France races to clinch EU deals

By Laurence Peter
BBC News

Electric-powered cars are seen as one way of reducing emissions

The EU's credibility will be at stake at a summit opening on Thursday, with France pushing hard for deals on a key energy package and the Lisbon Treaty.

But the economic downturn is casting a big shadow over the talks in Brussels.

EU leaders know that disunity would send the wrong message to nervous investors and businesses, but they are divided over the economic medicine.

The crisis threatens the EU's climate change package, because of the cost of cleaning up polluting industries.

But many in Europe also see it as an opportunity to invest in green jobs and technologies, to engineer a "green new deal".

CLIMATE PACKAGE

The risk that one or more EU member states could veto the climate package is still there. Italy and Poland threatened to do so at the last summit in October.

The package, which also requires approval by the European Parliament to become law, commits the 27-nation EU to cutting carbon dioxide (CO2) emissions by 20% by 2020, compared to 1990 levels. If a global, binding deal is reached on CO2 cuts, the EU target will be 30%.

EU 20-20-20 TARGETS 20% cut in greenhouse gas emissions by 2020 20% increase in use of renewable energy by 2020 20% cut in energy consumption through improved energy efficiency by 2020 In depth: Climate change EU climate package explained

France hands over the EU presidency to the Czech Republic in January and is striving to clinch a deal on the climate package before then. The Brussels summit coincides with international climate talks in Poznan, Poland - an added incentive for the EU to show leadership on this issue.

One of the thorniest issues is the time scale for the EU's big power plants to buy CO2 emission permits at auction. The package envisages that full auctioning of permits will start in 2013, in an expanded Emissions Trading Scheme (ETS). Poland, whose power plants are 95% reliant on coal, wants a later date for the start of full auctioning.

Germany and Italy have also voiced concern that their industries might be put at a competitive disadvantage if the CO2 targets are too ambitious. There have been plenty of warnings about "carbon leakage" - the possible relocation of industrial plant and jobs to countries like China and India, where pollution controls are less stringent.

Countries queasy about the climate package targets might be appeased through a delay in the move to full auctioning of CO2 permits, or compensation - most likely using ETS revenues - or even an agreement to expand carbon "offsets". Offsets - investments in green projects in developing countries to "offset" CO2 pollution in Europe - are allowed under the 1997 Kyoto Protocol.

But Finnish Green MEP Satu Hassi, a leading negotiator in EU climate talks, warns that "it's a dangerous illusion that our emissions reductions can be mainly based on CDMs (offsets) while we continue with business as usual here".

Simon Tilford, an economist at the Centre for European Reform think-tank, said backsliding over CO2 targets by the older EU countries would be more serious than opposition among the new member states. "In that case, it would be harder to keep the East Europeans on board," he told BBC News.

ECONOMIC STIMULUS PLAN

As well as the energy deal French President Nicolas Sarkozy wants a show of unity on a 200bn-euro (£173bn; $257bn) economic stimulus package announced by the European Commission.

The EU proposal includes putting 5bn euros into energy and broadband projects and bringing forward 4.5bn euros in funding for infrastructure projects. But Germany does not share the British and French enthusiasm for tax cuts and extra government borrowing to ease the impact of the recession.

Germany, the EU's biggest exporter, is sticking to fiscal prudence, but according to Simon Tilford, the EU "urgently needs to get the Germans on board". Domestic demand has been weak for many years in Germany, unlike the UK, and its economy needs rebalancing, he says.

LISBON TREATY

The Irish government is expected to present a Lisbon Treaty "roadmap" at the summit - a plan to salvage the controversial reform treaty which was rejected by Irish voters in June.

The No camp and their supporters across Europe will oppose any deal which looks like Lisbon "through the back door".

Most member states have ratified the treaty, aimed at adapting EU institutions to fit the enlarged bloc of 27 states. Speculation is rife that the Irish government will propose holding a second referendum on Lisbon next year, and that a special EU protocol will protect the Republic of Ireland's positions on abortion, neutrality and other issues that fuelled anti-Lisbon feelings.

But any promise that Ireland can keep its commissioner is likely to upset some member states.