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ViewpointsThis story is tagged with the following keywords |
Viewpoints
Environmental policy has failed in Europe The European Commission recently called for public finances to shore up European environmental policy goals and overcome chronic failures of the market. However, it stopped short of acknowledging that the current lack of comprehensive regional and EU policy direction, credible legal frameworks and appropriate licensing regimes has left markets and energy companies powerless to deliver Europe's exacting environmental policy targets. European environmental policy - which for the most part is characterised by the incremental intrusion of ad hoc policy interventions - has failed. It is apparent that the plethora of European and regional initiatives, directives and interventions have not produced the desired environmental outcomes. In a recent communication, the European Commission claimed that moving towards a low-carbon economy would require new technologies to be conceived, tested and deployed. To that end, the EU has deployed policy direction through the policy framework commonly referred to as the European energy and climate package. The Commission now estimates that meeting the EU's environmental targets would require €50 billion in total investment over the next decade - nearly triple the amount that the bloc is currently projected to spend. As a result, it has admitted that the only remaining credible route by which Europe's environmental objectives can be met is to partner public policy and greater levels of public funds with the private sector - it now recognises that markets and energy companies acting on their own are unlikely to deliver the necessary technological breakthroughs. It is Datamonitor's view that the EU energy and climate package of January 2008, along with the negotiated agreement at the December 2008 summit, are at the very heart of the market's inability and reluctance to credibly address the challenge posed by climate change and European environmental policy makers. Indeed, the design of the package is inexorably flawed, to say nothing of the fact that it has been subjected to the usual political concessions to the almost complete detriment of its original purpose. Europe's irrational and short-term regional response to what is a long-term global problem has been witnessed in the establishment of the 20-20-20 by 2020 package of initiatives. The economically inefficient measures are underpinned by a 20 per cent overarching production-based target that appears to have been instigated more by a political PR process than scientific and environmental certainty. Europe's insular approach has been further accentuated by the recent failure of the Copenhagen climate change talks to deliver a credible and binding international framework that would curb climate change to the extent that scientists deem necessary. In the past, Datamonitor has highlighted the many ways in which European environmental policy is flawed and how current renewable targets are too costly, unsound and unlikely to be met. Having picked wind power as their chosen political low-hanging fruit, European policy makers have fallen short of deploying arguably the more successful elements of environmental policy at their disposal. Accordingly, utility investors are unlikely to flee the safe returns of coal and gas power generation projects for the untested returns of comparatively expensive carbon capture and storage (CCS) projects, for which few investors claim robust risk assessment credentials. Policy can and must rapidly be directed towards frameworks that promote CCS technology, nuclear power generation, investment in infrastructure and credible carbon pricing - to name just a few. A long-term cap and floor on the price of carbon, coupled to a carbon border tax regime, is one of several possible ways of providing a more level playing field on which all power generation technologies could compete. Failing such redress, markets will continue to fall short of delivering the necessary investments and technological breakthroughs required to meet the EU's energy and climate policy goals. As things stand, the public purse will be called upon to bridge the gaping disconnect between the threat of climate change, the current European policy approach and the important role that large-scale, low-carbon power generation technologies must play. Alex Desbarres, senior renewables analyst, Datamonitor Source: Disconnector © Faversham House Group Ltd 2010. News articles may be copied or forwarded
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