Climate change and Energy: 2004 round up

The Kyoto Protocol and preparations for the European Emissions Trading System dominated the agenda for all climate change debates this year, with commentators drawn between wondering whether Kyoto goes far enough, or whether the proposed measures will cripple European industry.

The year did not get off to an auspicious start after Loyola de Palacio, European Energy Commissioner at the time, debated aloud whether it was really worth Europe staying signed up to the Kyoto treaty if Russia refused to be a part of it (see related story). This forced the Commission itself, always one of the biggest supporters of the Protocol, to issue a statement re-emphasising its commitment despite the doubt the Energy Commissioner had cast over its future.

Similar thoughts about the possible negative effects of the emission trading scheme were affecting British industry’s mind when the Government published its draft National Allocation Plan (NAP) for emission allowances in January. The draft plan delighted conservationists with its commitment to a 20% cut in emissions by 2010, but upset industry groups who said the price of wholesale electricity would rise uncontrollably, adding to the cost of manufacturing and driving business away from Britain to other parts of the world (see related story).

These concerns were played down by Ministers and by Dr. Anthony White, head of Policy and Markets Analysis at Climate Change Capital, a finance house specialising in emissions trading, who said: “Industries have a long track record of overestimating the costs of compliance with environmental measures in advance of implementing them.”

This view was backed by up research from consultancy firm Trucost, in February, which found that the impact of emissions trading on electricity prices had been grossly exaggerated (see related story). Simon Thomas, chairman of the research firm told edie news that: “Most comment about the national allocation plan is not based on any form of research. No-one has taken into account what value the allowances have or that some companies could benefit from it, or the fact that this (national allocation) plan doesn’t apply to the entirety of electricity generation, but only to emissions from generation above the allocation for any particular source.”

Such research didn’t stop a group of power intensive industries proposing their own alternative to the ETS however, to avoid what they called “the negative effect on their competitiveness”(See related story), while the Commission issued a strong defence of the original scheme (again) to see off such alternatives (see related story).

The benefits of emissions trading were laid out in a report by the National Audit Office (NAO) in April which found that the first two years of emissions trading in the UK had seen 34 companies get a £215 million dividend incentive over five years in return for a commitment to cut their emissions (see related story).

Soon after, Prime Minister Tony Blair launched ‘The Climate Group’, bringing together financial institutions, business leaders, civil organisations and governments to identify best practice for reducing greenhouse gas emissions (see related story).

At the launch, Mr Blair said: “Climate change is the most important environmental issue facing the world today. By bringing together progressive businesses, states and cities from across the world, the Climate Group will enable these organisations to show leadership, and to demonstrate the benefits of taking early action to cut greenhouse gas emissions. I welcome the launch of The Climate Group and look forward to hearing of its progress.”

His words seemed rather shallow and short lived, however, when the Government published its revised NAP a week later, allowing for greater emissions than had previously been announced (see related story).

Even this revised version was not good enough for industry groups, though, who published yet another attack on the ETS saying it was far more draconian than any other in Europe and would damage their competitiveness abroad (see related story). This led the Government to appoint environmental consultancy, Ecofys, to study rival country NAPs and ensure compliance across the continent.

Meanwhile, the world received a surprise from Russian President Vladimir Putin who said he would “move quickly” to ratify the Kyoto Protocol (see related story) despite his economic advisor Andrei Illarionov saying the treaty was “an economic Auschwitz” a month earlier (see related story). The move was seen as a result of negotiations with the EU over the price of natural gas exports compared to Russia’s domestic prices.

Putin’s apparent commitment to the cause also made US President George Bush look increasingly isolated on the world stage. A poll from Yale University, however, showed that 84% of American voters wanted the environment to play a significant role in the US elections (see related story), increasing hopes abroad that this would lead Bush to lose and Kerry to win. Sadly, this rather overestimated the American electorate, as scientific and environmental issues took a back seat to more fundamentalist Christian views such as gay marriage, returning the incumbent to power.

Russia’s good news was supported by good news from Europe which showed that emissions levels had fallen for the first time after two years of increase, albeit by a very small amount (see related story). The EEA said this was likely to be due to warmer weather rather than any specific energy efficient measures, however.

Britain continued the good news by saying it would double its commitment to energy efficiency (see related story) but was then accused of deception over leaving out the mammoth rise in transport emissions when it published a report saying emissions had declined in the UK (see related story).

Indeed, transport was identified as the fastest growing emissions producing sector, particularly from aviation, (see related story) and discussion raged over whether to include aviation in the emissions trading scheme, while London Mayor Ken Livingstone suggested doubling the congestion charge for overtly polluting vehicles (see related story).

Climate change was such a big issue last year that both main political party leaders gave speeches talking tough on the matter (see related story) although neither really gave any specific details about what they would actually do.

The real reason for Blair’s reticence to give exact details could well have been explained when the Government published its final NAP to present to the European Commission (see related story) significantly raising the amount of greenhouse gases industry would be allowed to emit, rather contradicting Blair’s claim to put climate change at the heart of all Government thinking.

To try to counter criticism of such a move the Government launched a review of its climate change policies after admitting it is unlikely to meet its own targets (see related story).

Despite this admission, the UK should be given some credit for rapidly increasing the amount of renewable energy capacity in the country with the biggest onshore windfarm getting approval in February (see related story), the Welsh Assembly saying that wind power was the only option for the future (see related story), Cornwall launching its own sustainable energy strategy (see related story), new planning rules to encourage use of renewables (see related story), and the first offshore wave power supplied to the National Grid (see related story) to name but a few of the achievements.

In Europe, the world’s second most powerful wind farm opened in Spain (see related story</a), an action plan on renewable technology was launched (see related story), and Spain said it would triple renewable energy production (see related story).

The biggest environmental news of the year though, was Russia finally signing the Kyoto Protocol (see related story) and signalling that most of the world was taking climate change seriously.

Romano Prodi, President of the European Commission said he hoped this would force the US to reconsider its position. “The United States should not abstain from the one fight that is crucial for the future of mankind,” he said.

Russian involvement in the protocol was widely tipped to boost the fledgling markets in the Clean Development Mechanism and Joint Implementation schemes (see related story) although that will only be seen in years to come.

Despite these various positive advances, the dangers of climate change were also all too evident with reports that a million species would be made extinct as a result (see related story), and that regions such as the Arctic are rapidly disappearing (see related story).

No doubt 2005 will see even more horror stories regarding what the Government’s Chief Scientific Advisor has called a “bigger threat than terrorism”, but we can but hope that it will also see more positive breakthroughs in the mitigation of the problems.

By David Hopkins

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