EUROPEAN COUNCIL ADOPTS BINDING TARGETS FOR CO2 REDUCTION

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SUBJECT: EUROPEAN COUNCIL ADOPTS BINDING TARGETS FOR CO2 REDUCTION
AND RENEWABLES


1. SUMMARY. On March 9, the European Council endorsed an
integrated climate and energy policy in an effort to limit global
warming to 2 degrees C above pre-industrial levels. It called for
targets to limit CO2 emissions by 20% by 2020 and to adopt an
overall binding goal of 20% of renewable energy for the EU as a
whole by the same date. The final draft is the result of compromise
among more environmentally active countries who sought binding
targets on renewable energy and others, led by Poland, which argued
reaching the renewable targets would be too expensive. By focusing
on EU average targets, Germany mitigated individual country
resistance to binding targets, which if not met, could possibly lead
to court action and fines. The Commission has committed to tabling
country specific plans by the third quarter of 2008, to be agreed
with individual member states. In what Chancellor Merkel termed
"ambitious but realistic targets," the Council agreed to 17
different measures on energy in all, ranging from 10 percent binding
targets for biofuels to an increase of 20 percent in energy
efficiency by 2020. The measures, endorsed by European Commission
President Barrosso, British Prime Minister Blair and French
President Chirac, were heralded as "historic," marking the
beginning, according to Chirac, of "green Europe." END SUMMARY.

SPECIFIC TARGETS
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2. The final conclusions on energy and climate change reached by
the European Council on March 8 - 9 echoed the draft COREPER
conclusions released on February 20. The main issue of contention
was Germany's push for 20 percent binding target for renewable
energy for the EU as a whole by 2020. This met resistance from
France and other member states, mainly from the former East bloc.
According to Chirac, France sought to broaden the definition of
renewables to encompass "non-carbon based energy sources," with a
subtarget for renewable energy. Germany and other states resisted
this move. The compromise left open the question of Member States'
individual energy mix but did not broaden renewables to include
other CO2 friendly sources such as nuclear. By focusing on an
average target of 20 percent for the EU as a whole, the Council
sidestepped, at least for a time, the sacrifices individual
countries will have to make. Acknowledging the difficulties ahead,
Barosso said the Commission would table country specific plans by
the third quarter of 2008. He declined to outline which penalties
would apply to countries who did not meet these targets. Instead,
he emphasized the country plans would be agreed upon with the
individual Member States and would include enforcement mechanisms.
Merkel admitted the country plans could be contentious, but
emphasized that major changes in policy begin with specific steps
and the commitment to a binding target on renewables is "historic."
She also sidestepped the question of the cost of such measures.


3. On biofuels, the Council also agreed to a 10 percent binding
target for all member states by 2020. The binding character of the
target is subject to production being sustainable and second
generation biofuels being commercially available and competitive.
The Council committed itself to a nonbinding target of 20 percent
energy efficiency savings by 2020 and called for an international
agreement on energy efficiency.


4. In addition to a 20 percent target in reduction of greenhouse
gases from 1990 levels by 2020, the Council adopted a target of 30
percent greenhouse gas reduction by 2020, if other OECD countries
also agreed. This last measure was seen by most as a public
relations ploy aimed at encouraging the U.S. to discuss post-Kyoto
emission targets. The European Parliament had called for even
stricter targets, in a move considered by many calculated to apply
pressure on Member States that opposed the adoption of binding
targets. On March 8, President of the European Parliament
Poettering, announced his support for hard targets of 30 percent
reduction in CO2 emissions by 2020. Poettering also endorsed a
binding goal of 25 percent of renewable. In calling for higher
targets than the Council, Poettering said his role was to "push the
envelope" and challenge the Member States that are hesitant to
embrace policies to combat climate change. Poettering called for
Europe to lead the way on climate change. He noted the positive
benefits a leadership position could have for the economy and for
job creation. Poettering rejected the trade-off of the debate over
ecology vs. economy, stating Europe's commitment to ambitious CO2
reduction targets and renewable energy would only help it in the
long run. At the same time, he noted the necessity of involving
other major economies, e.g., China, India and the U.S., in this
strategy.


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5. The Council adopted a comprehensive energy action plan for the
period 2007-2009 based on the Commission's energy policy for Europe.
The policy calls for further integration of the internal European
market for gas and electricity to increase competition and decrease
consumer prices. The Council did not support the Commission's
proposal to completely unbundle energy generation from distribution
networks met. Instead, it called for "greater separation of energy
generation and distribution" based on independently run network
operating systems. This position, the result of a compromise
endorsed by Germany and France, is interpreted as support for a
measure to allow energy companies to retain ownership of energy
supply systems, while placing them under the operation of regional
energy operators. The Council also endorsed strong, independent
energy regulators with a "cross border" perspective, as well as a
customer's energy charter. Moves for further harmonization of
national regulators, improvement of integration of regional grids,
and increased transparency in energy markets were generally not
controversial.


6. In a nod to the concerns of Poland and the Baltics, the energy
plan includes a statement of solidarity for member states on the
issue energy security in times of crisis. This echoed the comments
of the new President of the European Parliament, Hans-Gert
Poettering on March 8 that relations between Member States must take
priority over relations with third parties. The Council also
endorsed diversification of energy supplies and transit routes and
an analysis of gas storage facilities within the EU. While not
mentioning the Energy Charter specifically, it also calls for the
finalizing of an agreement on energy with Russia. The plan calls
for establishing an Energy Observatory within the Commission. The
plan

PREPARATIONS FOR THE G-8
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7. The plan also calls for strengthening a partnership and on
energy with the U.S., Brazil, China, and India, focusing on green
house gases, energy efficiency, renewables and energy technologies
such as carbon capture and storage. This was further endorsed by
both Merkel, Barroso and British Prime Minister Blair that the work
of the Council on energy should lay the basis for energy discussions
within the context of the G-8 ministerial in June.


GRAY