More EU hot air blown on financial crisis

Civitas, 13 October 2008

Open Europe, the independent think tank backed by some of the UK’s leading business people, has produced the first independent report estimating of the cost and wider effects of the EU’s new package of climate change measures, currently still under negotiation.

In January 2008 the European Commission proposed a series of EU-wide policies to implement all the major energy and climate decisions taken by the European Council during 2007, including the reduction of greenhouse gas emissions and the mandatory target of increasing renewable energy to 20% of the EU’s overall energy mix by 2020. The target date for final adoption is set to be 2009, which leaves little time to debate the consequences of the Climate Action and Renewable Energy Package (CAREP).
As always with EU policies the problem lies in its centralized approach. As Open Europe points out, the EU would set up a new, centrally controlled version of the Emissions Trading Scheme (ETS), under which the EU will set a central target for emissions reductions, rather than allow member states to set their own targets.
To be able to meet the requirements dictated by CAREP the EU 25 face an immense increase in costs, estimated to be more than €73 billion per year by 2020, with the UK facing the second highest costs in the EU, surpassed only by Germany, which has a much higher population. This is mainly due to the increase requirement for the UK to meet EU’s renewable energy targets.
According to the Open Europe research, for the UK alone the CAREP will:
-Push one million extra people into ‘fuel poverty’
-Increase energy bills by up to 13%
-Add £130 – 200 a year to the annual energy bill for a family of four
Those results come at a time when European countries are struggling with the consequences of the growing worldwide financial crisis, with most countries facing a sustained economic slowdown and recession. Since taxpayers in the UK are going to be asked for up to a whopping £40bn to boost balance sheets of four of Britain’s biggest banks, the additional costs for energy bills resulting from yet another opaque and overpriced EU policy could become the straw that breaks the camel’s back.
The UK will not be the only country suffering badly from the EU’s centralized approach with Poland gearing up for a battle over CO2 emissions at the EU leaders’ summit next week. The reform simply does not take any consideration of countries’ current realities. For example Poland’s energy production is based 95% on coal and if its coal industry is forced to buy the right to emit carbon dioxide by auction, one of the objectives of CAREP, the economic consequences could be disastrous.
However, as Hugo Robinson, Open Europe Research Director and author of the report put it, ‘it is legitimate for the EU to set targets for absolute carbon emissions reductions, which should be our ultimate priority… it is wrong for Brussels to micromanage national energy planning by setting binding targets for renewables and biofuels.’
By Judith Gollata