Can Europe cut carbon without cutting growth?

EU Commission chief Jose Manuel Barroso said it would cost each of the EU's 500 million people an average of ¤3 a week to implement the plan – a total of around ¤75 billion a year, or 0.6 percent of GDP.

But failure to act, he said, would cost "at least 10 times that and could even approach 20 percent of GDP." And the longer-term benefits of a low-carbon economy with prodigious supplies of renewable energy, efficient buildings, greener driving fuel, and industries that must factor a carbon cost into their bottom line would be enormous.

"Europe can be the first economy for the low-carbon age," said Mr. Barroso. "There is a cost, but it is manageable," he told the European Parliament, which has to vote on the plans. "And every day the price of oil and gas goes up, the real cost of the package falls."

The EU plan sets a framework that will be closely studied in Beijing, Washington, New Delhi, and elsewhere. Part of it revolves around targets for renewable energy imposed by Brussels on member states. To reach the overall goal of 20 percent across the EU, individual countries have been assigned their own goals.

Britain, for example, will have to implement a sevenfold increase in its renewable energy supplies, from about 2 percent currently to 15 percent. France must move from 10 percent to 23 percent; Sweden, from 40 percent to almost 50 percent.

The EU is also fortifying its market-based mechanism for getting industries to cut greenhouse-gas emissions. The Emissions Trading Scheme (ETS) has been criticized since it came into force three years ago for being ineffectual. It was meant to work by making polluters pay for permits to emit greenhouse gases; in fact, too many permits were handed out free of charge.

But under a revamped ETS, more permits will be auctioned, costing polluters more. Power companies will, for example, have to pay for all carbon emissions by 2013. Airlines will also be brought in for the first time. This, say experts, will set a higher "carbon price" that industry will have to factor in. The total cost to polluters by 2020 would be ¤50 billion a year – money governments could use to develop green technologies.

"It is clear that in some shape or form emissions must have a financial value," says Mr. Froggatt.

But industrial leaders have complained that the additional cost would place them at a disadvantage to rivals in the developing world, who face no such constraints.

The EU indicated that some industries may remain exempt, disappointing some environmental activists. It also said it would consider import tariffs on countries that do not match the EU's climate change efforts, a threat that has met with consternation from trading partners. One way of imposing this "carbon fee," Barroso said, would be to require importers to obtain the same permits that Europe companies must acquire under the ETS.

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