London (Platts)--6Apr2009

The EU's 2020 binding climate targets to cut emissions and increase
renewable energy use had their final sign-off Monday as EU ministers adopted
the climate change package agreed by EU leaders and the European Parliament
last December.

The package includes stricter emission limits on cars, rules to boost the
use of efficient biofuels and a fuel quality directive to curb greenhouse
gases from the entire fuel production chain by 6% by 2020.

This is the final stage in the formal approval process for the new EU
renewables directive, the revised EU emissions trading scheme directive, the
new EU carbon capture and storage directive and the EU decision setting
binding 2020 greenhouse gas emission targets for each of the EU's 27
countries.

The European Commission proposed the laws, known collectively as the
climate package, in January 2008. Member states are required to transpose the
directive for biofuels and fuel cleaner fuels into national law by the end of
2010.

EU justice and home affairs ministers adopted the package, as agreed last
December, without discussion at a council meeting on Monday.

The EU is now formally committed to cutting its emissions by 20% below
1990 levels by 2020, and by 30% if other industrialized nations make similar
commitments. It is also committed to increase renewable energy use to 20% of
all EU energy by 2020.

FUEL QUALITY

The fuel quality directive will place an obligation on fuel suppliers to
reduce greenhouse gases from the entire fuel production chain by 6% by 2020.
This can be reached by mixing biofuels road fuels as well as by improving
production technology in refineries.

The European Commission's initial proposal for a revised Fuel Quality
Directive sought fossil fuel suppliers to cut the greenhouse gas emissions of
their fuels throughout their life-cycle by 10%, or 1% per year between 2011
and 2020.

Under the final directive passed in December, a review in 2012 will
consider increasing the level to 10% greenhouse gas reduction by 2020 through
the inclusion of international projects, carbon capture and storage, as well
as electricity for cars.

The fuel quality directive is to incorporate sustainability criteria for
biofuels used to meet greenhouse gas reduction requirement, but these have yet
to be agreed on. The European Commission has been tasked with agreeing to a
methodology to assess the life-cycle environment impact of biofuels before the
end of 2010.

The EU fuel quality directive update also allows for gasoline blends with
up to 10% ethanol, but also guarantees that blends of up to 5% ethanol will be
allowed until 2013, to avoid potential damage to older cars.

The directive also calls for the reduction of the sulfur content of
inland waterway fuel in one step to 10ppm by January 1, 2011.

TAILPIPE EMISSIONS

On emissions, the package gives legal effect to the EU's existing goal
of reducing average emissions from new cars to 120 grams of CO2/km by 2015.

This is to be achieved in two ways: A reduction to 130 grams of CO2/km
through engine technology plus an additional cut of 10 grams of CO2/km through
more efficient vehicle features, for instance air-conditioning systems or
tires.

In 2012, 65% of car fleets must meet the target, in 2013 75% and in 2014
80%. From 2015, the whole fleet needs to comply with the CO2 emissions
objective.

Once the package is published in the EU's Official Journal, the EU's 27
national governments have 18 months to transpose the renewables directive into
national law, and two years for the carbon capture and storage directive.

The national 2020 targets for cutting emissions outside the ETS sectors
become binding shortly after the decision is published in the Official
Journal, while the new rules for the EU ETS apply from the start of the third
trading period on January 1, 2013. National governments have to ensure their
national law complies with the new ETS rules by December 31, 2012.