EU CLIMATE DEAL STRUCK AT A PRICE!

By Laurance Peter -BBC News Brussels.

Securing a deal on the wide-ranging EU climate change package was a key goal of the French EU presidency, which will hand over to the Czechs in January.

European nations reliant on polluting industries will be compensated

The deal agreed at the EU summit in Brussels on Friday keeps the European Commission's overall 20/20/20 targets on cutting greenhouse gas emissions, developing renewable energy and boosting energy efficiency.

But the deal comes at a price. Many EU countries have exerted pressure to soften their national energy targets, arguing that the cost of modernising heavy industry - and thereby cutting emissions - risks making them less competitive, at a time of economic crisis.

So there will be compensation for the EU's poorer member states - notably the former communist countries in Central and Eastern Europe, which have a legacy of heavily polluting old industrial plants.

Chief among them is Poland, whose energy sector is 95% dependent on coal, one of the dirtiest fossil fuels.

The French presidency says the deal should enable the climate package to be finalised with the European Parliament by the end of this year.

The parliament has co-decision powers on this, so it can still make amendments - and the plan to make it EU law early next year still looks ambitious. The EU is keen to prove itself a world leader on this issue before the global climate talks in Copenhagen in a year's time.

The main target is to cut CO2 emissions by at least 20% by 2020, compared with 1990 levels. That will rise to 30% if a global deal on emissions cuts is reached for the period after 2012.

The summit saw tough negotiations over the mechanism for reaching that target, along with the goals of 20% use of renewables and a 20% improvement in energy efficiency.

Claude Turmes, a Green MEP and one of the European Parliament's chief climate negotiators, strongly criticised the revised package, saying it meant only one-fifth of the world's emission cuts would be made in Europe.

He said only the targets on renewables remained untouched. EU leaders had decided to postpone the structural changes to industry needed to combat global warming, he said. "We must stop the dirty polluting lobbies dominating European politics. This is giving too much to the big polluters," he told the BBC.

Changes will be made to the EU's existing Emissions Trading Scheme (ETS), launched in 2005. The deal softens the blow for big electricity generators in Eastern Europe.

The original plan was for them to start buying all their pollution allowances from 2013. Currently many of these CO2 allowances are allocated for free, with varying national allocations in the 27-nation EU.

Under the revised package, exceptions will be made for plants which were only partly or not at all linked up to the main EU power network in 2007 and for plants in poorer EU states still heavily dependent on fossil fuel.

They will buy 30% of their CO2 allowances in 2013, and the 100% figure for buying allowances at auction will not be reached until 2020.

Exceptions - called "derogations" - will also apply to industrial sectors identified as being at risk of "carbon leakage". That is, industries which EU data suggest could relocate jobs or plant to non-EU countries which pollute more.

The Commission now faces a huge job in identifying those "carbon leakage" risks - and there will be pressure from industry lobbies who hope to get derogations.

There was intense bargaining at the summit over revenues from the ETS, which will generate many billions of euros as the scheme expands to take in more sectors of the economy.

Future projections are difficult, however, because the recession will force more plants in Europe to close, and that could substantially reduce the need for CO2 allowances.

The leaders decided that 12% of ETS revenues would go into a "solidarity" fund to help the poorer member states modernise their heavy industry.

But environmentalists say ETS revenues ought to be invested in renewable energy and green technological innovation, such as carbon storage.

Lithuania may also get extra CO2 allowances after its nuclear power station at Ignalina shuts down next year.

The Kyoto Protocol of 1997 set up a clean development mechanism (CDM) - also called "carbon offsets" - which is meant to boost green projects in developing countries.

It means industrialised countries can "offset" some of their emissions by investing in such projects. The EU package sets the "offset" limit for each EU country at 3% of verified 2005 emissions.

BBC NEWS REPORT.