Green economy  |  Publications  |  09.07.2012

Europe's next economy: The benefits of and barriers to the low-carbon transition

This report by the Institute for Public Policy Research (IPPR) examines the views, reactions and actions of businesses across Europe with regards to the EU objectives for a transition to a low-carbon economy by 2050.

Through its Kyoto commitments, array of regulations and flagship cap-and-trade emissions trading scheme (ETS), the European Union has long led the development of global climate policy. European businesses have, therefore, been among the first in the world to adapt and respond to these new requirements. Their reaction and the prospect of future regulations, however, has been mixed.

This report examines the competing views of businesses across Europe. With partner thinktanks in France, Germany, Spain and Poland, the Institute for Public Policy Research (IPPR) brought together businesses and industry associations to discuss these issues. This process complemented four roundtable discussions and a series of one-on-one interviews with British businesses captured in the sister publication to this report, Growing pains: British industry and the low-carbon transition (Nash et al 2012).

Even when taking into account national contexts, especially relating to different energy policies, the debates about climate change and the level of the EU’s ambition are similar throughout the continent. Indeed, in every country there is a dichotomy between those businesses set to benefit from the low-carbon transition (e.g. renewable energy companies, resource efficiency sector, enterprises developing clean transport) and those that believe they will lose out ( industries such as steel and cement).

Across Europe there is consensus that the EU and its member states could do more to provide regulatory certainty for businesses by avoiding the plethora of overlapping regulations and sudden policy changes like those in many countries on FITs. Businesses across the region noted that several supply-side constraints are thwarting the transition to a low-carbon economy, including a workforce that is unable to undertake the necessary tasks, inadequate financing (especially in the demonstration stage for new technologies) and a need for infrastructure improvements.

This report makes the following main recommendations:

  • Expand the EU ETS to include imported energy-intensive goods: serious consideration should be given to extending the ETS into imported goods from energy-intensive sectors if binding emissions commitments for 2020 are not agreed by 2015.
  • Raise the price of carbon: the EU should act to raise the price of carbon, which is worryingly low.
  • Focus the EU’s multiannual financial framework on innovation: in addition to the demand-side measures described above, the EU should develop a set of supply-side policies.
  • Protect ETS revenues for low-carbon projects: the ETS is partly undermined by concerns that it has become a fiscal policy to raise revenue rather than a climate policy to reduce emissions. More revenue from the EU ETS should be directed towards low-carbon projects like the EU’s NER 300 programme.
  • Provide industry with greater regulatory certainty: industry participants from France, Germany and the UK called for more stability in the EU’s regulatory setting process.
  • Maximise the EU’s role as a standard setter: for example, the EU has been successful in setting new vehicle emissions standards for passenger and light commercial vehicles.

In the Annexes, you can also find detailed examination of the situation of the four countries analysed in this report (France, Germany, Spain and Poland).



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