Geopolitical clouds gather over Europe’s plans to tackle climate change

BRUSSELS (Reuters) – Soaring energy prices and a geopolitical crisis linked to Russia’s invasion of Ukraine threaten European Union attempts to agree a tougher set of change laws climate change, raising fears that some may be delayed or reduced.

In the weeks since the European Commission unveiled the world’s largest package of green policies last July, wildfires have ravaged the Mediterranean and floods have ravaged Western Europe. From Greece to Germany, governments have called for urgent action to tackle climate change.

Seven months later, as EU policymakers negotiate how to turn these proposals into binding laws, the political context is radically different.

Europeans’ energy bills are skyrocketing. Gas prices ended Thursday 300% higher than in July, pushed higher as the invasion of Ukraine by Russia, Europe’s largest gas supplier, heightened fears of supply shocks energy. EU carbon prices are near record highs. Eurozone inflation is at an all-time high.

Brussels has presented Europe’s green transition as its path out of dependence on Russian energy and the 300 billion euros that EU countries spend each year on imports of oil and gas. This will require huge investments initially, but will eventually reduce costs and give European industry an edge in global green technologies.

Immediate concerns about costs, however, dominate negotiations on climate proposals between EU countries and the European Parliament. A majority of both must approve laws.

With soaring gas prices the main driver of recent increases in energy bills, a growing number of states – especially from the poorer east of the bloc – are warning of public backsliding if Ambitious green goals increase costs in the future.

“We were quite a large group of countries advocating for more ambition. There are not very many of us left,” said an EU diplomat.

CARBON MARKETS

The EU proposals are designed to meet the bloc’s target of cutting emissions by 55% by 2030, compared to 1990 levels, setting the world’s third-largest economy on a path which, if followed at the on a global scale, could avoid the worst impacts of global warming.

They include a 2035 ban on new gasoline and diesel cars, taxes on polluting jet fuel and tariffs on imports of high-carbon goods.

A proposal for a new emissions trading system (ETS) is particularly controversial. This would introduce carbon costs for transport and buildings – costs that fuel suppliers could pass on to consumers through higher bills.

“What is the cost and who will pay? We warn that if we don’t discuss it, we will lose popular support for the whole project,” said a senior diplomat from an EU country.

The Commission has proposed using revenues from the new market to shield low-income households from costs. Critics always warn of a political backlash.

Pascal Canfin, chairman of the European Parliament’s environment committee, said the ETS proposal was so controversial it could “freeze the whole package” of climate laws.

Groups representing more than 200 of the European Assembly’s 705 lawmakers proposed amendments this month to scrap the new ETS, according to documents seen by Reuters.

Soaring energy costs also threaten reforms to the EU’s current carbon market, which forces power plants and industry to buy permits when they emit CO2.

CO2 permit prices soared 150% last year and are now trading around 90 euros a tonne – a near-record level which analysts say could encourage key green industrial technologies such as carbon capture facilities. CO2.

But as CO2 costs have risen, calls for intervention to mitigate price spikes have also grown.

Parliament’s chief negotiator this month proposed rules making it easier for policymakers to free up more permits in the emissions trading scheme if prices rise rapidly. Countries like Poland, Spain and Romania support the idea, although others warn against weakening the price signal for low-carbon investments.

“Any price intervention is undesirable,” an EU diplomat said.

BALANCE

The European Parliament and EU countries plan to confirm their positions on the most important proposals, including the carbon market, by July. The Commission has urged negotiators to strike deals ahead of a UN climate summit in November, strengthening the EU’s diplomatic hand to convince other countries to improve their plans.

EU officials expect some talks to stretch into 2023. Contentious proposals could go to EU leaders, raising the bar for approval as they make unanimous decisions .

The challenge is to ensure that the final package will still meet legally binding EU emissions targets.

“Everyone says the targets are too high and too restrictive. The problem is that if you add all these concerns, you will miss your 2030 target,” said Lucie Mattera, head of the Brussels office of think tank E3G.

Green lawmaker Bas Eickhout said he was optimistic some plans could be made more ambitious, such as proposals to expand renewables and tighten CO2 limits for cars.

“Member states on each file are getting a bit more cautious,” Eickhout said. “Well, they promised the 55% so they’ll have to deliver.”

(Reporting by Kate Abnett; additional reporting by John Chalmers; editing by John Chalmers and Alex Richardson)

Mary I. Bruner