A view from Europe: Something in the air

The issue of climate change is not just on Congress’s agenda. It’s a major focus of the European Commission, too.

Emissions of carbon dioxide and other greenhouse gases have again emerged as one of the European Union’s major projects in the near term, as the benchmarks set by the Kyoto Protocol are set to expire.

The “Thematic Strategy on Air Pollution” is part of the Clean Air for Europe program put forward by the European Commission. Its key objective is to bring all existing air quality legislation and emission caps into a new single legal instrument, which is known as the draft Ambient Air Quality Directive.

The strategy focuses on reducing emissions from the following key pollutants as well as ground-level ozone: particulate matter; nitrogen oxides; sulfur dioxide; and volatile organic compounds.

Ground-level ozone levels, for example, would have to be cut by 60 percent under the proposed changes.

In order to tackle these pollutants, the EU strategy proposes broadening clean air laws to cover more sectors of the economy and toughening the laws that already apply.

But the same economic concerns that have hampered efforts in the United States and elsewhere are also a concern in Europe. A plan, for instance, to lower Europe’s greenhouse gas emissions, presented in January, recognized that the legislation could put European companies at a competitive disadvantage compared to countries with less stringent climate protection laws, such as the United States, China and India.

According to the Commission, this situation could cause large “carbon leakages” whereby companies move their operations to regions of the world where climate laws aren’t nearly as strict in order to keep costs down.

The EU draft legislation tries to combat that threat with proposals to impose restrictions on imports unless an international agreement subjecting all industrialized countries to similar climate change mitigation measures is reached. Such a “carbon equalization system” could take the form of an obligation for foreign companies doing business in Europe to obtain emissions permits alongside European competitors.

In addition, the European Union Emission Trading Scheme is the largest multinational emissions trading scheme in the world and a major pillar of EU climate policy. The trading scheme covers more than 10,000 installations in the energy and industrial sectors that are collectively responsible for close to half of the EU’s emissions of CO2 and 40 percent of its total greenhouse gas emissions.

Under the trading program, large emitters of carbon dioxide within the EU must monitor and annually report their CO2 emissions, and they are obligated every year to surrender (or give back) an amount of emission allowances to the government that is equivalent to their CO2 emissions in that year.

The installations may get the allowances for free from the government, or may purchase them from others that are operating in the trading market. If an installation has received more free allowances than it needs, it can sell them to anybody.

In January 2008, the European Commission proposed a number of changes to the scheme, including centralized allocation (no more country-specific allocation plans), auctioning a greater share (greater than 60 percent of the total) of permits rather than providing them for free, and inclusion of the greenhouse gases like nitrous oxide and perfluorocarbons.

The proposed caps would reduce greenhouse gases in 2020 by 21 percent of 2005 emissions levels.

Those new EU proposals — if they come to fruition — will have two trans-Atlantic implications: U.S. companies will in the short term face tougher emission rules when acting in Europe compared to the restrictions they face at home. That could give American multinationals that do business in Europe more incentive to lobby Congress to adopt similar rules so that fewer companies have a competitive advantage.

Geiger is founder and managing partner of Alber & Geiger, a leading EU government relations law firm with offices in Brussels and Berlin. Before that, Geiger was head of the EU Law Center of Ernst & Young, and president and CEO of Cassidy & Associates Europe. He has written a handbook on lobbying the EU.