What the EU's Climate Plan Means for Cleantech

The European Union is set to unveil its plan to guide its 27 member states towards a greener future. The proposal from the European Commission, the EU’s governing body, will look to reduce the community’s greenhouse gas emissions by a fifth below 1990 levels by 2020. The EU also set a binding target of generating 20 percent of their power from renewable sources by 2020.

So the EU has a shiny new stick, now it needs a cleantech carrot to spur domestic energy innovation. However, this is where the fractious interests of the 27 separate national constituents will be problematic. Not all renewable energies are created equal nor are the member countries equally able to exploit different technologies. How do you equitably compensate Spain’s massive solar power undertaking and Denmark’s world famous wind installations in an international forum?

In order for the EU to meet its emission reduction goals it will have to create a serious incentive systems. But making the EU’s emission reduction goals will take an effort the size of the Apollo moon landing on the part of member state’s and their growing cleantech industries.

According to the CleanTech Group, cleantech investments in European companies in 2007 totaled $1.23 billion as compared to $3.95 mbillion for North American companies. As Europe looks to lead the world in carbon regulation, if it doesn’t step up cleantech investment it could take a hit as much of the carbon intensive industry moves overseas.

The EU acknowledges that the plan will cost the group about 0.5 percent of its GDP, around $80 billion, but says it will save some $72 billion in oil and petroleum costs, according to a draft obtained by the Associated Press. That leaves the EU with an $8 billion deficit and the promise of more expensive power.

The solution may lie in the European Climate Exchange (ECX). The EU has already said that it will be auctioning off carbon permits as part of their new plan, a move many think should have been made when the ECX originally launched. Connecting more carbon permits to cleantech projects could help alleviate the growing pains of the ECX, cleantech entrepreneurs, and cleantech venture capitalists.

The sticking point for Wednesday’s announcement will come down to the balancing of the burden. Some countries will be asked to reduce their emissions more than others. While the EU has set minimums for renewable power growth, the focus on emission reductions could hurt Europe’s strengthening economy. While America has been abysmal at curtailing emissions, tax incentives have fueled cleantech investment and innovation. Perhaps a dash of American capitalist entrepreneurship in the European Union’s climate plan could do some good for profitably reducing greenhouse gases.

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