European Climate Summit Reaffirms 20 and 20 Goals, but with Major Concessions to Big Emitters

Today, Dec. 12, the European Council of Ministers reaffirmed the union''s general objectives of reducing carbon emissions 20 percent and increasing reliance on green energy by 20 percent, both by 2020, and adopted new rules for its controversial carbon trading system. The decisions met with some relief that a consensus was reached at all, but also with considerable consternation about the concessions made to some of the continent''s top emitters of carbon dioxide. Critical commentary has centered on those concessions, without, however, focusing on what is arguably the most fundamental issue of all.

You might suppose--this is what I once supposed, anyway--that given the European Union''s notoriously bureaucratic decision making and its so-called democratic deficit that carbon emissions permits would be issued top-down, in conformity with Europe''s commitments under the Kyoto Protocol and its own 2020 agenda. That is, you might suppose that since Europe has pledged to reduce its carbon emissions 20 percent by 2020, that it would adopt a schedule of carbon permits such that, by 2020, there would be enough permits to cover only 80 percent of what the EU countries were emitting in 1990. That way, assuming corresponding measures were taken in the automotive sector--say a 40 percent hike in gasoline taxes to induce a 20 percent reduction in gasoline usage--Europe would attain its 2020 carbon reduction goal almost by definition.

But no, that''s not the way it works, because that kind of system would not have been politically sellable, even among supposedly democracy-deficient Europeans. This is how it works: the European Commission invites each participating country to submit a plan saying how many permits it feels it will need to issue in a given period; then the commission wheedles and cajoles, hoping to get the countries to reduce the number of permits they have to give out. The general results of this are by now well known. In the first phase of the trading program, many too many permits were issued, so that carbon prices were much too low, no real reduction in emissions resulted, and big electricity producers and industrial emitters reaped windfall profits. In Germany, as the New York Times reported this week, electricity companies ended up getting 3 percent more permits for the period 2005-7 rather than 3 percent fewer. RWE, the country''s largest electricity company and Europe''s biggest recipient of permits, ended up emitting 158 million tons of CO2 in 2007, compared with 120 million tons in 2005.

It ill behooves Americans, who have let their Federal government do nothing constructive to reduce carbon emissions for the last ten years, to criticize Europe for shortcomings in the way they are trying to meet their climate goals. But the Europeans themselves are being plenty critical. Across the political spectrum, the European press greeted today''s news with concern, to put it politely. ''Buckling to Business Lobby'' was the headline in Switzerland''s Neue Zuercher Zeiting, one of Europe''s top business-oriented newspapers. France''s Le Figaro took a less jaundiced view, calling the agreement ''historic.'' But Munich''s liberal Sueddeutsche Zeitung asked in a prominent commentary whether the EU''s compromises had put its goals in question. Taking a cue from that newspaper, Paris''s leftish Le Monde quoted a skeptical take on the agreement by, of all people, the climate counselor to Germany''s chancellor. In some eyes, Angela Merkel had gone from being ''the climate chancellor'' to a ''climate fossil.''

Almost all critical commentary has focused on the concessions made to big cement, chemicals, and steel manufacturers, who will receive emissions permits free until 2020, instead of having to buy them at auction like most everybody else, and to Poland''s electrical utilities, who rely almost entirely on carbon-intense lignite coal. How is it, asked a German commentator trenchantly, that the biggest emitters of carbon are getting the big breaks, while it''s the little emitters who have to pay full price for the right to emit?

That''s a good question, but an even better one, in my opinion, is whether the whole procedure for setting emission limits and issuing permits needs to be revisited. Would it not be better, especially as the world moves into its next big round of climate negotiations, for the European countries to give Brussels full authority to determine how many permits in total will be auctioned or issued? That way, and perhaps that way only, Europe will be in a position to retain the leadership position in climate that it''s occupied for the last ten years.

As things stand, European countries'' success at reducing emissions has been very uneven. In aggregate, the EU''s record since Kyoto is considerably superior to that of the United States or Canada. But especially in the last decade, there are many individual countries and regions in Europe that have done much worse.

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