EU industry warns of danger in 30 percent emissions cut

BRUSSELS Fri May 7, 2010 10:17am EDT

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BRUSSELS (Reuters) - The economic crisis might well have made it cheaper for European industry to deepen cuts to climate-warming emissions, but it has also left companies too weak to face the challenge, industry groups said on Friday.

Environmentalists accused industry of lying about the cost, saying many sectors had reaped huge windfall profits from Europe's efforts to clamp down on carbon emissions through its carbon market, the EU Emissions Trading Scheme (ETS).

Europe's climate commissioner, Connie Hedegaard, looks set to announce in coming weeks that extending cuts in carbon dioxide levels to 30 percent below 1990 quantities would be about a third cheaper than before the crisis.

The current plan is a 20 percent cut by 2020.

"The additional total costs for the EU to step up from 20 percent to 30 percent are estimated to be around 33 billion euros ($44.3 billion) in 2020, or 0.2 percent of GDP," said a draft of Hedegaard's impact assessment seen by Reuters.

One reason the costs would be lower is a decline in the price of buying ETS permits to emit carbon dioxide.

Industry bodies for steel, refining, glass, paper, cement, ceramics and chemicals said the burden of heavier carbon caps would still increase their disadvantage versus competitors in less regulated regions.

"Currently 'low' market prices of carbon reflect the collapse in consumer demand, the slowdown of economic activity of manufacturing industries and the consequent reduction in emissions," they said in a joint statement.

"However, EU industries' exposure to competing economies without carbon constraints has by no means decreased and must not be further increased by additional, unilateral policies."

The groups said the only safe way to tackle climate change was a global agreement, such as the United Nations deal governments will be working on in Cancun, Mexico this year.

Sonja Meister of Friends of the Earth Europe said that because of the recession, Europe was on track to hit its 20 percent goal without further investment in the green economy.

"It would almost be business-as-usual," she said. "The situation has totally changed because of the recession. It's definitely time to move forward unilaterally.

"For many of these sectors, they are earning large windfall profits from the system ... from surplus emissions rights," she added. "They are not being open about that."

(Reporting by Pete Harrison)

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