EU executive adopts climate fight blueprint

BRUSSELS - The European Union's executive adopted landmark proposals on Wednesday that will make the 27-nation bloc a world leader in the fight against climate change, but tradeoffs will include higher energy bills.

The European Commission approved detailed plans to cut planet-warming greenhouse gas emissions by one-fifth and split among EU states a target to produce one-fifth of all power from renewable sources like the wind and sun by 2020.

Commission President Jose Manuel Barroso called the fiercely contested package "the right policy framework for transformation to an environment-friendly European economy and to continue to lead the international action to protect our planet".

The Commission aims to spur talks among industrialised countries for a global climate deal by 2009 to help arrest global warming which risks raising sea levels and causing more floods and droughts.

Environmentalists say the cuts are too small to arrest global warning or give a strong lead to the world.

Brussels fine-tuned its plans at the last minute to placate anxious industry leaders, who fear higher energy costs will tilt competitiveness further in favour of China and India, which have no emissions limits, at a time of record oil prices.

EU Enterprise Commissioner Guenter Verheugen, standard-bearer of the interests of heavy industry, told German television: "I am all for setting an example for the rest of the world. But I am against committing economic suicide."

But the key features remained in place, including a major overhaul of the EU's flagship Emissions Trading System to cover more greenhouse gases beyond carbon dioxide (CO2) and involve all major industrial emitters.

SPECIAL PROTECTION

The Commission's plans will implement renewable energy and emissions-cutting targets agreed by EU leaders last March, and require approval by member states and the European Parliament.

Resistance is expected over targets for each country to cut greenhouse gases and install renewable energy.

Business has sought to soften the emissions trading reform, demanding special protection for energy-intensive industries facing global competition such as steel, cement, aluminium and possibly chemicals and pulp and paper.

"If we were to relocate our industries outside Europe we would then have to transport steel to Europe, adding emissions," said Philippe Varin, president of the European Confederation of Iron and Steel Industries, and chief executive of Anglo-Dutch steelmaker Corus, owned by India's Tata Steel.

But the EU executive talked up potential business benefits.

Environment Commissioner Stavros Dimas said the plan "gives Europe a head start in the race to create a low-carbon global economy that will unleash a wave of innovations and create new jobs in clean technologies."

From 2013, power generators will get fewer permits to emit carbon dioxide and have to buy them all. They will pass the extra electricity costs on to consumers, and those costs will rise as the supply of permits is tightened.

Until now utilities got most permits for free and derived huge windfall profits.

Power bills for industry and households will also rise as a result of targets to supply more energy using clean energy technologies which are more costly than fossil fuels.

Higher bills were an inevitable result of efforts to arrest global warming, the Chief Executive of the British arm of the German utility E.ON, Paul Golby, said on Tuesday.

"The time of a cheap energy world is over," he told Reuters.

The Commission's measures will cost around half a percent of the EU's combined wealth, or about 60 billion euros ($86.99 billion) a year, Barroso said this week. EU officials say they will add about 10 percent to electricity prices.

EU officials faced a barrage of last minute lobbying from environmentalists, governments and energy-intensive business.

Industrialists from the steel, cement, aluminium sectors partially won their case, and will get their fixed quota of emissions permits for free from 2013, paying more over time.

Leaders of the steel sector were among the last to lobby Environment Commissioner Stavros Dimas on Tuesday, warning they would be forced to shift production outside Europe if emissions curbs and costs of auctioning emissions permits put them at a competitive disadvantage against rivals in China or India.

"We have major concerns that the auctioning is being very much diluted due to scaremongering by industry," said Stefan Singer of the WWF environmental campaign group.