From: Reuters
Published February 12, 2008 10:56 AM

EU ministers urge caution on cost of climate plan

By Huw Jones

BRUSSELS (Reuters) - The European Union's move to a low-carbon economy to fight climate change must not harm its competitiveness, the bloc's finance ministers said on Tuesday.

The executive European Commission last month proposed an ambitious package of measures to help the 27-nation bloc cut greenhouse gas emissions blamed for global warming, partly by using more green energy sources.

"The Council supports the leading role of the EU when it comes to energy and climate change. However we have to make sure this transfer to a low carbon economy will be carried out in a sustainable manner so economic growth is sustainable and public finances do not suffer too much," Andrej Bajuk, finance minister of EU president Slovenia, told a news conference.

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Finance ministers discussed the economic impact and cost of the energy and climate change strategy at their monthly meeting, including such issues as subsidizing renewable sources such as wind, wave and solar power, and biofuels made from plants.

"We need to take into account all costs incumbent from the climate energy package proposals. We are talking of very expensive programs which we believe should be kept within the framework of market forces and efficiency," Bajuk said.

EU Monetary Affairs Commissioner Joaquin Almunia said he had told the ministers Brussels estimated the measures would cost "something like 0.5 percent of gross domestic product of the EU" -- equivalent to 60 billion euros ($87.18 billion) a year.

The proposals aim to implement targets set by EU leaders last year to cut CO2 emissions by at least one-fifth by 2020 from 1990 levels, to increase the share of renewables in power production to 20 percent and to boost the share of biofuels used in transport to 10 percent by the same date.

The finance ministers watered down a draft statement that would have made the EU's Emissions Trading Scheme the undisputed vehicle for cutting pollution.

Instead, ministers agreed more guardedly that the ETS was the most efficient allocation method "in principle."

The Commission has shelved until a review in 2011 the idea of imposing tariffs on imports from countries that do not join international efforts to curb greenhouse gas emissions.

Sectors such as steel and aluminum have voiced worries that they may be forced out of Europe by having to buy CO2 emissions permits while non-European rivals face no such constraints. Free trade supporters said such a tariff would hurt global commerce.

EU Economic and Monetary Affairs Commissioner Joaquin Almunia said the climate change package was based on a cost efficiency analysis and that the most efficient instruments to tackle the problem were market-based mechanisms like ETS.

Implementing the package was cheaper than paying for the consequences of climate change, Almunia said.

(Reporting by Huw Jones, editing by Paul Taylor)

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