Thursday, January 17, 2008

EU Hubris & The Coming Economic Storm

The EU prides its socialist self on being the world leader in respect to climate change - so much so that they have written the reality of man-made climate change into their new constitution - and given themselves plenary powers over the EU provinces to legislate on this issue. And, as previously discussed here, on January 23, the EU's European Commission will unveil its "action plan" to massively cut carbon emissions and invest in renewable energy. As the 23rd grows ever closer, those with the most to lose are getting anxious - and rightfully so. Before getting to the EU provinces, one industry example of the coming storm can be found in the not insignificant EU iron and steel industry.

If my rough math is correct, EU provinces account in toto for about 16% of the world's iron and steel production, and according to the most recent figures I could find -2002 - it is an industry that directly employs over half a million Europeans and directly accounts for some 29 billion euros in value. These figures do not consider the indirect employment and economic figures that relate to the industry. Yet this industry is about to come under extreme pressure from the EU. This according to the EU Referendum:

Gordon Moffat, secretary-general of Eurofer, the European iron and steel trade group, had accused the EU of a "vindictive" campaign to chase the sector out of Europe to meet its climate change goals.This is a response to a remark by Jos Delbeke, who runs the EU scheme to cap and trade carbon emissions, who has admitted that the booming sector would have relocated offshore within a decade of a new law cutting greenhouse gas emissions coming into effect in 2013.
But, while Delbeke is rapidly disowning his own remark – despite several people witnessing it - the industry is campaigning heavily against this impost, with Moffatt claiming that its effect will be "catastrophic".

He adds, "The way this is framed would give us no option but to leave."On Friday, thirteen business associations wrote to Barroso asking him to amend the legislation, saying that the law would increase costs that could not be passed on to customers. Even according to commission research, prices would have to rise between five and 48 percent. Aluminium production would leave Europe within a decade. . .

Read the article here. But the iron and steel industry are not the only ones raising the brown flag. This from Der Spiegel:

European countries and businesses have criticized a climate change action plan that the European Commission is scheduled to unveil next week. Their concerns about competition and carbon trading could undermine the EU's commitment to confront climate change.

As the European Commission puts the finishing touches on a sweeping climate change policy package to be unveiled on Jan. 23, politicians and business leaders from the EU's richest member states are lobbying to revamp draft policies that they believe could harm them in Europe and abroad.

Among the critics of the bill are France, which wants to protect its nuclear investments, Germany, which is worried about its renewable energy sector, and major European auto and steelmakers, who are concerned that Europe could lose its competitive edge.

. . . French President Nicolas Sarkozy . . . objected to a policy that would raise the share of energy that Europe derives from renewable sources from 8.5 percent currently to 20 percent by 2020. He said the policy "unnecessarily penalizes the prospects of growth." France wants to have its huge nuclear energy program counted in the mandatory contribution it will be asked to make toward the EU goal, but atomic power, which produces toxic waste, is not considered a form of renewable energy.

Germany and Spain are protesting another proposed policy. Ministers in Berlin and Madrid sent a letter this week to the Commission criticizing a system would encourage companies in Europe to trade renewable energy across borders. They are worried that an EU-wide system would undermine their existing national systems. "This will put a very successful development of renewables at risk, which is not acceptable to our governments," read the letter in part. It was the second time this week that German officials criticized the forthcoming policies, after Bavarian politicians condemned (more...) a proposal to cap the amount of carbon dioxide that new automobiles produce per kilometer they are driven. . .

And now for the hubris:

But the Commission says it will not be bullied into diluting the climate change package. To back down, Commission President José Manuel Barroso told Reuters, would be an international embarrassment after the EU worked to promote itself as the international leader in addressing climate change. "We knew from the very beginning that transforming Europe into a low-carbon economy is not an easy task," said Barroso. "But this is the moment to be serious, responsible and coherent with our commitment."

Read the article here. This is all utter insanity. I probably wouldn't mind watching European socialists' lead their countries towards the economic precipice, but the fact is it will impact on the world economy - likely significantly so. Its all like watching a terrible car wreck in slow motion, being unable to do anything about it, but knowing all the while that its going to cause your car insurance premiums to go up.

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