Europe clinches deal to battle climate change

BRUSSELS Fri Dec 12, 2008 1:19pm EST

1 of 13. France's President Nicolas Sarkozy (L) and Europen Commission President Jose Manuel Barroso address a joint news conference at the end of a two-day European Union leaders summit in Brussels December 12, 2008.

Credit: Reuters/Thierry Roge

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BRUSSELS (Reuters) - Europe secured the world's broadest agreement yet to battle global warming on Friday after helping east European states pay for changes that will punish their heavily polluting power sectors and industries.

The rampant economic crisis had at times threatened to derail the European Union's plans to cut carbon dioxide by a fifth by 2020, but a myriad of concessions to industry helped pin down a deal amid criticism from environmental groups.

"This is quite historic," said French President Nicolas Sarkozy. "You will not find another continent in this world that has given itself such binding rules.

The deal takes on a greater importance coming just before Barack Obama assumes the U.S. presidency, amid hopes in Europe of transatlantic cooperation to tackle climate change.

"Our message to our global partners is... Yes, you can do what we are doing...especially to our American partners," said European Commission President Jose Manuel Barroso. "We are asking him (Obama) to join Europe and with us lead the world."

But green groups said that in their rush to get a deal, European leaders had granted too many concessions to industry.

"This is a flagship EU policy with no captain, a mutinous crew and several gaping holes in it," said Sanjeev Kumar of environment pressure group WWF.

Chancellor Angela Merkel and Prime Minister Silvio Berlusconi had fought hard for industries like German steel, chemicals and cement and Italian glass, ceramics and paper, and at one point Berlusconi had threatened to block a deal.

They had already succeeded this year in watering down action to curb emissions from the powerful auto sector.

"We demanded 15 things -- we got practically all, and we are very satisfied," Berlusconi said.

SWATHES

Measures were agreed to reduce the risk that carbon curbs would hurt European industry and reduce its ability to compete with less regulated rivals abroad.

European industries exposed to international competition will receive free emissions permits if they face a 5 percent increase in costs, a measure that is viewed as covering over 90 percent of EU industry.

Critics said the move reduced the main incentive for industry to cut emissions, but a commission official said that a steadily lowering cap on emissions would do the job.

The biggest threat to a deal on Friday was the opposition of nine former communist nations, which feared the deal would ramp up costs for their highly polluting coal-fired power sectors.

To buy their support, two swathes of funding will be distributed to them taken from around 12 percent of revenues from the EU's flagship emissions trading scheme (ETS), which makes industry buy permits to pollute.

The money is partly framed as recognition for the massive drop in emissions they experienced when their industry collapsed in the wake of communism.

Their power sectors were also partially exempted from paying for emissions permits from the ETS, getting 70 percent free in 2013 but those exemptions will be phased out by 2020.

Diplomats reluctantly praised the negotiating skills of Polish Prime Minister Donald Tusk, who later flashed the two-finger victory sign as he left the building.

Britain's Gordon Brown came away having secured a boost to funding to around 6 billion euros for innovative technology to capture and bury emissions from power stations underground, such as in depleted North Sea gas fields.

"The sum that is involved is very considerable," he said. "A few weeks ago people were saying it was going to be impossible."

(Additional reporting by Paolo Biondi and Julien Toyer; editing by Ralph Boulton)

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