Shortcomings and Divisions in the EU

Despite Europe's laudable focus on climate change at the regional and national levels, fruitful action has not always followed the rhetoric. France, Sweden, and the United Kingdom are on track to meet or even exceed their Kyoto targets for CO2 emissions reduction, but others, including Ireland, Portugal, and Spain, are badly behind.11

Although the ETS carries real symbolic importance, the first phase (2005 to 2007) has witnessed a number of serious shortcomings. At the start of the ETS, many targets for major emitters were set too high, and the allocation of carbon credits was far too generous. As a result, many large polluters were not required to reduce emissions, nor did they ever have to purchase credits, since many were already sitting on a surplus. When news of the credit hoards became public in the spring of 2006, the ETS market price for carbon credits collapsed.

Furthermore, under the Kyoto Clean Development Mechanism, European companies can trade credits outside of Europe, paying large sums to cash-hungry polluters in the developing world, especially China and India, for their carbon credits. But this influx of cash spurs expansion and new operations in the developing world, generating new emissions. Critics also argue that the money spent in the global emissions trading market—$30 billion in 2006—would have made a much greater difference had it instead been invested in emissions-reducing technologies.

In fact, the very existence of the market acts as a disincentive to many companies to change their polluting ways and move away from fossil fuels toward renewable energy sources and new technologies. With this first phase of the ETS admittedly a learning phase, the EU will need to apply its lessons vigorously to the second phase, 2008 to 2012, including setting stricter emissions limits and auctioning credits off, rather than handing them out.12

Although it is widely expected that Europe will continue to be a global leader in climate change policy, internal divisions on the continent do pose a number of potential problems. Intra-European east-west tensions flared during the European Council negotiations of the EPE. The economies of the new member states of central and eastern Europe are generally far more dependent on coal, gas, and CO2-generating manufacturing than their counterparts in western Europe. Poland, for example, derives 90 percent of its energy from coal.13

These countries also have a much lower portion of renewable sources in their energy mix. Estonia's renewable energy sources account for 1 percent of energy sources, whereas Austria's account for 60 percent. These facts led the Czech Republic, Hungary, and Poland to oppose the EPE. They felt that the potential economic burdens of emissions reduction would be too great and the difficulty of meeting the renewable energy targets too extreme. A compromise was reached whereby the implementation of the EPE will mean more permissive emissions targets for the new members and possibly west-to-east subsidies of technology and energy supply.14

Intriguingly, diversification of energy supply through the development of renewable, alternative energy sources would be of greatest benefit to the central and eastern European EU members: many of these states currently are highly dependent on Russian oil and gas for their energy needs, and they are finding the affordability and availability of their energy sources increasingly vulnerable to the political aims of a Kremlin that boldly wields energy as an instrument of foreign policy. Thus, those countries with the least realistic capacity to diversify their energy and where economics still outweigh environmental concerns arguably have the greatest political rationale for seeking alternative sources.

Energy dependence is also an issue for western Europe, as the original EU-15 account for nearly 90 percent of the EU-25 gas market, which relies on Russia for 24 percent of its supply.15 In addition, western Europe stands at the end of a pipeline network that runs out of Russia through eastern Europe, making it subject to disruptions anywhere along the way. These political considerations notwithstanding, the western European countries seem to be more inclined to diversify for environmental rather than political concerns. One can only hope for the gradual evolution of a state of affairs wherein all member states find it in their interest to pursue the same goals of emissions reduction and energy diversification seriously, even if their reasons differ widely.

The desirability and acceptability of nuclear power as a carbon-free energy source is another persistent topic of passionate debate in Europe. This issue has led to the creation of unlikely coalitions of interest, with pro-nuclear energy countries such as the Czech Republic, Finland, France, and Slovakia on one side and countries with broadly antinuclear publics, such as Austria, Denmark, and Ireland, on the other. Despite its appeal, some countries have already taken dramatic steps to reduce their reliance on nuclear energy. In a decision made under the Red-Green government of Chancellor Gerhard Schroeder, Germany plans to do away with its nuclear plants, which currently provide one-third of the country's power, by 2020. Ironically, this power supply will have to be replaced mainly by coal, which already accounts for more than one-half of Germany's electricity.

Finally, business leaders have predictably expressed concern that the EPE will hurt competitiveness and that it is unclear how the targets can be met. In January 2007 the heads of BMW, DaimlerChrysler, and Volkswagen sent a joint letter to the European Commission complaining that the EPE would unduly burden and harm the German auto industry. Although German carmakers have introduced some new technologies that reduce auto emissions and are gradually introducing hybrid vehicles, manufacturers often argue that significantly lower emissions limits simply cannot be met by most of the car models currently made by companies such as Audi, BMW, Mercedes, and Porsche.

198 Julianne Smith and Alexander T. J. Lennon Europe's Pivotal Role

The many shortcomings of the Kyoto Protocol are well known. It is in the nature of international agreements that there is no real enforcement mechanism to make the targets truly legally binding. Moreover, the Kyoto Protocol is limited to countries that are defined as industrialized, and key developing countries are not covered. This fact led the United States, the world's largest generator of CO2, to refuse to ratify the agreement. Whereas the EU appears likely to meet its emissions reduction targets by 2012, growth in greenhouse gas emissions remains strong in Brazil, Canada, China, India, and the United States.

The future of managing climate change nevertheless rests with the next round of international agreement. With the Kyoto Protocol set to expire in 2012, the details of a regime to replace and build on it remain unclear. Many look to the EPE as setting the bar for a new international accord on climate change, which means European credibility is now on the line. Even if Europe achieves its internal goals to reduce greenhouse gas emissions, which it may very well do, it will only address a small portion of the problem.

With Europe's share of global pollution and energy consumption set to decline significantly over the next thirty years, the vision of the EU is now turning outward. According to projected scenarios decades in the future, the effects of climate change in Africa, the Middle East, South Asia, and elsewhere will radically impact Europe. As a result, European policymakers need to set a broad international negotiating strategy and get started on the far-ranging diplomacy needed to bring an aggressive post-Kyoto Protocol treaty into being. This means engaging the United States and developing countries such as China to bring these key players into the fold.

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