution Prevention and Control and the Large Combustion Plant directives were cited as a starting point for defining the trading system population.
• The extent to which any emissions trading will need to substitute or complement technical regulation, environment agreements and energy taxation will require clarification. Interestingly, in the Communication the Commission drew particular attention to its former energy tax proposals. The Commission pointedly insisted on "the utmost importance of energy taxation within an overall strategy on climate change".
• Compliance and enforcement, clearly, will be key issues.

For further information on this topic, please contact Paul Sheridan at [email protected] or on +44 (0)20 7367 3000.