15 december 2008

European unity carries a price
Financial Times editorial December 15 2008

No one disputes that fighting climate change has become a harder sell as a result of the financial and economic crises sweeping the globe. But the concessions made to heavy industries at Friday’s summit of EU leaders are a high price to pay for political unity.

In a race to protect their economic interests as recession bites, EU member states ensured that the winners in a weakened plan to require utilities and manufacturers to buy pollution permits via auction will be German metalbashers and Poland’s power stations.

The European Union, which created the single market and the euro, should have delivered more last week. Its target to cut carbon dioxide emissions by a fifth from 1990 levels by 2020 requires bold action. But the summit communiqué fell short of what will be needed to inject momentum into United Nations-led efforts to reach a wider international agreement in 2009.

To have struck a deal is a much better outcome than if the meeting had broken up in acrimony. But the questions remains: how can the EU expect to persuade China and India to act when its cement, chemicals, steel and other heavy industries will be shielded from much of the cost of buying tradeable permits, especially since they are being given almost a third of them free?

Many manufacturers will, more-over, be exempted from paying for most of their permits on the grounds non-EU rivals could gain an advantage. Poland, with its partial exemptions, has less incentive to close coal-burning plants soon.

These concessions do not reflect well on Europe. They will frustrate efforts to make polluters pay for emissions, an essential step in fighting climate change. Indeed, the risk is that some of them will reap windfall profits, just as the utilities did under the EU’s original and flawed emissions trading scheme. One of the biggest losers may be the taxpayer as revenues from auctioning permits will be diminished.

It is tempting, now that the world’s richest economies are grappling with recession, to relax about the urgency of tackling global warming. But to focus on the immediate risks to industry and jobs at the expense of the threat posed by rising temperatures misses an important point. Decisions taken today will shape events decades ahead. It may be too late to stop the planet heating up, but the rate at which temperatures rise must slow.

It was easy for Europe to posture as leaders on climate change while George W. Bush was in the White House. The EU now needs to show more conviction if it is to persuade Barack Obama to follow its lead.

Copyright The Financial Times Limited 2008

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