News and Analysis • Volume 8 • Number 5 • 20th March 2008

Climate Change: Energy-Intensive Sectors In The Spotlight

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The G-8 industrialised countries, together with the major emerging economies, recently met to discuss options for tackling climate change. The idea of agreeing to sectoral targets for particularly polluting industries in all nations, a controversial concept proposed by the host, Japan, received a cool welcome.

Meanwhile, a recent EU summit also addressed climate change. Several European countries said that the concerns of their energy-intensive industries with regard to competitiveness needed to be taken into consideration when finalising the new EU climate strategy.

Japan pushes sectorals

The so-called ‘Gleneagles Dialogue’ on climate change (see Bridges Trade Biores, 8 July 2005, http://www.ictsd.org/biores/05-07-08/story3.htm) among the G-8 industrial countries, along with emerging economies such as Brazil, India, Indonesia and South Africa, continued in Chiba City, Japan, from 14-16 March. The meeting gathered energy and environment ministers, although it was co-chaired by Akira Amari, Japan’s trade minister, and Japanese environment minister Ichiro Kamoshita.

Among the key topics discussed was the concept of a ‘bottom-up, sectoral’ approach to climate change mitigation. Under this approach, energy-intensive sectors such as steel, aluminium and cement would set benchmarks related to best available technologies, taking on sectoral climate change commitments that would be added up at the national level. For developing countries, these commitments would be of a voluntary nature. The sectors considered are in many cases heavily trade-exposed, and their representatives in countries taking on steep climate commitments have warned that they will be badly hit by ‘unfair’ competition from industries in countries without greenhouse gas caps.

The proposed sectoral approach did not get a warm reception, however. Developed countries set to take on emissions caps felt that sectoral targets were too soft. The EU has already committed itself to reducing overall greenhouse gas emissions by a minimum of 20 percent under 1990 levels by 2020 (see Bridges Trade BioRes, 25 January 2008, http://www.ictsd.org/biores/08-01-25/story1.htm). Developing countries also viewed the approach with suspicion, stressing the need for developed countries to take the lead in combating climate change, taking on hard targets. For any voluntary sectoral initiative to apply to developing countries, they would need to be accompanied by finance and technology transfer. Developing countries also complained that the concept was vague, and said they needed more information.

Speaking to journalists, Yvo de Boer, head of the UN Climate Change Secretariat, tried to highlight the differences between countries on the topic. He said that while Japan would prefer using the most efficient plants as the sectoral benchmark, “countries like China and India are much more interested in an incremental approach, whereby you look at the situation as it is at the moment and then try and build and improve on that.”

Europeans seek to shield energy-intensive industries

The EU Spring Summit, held from 13- 14 March, furthered, among others, discussions on the European climate and energy strategy. At the meeting, splits emerged over how to treat the energy-intensive industries that also are at the centre of discussions on sectoral approaches. The new strategy left the door open to the use of controversial border measures to safeguard the competitiveness of energy-intensive industries (see Bridges Trade BioRes, 25 January 2008, http://www.ictsd.org/biores/08-01-25/story2.htm).

At the Spring Summit, Germany, France, Austria and the Czech Republic wished for assurances that their energy-intensive industry would not be undermined by foreign competition. Britain, Sweden and the Netherlands, on the other hand, wished to maintain a strong bargaining position within the international climate change negotiations under the UN Framework Convention on Climate Change (UNFCCC), meaning they would allow no back doors out of their commitments for any European sector. Concerns have also been raised that threats of border measures would antagonise other countries, rather than help coax them onboard an international climate agreement.

In practice, the EU has assured energy intensive industries that there will be special measures to support them if there is no international agreement. These industries may get free pollution permits under the European Emissions Trading Scheme - instead of having to buy them by auction - linked to technological benchmarks.

Negotiations under the auspices of the UNFCCC will continue from 31 March to 4 April in Bangkok, Thailand.

‘ADB seeks more funds to protect against climate change’, INDIAINFOLINE, 17 March 2008; ‘Blair wants ‘climate revolution’, BBCNEWS, 15 March 2008; ‘Blair: Poor Nations Must Cut Emissions’, WASHINGTON POST, 15 March 2008; ‘Bigger role for developed nations against global warming’, CHINA DAILY, 16 March 2008; ‘EU agrees tight schedule for climate and energy deal’, EURACTIV, 17 March 2008; ‘EU Aims To Set Pace In Fight On Climate Change’, PLANET ARK, 14 March 2008; ‘Analysis: Reality check for EU’, BBC NEWS, 14 March 2008; ‘Brussels to grant some concessions to industry in environment proposals’, EU OBSERVER, 14 March 2008; ‘Concessions to Merkel threaten climate change plan’, GUARDIAN, 15 March 2008.