Environment law

by Paul Sheridan, CMS Cameron McKenna

Climate change and the European UnionAlthough the EU is committed to ratifying the Kyoto protocol, greenhouse gases at European level have been increasing rather than decreasing.

In March 2000, the European Commission produced two documents aimed at tackling greenhouse gas emissions and stimulating debate.

The documents were a communication on EU Policies and Measures to Reduce Greenhouse Gas Emissions; Towards a European Climate Change Programme and a Green Paper (the consultation period for which closes on 15 September 2000) on Greenhouse Gas Emissions Trading.Some of the key issues raised in the documents are:X Although to date there have been positive measures taken at both domestic and EU level, there simply has not been sufficient progress towards meeting the Kyoto requirements.X The objective of the European climate change programme is to identify and develop all those elements of a European Climate Change Strategy that are necessary for implementation of the Kyoto protocol.

The European Commission will follow a twin-track approach, namely reinforcement of EU-wide policies and measures, and the development of an emissions trading system within the EU.X The communication lists a number of proposed EU policies and measures on climate change in the following categories (a) energy supply, (b) industrial sector, (c) energy consumption in the domestic and tertiary sector, (d) energy consumption in the transport sector, (e) transport policy and infrastructure, (f) waste, (g) research and (h) international co-operation.X The European Commission recognises the need for ensuring the cost-effectiveness of the 'flexible mechanisms' set out in the Kyoto protocol (of which emissions trading is one).

Competition and market mechanisms will be the keys to achieving a cost-effective system.X The European Commission also recognises the limited experience of the EU in setting up and running an emissions trading system.

Although international emissions trading is due to start in 2008, the EU should prepare itself by commencing a trading scheme within the EU by 2005.

The EU should be 'learning by doing'.

X A pan-EU coherent and co-ordinated framework to emissions trading is preferable to a set of unco-ordinated national schemes and is likely to result in significant cost savings.X An EU-wide trading scheme is necessary to ensure that competition is not distorted (particularly, perhaps, in the context of EU enlargement).X Obviously, any emissions system will be based upon emissions allowances to companies that emit the greenhouse gases.

Not surprisingly, the European Commission recognises that 'it can nevertheless be expected that negotiations concerning the allocation of allowances will not be easy'.

X In developing the emissions trading scheme, the EU should first confine itself to large, fixed-point sources of carbon dioxide (one of the six greenhouse gases).

EU directives on Integrated Pollution Prevention and Control and Large Combustion Plant were cited as a starting point for defining the trading system population.X The extent to which any emissions trading will need to substitute or complement technical regulation, environment agreements and energy taxation will require clarification.

Interestingly, in the communication the European Commission drew particular attention to its former energy tax proposals.

It pointedly insisted on 'the utmost importance of energy taxation within an overall strategy on climate change'.

X Compliance and enforcement, clearly, will be key issues.