UK, Germany and France: Europe must cut emissions 30% to capture “low carbon economic opportunities.”

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"UK, Germany and France: Europe must cut emissions 30% to capture “low carbon economic opportunities.”"

In articles published simultaneously in newspapers in three countries, U.K. Energy and Climate Change Secretary Chris Huhne, Jean-Louis Borloo and Norbert Roettgen, his counterparts in France and Germany respectively, set out the economic benefits for increasing the EU’s climate change targets to a 30% cut.

Here’s an excerpt from one of those articles:

Europe’s current focus on recovery from recession must not distract us from the question of what kind of economy we want to build. Unless we set our countries on a path to a sustainable low-carbon future, we will face continued uncertainty and significant costs from energy price volatility and a destabilising climate.

This is why we today set out our belief that the European Union should raise its emissions target. A reduction of 30 per cent from 1990 levels by 2020 would represent a real incentive for innovation and action in the international context. It would be a genuine attempt to restrict the rise in global temperatures to 2°C – the key climate danger threshold – stiffening the resolve of those already proposing ambitious action and encouraging those waiting in the wings. It would also make good business sense.

The current target of a 20 per cent reduction now seems insufficient to drive the low-carbon transition. The recession by itself has cut emissions in the EU’s traded sector by 11 per cent from pre-crisis levels. Partly as a result, the price of carbon is far too low to stimulate significant investment in green jobs and technologies.

If we stick to a 20 per cent cut, Europe is likely to lose the race to compete in the low-carbon world to countries such as China, Japan or the US – all of which are looking to create a more attractive environment for low-carbon investment.

Well, “looking to” is about the best you can say about us now.

By moving to a higher target, the EU would have a direct impact on the carbon price through to 2020 and also send a strong signal of our commitment to a low-carbon policy framework in the longer term. We must not forget that building a low-carbon future depends overwhelmingly on the private sector. Moving to a 30 per cent target would provide greater certainty and predictability for investors.

Europe’s companies are poised to take advantage of the new opportunities. They currently have a global market share of 22 per cent of the low-carbon goods and services sector, thanks to Europe’s early leadership in tackling climate change. But the rest of the world is catching up. The Copenhagen commitments, though less ambitious than we had hoped, have triggered widespread action, notably in China, India and Japan.

Because of reduced emissions in the recession, the annual costs in 2020 of meeting the existing 20 per cent target are down a third from ‚¬70bn ($89bn, £59bn) to ‚¬48bn. A move up to 30 per cent is now estimated to cost only ‚¬11bn more than the original cost of achieving a 20 per cent reduction. In addition, delayed action would come with a high price tag: according to the International Energy Agency, every year of delayed investment on low-carbon energy sources costs ‚¬300bn to ‚¬400bn at the global level.

Furthermore, these costs were calculated on the conservative assumption that oil will cost $88 (‚¬69, £58) a barrel in 2020. Given the current constraints on supply-side investment, rapid growth in consumption in Asia, and the impact of the Gulf of Mexico oil spill, oil prices may well rise further; under one IEA scenario, the price could reach a nominal $130 a barrel. Rising oil prices would lower the costs of hitting any targets and, under some scenarios, the direct economic effects of hitting the 30 per cent target by 2020 actually turn positive….

Ducking the argument on 30 per cent will put us in the global slow lane. Early action will provide our industries with a vital head start. That is why we believe the move to 30 per cent is right for Europe. It is a policy for jobs and growth, energy security and climate risk. Most of all, it is a policy for Europe’s future.

The writers are UK climate change secretary, German federal environment minister and French environment minister

Ah, if only the debate in this country could be between 20% and 30%….

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16 Responses to UK, Germany and France: Europe must cut emissions 30% to capture “low carbon economic opportunities.”

  1. Ken Johnson says:

    “… the price of carbon is far too low … By moving to a higher target, the EU would have a direct impact on the carbon price …”
    So why don’t they just cut to the chase and set the carbon price at whatever level they want? (Or at least set a floor price.)

    “The Copenhagen commitments, though less ambitious than we had hoped, have triggered widespread action, notably in China …”
    What carbon price does China impose?

    “… under one IEA scenario, the price could reach a nominal $130 a barrel …”
    According to Lloyd’s of London, the price could go above $200 a barrel by 2013.

  2. Prokaryotes says:

    Introducing a European Carbon Tax

    A concrete proposal is expected in the coming weeks.
    http://www.social-europe.eu/2010/06/introducing-a-european-carbon-tax-the-missing-piece-in-europes-climate-strategy/

  3. Arne says:

    It is remarkable that each of these Ministers belong to a Conservative Party and govern within a center-right government. Climate change is non-partisan in Europe. The conservatives have understood that also to their constituents the issue is important. That is something the US conservatives should take away from this!

  4. Prokaryotes says:

    Germany draws up plan to tax air traffic with fee of up to $33 per passenger

    Its bill says it aims to provide “incentives for environmentally friendly behavior.”
    http://www.latimes.com/business/nationworld/wire/sns-ap-eu-germany-air-traffic-tax,0,1520366.story

  5. Ken Johnson says:

    Prokaryotes (Re #2): How much would Europe’s carbon tax be?

    As a point of reference, current oil prices ($71/barrel) equate to $157 per ton-CO2.

  6. Preeem says:

    Unfortunately, this is but a very extreme point of view voiced by idealists of sorts that haven’t gotten their governments very far (yet?).

    The Sarkozy government has typically made pretenses to care about the environment several times, only to go back on all the promises in the face of low voter turnout from the green party electorate, farmers’ protests and generally speaking, the recession. The Burqa issue is a more pressing one for them.

    Unfortunately, I can only take such a message as one more empty gesture that will go unheeded come election time because it’s not popular.

  7. Prokaryotes says:

    Ken Johnson, these are just some constructs, but gives an idea.
    http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=E-2009-5645&language=EN

    According to above letter, it could start at 20,00 € per ton of Co2.

    Sweden is since 2007 at 101,00€ per ton of Co2
    http://en.wikipedia.org/wiki/Carbon_tax#European_Union

  8. Antoni Jaume says:

    Ken Johnson says:

    “[...]How much would Europe’s carbon tax be?

    As a point of reference, current oil prices ($71/barrel) equate to $157 per ton-CO2.”

    Remember that in Europe, whether EU or not, oil is heavily taxed.

  9. Prokaryotes says:

    Ken, there is post in moderation but i think it’s about 20,00€ per ton of Co2.

  10. Antoni Jaume says:

    Prokaryotes says:
    July 15, 2010 at 5:54 pm
    “[...] i think it’s about 20,00€ per ton of Co2.”

    Or about a 4% increment on retail price for gasoline.

  11. Ken Johnson says:

    What would happen if vehicle buyers were required to prepay their vehicles’ entire projected lifecycle fuel costs as part of the vehicle purchase price? They would eventually get the all money back — with interest — over the life of the vehicle, but the full lifecycle fuel costs would be included in the purchase price.

    Alternatively, suppose that the purchase price for gas guzzlers only included the projected excess fuel cost over a “benchmark” performance level. (The fee is repaid in annual installments, which at least partially offset higher fuel costs.) Fuel-efficient vehicles qualify for long-term, low-interest loans, based on how much less fuel they use relative to the benchmark level. (The loans are, in effect, repaid out of fuel savings.) On average, vehicle prices are unaffected by the fees and loans, but the difference between gas-guzzler and economy-vehicle prices would be the same as if the full lifecycle fuel prices were paid upfront.

    In effect, you would have a carbon price incentive well in excess of $100/tonne built into vehicle prices before buyers make their purchase decisions, but without any of the long-term “wealth transfer” associated with taxes or carbon trading.

  12. Prokaryotes says:

    Actually with electric car batteries you have to prepay the biggest energy cost.

  13. Ken Johnson says:

    Right. Electric vehicles can cut fuel costs — electricity substituted for gasoline — by a factor of four. But even if that cost savings outweighs the battery cost, EV’s are at a disadvantage because the battery cost appears in the vehicle sticker price; the fuel savings do not.

    So find a way to internalize lifecycle fuel costs in vehicle prices, and transportation electrification might happen relatively quickly.

  14. Roald says:

    That’s all very well, but what’s the point of the EU reducing its carbon emissions and fossil fuel consumption if the rest of the world doesn’t follow suit. This will only lower the oil price and increase the amount of oil available for the others.

    The EU is on course to a 30% reduction also because industrial plants shut down in Europe and production was outsourced to Asia where the environmental standards are less rigorous.

    I’m all for climate action but we can’t ignore the economic and political reality. Without a global agreement all this talk about emission reduction and green energy remains academic.

  15. Preeem says:

    Yes, that last point about Grey emissions is something that I am very concerned about too. Here in Switzerland where I live, half of our GHG emissions are indirect, because of production and transport of our goods, according to one study that I once had to write a report on. Many of our environmental externalities have been outsourced to Japan, first, and then China when we decided tha the Rhine river would no longer be polluted by our income-earning chemicals. Now we do the R&D and the small scale high-earnings production and we sent all of the dirty chemicals that once made Basel famous to be produced elsewhere. Environmental regulation only came about once we were wealthy enough to outsource all the low-paying, bulk, dirty work somewhere else and keep service jobs here.

    I’m pretty sure this is more or less happening all over Europe. France has been heavily de-industrialised in the past decades, much to the dismay of many an unqualified worker in textile or automobile industry.

    In this sense, projects and concepts like the 2000 Watt society, or reduction of GHG emissions cannot take place meaningfully by only taking into account domestic activities. Much like the distinction between GDP and GNP is made, we need to take into account the emissions that we are buying as part of products and services we consume that reside elsewhere.

    However, apart from a border tax, I think this is really difficult.

  16. Lewis Cleverdon says:

    UK Energy and Climate Change Secretary Chris Huhne (from the Liberal Democrat wing of the governing coalition) attended his first meeting of EU Environment Ministers on Friday 11 June in Luxembourg. On the agenda was the European Commission’s recent paper on the moving beyond a 20% EU emissions reduction target, as well as a discussion on the state of play of the international climate negotiations.

    Speaking ahead of the meeting, Secretary Chris Huhne said:

    “I’ll be using my first meeting of EU environment ministers to make clear the new UK Government’s support for ambitious European action on climate change, including a 30% cut in EU emissions. The Commission’s recent analysis provides a welcome starting point as we discuss how to implement a higher target.

    “We believe a move to 30% is achievable, right for the climate and right for our economies as Europe focuses on a sustainable economic recovery. We can put Europe ahead of the game by taking new low carbon economic opportunities.

    “Europe must take a lead in securing an international climate agreement though we can’t just click our fingers and hope the rest of the world will follow. We’ve got to make real emission cuts at home, and work constructively with all other nations in achieving that ambitious deal.”

    It was at that meeting that French objections were resolved and the German U-turn initiated, on grounds that both regional and global interests are served by the advance to a 30% target, as the recent FT article describes.

    The issue of addressing wealthy nations’ sponsored or ‘grey’ emissions is logically a subset of the function of the climate treaty – and one which cannot and will not be resolved via border tariffs. The latter would be neither negotiable nor practicable in operation.

    The widely endorsed framework for that treaty, known as “Contraction & Convergence,” (C&C),
    being the setting of a declining cap on global emissions and the allocation of tradable national emission rights converging over time from present output-shares to per capita parity,
    provides a transparent and self-balancing system for pricing grey emissions.

    Under the treaty, when a nation chooses to use emission rights on making goods for export, it means losing the revenue from trading those rights abroad.
    That cost will be redeemed as a part of the price charged for the goods to the importing nation, who thereby internalizes the cost of their grey emissions.
    Both parties thus have a direct incentive to develop non-fossil-based manufacturing capacity asap as a result of the current global price on CO2e outputs.

    It is worth noting that Huhne is on record as a supporter of Contraction & Convergence, which was also the acknowledged basis of the UK’s recent climate law of cutting 3% of CO2e outputs per year.

    Regards,

    Lewis