January 21, 2008 / 5:31 PM / 11 years ago

Carbon revenues can aid climate fight-Barroso

LONDON (Reuters) - The European Commission wants European Union states to spend on clean energy technologies a fifth of the billions of euros they raise from selling emissions permits to high-polluting industry, its chief said on Monday.

A Hungarian oil and gas refinery is seen in Szazhalombatta, south of Budapest, in this January 8, 2007 file photo. The European Commission will propose this week auctioning permits to emit greenhouse gases after 2012 in a package of measures to fight climate change, despite protests from business, its chief said on Monday. REUTERS/Laszlo Balogh/File

That could spell a cash cow for alternative energy companies as the Commission tries to sharpen its climate policies and catch up with U.S. investment in clean technologies, but any final decision would rest with individual EU member states.

Brussels will announce on Wednesday a raft of new climate change policies, to kick in from 2013, aiming to boost low carbon-emitting businesses while trying not to harm traditional high-polluting industries such as steel.

“We are planning, it’s not yet adopted, that the revenues of the auctioning from member states will be invested 20 percent of this in climate change,” said Commission President Jose Manuel Barroso in a speech at investment bank Lehman Brothers in London.

He said Europe was lagging in so-called venture capital funding for start-up renewable energy companies.

“I believe in that matter the Americans are doing better than we are,” he said.

One of the biggest changes will be an overhaul of the EU’s emissions trading scheme, to wipe out windfall profits that Europe’s biggest polluters have earned by adding to power prices the cost of emissions permits they obtained for free.

Auctioning permits instead could raise up to 60 billion euros ($87 billion) a year for EU governments, Deutsche Bank estimates.

“Allowances will be auctioned, with revenues going to member states, but any EU company will be allowed to buy allowances in any member state,” Barroso confirmed on Monday.

COST

The European Commission is eager not to harm European business and the wider economy by taking on tough carbon emissions targets that are not matched elsewhere.

Barroso said implementing the EU’s entire green energy plan would cost about 0.5 percent of gross domestic product a year, equivalent to about 60 billion euros.

EU sources have said about 20 percent of permits to emit carbon dioxide (CO2) — the main gas blamed for global warming — are to be auctioned in 2013, fewer than Brussels originally envisaged, rising to 100 percent in 2020.

Europe’s top business lobby, BusinessEurope, attacked the plan last week, saying that auctioning permits could hurt European industry in global competition.

Barroso confirmed that energy-intensive industries might be given an easier regime for greenhouse gas emissions, in the light of whether an international agreement is in place by 2011 to succeed the Kyoto Protocol after 2012.

The Commission might also “require importers to obtain allowances (emissions permits) alongside European competitors, as long as such a system is compatible with World Trade Organisation requirements,” he said.

U.S. DISMAY

U.S. Trade Representative Susan Schwab said on Monday she had agreed with EU Trade Commissioner Peter Mandelson that punitive trade measures should not be used against imports from countries that do not sign up to greenhouse gas emissions cuts.

“We have been dismayed at a variety of suggestions where we see climate or the environment being used as an excuse to close markets,” Schwab said in response to ideas in earlier versions of the EU plan.

The Commission package will translate into draft legislation of EU leaders’ commitment to cut greenhouse gas emissions by one-fifth from 1990 levels by 2020 and draw 20 percent of power from renewable sources.

The Brussels executive will set EU-wide targets for emissions from sectors such as energy and power generation covered by the ETS and national targets for CO2 cuts from other sectors such as buildings, heating and cooling and transport.

The package will also spell out how to increase the share of renewable sources in power production to at least 20 percent in 2020 from 8.5 percent now.

Writing by Marcin Grajewski and Paul Taylor; Editing by Steve Orlofsky

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