EU says climate plan mustn't cost the earth

By Paul Taylor and Ingrid Melander

BRUSSELS (Reuters) - European Union leaders reaffirmed ambitious goals to combat climate change on Friday but stressed they must be affordable for governments and industry at a time of economic downturn and market turmoil.

A draft final statement at a two-day summit, obtained by Reuters, called for cost-effective and flexible mechanisms to reach energy and climate policy objectives, adding the tell-tale phrase "so as to avoid excessive costs for member states".

The leaders pledged to enact the necessary laws within a year to meet their goals of slashing greenhouse gas emissions by 2020 and increasing the share of wind, solar, hydro and wave power and biofuels in their energy mix by the same date.

But they stressed the need to ensure that the high cost of carbon trading, the EU's central instrument in the fight against global warming, should not drive sectors like steel, cement, paper and aluminum out of Europe or out of business.

"We're not calling the reduction targets into question, but even if we have a common European goal, we can still discuss the way to achieve it, and what can be imposed on each industry," German Chancellor Angela Merkel told reporters.

She said she was pressing for a commitment as early as 2009 to give special treatment to energy-intensive industries if there is no global agreement to curb carbon dioxide emissions. Companies needed legal certainty to make investments, she said.

European Commission Vice-President Guenter Verheugen told Germany's Deutschlandfunk radio measures would have to be taken to ensure European industries were protected against competition from countries with lower environmental standards.

Brussels did not rule out "some sort of compensation for our industries" but a green tariff would not work, he said.

Instead, importers might be included in the EU's Emissions Trading Scheme to make them bear a share of the cost.

GREEN TARIFF?

After chairing the first day of a two-day summit, Slovenian Prime Minister Janez Jansa told a news conference all 27 leaders agreed to adopt a liberalization of the European energy market in June and a package of measures to fight global warming and promote green energy in December.

"We must reach agreement in the first months of 2009 at the latest," said Jansa.

Failure to agree on the details by this time next year would delay EU laws and weaken the bloc in United Nations talks on curbing emissions with other countries, including the United States, in Copenhagen in November 2009.

French President Nicolas Sarkozy said he was hopeful of reaching a package deal on climate change under France's presidency of the EU in the second half of this year.

But several leaders said a deal would be difficult because of conflicting national priorities.