Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions - Climate Change - The EU Approach for Kyoto
Date: 1997-10-01
Institutions: European Commission
Subjects: UN convention, climate change, environmental protection, greenhouse gas, pollution control measures

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 01.10.1997 
COM(97)481  final 

COMMUNICATION FROM THE COMMISSION 

TO THE COUNCIL, THE EUROPEAN PARLIAMENT, 
THE ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 

Climate Change - The EU Approach for Kyoto 

1. 

Introduction 

On 3 March  1997 the EU Environment  Council adopted a negotiating position on climate 
change that, inter alia, established a quantified  emission reduction objective  for  inclusion 
in  the  Community's  protocol  proposal  to  the  UN  Framework  Convention  on  Climate 
Change  (UNFCCC).  This  proposal  sets  a  15%  reduction  of  emissions  for  three 
greenhouse  gases  carbon  dioxide  (C02  ),  methane,  (CH4 ),  and  nitrous  oxide  (N20  )  by 
2010,  individually  or jpintly,  compared  to  1990  for  all  industrialised  countries  that  are 
parties to the Convention. At the  19/20 June Environment  Council, Ministers also  agreed 
to include in the EU's negotiating proposal an intermediate reduction objective  of at least 
7.5%  for  2005.  The  EU  position  covers  an  average  reduction  for  a  basket  of  three 
greenhouse gases. At this stage no decision has been taken on specific targets for the three 
gases. 

The  EU position  in the negotiations  has been  widely  debated  both  inside  the  EU  and  at 
the  international  level, particularly  among  other  industrialized  countries.  Reactions  have 
varied  widely  from  positive  recognition  of  an  ambitious  policy  to  over  sceptical 
questioning  of  the  technical,  economic  or political  feasibility  of the  targets  and  in  some 
cases outright opposition. 

This Communication  seeks to place the EU negotiating position in an overall context  and 
is  designed  to  show  both  that  it  is  technically  feasible  and  that  within  a  sound  policy 
framework  it  is  economically  manageable  to  arrive  at  a  reduction  of  greenhouse  gas 
emissions of  15% by the year 2010 despite the underlying upward trend. The targets were 
agreed because  of their environmental  necessity  and on the basis of studies  showing  that 
the targets are technically  and economically  feasible  using in the main currently  available 
technologies  and  practices.  These  targets  are  based  on  the  assumption  that  other 
industrialised  countries  will  make  comparable  commitments.  It  is  also  recognized  that 
implementing the targets will be politically challenging. 

The EU negotiation  position  covers  a basket  of three  greenhouse  gases. By  far  the  most 
important  of  these  is  C02  , responsible  for  approximately  80 % of the  impact  when  the 
gases  are  weighted  according  to  their  so-called  "global  warming  potential".  C02 
emissions are also the most difficult  to reduce since, unlike  other emissions  arising  from 
fossil  fuel  use  such  as NOx and  S02,  there  are  as  yet  no  end  of pipe  solutions  for  C02. 
Business-as-usual  scenarios for  CH4 and N20  indicate a likely reduction of emissions and 
the possibility even for a significant  reduction. This implies that a cost-effective  reduction 
of  the  overall  emission  of  the  three  gases  might  include  a higher  reduction  of  CH4  and 
N20 emissions than  15 % and a lower reduction than  15 % for C02.  However, because of 
the  high  relative  weight  of  C02  it  will  still  be  necessary  to  achieve  a  reduction  of  C02 
above  10% in order to meet a 15 % overall target. 

For these  reasons  the  focus  of  this  Communication  is  on  C02  emission  reductions.  The 
special circumstances concerning the other two gases are dealt with in chapter  6. 

A  Commission  Staff  Working  Paper  prepared  in  parallel  with  this  Communication  sets 
out  a fuller  technical  and  economic justification  underlying  the  EU  negotiation  position 
and explains  in greater detail where the necessary  reductions  in greenhouse  gas  emission 

are expected  to  take place, the  likely  economic  impact  of the measures  and  the  possible 
instruments to implement the policies. This paper also outlines a number of EU proposals 
already  on  the  table  which,  when  adopted,  will  facilitate  limitations  and  reductions  in 
greenhouse gas emissions. 

This  Communication  examines  the  2010  EU  negotiating  position  which  has  been  the 
focus of international debate and is also more important in a long-term climate strategy. It 
is essential to bear in mind that the core of any strategy to protect the global climate aims 
at a significant  switch from the long-term trend for  greenhouse gases to increase  globally 
to a significant  decrease. This requires action now with the benefits  spread  over  a longer 
time  frame. 

2.  Why is action necessary now? 

The  First  Conference  of  the  Parties  to  the  Framework  Convention  on  Climate  Change, 
held  in  Berlin  in  April  1995,  decided  to  initiate  negotiations  on  the  necessary 
commitments  for  industrialized  countries to limit and reduce greenhouse gas emissions in 
the  years after  2000. The EU was  always  a strong  supporter  of the  Berlin  Mandate.  The 
Second  Assessment  Report  from  the  Inter-governmental  Panel  on  Climate  Change  ( 
IPCC), published  early  1996, has  confirmed  the  view,  already  held  by  the  EU, that  it  is 
urgent to initiate the necessary  changes  in production  and  consumption  patterns that  will 
allow  the  long-term  reduction  of  global  greenhouse  gas emissions  necessary  to  meet  the 
long term  objective  of the Climate  Convention.  The EU has recognised  that  failure  to  do 
so could have potentially  damaging effects  in the long-term  since society  needs to have a 
realistic timeframe  for change to take place in an open and transparent way. 

Whereas the negotiations  on the  Climate  Convention  in the early  nineties  were  based  on 
the precautionary  principle  (action may be needed  even  in the absence  of the  final  proof 
of the damage), the Second Assessment Report goes a step further  by acknowledging  that 
the  "balance  of  scientific  evidence  suggests  that  there  is  a  discernible  anthropogenic 
influence  on  the  global  climate".  The  global  problems  associated  with  climate  change 
could  have  a  substantial  negative  impact  on  global  agricultural  production  and 
productivity,  reduce  biological  diversity,  lead  to  land  loss  and  population  displacement 
and  increase  a  number  of  vector-borne  diseases.  The  damages  are  likely  to  be 
proportionately more significant  for the developing countries. 

It  is  important  to  underline  that  the  scientific  evidence  of  climate  change  (including 
research  reported  in,  or  initiated  after  the  second  IPCC  Second  Assessment  Report) 
indicates  that  unacceptable  social,  economic  and  ecological  impacts  could  occur  in  the 
coming decades. This calls for a precautionary approach. Moreover, much of the expected 
negative  impact  of  climate  change  is  likely  to  occur  in  countries  that  have  only 
marginally  contributed  to  causing  the  problem  and  without  the  financial  resources  to 
compensate  for  any  possible  damage.  If  industrialised  countries  do  not  act  now  to 
mitigate  climate  change  future  generations  will  not  only  be  confronted  with  the  cost  of 
climate  change  impacts  but  the  economic  costs  associated  with  limiting  emissions  could 
be much greater since there will be less time to make the  adjustment. 

A  particular  reason  to  initiate  early  action  on  C02  emission  reductions  is  the  long  lead 
time  necessary  before  policy  decisions  show  their  full  impact  on  the  emissions.  Many 
"traditional"  environmental  problems  offer  relatively  fast  end-of-pipeline  solutions  or 
modifications  of  existing  technology:  reducing  S02  emissions,  eliminating  lead  from 
gasoline or phasing out of CFC's. This is not the case for  C02 

Since  C 02 emissions  are inherently  linked to use of fossil  fuels  (coal, oil, gas)  and  since 
no economical removal technology exists as yet, the only way to reduce C02  emissions is 
through modification  of structures, processes, equipment and behaviour which directly  or 
indirectly  use  fossil  fuels.  Because  of  the  very  long  lifetime  of  investments  in  the 
transport  and  energy  sector  and  because  of  the  relatively  long  lifetime  of  many  energy 
consuming  goods  (cars,  refrigerators,  etc.)  a  C02  emission  strategy  will  need  a  much 
longer horizon for implementation than for most other environmental problems. 

As  chapter  7  explains,  early  action  by  industrialised  countries  is  also  a  prerequisite  for 
limiting the growth  in greenhouse  gas emissions from developing  countries. The  latter  is 
a development that is expected to be increasingly important in coming years. 

3.  Possibilities  to reduce CQ2 emissions. 

All  C02  emission  reduction  possibilities  have  a  cost  impact  and  the  more  society  is 
prepared  to  pay, the  greater  the range  of  reduction  possibilities.  In this  Communication, 
among  the  actions  to  reduce  greenhouse  gas  emissions  either  through  investments 
technologies  or  the  application  of  new  technical 
incorporating  existing  efficient 
approaches  and practices, only those that can be expected to be politically  acceptable  are 
considered.  In this context such reduction possibilities must not be excessively  costly and 
should  not have  unacceptable  social  and  distributional  effects.  These  emission  reduction 
possibilities have been the subject  of numerous studies in recent years and how to realise 
this  potential  has  been  an  essential  part  of  the  preparations  within  the  EU  for  the 
negotiations of a climate protocol. 

For  the  analysis  of the  reduction  possibilities  in the  various  sectors  of  the  EU  economy 
the pre-Kyoto scenario in Table I is used as a reference. It assumes an 8% increase in total 
C02  emissions  by  2010  compared  to  1990  provided  no  additional  new  measures  are 
taken. 

Table I - Sectoral Distribution of C09  emissions in EU - Mtonnes 

Sector/year 
Transport 
Industry 
Energy  Industry 
Domestic/Tertiary 
Electricity/Heat 
Production 
Total  emissions 

1990 
743 
626 
141 
654 
1036 

3200 

2010 
1032 
532 
158 
680 
1057 

3459 

%  inc/dec 
+ 39% 
-  15% 
+  12% 
+  4% 
+  2% 

+  8% 

Source:  Pre-Kyoto  scenario  based  on  Eurostat  data  (Excludes  international  marine 
bunkers but includes international air transport ) 

Table I shows that  it will  be important to address the transport  sector where the  inherent 
tendency  to  continuous  strong  growth  will  pose  a challenge  for  the  achievement  of  any 
emission reduction target. Table I shows a 39 % increase in C02  emissions from transport 
between  1990 and  2010,  much  of  which  will  come  from  road  and  air  transport.  In  this 
context, it should be noted that because energy prices to end-users in the transport  sector 
are  generally  higher  than  elsewhere  in the  economy,  targeted  action  aimed  at  removing 
existing  market  failures  and  inefficiencies  in  transport  is  required  to  significantly  cut 
emissions at low costs. 

The  Council  has  already  adopted  a  C02  emisson  target  which  corresponds  to  an 
improvement  in the average  fuel  economy  of new cars in the market in the order of 30% 
by  2005,  over  today's  average.  Future  fuel  use  is  not  fully  taken  into  account  at  the 
moment  of  vehicle  purchase.  However,  vehicle  fuel  economy  can  be  improved  at  low 
cost with available technology. To this end, the Commission  is currently  discussing  with 
the  automobile  industry  the  possibility  of  an  effective  and  transparent  environmental 
agreement in which the industry would commit itself to reducing the C02  emissions from 
cars.  Other  elements  of  the  strategy  are  fiscal  measures  and  fuel  economy  labelling  to 
influence the vehicle market. 

The uncompleted  internal  market  in rail and the existing  barriers to  intermodal  transport 
are other  examples  of transport  inefficiencies  whose removal  would  also  imply  low  cost 
energy  savings. The Commission has already proposed  several measures to address these 
issues. For  example,  the  liberalisation  and  revitalisation  of  the  Community's  railways  is 
expected  to  bring  down  transport  costs  and  enhance  service  quality  in  rail,  thereby 
attracting  traffic  that  currently  goes by road.  Similarly,  the  implementation  of the  action 
programme  proposed  by  the  Commission  in  its  Communications  on  the  Citizens' 
Network about Improving Public Transport and on Freight Intermodality  should lead to a 
greater use being made of alternatives to road and air transport. 

Finally,  measures  to  improve  transport  pricing  proposed  by  the  Commission  should 
enhance transport efficiency,  both within and across modes. 

Although  it  is  clear  that  these  policy  approaches  require  significant  adjustments  in  the 
transport  system,  their 
implementation  would  hold  out  the  prospect  of  major 
environmental, transport  and economic benefits.  The Commission  is establishing  a report 
on a strategy for the reduction in the growth of C02  emissions from  transport that will be 
adopted in the near  future. 

The  industrial  sector  is  characterized  by  very  different  energy  intensity  ratios  and  C02 
emissions  from  one  sub-sector  to  another.  In general, the  most  energy  intensive  sectors, 
particularly  those  exposed  to  international  competition,  already  pay  close  attention  to 
energy efficiency  for  sound economic reasons, notably lower final energy prices of  faced 
by  international  competitors.  For  other  industrial  sectors  a  number  of  market  barriers 
together  with  the  low  world  energy  prices  which  have  applied  for  more  than  10  years 
have  pushed  the  issue  down  the  list  of  priorities.  Even  though  direct  industrial  C02 
emissions  are  becoming  relatively  less  important  in  overall  emissions  there  is  evidence 
from  several  Member  States  that  these  can  still  be  further  reduced  in  most  sectors.  The 
Dutch  experience  of  an  approximately  2%  annual  increase  in  energy  efficiency  since 

1990, achieved in the framework  of negotiated agreements is particularly  convincing 
this context. 

in 

The role of the electricity  sector in meeting the challenge of climate change is a key one. 
This is recognized by both the electricity supply industry, Member States' authorities and 
the  Commission.  The  Commission's  services  have  completed  an  in-depth  review  with 
Eurelectric  and  other  stakeholders  on  electricity's  contribution  in  achieving  both 
sustainable  development  and  greenhouse  gas  reductions  Developing  energy  services  is 
recognised  as  fundamental  to  these  objectives  and  this  linked  to  improved  supply 
technology,  greater  fuel  switching  and  increased  use  of  non-fossil  fuels  will  lead  to 
substantial reductions in emission levels. 

Taken  together  reduction  potential  from  the  electricity  sector  reflects  improved  end-use 
efficiency  thus reducing overall demand, and greater production  efficiencies. 

On  the  end-use  side  there  are  numerous  ways  to  improve  efficiencies,  both  in  the 
industrial  and  in  the  domestic  and  tertiary  sectors.  Refrigerators,  computers,  TV's, 
washing machines, light bulbs are only a few examples where use of existing  technology 
will allow the same level  of service with much less energy consumption.  Electric  motors 
used  extensively  in  industry  can  similarly  be  improved.  The  EU  has  already  developed 
mandatory  energy  efficiency  labeling  scheme  for  the  principal  "white  goods"  and 
mandatory  standards  for  refrigerators/freezers  to  improve efficiency.  The  Commission  is 
now negotiating  standards on a more extensive product range with the relevant  industrial 
sectors. 

Likewise  on the  supply  side the  overall  thermal  efficiency  of  exisiting  fossil  fuel  power 
plants in the EU was around 38% in  1994 compared with new power plants that typically 
offer  efficiencies  of  around  or  even  above  50%.  There  is,  therefore,  some  scope  for 
reducing  C02  emission  through  an  accelerated  closing  of  low  efficiency  old  plants. 
Additional  reductions  will  result  from  switching  from  coal  to  natural  gas  as planned  in 
several  Member  States.  Combined  heat  and  power  production  could  further  add  to  the 
reduction  possibilities.  It  is  estimated  that  increasing  co-generation's  share  of  EU 
electricity production  from  the present level of 9 % to  18% in 2010 could  save up to  150 
Mtonnesof C02  . 

The  Commission's  believes  that  doubling  the  share  of  renewables  in  the  EU  energy 
consumption  from  the present  6%  of  overall  energy  consumption  to  12% in  2010  while 
being a challenge to the electricity  industry is a realistic target.  Windpower  and  increased 
use  of  biomass  in  electricity  generation  are  the  most  competitive  uses  of  renewables. 
Without at least half of the increase in renewables taking place in the electricity  sector the 
12%  is not  likely  to be met.  The  experience  from  Denmark  where  installed  wind  power 
capacity  is  coming  close  to  1000MW  and  accounts  for  around  5  %  of  electricity 
consumption  is a convincing  example that the Commission's  objective  is not  unrealistic. 
A recent Commission Green Paper has underlined that the realisation of this potential will 
require  strong  measures  such  as  access  of  renewables  to  grid  systems,  obligations  for 
renewable  energies,  increased  payments  for  renewables  and  financial  engineering  in 
favour  of  renewables.  A  forthcoming  White  paper  will  set  out  the  Commission's  policy 

direction for  the future  development  of renewables, together  with a comprehensive and 
detailed action plan. Publication is planned by  the end of this year. 

Most of the possibilities  for  reduction  in emissions contained  in the Commission  Staff 
Working Paper have, at least in a qualitative way, been accepted for a number of years.  It 
is equally true that in certain areas technological development has increased the potential 
or brought down the cost of  a number of technical  solutions to  a more acceptable  cost 
range. 

It is however disappointing that the use of most available climate friendly technology has 
been modest. Low energy prices and expectations of this continuing is an important factor 
in explaining  this. The  fact  that  up-front  investment  is  more important  than  long term 
overall  cost for  both industry  and private consumers is another part of the  explanation. 
The result is that despite the cost of different measures varying considerably there already 
exists a large amount  of "no-cost" or "low-cost" possibilities to reduce  greenhouse gas 
emissions. 

Conclusion: 

In conclusion,  what part  of this greenhouse  gas emission  technical  reduction  potential 
can be tapped  depends  on what levels of economic, social  or political  cost are deemed 
acceptable. Work carried out so far shows that it is possible to identify technical reduction 
possibilities  for  reducing  C02  emissions  of  800  Mtonnes. This would  be  sufficient  to 
achieve a  15% reduction of C02 emissions by 2010 compared to 1990 instead of the 8% 
increase  in  this  gas  foreseen  in  the  business-as-usual  scenario  in  Table  I.  When 
implemented  with  the  right  mix  of  cost-  effective  policies,  this  technically  feasible 
reduction potential can become both economically manageable and political acceptable. 

Table  II  gives  estimates  of  the  potential  C02  emission  reductions  possibilities  for  the 
main sectors in the EU. It is estimated that there are C02 emission reduction possibilities 
of around 300 Mtonnes in the power sector, 180 Mtonnes in transport, 200 Mtonnes from 
the end user sectors and  100 Mtonnes from renewables. The Commission underlines that 
these reductions  in C02  emissions will be a challenge for the political  decision makers. 
The quantities reflect  the implementation of a series of policies and measures  similar to 
the  ones  suggested  in  the  following  chapter.  For  each  sub-sector,  the  reduction  that  is 
achievable depends on the detailed formulation of the measures. 

The Commission Staff Working Paper sets out in more detail the measures that will have 
to be taken to achieve these C02 emission reduction possibilities. 

Table  II  -  Estimates  of  possible  potential  C02  emission  reductions  (Mtonnes  C02)  per 

sector in EU 

Sector 

Emission Reduction 
Possibilities 

Transport 
of which 
- passenger car 
- intermodal shift 
- other measures 

Industry 
Energy Industry 
Domestic/Tertiary 
Renewables/Heat 
Power generation 
of which 
- fossil  fuel  switching 
- cogeneration/ thermal 
efficiency 
-renewables/electricity 

"TOTAL 

100 
50 
30 

50 

150 
100 

180 

100 
20 
100 
100 
300 

8ÔÔ 
[ 

4. 

Elements for a Climate Change Strategy 

A  successful  climate  strategy  needs to be comprehensive,  cost-effective,  technically  and 
politically  feasible  and  avoid  negative  social  or  regional  side  effects  from  the  policy 
necessary  to  implement  it.  This  Communication  does  not  aim  at  prescribing  such  as 
strategy  in detail  but, attempts to outline the possible  elements  for  a  successful  strategy. 
The  development  of  a  full  strategy  will  only  be  possible  when  the  result  of  Kyoto  is 
known. 

Any EU strategy while being effective  in meeting the interim targets also needs to initiate 
a process of technological  and behavioral  changes that curbs the growing  greenhouse  gas 
emissions  and  sets  them  on  a  sustainable  paths  which  will  meet  the  requirement  for 
continued  reductions  at  and  beyond  2010.  That  implies 
the  need  to  address  both  the 
emission  intensity  of economic  activities  as well  as the growth in demand  for  goods  and 
services which trigger the increase in greenhouse gas emissions. 

The  choice  of  the  right  strategy  with  the  right  mixture  of  instruments  is  not  only 
important  from  the  technical  or  economic  point  of  view,  it  is  the  core  of  the  political 
challenge  of  making  progress  to  protect  the  global  climate.  In  the  development  of  this 
strategy  it will  be  necessary  to  ensure that  the  action  is taken  in the  right  way,  - both  to 
ensure  a  cost-effective  strategy  and  to  avoid  negative  social,  equity  or  regional  side 
effects  from policy  implementation. 

The  Commission  is  therefore  convinced  that  a  comprehensive  strategy  that  brings  all 
these elements together is a top priority. The Commission has already tabled a number of 
proposals including: 

- 

the  Communication  -  Energy  Dimension  of  Climate  Change1 
and  the  Council 
Conclusions  on it in which the Council  invites the Commission to come forward  with 
an  action  programme  in  the  energy  sector  to  address  climate  change  in  the  energy 
sector in the context of common and co-ordinated policy measures 

- 

the  extension  of  SAVE II to the year  2000  with  a budget  of 45  Mecu  and  a  proposal 
for an ALTENERII programme 

-  a proposal  for Rational Planning Techniques in the supply and demand cycle 

-  a Communication setting out a strategy for reducing C02  emissions from  cars 

-  proposals,  in  the  context  of  the  Common  transport  policy,  for  the  revitalisation  and 
liberalisation of the railway sector and for European Rail Freight Freeways, in order to 
encourage the shift  of freight  from road to rail 

-  a  proposal  for  a  Council  Directive  to  restructure  the  Community  framework  for  the 

taxation of energy products (COM(97)30) 

-  a proposal for Fifth  Framework Programme for RTD covering the period  1998 to 2002 

for which an overall amount of  16.3 bn Ecu is proposed. 

The  Commission,  however,  is  convinced  that  proposals  on the  table  and  in  the  pipeline 
are not  sufficient  to meet the targets proposed  by the EU and depending  on the  outcome 
in  Kyoto  will  make  additional  proposals  that  will  reduce  significantly  C02  ,  some  of 
which  are  already  listed  in  the  working  programme,  to  complete  the  strategy  that  will 
allow the EU to meet its post-Kyoto commitments. Additional proposals could be: 

-  a  proposal  aimed  at  significantly  increasing  the  share  of  renewable  energies  in  the 
EU's  energy  consumption  by  2010  along  the  lines  spelled  out  in  the  Commission's 
recent Green Paper 

-  a proposal  to increase significantly  by 2010 the share of cogeneration  - the  production 

of electricity and heat - in the EU's electricity production 

-  a  series  of  actions  regarding  standardization,  harmonisation  and  liability  to  promote 

intermodal freight transport 

-  revision  of  the  Trans-Europe  Network  guidelines  to  integrate  strategic  environmental 

considerations 

Com (97)  196 final of  14.5.97 

proposals to significantly  improve the overall thermal efficiency  of power plants; 
increased penetration of co-generation would be a particular effective  way to 
improve thermal  efficiency. 

In  addition  potential  exists  for  developing  a  comprehensive  approach  to  promote 
sustainable  consumption  patterns  with  a  positive  impact  on  climate  policy  goals.  To 
facilitate  such reorientation of consumer behaviour and choice, it is necessary to promote 
consumer awareness and to provide them with appropriate education, reliable  information 
and advice. 

» 

A  comprehensive  strategy  calls  for  the  use  of  a  broad  range  of  policy  instruments. 
Traditional  regulatory  measures  will  play  a  role  in  some  cases  (examples  of  regulation 
are,  banning  the  use  of  HFC's  for  self  chilling  cans,  higher  efficiency  standards  for 
certain  electrical  equipment).  However,  in  many  areas  more  flexibility  for  economic 
sectors offers  obvious advantages. 

Economic  incentives - positive as well as negative - are one way to secure a high  level  of 
flexibility  and can often  achieve an objective  more rapidly  and at a fraction of the cost of 
regulation. 

In this context  it is important  to be aware that the use of  fiscal  incentives does not  imply 
higher  taxes  overall.  In  areas  already  subject  to  taxation,  incentives  can  be  created 
through  differentiation  (as  was  done  to  promote  lead-free  gasoline).  Switching  the  tax 
burden  from  labour  to  energy  and  carbon  intensive  production  is  a  revenue-neutral 
possibility  likely  to  reduce  barriers  and  to  increase  the  acceptance  by  the  consumer  of 
cost-effective  technologies. 

Some  of  the  key  challenges  will  be  to  identify  and  to  implement  policy  measures  that 
allow  the  exploitation  of  energy  efficiency  improvements  in  the  existing  stock  of 
buildings  and  equipment.The  social  discount  rate  employed  is  the  one  used  in  public 
policy  decisions. Private discount rates can of course be higher. For this reason  measures 
are  needed 
to  bridge  the  gap  between  the  social  rate  of  return  and  the  private  rate  of 
return used by business and commerce when they take their investment decisions. 

There  are  also  other  market  based  options  such  as  changes  in  the  current  structure  of 
subsidies.  The  present  trend  for  phasing  out  subsidies  on  energy  products  such  as  coal 
should be continued  and accelerated where this brings benefits  for  emission reduction.  At 
the same time using short-term and temporary  subsidies to encourage renewables or clean 
technologies is an additional option available. 

Negotiated  agreements  between  public  authorities  and  specific  industrialized  sectors. 
These offer,  in principle, maximum  flexibility  for  industry  to act  in a cost-effective  way. 
The  Commission  has  recently  issued  a  Communication  outlining  the  conditions  under 
which Negotiated Agreements would be useful  instruments. 

Technical  options  used  to  achieve  the  EU  emission  reduction  objectives  up  to  2010  are 
mainly  based  on  existing  technologies.  The  role  of  new  technological  research  and 
development  is limited for this time horizon. Additional efforts  are needed to diminish the 

10 

cost  of  existing  advanced  technologies  given  that  at  present  they  are  not  always 
competitive. 

Furthermore,  socio-economic  research  is  necessary,  in  order  to  understand  better  the 
barriers  to  the  application  of  available  technologies  to  realise  emission  reduction 
possibilities  and  organisational  aspects  of  the  integration  of  new  technologies.  The 
impacts  of economic  instruments  both  at the micro and  sectoral  levels  and  the  condition 
for behavioural change (including consumption patterns) also need to be researched. 

In  relation  to  RTD,  it  is  very  important  to  underline  the  need  for  continued  focused 
research  that  will  assess  the  socio-economic  and  ecological  impacts  of  climate  change 
(especially  at  the  regional  level)  and  will  develop  the  necessary  technical  solutions  to 
reduce  greenhouse  gases  beyond  2010  and  to  cope  with  possible  adverse  impacts.  Such 
research efforts  could also be an advantage  for EU competitiveness  and lead to  improved 
opportunities for EU exporters of such technologies. 

Above,  many  possibilities  for  reducing  emissions  in  the  EU  have  been  identified. 
However,  the  implementation  of  measures  to  capture  this  potential  and  to  reduce 
emissions,  particularly  above  the  normal  rate  of  equipment  replacement,  is  unlikely  to 
take  place  in  the  absence  of  strong  action.  No  one  instrument  will  be  sufficient  for 
achieving the Community's emission target. It will require a combination of actions. 

Any  policy  or  strategy  must,  therefore  ensure  the  broadest  possible  co-operation  and 
acceptance  of  all  stakeholders:  governments,  industry,  trade  unions  and  the  public  at 
large.  Several  sectors  of  society  and  several  regions  of  Europe  will  have  to  cope  with 
significant  changes  if an overall  15% reduction of greenhouse  gas emissions  in the EU is 
to  be  achieved  over  the  next  13  years.  Options  that  have  a  favourable  benefit  on 
employment and economic growth should be pursued. 

While  liberalization  is  generally  conducive  to  higher  efficiency  it  is  less  supportive  of 
investments  that pay  off  in the  long-term  rather than  in the  short-term.  The  globalization 
of  capital  markets  have  been  followed  by  expectations  from  investors  of  rapid  profits 
from  invested  capital.  The  profitability  of  the  more  cost-effective  measures  to  reduce 
C02  emissions, however,  often  need longer periods to pay back the investment.  This is a 
problem  that  will  have  to  be  addressed  politically  as part  of  the  implementation  of  any 
future  strategy.  Investors  need  the  certainty  of  a  firm  commitment  to  reductions  to 
persuade them to invest in cost-effective  efficient  measures. 

Policies to break the growth trend  in emissions  will have to attack the problem  from  two 
sides. They will have to reduce the emission intensity of relevant economic activities, and 
they will have to curb growth in demand for goods and services triggering the emission of 
greenhouse  gases. In consequence, the environmental  success of any strategy will depend 
on these policies' ability to stimulate the necessary technological  and behavioral  changes. 
Their  political,  economic  and  social  success  will  depend  on  their  economic  and 
distributional  implications. To this end, a least-cost  strategy, based  on a multi-gas, cross-
sectoral and multi-country  approach, not yet developed  in detail, should be pursued. 

11 

5. 

Economie Implications 

Even a comprehensive strategy based on a least-cost approach is not costless but comes at 
a  price.  Production  processes  and  products  will  have  to  be  adjusted  to  become  less 
polluting or fuel  and energy consuming, new technologies will have to be developed, and 
the  dissemination  of  existing  cleaner  technologies  will  have  to  be  accelerated,  the 
replacement  of  old  and  pollution  intensive  production  facilities  by  more  modern  and 
environmentally  friendly  capital  stock  will  have  to  be  accelerated  and  consumption 
patterns  and  habits  will  have  to  be  changed.  All  this  entails  costs:  resource  costs  for 
developing  and  implementing  new  technologies,  adjustment  and  distributional  costs  for 
adjusting  to  an  altered  framework  for  supply  and  demand  and  for  different  demand  and 
supply  dynamics  and other welfare  costs resulting from  an interference  in production  and 
consumption  decisions  to 
the 
implementation of such a policy a challenging process. 

limit  greenhouse  gas  emissions.  This  will  make 

However, most of the above cost components will at least partially be compensated  for by 
cost savings: investing in a more fuel  and energy  intensive production process or product 
will  lead to  fuel  and  energy  savings  , reducing  excessive  use  of  fertilizers  in  agriculture 
will  reduce  input  costs. Moreover,  a reduction  in the demand  for  polluting  products  and 
services  frees  financial  resources  for  alternative  uses.  The  wider  emission-reducing 
technology  is spread the more likely will it be that economies of scale come into play and 
substantially  reduce mitigation  and resource  costs, potentially  putting  in place  a  virtuous 
circle.  Most  efforts  will  also  have  secondary  benefits:  reducing  the  use  of  fertilizers  in 
agriculture  will  also  be  beneficial  for  the  quality  of  groundwater;  reducing  demand  for 
traffic  services  will  also  improve  ambient  air  quality;  reducing  noise,  congestion  and 
accidents, or reducing  fuel  consumption  will contribute  to less acidification.  It should  be 
noted  that  the  total  environmental  benefits  that  can  result  from  avoided  ecological 
damage  of  adverse  climate  impacts  (with  associated  social  and  economic  benefits)  are 
difficult  to  calculate  accurately.  It  is  essential,  however,  that  they  are  taken  into 
consideration  in the overall  assessment. 

The costs: 

Estimating  the net costs of a strategy to combat  greenhouse  gas emissions  would  require 
detailed  and  reliable  information  on  mitigation  costs,  preferably  at  the  individual 
enterprise  level,  for  the  whole  economy,  and  across  all  relevant  greenhouse  gases. 
Moreover, the degree and effects  of adjusting  production and consumption patterns in line 
with  the  planned  policy  objectives  would  have  to  be  quantified  as  would  welfare  costs 
resulting  from  interferences  into  production  and  consumption  patterns.  The  same  holds 

Indeed, replacing an old coal-fired  power plant by a plant based on combined  cycle gas 
turbine production  is normally  a win-win situation  for both the environment and the power 
generator,  investing in a car with improved fuel  efficiency  comes at zero lifetime  costs for the 
car-owner  in Europe as long as the investment costs of the efficiency-improving  technology 
are not too high. 

12 

for  offsetting  cost  savings  and  side  effects.  Finally,  the  different  cost  components, 
including  offsetting  cost  reductions  and  resource  savings  do  not  necessarily  match  over 
sectors, regions  or  in time. Typically, policy  measures  require  substantial  investment  in 
mitigation  technologies  or  changed  demand  patterns  before  resource  cost  savings,  side 
benefits  and the core benefits  can be enjoyed.  Also sectors and firms providing mitigation 
technologies  or  benefiting  from  changed  consumption  behaviour  are  not  identical  with 
those who have to invest in cleaner production. 

This  information  is  not  yet  available  on  a  sufficiently  detailed  and  broad  scale. 
Nevertheless,  there  exist  numerous  efforts  to  quantify  the  overall  costs  connected  to  a 
policy  aiming  at  a  reduction  in  greenhouse  gas  emissions.  These  estimates  are  using 
bottom-up  and  top-down  approaches,  often  based  on  partial  information,  simplified 
assumptions,  and  often  reflecting  only  parts  of  the  economy  and  economic  effects. 
Notwithstanding  these  shortcomings,  they  give  a  first  rough  impression  of  the  issues  at 
stake, quantified  in money terms. 

For  a  15%  reduction  in  C02  emissions  compared  to  1990  estimates  of  the  direct 
compliance costs related to energy supply/demand mitigation actions 
range from  around 
15bn Ecu to about  35 bn Ecu annually by 2010. This corresponds to roughly  0.2  and  0.4 
%  of  GDP  in the  year  2010. This  estimate  is based  on  C02  alone  since  adding  methane 
and  nitrous  oxide  is  not  expected  to  alter  this  drastically  .  A  cost-effective  multi-gas 
strategy could even be somewhat  less costly. The lower cost figure  assumes that a part of 
the  reduction  can  be achieved  through  zero  or low net  cost  measures,  i.e.  resource  costs 
related  to  the  introduction  of  more  efficient  mitigation  technologies  are  expected  to  be 
(almost)  totally  paid  off  through  fuel  and  energy  savings  over  the  life  cycle.  The  lower 
cost  estimates  are  also  based  on  the  assumption  that  the  political  decision-making 
process manages to pursue the cost-effective  solutions for reducing  C02  emissions, i.e. to 
pursue  those  policies  which  allow  the  reduction  target  to  be  met  at  least  costs.  This 
requires that  C02  is reduced  by those quantities  and in those countries and  sectors  where 
it can be done more cheaply. 

Figure  1  depicts the annual direct compliance costs (in 2010) as a function  of the 
emission reduction compared to  1990. A reduction of  15% compared to  1990, when 
effected  in a least cost way, might cost between  15 bn and 30 bn Ecu, depending on the 
model. POLES  estimates suggest costs of 30 bn Ecu (35 bn Ecu if the emissions are not 
based on the least-costs). Costs are high also because  POLES assumes a  15% increase in 
C02  emissions compared to the 8% increase in emissions in the pre-Kyoto scenario. The 
results of PRIMES are only available for reductions of up to  12% in emissions. If these 
results are extrapolated to a  15% reduction in emissions a similar range of costs is 
obtained compared to other models . 

3 
4 

The Commission Staff Working Paper provides more details on this and the following. 
The Commission Staff Working Paper provides more detail on this. 

13 

Figure 1. Annual Direct Compliance Costs in 2010 

bn ECU/yr 

15  11 

1 
% reduction (from 1990)  -10  -12  -14 

2 - 4 - 6 -8 

-15  -17  -18 

POLES 

PRIMES 

CRASH91 

The estimates are assuming  discount rates of 8%  and are based on existing technologies. 
New  technologies  and  the  exploitation  of  substantial  economies  of  scale  once  there  are 
prospects  for  fast  growing  markets  for  these  technologies  may  reduce  mitigation  costs. 
Moreover,  work  under  IPPC  has  recently  confirmed  that  the  possibility  to  apply  Joint 
Implementation  could  significantly  (up  to  50%)  reduce  the  overall  cost  figure.  The 
Community  has actively  supported Joint Implementation  in the protocol  negotiations  and 
there  is  evidence  that  a  number  of  industrialized  countries  such  as  the  Associated 
Countries, can offer  relatively cheap C02 reduction potential. 

Similarly,  emission  trading  in  principle  offers  scope  for  overall  cost  reduction.  It  is, 
however,  important  to make  sure that an eventual  emission trading  system  will  be  set up 
in such a way that it ensures that the overall reduction objectives  are met. 

The  assessment  of  the  macro-economic  impact  shows  wider  ranges.  While  the  direct 
static  effects,  as  a result  of  higher  resource  cost,  are  negative,  the  overall  impact,  when 
considering  the  traditional  multiplier  effects  are  much  more  difficult  to  predict  and 
depend  to  a large  extent  on  the policy  package  chosen.  The  Commission  Staff  Working 
Paper  reports  on  different  studies  that  have tried  to  assess  overall  costs. Not  all  studies 
have taken the  15 % reduction by 2010 as their basis. Estimates in available studies range 
from  a positive  impact on GDP of close to  1 % to a negative  impact of up to  1.5  %. That 
implies  that  the  absolute  GDP  level  might  be  1.5%  lower  with  than  without  climate 
policy. These observations are in line with a recent report from  World  Resources  Institute 
(WRI)  and  with  the  IPPC  second  assessment  report.  Positive  impacts  can  occur  if  the 

Poles  and  Primes  results  are based  on a 8%  discount  rate and  CRASH91 uses 5%  to 8% ( 
depending  on the country).  These are discount  rates that are usually  applied  for  public 
policy  decision  making  . Similar  discount  rate levels are used  in AUTO-oil  and  the 
acidification  strategy  and  recommended  by international  organisations  such  as the  QECD. 
Private  discount  rates  might  of course be higher. 

14 

revenues  or  carbon/energy  taxation  (or  the  revenues  from  selling  tradable  permits)  are 
used  in  a  effective  ways,  such  as  reducing  labour  costs  for  employers  or  giving 
investment tax credits. 

It  is  important  to  note  that  in  spite  of  the  uncertainty  none  of  the  cost  figures  are 
disturbingly high compared to the overall GDP, or compared to the expected 50 % growth 
in GDP between  1990 and 2010. 

The  underlying  assumption  for  the  EU  policy  on  climate  change  is  that  other 
industrialized  countries  undertake  comparable  commitments  to  cut  greenhouse  gas 
emissions. With unilateral  action  in the EU alone, the changes  in industrial  structure  and 
costs  would  be  much  larger.  Energy-intensive  industries  would  relocate  to  outside  the 
EU. Moreover,  energy  consumption  in the EU might fall  but rise elsewhere  (since  global 
energy  prices  would  fall).  As  a result  carbon  dioxide  emissions  in the  rest  of  the  world 
would  increase  (carbon  leakage)  which  would  partially  undo  the  efforts  of  the  EU  to 
reduce global emissions. 

The benefits: 

The  benefits  of  any  climate  strategy  are  difficult  to  quantify  in monetary  terms.  This  is 
especially  so  because  of  the  global  and  inter-generational  nature  of  the  climate  change 
issue.  Further complications arise because of the difficulties  of attaching money values to 
categories such as ecological preservation and human health impacts. 

The  benefits,  both  primary  and  secondary,  of  emission  reduction  are  often  less  obvious 
and  the  cost  estimates  mentioned  above  neglect  the  positive  economic  primary  and 
secondary  benefits  from  reduced  damage  due  to  less  air  pollution,  Estimates  of  the 
primary  (climate)  benefits  depend  on  the  assumptions  made  on  discount  rates,  climate 
sensitivity,  the  reference  point  for  the  emissions  and  the  weight  attached  to  damage  in 
developing  countries. Accounting  for all these factors  suggests that the global benefits  of 
a  15% reduction in C02  emissions in the EU would be between 0.3bn and  101 bn Ecu /yr. 

These  estimated  benefits  are  for  the world  as a whole  and  only  part of them  will  benefit 
the  EU.  The  large  range  of  estimates  for  the  benefits  mainly  depends  on  the  value 
attached to damage occuring  in the distant  future.  If this value is very high (the  discount 
rate  is zero)  damage  in the  future  is worth  as much  as damage  now.  If the  value  is  low 
(e.g. a discount rate of  10 %) the value of  100 Mecu of  damages in 50 years ahead would 
be worth less than  1  MEçu now.  The choice is basically political. 

The  above  estimate  does  not  yet  reflect  the  avoided  damage  costs  (secondary  benefits) 
due  to the  reduction  in  other  pollutants.  The  strategy  would  not  only  reduce  greenhouse 
gases  but  would  also  reduce  sulphur  dioxide,  nitrogen  oxides  sulphur  and  particulate 
emissions  compared  to  current  legislation  by  15% to  25% if  not  more.  The  associated 
benefits  (on  mainly  human  health,  agriculture  and  infrastructure  damages)  can  be 
estimated  to  be  at  least  1 lbn  to  32 bn Ecu.  In addition,  the  reduction  in  C02  emissions 

15 

would  also  cut  the  annual  compliance  costs  from  the  Commission's  proposed 
acidification  strategy by at least 4 bn Ecu each year. 

The total  (primary  and  secondary)  benefits  related  to  the  reduction  in  greenhouse  gases 
are difficult  to  express  and  quantify  in monetary  terms. Available  estimates  suggest  that 
these might range  from  15 to  137 bn Ecu per year. This estimate taken together with the 
direct  compliance  costs,  would  imply  that  the  proposed  emission  reduction-could  on 
balance bring net benefits if one attaches a high value to damage in the far  future. 

Improving  overall  the  allocation  of  resources,  e.g.  through  a  better  restructuring  of  tax 
systems  will  tend  to  have,  positive  overall  effects  on  employment.  C02  emission 
reductions  are  often  linked  to  the  more  labour  intensive  solutions,  i.e.  imported  fuels 
could  be  replaced  by  domestically-produced  mitigation  technologies.  Although  this  is 
difficult  to  quantify  in  general  terms,  it  has'to  be  an  important  element  in  the  detailed 
elaboration of a climate change strategy after Kyoto. 

Finally,  it  is  necessary  to  emphasise  the  strong  case  for  collective  action,  first  and 
foremost  by  the  industrialised  countries.  Unilateral  action  would 
imply  that  the  EU 
would  carry  the  full  costs  of  the  policy  alone.  At  the  same  time  other  countries  would 
benefit  without  having  contributed  to  the  solution.  Coordinated  action  ensures  that 
environmental  costs  and benefits  for  the EU would  be -better balanced.  Joint  action  with 
other industrialized  countries is therefore  essential to overcome the imbalance that  would 
be  created  by  unilateral  action  and  is  the  only  way  that  the  parties  can  arrive  at  an 
effective  climate policy. 

Conclusion 

Although the overall  costs might  look to be relatively  manageable  at the aggregate  level, 
costs could be substantially higher at the disaggregated  level, e.g. for  specific  sectors and 
could  have  a  significant 
if  other 
industrialised  countries do not take on comparable commitments. The extent to which the 
costs  are  politically  and  socially  acceptable  depends  on  the  willingness  of  society  to 
invest in a European policy that addresses global warming. This will crucially depend  on 
the commitments of other industrialized countries described in chapter 7.  Joint action is a 
condition for a proper balance of costs and benefits for all countries concerned. 

international  competitiveness 

impact  on  their 

Mitigation  costs  differ  between  economies, regions, sectors  and  firms,  and  also  between 
greenhouse  gases.  These  differences  and  the  numerous  leverage  points  and  policy 
measures  for  reducing  greenhouse  gas emissions  make the  choice  of the  policy  mix  and 
the  geographical  coverage  of  a  comprehensive  climate  policy  a  crucial  issue.  Policy 
makers  should  struggle  for  implementing  a  policy  mix  which  achieves  the  aimed-at 
emission  reduction  at  least  cost.  This  holds  both  domestically  and  internationally.  The 
more  instruments  and  measures  are available  and  the  broader  the  geographical  coverage 
the  cheaper  and  the  more politically  acceptable  a cost-effective  strategy  will  turn  out  to 
be.  Moreover,  common  and  co-ordinated  policies  and  measures  could  open  a  new  and 
less  costly  vector  of  cost-effective  policies,  inter  alia  because  it  would  make  policies 
globally more environmental efficient,  e.g. through limiting the risk of carbon leakage. 

16 

6. 

Other Greenhouse Gases 

Methane  is  the  second  most  important  greenhouse  gas  in  the  EU  basket.  In  1990 
agriculture  accounted  for  45 %, waste 32 % and energy 23 % of EU methane  emissions. 
Calculations,  referred  to  in  the  Commission's  Communication  on  methane  (  COM  (96) 
557), indicate that in  2010 compared to  1990  a reduction of methane emissions of up to 
13% to  15% is feasible  with current policies. A reduction of 40% over the same period  is 
estimated  to  be  the  maximum  technically  feasible  assuming  that  significant  policy 
changes are made. 

The  costs  of  this  extra  25%  reduction  of  CH4  (  from  around' 15%  to  around  40%  ), 
equivalent to around  100 Mtonnes of C02,  can be estimated at around 20 to 30 Ecu/tonne 
of  C02  equivalent  reduced  which  gives  an  annual  cost  of  around  2bn  Ecu  to  3bn  Ecu. 
However,  this additional  25% methane reduction may allow C02  to be reduced  by  12% 
instead  of  15%. It  should  be  noted  that  this  additional  25% reduction  assumes  a  60% 
reduction  of methane  emissions  in the waste  sector  and  reductions  of  34% in  agriculture 
and energy  . As far  as agriculture  is concerned,  further  analysis is required  to ensure  that 
only  such  measures  are  pursued  that  are  technically  feasible,  politically  acceptable  and 
consistent  with  other  policy  objectives.  It  is  therefore  uncertain,  how  much  of  the 
reduction potential of methane above  15 % will actually take place. 

Policy  measures  aiming  at  improved  treatment  of  waste,  methane  recovery  in  new  and 
existing landfills,  best available recovery techniques in coal mines, minimising  emissions 
in  the  production  on-shore  and  off-shore  of  oil  and  natural  gas  and  minimum  leakage 
standards and more  frequent  control  of gas pipelines need to be pursued.  For  agriculture, 
a better  storage and treatment of animal manure is a promising  option and there is a need 
for  analysing  how  the  Common  Agriculture  Policy  (CAP)  and  Rural  Development 
policies  can  assist  such  a  development,  for  example,  in  the  form  of  incentives  or 
investment  aid  for  covered  manure  storage  combined  with  biogas  utilisation,  notably  at 
larger  intensive  animal  production  units.  Research  into  the  possibilities  for  improved 
feeding  of  animals  should  also  be  encouraged  in the  Community's  agricultural  research 
programme. 

Emissions  of  Nitrous  oxide,  N20,  in  1990  amounted  to  0.9  Mtonnes,  equivalent  to 
around  300  Mtonnes  of  C02  Reductions  in N20  emissions  from  industry,  in  particular 
the nylon producing  sector, which accounts for  a third of total N20  emissions  can lead  to 
a  reduction  of  30% in N20  emissions  in the  year  2010. N20  emissions  from  energy  use 
(power  stations)  are  expected  to  remain  stable  up  to  2010  since  most  new  power  plants 
are  likely  to  be  gas  fired  and  the  lower  N20  emissions  will  more  than  offset  growth  in 
electricity  production.  N20  emissions  from  agriculture  are  estimated  to  fall  due  to 
reduced  fertilizer  use  and  this  trend  should  be  further  assisted  by  enhancing  the 
agricultural  component  of  the  CAP  in  the- context  of  Agenda  2000  .  The  reductions  in 
these  sectors  will  more  than  offset  increases  from  transport  due  to  catalytic  converters. 
Consequently,  estimated  reductions  in N20  could  be between  70 to 95 Mtonnes  of C02  ( 
equivalent ). 

17 

The  reduction  of N20  ( 0.285  Mtonnes)  could  cost  around  120 Ecu/ton  of N20  or  0.36 
Ecu/ton of C02  equivalent, in total 0.03 bn Ecu. As regards policy instruments, steps can 
be  taken  to  ensure  that  as  regards  emissions  from  industry  agreements  cover  all 
producers.  In agriculture, increased  support  should be given to environmentally  friendly 
farming  practices,  such  as best  practice  in  fertilizer  use.  In the  energy  sector  intensified 
research  to reduce N20  emissions from fluidised  bed  combustion  of fossil  fuels  needs  to 
be pursued and improved catalytic technology is required in the transport sector. 

7. 

All industrialized  countries must be committed to comparable action 

Implementing reductions in greenhouse gas emissions that will imply  significant  changes 
in production  and consumption pattern, is not possible for  individual  countries  or  groups 
of  countries  such  as  the  European  Community.  Many  industries  operate  in  an 
environment  with  increasing  global  competition  where  relatively  small  cost  margins  are 
important. More and more economic sectors compete for capital in a global market where 
short  term  profit  is  important.  And  several  important  industrial  sectors  in  Europe  have 
faced  or are facing  overcapacity that make changes difficult  to achieve. 

Experience  with  the  implementation  of  the  Climate  Convention  since  Rio  makes  it 
evident that only in a global regime of shared responsibility  and comparable  commitment 
will  it  be possible  to  change  the trend  in  emissions  which  is necessary.  This  is  why  the 
EU proposal  is a negotiation position and nrït a unilateral  commitment.  It is based  on the 
assumption  that  other industrialized  countries must  and can act in the same way  and  it is 
linked  to  the  proposal  to  identify  common  and  co-ordinated  policies  and  measures  to 
achieve the targets. It has been argued that agreed common and co-ordinated  policies and 
measures  will  reduce  the  flexibility  for  parties  to  the  protocol  in  implementing  their 
commitments.  The  EU  position  is  based  on  the  belief  that  in  some  cases  :  global  co 
ordination of policies  and measures makes it easier to pursue cost-effective  solutions  and 
it reduces the political resistance to take action that will easily be seen as applying to only 
some parties to the protocol. 

It is important to underline that the potential for C02  emission reductions identified  in the 
EU  for  achieving  the  proposed  EU  target  by  2010  are  available  to  other  industrialized 
countries  as  well.  Significant  improvement  in  fuel  efficiency  in  cars  and  electricity 
consumption  in appliances can be achieved throughout  the world. Higher performance  of 
fossil  fueled  power  plants  or  accelerating  the  use  of  renewables  can  also  be  achieved  as 
well as improved energy efficiency  in industry. 

It is also clear that many of these measures can also apply  in developing  countries. There 
is  reason  to  believe  that  even  without  legal  commitment  by  developing  countries,  a 
significant  carry-over  effect  is  likely  to  be  observed.  Fuel  efficiency  of  cars  is  basically 
decided  by  international  producers  based  in Europe, US  and  Japan  and  cars exported  to 
or  produced  in  countries  outside  these  countries  will  not  continue  with  higher  specific 
fuel  consumption.  The same will hold true in several other areas. 

8. 

Developing  Countries 

18 

The  Climate  Convention,  as  well  as  the  Berlin  Mandate,  recognise  that  industrialised 
countries  must  take  the  lead  in  reducing  greenhouse  gas  emissions.  Industrialised 
countries emission accounted for 75 % of global emissions in the base year  1990 and on a 
per capita basis C02  emissions in industrialised countries are on average  10 times as high 
as in developing countries. 

It  is  also  generally  true  that  the  ongoing  and  expected  development  in  developing 
countries  is  likely  to  lead  in  future  to  much  higher  emissions  from  these  countries, 
although on a per capita basis most developing countries will remain well below emission 
levels in industrialised countries. 

The  answer  to  the  challenge  is  three  fold.  The  first  answer  is  a  reinforcement  of  the 
obligation  on  industrialised  countries  to  act  now.  Only  through  political  and 
technological leadership will it be possible to create a situation that will bring  developing 
countries closer into the global process. 

The second  answer.  Both greenhouse  gas emissions and the economic  capability  to  limit 
or reduce  greenhouse  gas emissions  vary enormously  among  developing  countries.  It  is 
important,  therefore,that  the  more  developed  among  the  developing  countries  gradually 
assume  bigger  responsibilities  when  their  level  of  development justifies  it.  There  is  no 
room  for  free  riders  on  this  issue.  This  reflects  the  fact  that  both  greenhouse  gas 
emissions  and  the  economic  capability  to limit  or reduce  greenhouse  gas  emissions  vary 
enormously among developing countries. 

Finally,  if  the  industrialised  countries  apply  and  develop  technologies  that  have  low 
greenhouse  gas  emissions  in order to  meet their  emission  reduction  commitments  many 
of  these  are  also  likely  to  be  applied  in  the  developing  countries  in  reducing  their 
emissions.  The  Commission  recognises  that  to  facilitate  this  technology  transfer  the 
Community  will need to focus  and to expand its technical  and financial  cooperation  with 
the developing countries. 

9. 

Conclusions 

In conclusion the Commission underlines: 

- 

that the potential  future  damage and cost resulting from  anthropogenic  climate  change 
makes it imperative to urgently reduce greenhouse gas emissions 

- 

that industrialised  countries must continue to take the lead 

- 

that  the  emission  reduction  targets  are  technically  feasible  and  economically 
manageable  in the EU  only  if all industrialised  countries make  comparable  reduction 
efforts 

- 

that  many  of  the  measures  identified  within  this  Communication  for  a  cost-effective 
strategy, are equally applicable to other industrialised  countries 

19 

that  the  choice  of  the  right  mixture  of  instruments  is  essential  for  a  cost-effective 
climate strategy. 

that given the political  challenge and the need for action, the involvement  of all parts 
of society will be needed. 

that the  Commission  will  develop  a more detailed  Climate  Change  strategy  after the 
emission reduction commitments have been agreed  in Kyoto 

20 

ISSN 0254-1475 

COM(97) 481 final 

DOCUMENTS 

EN 

14  15 

Catalogue  number  :  CB-CO-97-511-EN-C 

ISBN  92-78-25616-1 

Office  for  Official  Publications of the European  Communities 

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