Hugo Robinson: EU climate targets are bad for the environment and bad for the economy

Hugo Robinson is Research Director for Open Europe.

Behind closed doors in Brussels, European governments are engaged in fraught negotiations over the most far-reaching EU policy undertaken since the launch of the euro. 

Despite the scope, it has received just a fraction of the attention the euro did.

The EU is cooking up not only a 20% target for overall emissions reduction by 2020, but – and this is the crucial part - binding targets for 20% of all energy to be sourced from renewables, and for 10% of transport fuels to come from biofuels.

What this would mean in practice is breathtaking. In Britain, it would equate to around 40% of electricity being generated from renewable sources (up from under 5% today), within a decade. Building five giant wind turbines every single working day from now until 2020 (14,000 in total) would get us just over halfway to meeting this target. Throw in the £23bn Severn Barrage, and just 65% of the target will have been attained. The plan will have a revolutionary effect not only on Britain’s energy infrastructure, but also on Britain’s physical landscape.

Open Europe has estimated that the Package, if it is fully implemented, will cost at the very least £9bn per year in Britain – and €73bn across the EU as a whole. This is equivalent to £600 per family of four per year. It could push one million more people into fuel poverty. The plan would squeeze the most vulnerable in society the hardest – just when they can least afford it.

But the most alarming aspect of all this is that it’s just very, very bad value for money.  Clive Bates, the former head of policy at the Environment Agency, (whose blog I strongly recommend) branded the EU plan “reckless” because it “very heavily directs the response to climate change to some of the most expensive technological responses per tonne of carbon saved.”

This was confirmed when we investigated the Package in detail: the technology-specific targets for renewables and biofuels can only mean that investment is artificially directed towards very cost-ineffective methods of removing CO2 from the atmosphere. According to our calculations, these distortions will mean that the per-unit cost of carbon reduction of the EU Package as a whole will be extremely high, at least €80 to €105 per tonne of CO2 reduced.

In contrast, consultants McKinsey suggested that the cost of bringing global emissions down to safe levels could come in at less than €40 per tonne saved, predominantly achieved through energy efficiency (which can be achieved at a net economic benefit), nuclear power (for around €5 per tonne) and better management of forests and agriculture (€10 – 30 per tonne; although Stern has even lower estimates).

It is not hard to see why the EU Package is so much more expensive than these methods of carbon saving. For instance, biofuels grown in Europe cost a staggering €160 to €470 for every tonne of CO2 avoided.

To help visualise just what a waste of time and money biofuels are, the 10% target for biofuels will lead to only around 1% emissions reductions across the EU, and will cost around €10bn. If the money spent on biofuels were redirected instead towards forestry projects, the equivalent of almost 30% of EU emissions could be reduced.

Spending money on renewable electricity is better value than biofuels, but still a poor performer, with the UK Government admitting that its system for renewable electricity subsidy costs around €180 per tonne of CO2 saved. A leaked paper from British civil servants admitted that “As renewables are more costly than other methods to reduce GHG, if the tranche of reductions to be made through renewables turns out to be a high proportion of the GHG target, this will restrict flexibility and make it difficult to take on ambitious GHG targets”.

The only sensible conclusion to draw here is that the EU’s highly prescriptive approach will make it more expensive and harder than it should be to reduce our emissions and fight climate change. 

Surely it would be far better in environmental and economic terms to just focus on the central objective of simple targets for cutting carbon emissions, and allow member states to pursue this goal in the cheapest way possible given their specific circumstances? 

Unfortunately, because this plan is so obviously misdirected, the more important and realistic objective of building consensus within Europe on absolute emissions reductions is being jeopordised. It is already scaring off EU member states, not least the Italian government which has described it as "an act of madness". 

Even if EU members do sign up to this agreement, the massive and unnecessarily high economic costs will make the US, China and India more reluctant to take the self-styled ‘leadership’ of Europe on climate change seriously. This Package will merely reconfirm the misconception that maintaining economic prosperity and cutting carbon are irreconcilable, and will make these big polluters less willing to commit to binding emissions reductions.

It’s also quite possible that, as a result of the manifold flaws in the Package, EU governments may simply choose not to comply a few years down the line.  The EU Commission may wag its finger about the importance of the Package, but national governments are answerable to their electorates and ultimately don’t want to see their voters shivering, or heavy industry migrating offshore.

Whatever happens, it is clear that by coming up with such an unrealistic and badly thought-through plan, the Commission is dangerously undermining the potential for global consensus on what really matters – getting as much carbon out of the atmosphere as possible at the lowest cost.

Despite being advised by BERR (then the DTI) not to go along with the EU plan, the UK Government looks set to sign up to it. Although some ministers have shown a degree of scepticism, the Government knows that implementing the Package will probably not end up being its problem.

The deal threatens the mother of all migraines for an incoming Cameron government. During his first term, he will need to deal with the double whammy of a looming and unavoidable electricity supply crunch (in which about a third of Britain’s total generation capacity will be made redundant within a decade) and the ‘challenge’ of simultaneously implementing a massive expansion in intermittent generation sources – predominantly wind – to meet the EU renewables targets. Because of its unpredictability, wind cannot substitute for the 20GW of baseload conventional capacity that will come offline by 2020. 

All this makes it quite likely that a future Conservative Government will need to choose between blackouts and ditching the EU targets. This will obviously be awkward for Cameron, who will face accusations that he is both turning his back on Europe and the environment. 

But the truth is that these targets will be bad for environment, bad for the economy and will discredit the EU.  The plan means we will pay far more than necessary in fighting climate change; or put another way, we could spend the same amount of money and reduce emissions by a lot more. It will contribute to unnecessary fuel poverty, and rising energy bills will mean pensioners dying.  The plan will damage energy security and – because it is so cost-inefficient – will needlessly hurt the economy at a time when we can least afford it.

Cooperation in Europe on the environment is important, but this should focus on what really matters, and on what there is a realistic chance of reaching international consensus. The overall 20% target for absolute emissions reductions is fine – but the rest of the Commission’s reckless plan should be ditched, and fast.