Europe clinches deal to battle climate change

By Pete Harrison and Ingrid Melander

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.