Industry gains slight reprieve on 'Green Super Tuesday'

Out of fear that energy-intensive industries such as cement, paper, steel and chemicals would no longer be competitive against companies producing the same items outside the EU emissions trading scheme - the so called "carbon leakage" effect - the environment committee voted to back a phase-in of auctions for pollution permits.

A total of 15 percent of permits for the sectors will be auctioned in 2013, rising to 100 percent by 2020.

The committee voted to ensure that power companies, which have benefitted from windfall profits as a result of earlier free allocation of permits, should be forced to pay for all their emissions permits from 2013, however.

Given the heavy lobbying of MEPs on the part of industry in recent months and days to allow the continued allocation of free permits, green groups are relieved that the principle that the polluter must pay - even if only by 2020 - has stuck.

There have been intense backroom horse-trading sessions in recent weeks, with a number of MEPs from both the European People's Party - the centre-right grouping in the parliament - and the centre-left Socialists in the industry corner.

Irish centre-right MEP Avril Doyle, responsible for shepherding through one of the bills - a review of the ETS - was praised by her UK Liberal deputy Chris Davies for not bowing to intense pressure from what she termed "extremist" green and pro-industry lobbies.

"She stood up incredibly to the[se] interests," Mr Davies said during a press briefing after the vote.

Excess emissions penalty

MEPs also voted to support the sharing out of varying targets for different member states for carbon emissions reductions proposed by the commission in January. Ireland, for example, must reduce its emissions by 20 percent by 2020, while Bulgaria may actually increase its emissions by the same amount.

The targets, for the period 2013-2020, cover those industries not included within the ETS, such as agriculture, buildings and transport.

The committee wants emissions across the EU cut still further in future - by 50 percent as of 2035 and between 60 and 80 percent by 2050.

Lawmakers also decided that if member states do no meet their target, they would now have to pay a stiff fine - an "excess emissions penalty" - equivalent to those imposed under the ETS of around €100 per extra tonne of CO2 emitted.

If countries do not pay the penalty, the extra CO2 emitted will then be deducted from the ETS allowances allotted to the state to auction off. The deducted allowances would still be sold, but by the European Commission instead.

Countries that "overachieve" by cutting greenhouse gases to below their targets would now be able to sell that part of their emissions allocation to another member state, perhaps one that is having trouble meeting its own target.

But any money from the sale must be spent on "green" measures such as renewable energy development or energy efficiency.

The committee also ring-fenced 100 percent of auction revenues from the ETS, a sum that could be worth as much as €50 billion a year by 2020, strictly for climate-related purposes. A full 50 percent of this is to be earmarked for climate protection in developing countries.

Cuts to carbon offsets

The lawmakers moved to restrict the way in which Europe can buy its way out of making serious CO2 emissions cuts by paying other countries, mostly in the developing world, to make the cuts on its behalf, however.

They voted to decrease the European Commission's original proposals for the amount of "carbon offsets" European member states may use towards their carbon reduction targets. Carbon offsets allow people to keep on polluting so long as they pay others to make up the difference.

Member states may now only use such offsets for 8 percent of the emissions reductions they must make over the entire 2013 to 2020 period. Under the commission's original proposals, countries would have been able to offset emissions by 3 percent each year.

Industry as well would see the amount of offsets it can use from 2008 to 2020 to meet their emissions caps within the ETS. From this year till 2012, industry would be able to use offsets to cover 6.5 percent of their emissions. From 2013 to 2020, this is restricted to 4 percent. This works out to be 40 percent of all their emissions cuts required as part of the ETS.

Battle royale

The jam-packed committee agenda was a result of the pressure, particularly from France, to fast-track the legislation and wrap up the EU's climate package by the end of the year.

The climate package is now off to environment ministers to consider during the 20-22 October EU environment council meeting. EU heads of state and government will also consider the issue of "carbon leakage" during the European Summit next week.

The MEPs expect a rough ride from the council, however.

"There will be a battle royale [in the Council]," Ms Doyle told reporters, particularly regarding the ring-fencing of auction revenues for climate purposes.

Her Finnish colleague, Green MEP Satu Hassi, responsible for the legislation regarding the sharing of the burden of emissions reductions, believes that anywhere the parliament has strengthened the commission's proposals, especially the limiting of the use of offsets, will also be grounds for a fight with member states.

Green groups, for their part, had "mixed feelings" about how the votes went.

"As a result of the environment committee vote, countries and industries can buy their way out of their required emissions reductions," Delia Villagrasa, senior advisor at WWF, said. "It is clear that the EU is so far only partway down the road to being world leader against climate change."