Page last updated at 17:00 GMT, Monday, 6 October 2008 18:00 UK

EU's climate package 'in crisis'

By Roger Harrabin
Environment analyst, BBC News

Power station (Image: BBC)
Poland says a "polluter pays" approach will raise energy prices even further

The EU's attempts to lead the world to a new deal on climate change will crumble unless its current policy crisis is resolved, a study has warned.

As economic turmoil continues, there are widespread fears about the effects of the EU's climate package.

A group of states led by Poland has assembled a blocking minority to protect their industries from having to buy permits to pollute.

Poland, which relies on coal for more than 90% of its electricity, says the scheme will reduce the nation's energy independence and put up prices.

But a report from policy network Climate Strategies warns that if the group succeeds, the EU will lose its most powerful weapon in the fight for a new climate treaty.

Climate Strategies says that the existence of carbon pricing in the EU puts up electricity prices anyway - so it's important that polluters all pay into a fund that could be used to cushion the poor from the price rises.

Stern warning

The report has been published at the same time as influential economist Sir Nicholas Stern warned that it would be a serious mistake to water down climate policy.

In an interview with the BBC's Today programme, Sir Nicholas compared the current credit crunch with climate change:

"One thing that we must have learnt from this story of the very serious financial problems facing the world is you have to look ahead and think about the consequences of your actions."

He added that the current crisis had been in the making for the past 10-15 years.

"If we had thought carefully over the interim period, we could have avoided this.

"We have to treat climate change in the same way. If we leave this for 15-20 years, we will be in very difficult circumstances."

Instead of changing the rules of carbon trading, which were an essential part of the EU climate scheme, Professor Stern said other European nations had to help Poland and its allies with their predicament.

The bid from the Polish-led group is one of several attempts to dilute the EU's climate policy.

The UK is trying to remove aviation from the bloc's target on renewable fuels.

Elsewhere, Italy and Germany are both warning that forcing their industries to buy pollution permits will damage competitiveness. At the moment, heavy polluting sectors are given the permits free of charge.

But Climate Strategies argue that giving some industries a "free ride" in the EU's Emissions Trading Scheme will harm the wider economy.

"Free allowance allocation creates distortions for the carbon price signal and reduces the efforts of some sectors to reduce emissions which in turn increases the costs for the remaining economy," the network said in a statement.

On Tuesday, the European Parliament will vote on the climate package.

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