March 2, 2010 / 9:19 AM / 7 years ago

Europe all mouth and no money in green tech race

BRUSSELS (Reuters) - Europe's plan to lead the green technology race has a gaping financial hole for the next four years, handing the advantage to rivals China, Japan and the United States.

Even after 2014, when the European Union budget should have been thoroughly overhauled, there is no guarantee that green tech will have triumphed in a battle for funds versus the powerful farming lobby.

European Commission President Jose Manuel Barroso lays out his vision for the next decade on Wednesday, and he is expected to champion green growth as a means of protecting the climate and boosting jobs.

"The market for green technologies is forecast to triple by 2030," says a leaked draft of Barroso's strategy, seen by Reuters. "The EU was largely a first mover in green solutions, but its advantage is being challenged by strong growth in other markets, notably China and North America."

Industry experts say the EU currently has a pot of around 7.5 billion euros ($10.2 billion) available for green tech research.

The number may look big, but it is less than 1 percent of the total current EU budget, which weighs in at 862 billion.

The European Commission estimates 80 billion euros must be raised over the next decade to stay ahead in the green tech race.

Easier said than done.

While China's authoritarian government has little trouble mobilizing research funding, and the United States and Japan have a strong track record, the 27-nation European Union has a convoluted funding process to navigate.

TECHNOLOGY RISK

Industry says it cannot -- and will not -- make the necessary investments on its own.

"A low carbon economy does not come cheap," says Giles Dickson, an EU affairs expert at French engineer Alstom.

"There's a huge commercial and technology risk for companies that spend money on demonstrating technologies that are not yet commercially viable," he added. "Industry will pay most of this bill, but we cannot pick up this bill on our own."

A one-off injection of 400 billion euros will also be needed to roll out that technology on a pan-European scale, he adds.

Many politicians had hoped that the EU's Emissions Trading System, which forces companies to buy pollution permits, would have made traditional fossil fuels so expensive that firms would steadily shift to greener sources.

That change is not happening fast, with the price of permits to emit carbon dioxide hovering at a paltry 13 euros per tonne, and most decision-makers have accepted the need to speed the shift by subsidizing green technology.

BAD RECORD

Funding from national coffers is not seen as a realistic option as the EU's 27 countries emerge from the deepest economic crisis since the 1930s.

Furthermore, if European countries were to fund their own research programs they would run the risk of wasteful duplication.

The answer is funding at a pan-European level, and in the long term that means tapping the EU budget.

"The best thing that could happen is to transfer some of the funds that are locked into agricultural support," said Anders Wijkman, a member of the European Parliament until last year.

Agriculture takes up 40 percent of the EU budget, with French farmers accounting for about a fifth of that. But with a new budget looming in 2014, Britain, Denmark, Sweden and the Netherlands are pushing for change.

The battle is not expected to be easy.

French President Nicolas Sarkozy has urged colleagues to embark on an "offensive strategy" to control the debate, and support is expected from Poland, Italy, Spain and Greece.

In Brussels, Agriculture Commissioner Dacian Ciolos from Romania and Budgetary Commissioner Janusz Lewandowski from Poland are seen as likely allies.

Ahead of that fight, money is also scarce.

The European Commission launched its flagship "Strategic Energy Technology" funding plan last October with a vision of spending 8 billion euros a year on green tech research -- 5 billion more than current levels.

"There're instruments that can provide around 2.5 billion euros a year, but what they're looking for is 5 billion a year for strategic energy technologies, so there's still a gap," says Jesse Scott of environment think tank E3G.

"When it comes to putting its money where its mouth is, the EU is failing miserably."

editing by James Jukwey

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