Europe Looks to 2012 and Beyond

With the second phase of the Kyoto Protocol just under way, European Commission (EC) ministers met recently to nail down post-2012 climate policies. The so-called 20-20-20 benchmark—reducing greenhouse gas emissions by 20% below 1990 levels, and producing 20% of all electricity from renewable sources, both by 2020—remains a cornerstone of EC efforts. As for the European Trading Scheme (ETS), a framework that mandates the trading of GHG emissions among European industries, it looks like the EC favors further tightening of emissions credits. (Quick review: one credit, which currently trades between 20 and 24 euros, permits the holder to emit 1 ton of carbon.)

Still, there remain concerns regarding the competitiveness of European firms, particularly those that derive a considerable portion of their revenue from non-EU export markets. The EC’s plans for the post-2012 period indicate that manufacturers of aluminum and petrochemicals, as well as airlines, will be required to join the scheme. It makes sense that firms facing the added costs of reducing their emissions would resist such a move. But a recent brief from Carbon Trust suggest that these fears are somewhat overblown, and that Phase III won’t adversely affect Europeans’ competitiveness as much as previously thought. Plus, who knows? The U.S., whose firms often compete directly with those from Europe, may finally be coming around: given its conditions are met, the U.S. may be “prepared to enter into binding international obligations to reduce greenhouse gases as part of a global agreement in which all major economies [read: China and India] similarly undertake international obligations.”