Rhein on Energy and Climate

The View from Brussels

The European Council Meeting 11. and 12. December has overshadowed everything else worth reporting from Brussels.

It was the most complex EC Meeting ever, with three very difficult subjects on the agenda: the future of the Lisbon Treaty, the economic recovery package and the climate package. On all three counts, the French Presidency has been able to find solutions for all 27 member states and score victory. This was not a foregone conclusion. Indeed, the meeting has laid bare the extreme institutional fragility under which the EU 27 operates.

Without the skilful preparation by the Presidency and the masterly chairing by Sarkozy the meeting would have failed. The French did what all Presidencies will have to copy in the future: They focused on the breaking points presented by Poland for the climate dossier and Ireland for the Lisbon Treaty and tried to settle these issues bilaterally before or during the meeting. And Sarkozy was strict in cutting all irrelevant discussions.

New Irish referendum in the fall of 2009

Ireland came with a set of demands on which it wanted an answer before launching a new process of referendum: perpetuity of an Irish commissioner, guarantees for Irish neutrality, strict anti-abortion legislation (which had never been put in question by any one) and fiscal legislation.
The Council Presidency Conclusions contain these guarantees, couched in legal phraseology ensuring that these “concessions” will not require any change of the Lisbon Treaty text, which nobody wants.
Immediately the anti-EU lobbies in the UK and the Czech Republic have reintroduced demands for reviewing the treaty text. This shows the sensitivity of any treaty changes in the future. It also should be a warning to the Irish to avoid further referendum on future treaty changes, which they refuse doing though.

Quite a few people are furious with the Irish for having successfully used the referendum to “blackmail” their 26 partners for obtaining a different composition of the Commission than envisaged by the Treaty. The representation of each and every member state on the Commission will either have to enforce changes in the way the Commission will work or put a lid on the future enlargements. The Commission cannot function efficiently with close to 40 commissioners, each in charge of a full-fledged portfolio and being collectively responsible to the EP and Council by 2030. It might have to learn from the British experience with a big Cabinet and a core, where the key decisions are taken or appoint commissioners to key ambassadorial posts, say New York, Washington, Beijing and Moscow.

Considering that the “Irish Commissioner” was one of the central points in the “NO” campaign and counting on a much more forthcoming involvement of the government in 2009 we can be reasonably confident that the Lisbon Treaty will enter into force in early 2010. The European Council has therefore included the necessary transitional arrangements for number of EP members, for the following presidencies etc. That was a wise precaution also in view of the incoming Czech Presidency whose key political figures are anti-Lisbon.

The € 200 billion economic recovery package adopted

For the first time in its 50 years history the EU adopts an economic recovery package, based on an excellent Commission proposal and the conclusions of the ECOFIN Council a few days ago.
Of course, it leaves to be desired in scope and format. The coordination among member states was very superficial. But the EU is not a Federation, where Brussels can command member states what to do. The Commission could therefore offer no more than intelligent options to member states among which to choose, a sort of tool box.

Its size would have been considered huge only a few months ago. But since then we have seen so many more impressive rescue plans across the world that a 200 € billion package, 1.5 percent of the EU GDP, appears modest. It is in fact compared to what the US GOVERNMENT IS likely to inject in its economy, altogether up to 12 percent of GDP, something never seen before!

Basically the EU programme is no more than a compilation of the programmes member countries have already adopted or are due to adopt in the near future.
Economically, the compilation is important as a means for generating a scale effect.
Politically, it enables member states to justify their programmes domestically against opposition parties or public opinion. It may help Germany and others to break temporarily with fiscal orthodoxy. It will also help advance the idea of continental economic governance, which we will progressively have to get used to, even for the Germans for which it continues to be a horrible idea.

The Climate Package Approved
Despite the economic crisis and strong pressure from industry and certain member countries, in particular Poland, to soften the climate measures Sarkozy has managed to save its essential elements.

The EU will reduce its green house emissions, essentially carbon dioxide, by 20 percent until 2020, and it will generate 20 percent of its total energy demand from renewable sources.

The package addresses the measures to be taken by two main emitter sectors – power generation and energy intensive industries. The automobile industry had been covered by the compromise reached a few days earlier between EP and Council. Jointly these amount to roughly half of EU C02 emission. It is still necessary to tackle emissions from air traffic, agriculture and above all buildings. For air transport the Commission has made a proposal, blocked by UK opposition. Buildings are part of the general drive for higher energy efficiency. The Council still will have to approve Commission proposals. For agriculture, which is a much bigger emitter of green house gases than most people are aware, in particular methane, the Commission still has to submit proposals.

The two major concessions that had to be made to obtain unanimity concern
• The auctioning of emission rights for energy intensive industries. These will be distributed free of charge as at present. They will be auctioned only in case of a satisfactory outcome of the Copenhagen climate conference in December 2009.
– The auctioning of emission rights for power generation in the 10 Central Eastern European countries. Contrary to the Commission proposal, power companies in the countries will have buy only 70 percent of their emission rights in 2013, rising to 100 percent in 2020.
Power plants elsewhere will have to buy 100 percent of their emission rights from 2013 onwards. This discrimination infuriates the major German power companies. Economically it provides windfall profits to the power companies, similarly to those power companies in the EU 15 had reaped in the last few years. Ecologically these are irrelevant, as the companies will be subject to the obligation to reduce their C02 emissions by 20 percent (below 1990) until 2020, provided governments and the Commission do an effective job of policing, which may not be guaranteed in Central Europe.

This is not an ideal outcome. The EU has given the new member states excessive concessions. But as it depends on them for implementing whatever measures and in view of the urgency to adopt the package there was hardly any alternative.

The single biggest present the EU has made to Central Europe has gone unnoticed: shifting the reference year from 2005 to 1990. In 1990, Central Europe – and also Russia – was the incarnation of energy waste. No surprise that the new member countries had to fulfil ambitious reduction targets (>20 percent over 1990) for 2010, which they have little pains in implementing. That is why the Commission had proposed to fix 2005 as the new baseline year, for which it also disposes for compatible EU wide statistics.

It is therefore understandable that environmentalists have violently criticised the outcome as inadequate. The European Council would have been able to make much deeper cuts, provided it had only focused on clean energy. But it did not want to keep some margin of manoeuvre for the real negotiations that will start in early 2009 on the global compact. China and India will ask for deeper cuts from the developed countries as the price for their own commitment. The EU is therefore likely to come back to the domestic negotiating table and raise the stakes to a 30 percent reduction if the US government is ready to engage for Copenhagen.

The legislative texts of the package agreed by the European Council will have to be formally approved by the EP, which will have its first reading before Christmas. Depending on the outcome of that discussion, another round of conciliation between the two legislative branches might follow, as we have seen for the automobile deal.

Preparing for the global climate negations in 2009

The European Council has stolen the headlines from the parallel climate meeting taking place in Poznan during the last 10 days.

It was a disappointing show. When almost 200 countries and up to 6000 delegates convene you can expect concrete results only with a supreme leadership. But neither the UN nor the key industrialised countries showed such leadership!
Thus one year before the crucial negotiations in Copenhagen in December 2009 there is no certitude whatever on a globally effective climate treaty.

Compared to Poznan the EU has been vastly successful. No other country, let alone regional entity, has been able to define its medium-term climate policy.

The industrial countries are failing. Japan is disappointing. So are Canada Korea and Australia. Russia is nowhere, though it has a huge potential for reducing its energy waste.

In procedural terms, all countries are invited to make their substantive inputs for the Copenhagen Treaty by early April. On that basis the UN Climate Secretariat will submit a first treaty draft in June 2009, on the basis of which the real negotiation process will start and dominate the second half of 2009.

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  1. An excellent summary – Thank You! – especially the way you describe the Lisbon issue and agreement. To my mind, that is a fearsomely complex issue and I fully understood your description.

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