Point Carbon: EU faces economic slump without climate policy changes: study

http://www.pointcarbon.com/news/1.1548148

The EU needs sweeping climate reform to avoid crippling GDP that would be caused by costly last-ditch efforts to meet a 2050 emission target, a report found on Wednesday.

A study led by think tanks Iddri and Climate Strategies said the EU’s climate and energy policies to 2020 postpone so much of the emission reductions committed to by 2050 that the bloc faces a full decade of economic decline as the long term goal closes in.

“The 2020 package is simply inconsistent with meeting 2050 targets… it is, of course, politically unacceptable to suffer a GDP slowdown for 10 years,” said Iddri’s Emmanuel Guerin at the publication of the study in Brussels.

The report called for the 2020 package to be strengthened by deepening a goal to slash output of greenhouse gases (GHGs) from 20 to 30 per cent under 1990 levels, which the study’s authors said would prevent the shrink in GDP from 2040 while shaving only a tiny amount of economic growth over the next 20 years.

The report said EU lawmakers needed to take steps to ensure meeting a goal to improve energy efficiency over the next decade, improve the stringency and predictability of the EU cap-and-trade system and deploy greater amounts of the EU budget to help newer member states decarbonise.

These reforms would ensure the EU can hit a target to cut emissions to a fifth of 1990 levels by mid-century, compete with emerging nations economically and protect the bloc’s access to energy.

EU leaders have so far failed to agree to deepen their 2020 emission target unless other major emitters take comparable measures, with member states divided over whether a unilateral move will help or hinder economic growth.

ETS changes

The emissions cap imposed on the bloc’s emissions trading scheme (ETS), which accounts for around 45 per cent of the EU’s greenhouse gas output, should be recalibrated by setting a new target to 2030, the report said.

EU law sets an annual GHG output reduction of 1.74 per cent for sectors covered by the ETS to 2050, a rate the study found to be “inconsistent” with the political commitment made by EU leaders to cut emissions by at least 80 percent under 1990 levels by 2050.

“We recommend that we should enter into discussions on a 2030 ETS cap,” said Iddri’s Guerin, referring to a proposed extension of the current 2020 ETS limit, which is a 21 per cent reduction on 2005 levels across some 11,500 installations covered by the world’s biggest carbon market.

The European commission’s climate department has said the ETS should be tweaked should proposals to strenthen energy efficiency measures be made law, according to an analysis published in March.

However, the Iddri study found that the department’s idea to set aside millions of carbon permits would be too difficult to achieve amid fierce political opposition from industry groups.

“Simply setting aside some allowances just before (2013) could be interpreted as changing the rules of the game, and enhancing the volatility of the carbon price,” a draft version of the report said.

“Whereas setting a 2030 EU ETS cap would be seen as increasing the predictability of the carbon price signal, and therefore the credibility of the regulator,” it added.

The study recommended that the 2030 ETS cap should be set to ensure an emission reduction for covered sectors of 45-50 per cent under 1990 levels.

By Ben Garside – This e-mail address is being protected from spambots. You need JavaScript enabled to view it