Europe needs to clean up its act

In an recent articleon these pages, Ove Andersson of the Swedish Labour Movement Think Tank suggests that the Swedish left is becoming increasingly excited about “the practical and immediate results that can be achieved within the EU partnership” and that “environmental and climate policy is a case in point.”

We are all in favour of strong cross-border measures to fight climate change – and good ideas are needed. But before we commission the EU to build a fast-train system across Europe, which Andersson favours, perhaps we should make sure that Brussels’ existing environmental schemes work.

Take the EU “Emissions Trading Scheme” (ETS) – the Union’s flagship in the fight against climate change. In principle, the idea sounds great; setting up a market for pollution by allocating a limited number of “permits to pollute”, and then allowing firms to trade them among themselves.

But in practice the ETS has had limited success in achieving its main objective. According to the UN Database, carbon emissions in the EU have actually gone up by 1.2 percent when compared to pre-ETS levels.

Part of the problem is that EU member states as a whole gave out permits to emit 1,829 million tonnes of CO2 in 2005, while emissions were only 1,785 million tonnes. Most countries printed far too many permits, while a few were arguably too stringent. Countries that set tough targets were also perversely punished in the system.

Another flaw is that instead of auctioning off permits to create a real “market”, the permits are simply allocated free of charge by national governments - under the rather soviet-sounding “National Allocation Plans” (incidentally, a name which may strike a chord with Sweden’s Social Democrats). Therefore, big companies – like oil firms BP, Esso and Shell - who can afford to lobby for more permits have done well, while smaller firms struggle.

Arguably, the costs also remain too high when weighed against the modest results of the ETS - not least for smaller firms that have little effect on overall emissions, but still face all the same costly bureaucracy. In addition, the scheme remains costly for the society as a whole. It is estimated that because of unfavourable allocation of permits for Sweden, the country’s electricity prices will increase by 50 percent next year.

Adjustments are now being made as the flaws in the system are becoming increasingly clear. However, the “improved” compromise deal the EU Commission has worked out for 2008 to 2012, is based on EU countries being allowed to import far more “Kyoto credits” from outside the EU to meet the targets. In fact, it is estimated that two-thirds of the carbon savings will come from outside the EU in the next phase of the ETS. In essence, this means moving the commitment to tackle climate change from the developed world to the developing world, when responsibility really should lie with the former.

Kyoto credits do not represent absolute emissions reductions, merely a cut-back on emissions growth that would have happened anyway, only off-setting trends of rapidly growing emissions in countries like India or China. Furthermore, half the money – around €5 billion – has been spent on generating Kyoto credits capturing marginal, “exotic” greenhouse gasses, a problem which could have been tackled at a fraction of the cost. On top of all this, very little money has actually ended up in the poorest countries - less than 4% has been gained by sub-Saharan Africa.

These things are not being discussed nearly enough amongst Swedish politicians and journalists, who often seem to focus only on “doing something” rather than considering the actual results and cost effectiveness of the measures at hand.

Equally important, before pursuing “a radical rail policy”, or any other project involving more taxpayers’ money, we should make sure that the EU Commission looks carefully at its own environmental record.

Consider the EU’s SEK840 billion a year Common Agricultural Policy, for example. It still encourages intensive agriculture – an activity which globally accounts for an eighth of all greenhouse gas emissions. The Common Fisheries Policy is another, leading to millions of tonnes of dead fish dumped in the sea (up to 90% of the fish caught), meaning more carbon in the atmosphere.

Member states spend €4 billion a year subsidising coal production, when we should be agreeing to end industrial subsidies altogether. And why not abolish the EU’s minimum VAT rate for environmental products? The list goes on. The EU wants to “ban” normal lightbulbs to make people use energy efficient ones. But it maintains a 66% tax on imported bulbs making energy-efficient bulbs artificially expensive. A similar “Brussels-logic” lies behind the EU’s high tariffs on ethanol.

Then there is the point of personal behaviour. The EU wants to set an emissions limit for cars of 130g of CO2 per km. Meanwhile, the President of the EU Commission drives a giant VW Touareg 4x4 which belches out nearly three times this amount (355g/km) and Trade Commissioner Peter Mandelson is asking for his company car to be a Mazerati (440 g/km).

As well as immediately reversing its most contradictory policies, the EU should evaluate the effectiveness of setting micro-managing targets for member states. An alternative could be to allow international agreements to set ambitious targets for carbon emissions - and create financial incentives to hit them - but then allow each country to meet the target in whatever way it deems the most effective.

Most importantly, the EU’s environmental schemes must be geared towards global reductions in carbon emissions. As far as Sweden, we should still take the lead on environmental policies, of course – not least through research and development - but with a more honest focus on global results. First, let us make sure that the EU cleans up its existing policies. This is a vocation for left and right alike.

Mats Persson is researcher at Open Europe, a UK-based think tank that campaigns for reform of the European Union.