Recession Clouds Chances for EU Climate Treaty

By LEILA ABBOUD
PARIS -- The European Union's ambitious plan to combat climate change could be dealt a crippling blow next week because of opposition from member nations who say the package is too onerous for businesses at a time of economic adversity.
Associated Press

Poland has opposed an EU climate pact because, it argues, the rules will cause huge increases in electricity prices and potentially cripple its economy.
French President Nicolas Sarkozy is scheduled to travel to Warsaw on Saturday in a last-ditch effort to win support from Poland and other Eastern European nations for the plan, in which the bloc agreed early last year to cut greenhouse gases by 20% by 2020.
Italy has also opposed the plan, and Germany, which originally championed the measures, is now pushing to soften their impact on energy-intensive industries such as steel, cement and chemicals, as the economic downturn damps countries' commitments to fight global warming.
"Some people claim environmental measures are a way to relaunch industry, but let's be realistic," said Stefania Prestigiacomo, Italy's environment minister. "Resources are limited, and they will be even more so because of the economic crisis."
Backpedaling by Europe on its climate-change measures could spoil its effort to play a leading role in the wider international global-warming debate. In a separate meeting under way in Poznan, Poland, representatives from 190 countries, under the auspices of the United Nations, are meeting through Dec. 12 to work toward a separate treaty that would succeed the Kyoto Protocol, which expires in 2012. The international accord would commit industrialized countries to deep emissions cuts in coming decades.
Europe had hoped to help convince developing countries like China and India to sign on to the cuts, but could find its powers of persuasion diluted if member states are seen to be squabbling over their own green reforms.
France has been a champion of the EU package and Mr. Sarkozy has made hammering out a deal a priority of his six-month presidency of the EU, which ends this month. If other countries' concerns can't be assuaged, the measures are likely to be shelved until the middle of 2009. The package needs to unanimous approval.
The EU already watered down one important part of its package last week, agreeing to delay implementation of mandatory emissions caps for passenger cars to 2015 from 2012. Auto makers had lobbied hard to soften the emissions standards, arguing that they needed more time to adapt their vehicles.
The conflict among EU countries centers on the details of implementation, which could have huge consequences for companies and employment levels.
Poland, which gets more than 90% of its electricity from high-emission, coal-burning power plants, argues the rules will cause huge increases in electricity prices and potentially cripple its economy. Its main gripe with the package is a so-called auctioning provision, which would require power companies to pay for permits to pollute instead of being given most of them.
According to the way the climate-change deal is currently written, companies that generate electricity would have to buy all of their carbon permits at auction starting in 2013. This would weigh on their bottom lines and inevitably lead to higher electricity prices as the firms pass on these extra costs to consumers.
According to French diplomats, Mr. Sarkozy this week offered to delay auctions in the power sector until 2016 and then phasing them in gradually. The Poles said no, according to documents reviewed by The Wall Street Journal. This weekend, Mr. Sarkozy will make the proposal again to Poland and countries including Bulgaria, Romania, and the Czech Republic.
Italy is also threatening a veto. Ms. Prestigiacomo, the environment minister, said Italy's main concerns are the package's potential costs for the country's power sector and heavy industry. "We have to set priorities. It's useless to lay down objectives that won't be respected," she said.
"It would be a miracle if we got an agreement at this point," a French diplomat said.—Stacy Meichtry contributed to this article.
Write to Leila Abboud at leila.abboud@wsj.com