New EU emissions targets put wind up green sector

One-size-fits-all approach will not encourage necessary investment

Roof insulation may not be deadly, but it is Europe’s unused secret weapon against Russia.

An experiment with two identical houses in Hungary laid bare the threat to Gazprom, which supplies 30 per cent of Europe’s gas.

One house was left uninsulated and consumed 1,848 cubic metres of gas from September to February. The German company Knauf Insulation fitted the other with its highest grade materials and almost halved consumption to 982 cu m.

With buildings accounting for 40 per cent of Europe’s energy consumption, Tony Robson, Knauf’s chief executive, argues that the crisis in Ukraine adds a geostrategic motive for putting energy efficiency targets at the heart of the EU’s environmental policy.

But he and many other green technology executives are disappointed by the path that Brussels is taking with its energy and environmental targets, which they say are misguided and, perversely, are pushing eco-friendly businesses out of the EU.

While the EU styles itself as a global leader in the campaign against climate change, energy has leapt to the top of the geopolitical agenda. Increasing tensions with Russia have revealed the dangers of depending on energy imports. Europe’s industrial competitiveness is also seen as trailing far behind that of the US, which has been boosted by a shale gas boom.

EU policies in response to these challenges have triggered intense debate. In January, Brussels proposed landmark targets that will shape energy policy until 2030 and the 28 member states have until October to finalise the package.

The most important target proposed by the commission was that, by 2030, countries should reduce their greenhouse gas emissions by 40 per cent from 1990 levels. The commission hailed this as an ambitious objective; heavy industry lobbies and some members, including Poland, are seeking to dilute it by October.

Many companies say the target is badly structured. Focusing on one overarching, binding target for reducing emissions represents a very different approach from the targets set for 2020, when Brussels put stronger emphasis on specific goals for renewables usage, energy efficiency and emissions from transport. Those second-tier targets have all been sidelined in the 2030 proposals.

The commission’s logic is that member states will have to determine how they make their 40 per cent emissions cut. The UK is likely to use more nuclear power. Germany is expanding renewables after deciding to decommission its nuclear power stations. Poland is looking to shale gas to reduce dependence on coal.

But companies that build renewable infrastructure, or produce low-emissions motor fuel or manufacture insulation are uniting in a chorus of dissent.

One big emissions target will not induce people to use more green technologies, they argue, saying that growth in their sectors to date has required specific targets. The industries complain that the lack of sector-specific targets is damaging investment, with banks seeing little evidence that the EU is creating an environment for their industries to grow beyond 2020.

“Unfortunately, we live in a world where, without legislation, energy efficiency does not just happen,” Mr Robson says.

He says Europe’s energy consumption in buildings could be greatly reduced by introducing quantifiable EU targets for emissions levels from set floor areas of buildings. There would be different criteria depending on the types of buildings and their ages.

But while the EU set a non-binding target of increasing energy efficiency by 20 per cent by 2020, there is no such target for 2030. Mr Robson says this means he is looking outside the EU for investment opportunities in areas such as Turkey, the US and Malaysia.

Groups such as Vestas and Alstom, which build renewables infrastructure such as wind turbines, have insisted the best way to ensure the growth of renewables is to set binding national targets for the percentage of energy that should be generated from renewable sources, which has not been done for 2030.

European companies pioneering the production of low-emissions biofuel from waste, such as Finland’s UPM and Italy’s Biochemtex, say the lack of a specific target for reducing transport emissions by 2030 is restricting their growth, pushing them to consider business in Brazil or China.

Brook Riley, climate campaigner at Friends of the Earth, says senior figures in the commission have a vested interest in arguing that the market can be left to reduce emissions because they devised the Emission Trading Scheme, the EU’s carbon market. Although this has fallen into disarray, officials want to ensure it remains Brussels’ main tool, rather than targets for renewables and energy efficiency, he argues.

“They’ve built their careers around the ETS. They need it to succeed, or rather they need to be able to claim it is succeeding,” he says.

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Letter in response to this report:

Broader emissions targets are better / From Edward Davey MP

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