May 22 (Bloomberg) -- The European Union may have to scale back its goals to reduce global-warming emissions after a less- ambitious plan won initial approval in U.S. Congress.
The 27-nation bloc has asked all industrialized countries to reduce greenhouse gases an average 30 percent over 30 years. The first U.S. legislation ever to cap emissions, which passed a committee vote yesterday, calls for a 5 percent cut by American industry in the period. The gap poses a potential conflict when global talks on a new climate treaty resume June 1 in Bonn.
Lower targets ease costs for coal-burning utilities such as RWE AG of Germany and Ohio-based American Electric Power Co. At the same time, United Nations scientists have said gas output should peak by 2015 or temperatures may rise more than 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial levels, adding to the risk of droughts and flooding from climate change.
“The U.S. bill is clearly an advance on the past,” said James Cameron, vice chairman of the London-based fund manager Climate Change Capital and a former treaty negotiator. Still, “the middle ground of scientific opinion tells us we need to make reductions in a much larger amount over a shorter period.”
The UN-led talks are scheduled to produce a climate- protection agreement by year-end in Copenhagen.
The U.S. is not likely to accept “more aggressive” reduction targets for itself in a treaty that Congress is now considering for domestic regulations, said Ben Feldman, environmental markets executive director at JPMorgan Chase & Co. in New York. The U.S. goals “are unlikely to be sufficient for the EU to move to 30 percent” reductions, Feldman said.
Bridging Gaps
The EU, the largest group of developed countries at the UN negotiating table, will try to bridge gaps with envoys from the U.S. and more than 150 other countries in the June talks that run for 12 days. President Barack Obama has endorsed the bill in Congress led by Democratic Representative Henry Waxman, chairman of the House Energy and Commerce Committee. The panel approved the measure by a 33-25 vote.
The EU defended its more ambitious goals, saying it hasn’t lost hope for reconciling U.S. and European stances.
“The U.S. position is evolving,” said Barbara Helfferich, environment spokeswoman at the European Commission, the EU’s executive arm in Brussels. “We hope to see an improvement in the targets that have been put forward by industrialized countries generally so that the 30 percent goal can be reached.”
Strategy Split?
A split now among wealthy nations will threaten their strategy to present a united front to emerging economies including China, the world’s biggest producer of greenhouse gases. China has been pushed by the EU and the U.S. to join in adopting limits in heat-trapping emissions.
The EU is on course to slash gas output 20 percent by 2020 from 1990 and aims to deepen the cut to 30 percent over the period, provided other wealthy nations make comparable efforts.
The bloc isn’t alone in making conditional promises. Australia has pledged a 5 percent to 15 percent cut in 2020 from 2000 levels and Prime Minister Kevin Rudd said May 4 that his country is prepared to reduce it by 25 percent provided other nations agree to an “ambitious global deal.”
The draft U.S. law would trim discharges 17 percent in 2020 from 2005. That’s a 5 percent drop from the internationally accepted base year of 1990, according to EU calculations.
“It doesn’t look very promising what’s coming out of the U.S.,” said Christian Egenhofer, head of the energy and climate program at the Centre for European Policy Studies in Brussels. “I don’t see how the EU can go to 30 percent” in negotiations.
Cap-and-Trade
The cuts Congress approves will form the foundation for U.S. proposals at international talks. The legislation would enforce new limits through a cap-and-trade system similar to the European program, which began in 2005 and is the world’s biggest greenhouse-gas market.
Cap-and-trade requires companies that exceed their emission quotas to buy spare permits from businesses that emit less. The EU program covers companies from RWE, the biggest greenhouse-gas producer in Europe, to steelmaker ArcelorMittal of Luxembourg.
The U.S. plan targets such businesses as Chevron Corp., General Electric Co., Caterpillar Inc. and American Electric, the largest U.S. power generator from coal.
Europe accounts for about 14 percent of global emissions. It needs help from China and the U.S., the second-biggest emitter, to prevent irreversible environmental damage from climate change, scientists say.
One possible compromise is for the U.S. to give more aid to poor countries to fight global warming in return for a weaker American emissions-reduction goal. Developing nations may need as much as 54 billion euros ($75 billion) a year by 2030 to adapt to climate change, UN projections cited by the EU show.
‘Big Climate Check’
“The less of a reduction you make, the bigger the climate check you write,” said Sanjeev Kumar, a Brussels-based emissions-policy analyst at the environmental group WWF. “That’s where the politics are going.”
In return for aid, poorer countries should commit to limiting emissions growth in 2020 to 15 percent to 30 percent below “business as usual,” the EU proposes.
“Let’s see some leadership from industrialized countries and let’s see some clarity on stable and predictable financial support for developing countries,” said Yvo de Boer, executive secretary of the UN Framework Convention on Climate Change, which is guiding the negotiations. “Then we can talk about what developing countries are able to do.”
The U.S. refused to ratify the 1997 Kyoto Protocol, whose limits expire in 2012. Senators said it gave an advantage to factories in China and elsewhere by sparing those businesses from pollution controls. Obama reversed eight years of U.S. opposition to emissions curbs under former President George W. Bush and has pledged action to fight climate change.
Recession Effect
The recession makes it harder for Obama to seek a stricter cap in the draft law. Republican Representative Mike Pence of Indiana called the plan, which also needs the Senate’s support, “an economic declaration of war on the Midwest,” which relies more than coastal states on power from burning emissions- intensive coal.
“Nobody wants a repeat of Kyoto,” said Jake Schmidt, the Washington-based international climate policy director at the Natural Resources Defense Council. “They don’t want the U.S. to come in and commit to something it can’t deliver at home.”
In addition to the June session, other rounds of talks are scheduled for September and November.
“I’m confident the numbers will be improved on by December,” the UN’s de Boer said.
To contact the reporters on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.netAlex Morales in London at amorales2@bloomberg.net
Last Updated: May 22, 2009 10:33 EDT
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