INTERNATIONAL: January 23, 2008


The European Commission will present on Wednesday draft laws on energy sector reform and ways to fight climate change, based on ambitious binding targets agreed by EU leaders last March.


Following are the main elements in the plan, which must be approved by the 27 member states and the European Parliament.

OVERALL GOALS

* 20 percent reduction in emissions of greenhouse gases in 2020 compared to 1990 level. The cut would be increased to 30 percent if there is an international agreement on the issue

* 20 percent of power production to be from renewable energy sources such as solar, wind, wave, hydro-electric and biomass by 2020 from current 8.5 percent

* 10 percent of biofuels in transport fuel

COSTS AND BENEFITS AS SEEN BY EUROPEAN COMMISSION

* Overall cost estimated at about 0.5 percent of GDP or 60 billion euros (US$86.53 billion) a year

* Reduction of energy imports worth 50 billion euros a year

* Reduced need for air pollution control of 11 billion euros a year in 2020

* Avert costs of harmful climate change estimated at up to 20 percent of global GDP

* Innovation in energy sector, efficiency improvements, global political leadership on fighting climate change

EMISSIONS TRADING AFTER 2012

* Emmissions trading scheme (ETS) to be extended to more industries, such as chemicals and aluminium. Aviation also to be partly included under a recent political agreement

* Emissions covered by the scheme to be cut by 21 percent from 2005 level (only year for which full ETS data available)

* Full auctioning of emissions permits for industries able to pass on the cost, including power sector

* Gradual phase-in of auctioning of permits for refineries and aviation sector, starting at 20 percent in 2013, rising to 100 percent in 2020

* Initial free allocation to energy-intensive industries such as steel, aluminium and cement, to be phased out gradually

* Revenues from auctioning to go to member states; 20 percent of them should be earmarked for combating climate change, promoting clean technologies and renewable energy sources

* Left-over credits from 2008-2012 can be used in 2013-2020

EMISSIONS OUTSIDE ETS

* Emissions from sectors not covered by ETS, such as transport, building, services and agriculture, are to be cut by an average 10 percent from 2005 level

* National targets to depend of states' GDP per capita and range between -20 percent and +20 percent of 2005 level

RENEWABLES AND BIOFUELS * Targets for power production from renewable energy sources to increase for all countries, taking into account their ability to produce renewables, with some to be below 20 percent and others above.

* At least 10 percent biofuels to be used in road transport fuels from 2020, but strict criteria to ensure biofuels produce less CO2 and their growth does not endanger the environment

* Countries unable to reach their goals to be allowed to buy the remainder from outperforming producers but trading will be on a voluntary basis, no pan-EU mandatory system

PROMOTING CARBON CAPTURE AND STORAGE

* First rules and economic incentives to govern the capture, transport and underground storage of carbon

* A report is to promote the use of low-polluting coal in electricity production

GUIDELINES ON STATE AID TO PROMOTE ENVIRONMENT PROTECTION

* State aid for evironment-friendly power generation schemes will be allowed to cover the difference between production costs and market prices, capped by the project's overall cost. The EU normally bans state aid that distorts competition

STICKING POINTS

* Member states are expected to seek lower emissions quotas both under ETS and outside

* Countries are likely to try to reduce their share of renewables under the overall cap. Sweden, for example, already has a high share of renewables in its energy mix

* Business groups protest against auctioning emission permits, saying this will endanger their global competitiveness

* Many experts and politicians say excessive production of biofuels will boost foods prices, cost billions in subsidies and lead to deforestation in developing countries.


REUTERS NEWS SERVICE