Monday, February 20, 2012
Is the European Union (EU) gently shifting energy law and policy and shaping the future of a climate treaty?
The European Union is steadfast in its commitment to reduce emissions by reducing reliance on traditional fossil fuels. To date it has taken several measures, each of which promises to change the paradigm of energy policy and politics. I have highlighted some recent actions below.
1. An EU law, the legality of which has been confirmed by the Advocate General, imposes a carbon tax on aviation, including international airlines, as part of EU’s Emissions Trading Scheme (EU ETS). China has retaliated by introducing legislation banning airlines from imposing a carbon tax. Several countries, including the United States, reportedly, support China’s position and may follow suit in introducing their own measures against the airline tax.
2. EU’s proposed sanctions against Iran. In response, Iran has suspended export of crude to French and United Kingdom and has threatened to suspend supply to several other European nations. It is simultaneously negotiating a contract to increase export of crude to China, as reported here. According to reports, France and the United Kingdom are not concerned. Not only do they claim to have sufficient reserves, but also the two countries recently inked a new civil nuclear energy pact as part of their energy cooperation efforts.
3. Another proposed action aims to include tar sands oil within EU’s Fuel Quality Directive (FQD), which was passed by the EU as part of its climate and energy strategy in 2008 and which requires suppliers of oil and gas fuel to the transport sector to reduce their emissions by 10% by 2020, as explained here. Based on a report that the extraction from tar sands is highly polluting because of high CO2 emissions, the European Commission has voted to include oil from the tar sands in the FQD. Even though Canada does not import oil to the EU, it fears that the inclusion can have indirect repercussions on its tar sands industry, as reported here. Pending vote by individual European nations, Canada is reportedly threatening to file a complaint before the World Trade Organization if the tar sand oil is included in the FQD.
Despite objections from different groups, EU’s measures may eventually have a larger impact on the energy landscape. In its attempt to help create a robust carbon market, it may eventually provide much desired incentive to invest in emissions reduction measure. That is, of course, unless nations who are not Party to the Kyoto Protocol or who have withdrawn from the next commitment period, notably China and Canada respectively, cooperate. Either way, it is worth watching Europe maneuver the energy market and the response of countries affected. What is emerging is a patchwork of subtle legal challenges that can nevertheless change the landscape of global energy production, supply, and consumption, as well as the future prospects of negotiating a meaningful climate treaty.