The Arhus School of Business M.Sc. in EUBusiness & Law
Emission Trading Lobbying in the EU
Submitted by: Nerijus
Program: M.Sc. EU Business & LawTerm: Fall Semester 2004Student ID:E-mail: knerkus@yahoo.com
Supervisor: Gert Tingard Svendsen Associate Professor, PhD (Econ.) Department of Economics
Table of Contents
1. Introduction 2
1.1 Background 3
1.2 Statement of the problem 3
2. Theory (lobbyism) 4
3. Why would have interest to lobby? 5
4. Lobbying 8
4.1 The idea is debated 8
4.2 Proactive attitude helps 10
4.3 The drafting stage and implementation 10
Conclusions 13
Literature: 15
1. Introduction
Global warming is one of the most challenging threats that themankind has been facing for the last two decades. The Earth’s surfacetemperature has reached its highest in the last millennium, theprecipitation patterns are changing, the see level is increasing, theglaciers are melting, the extreme weather events have become more frequentand severe. Even though, the causes and consequences of global warming arestill disputed by some parties, in general scientists agree that it iscaused by the emission of greenhouse gasses and principally by carbondioxide (CO2) which stems from burning fossil fuels (coal, oil and gas). Ofcourse, other factors of human activities such as deforestation,agricultural activities come in to play as well. Unfortunately, the greenhouse gases impact is global and thosecountries that suffer most have well underdeveloped industries andcontributed significantly less compared to the major rich ‘culprits’. Thus,climate policy is very much linked to equity and international climateprocess takes notice of that. So, it seems fair that major world economicpowers with the EU leadership take initiative to combat global worming. Despite this overreaching threat, solutions to tackle the problemare not that easy to implement. The environmental organizations andincreasingly conscious populations of states are those agents that bring upthe problem and exert the pressure on their governments to act on it byimplementing environment friendly policies. The political process reflectsthese pressures in those countries where environmental awareness is high,such as Germany and Scandinavian countries have been the forerunners inpushing for action to be taken (Pedler, 2002). Apparently, climatepolicies are not environmental policies any more – they are pure economicsas there is strong involvement industrial part. The cost at stake is ofsignificant importance to the industrials and societies in whole. Asindustrials claim, introducing drastic environmental solutions to reduceCO2 emission implies incurring substantial cost, thereby jeopardizingeconomic growth and prosperity. So industrials take initiative – thepolitical reaction to introduce EU wide energy tax was massively opposed byfossil fuel producers and many industrial groups. In this way thebureaucratic incentive to tax was counterweighted by industrial interests(Svendsen, 2003). To find the solution the EU Commission had launched theGreen Paper (CEU, 2001a) initiating the discussion on greenhouse emissiontrading that eventually led to producing the Directive Proposal (CEU,2001b) and the final Directive (CEU, 2001c).
1.1 Background
The first initiative to combat climate changes started in 1991 when theEU Commission introduced first Community Strategy to limit CO2 emissionsand improve energy efficiency. The initially suggested measure was tointroduce taxation on the CO2 emissions. But it turned out rather difficultto implement due to the strong opposition by industrials and voting rulesin the EU for the introduction of common CO2 tax (the unanimity rule forfiscal measures, Art. 175 of the Maastricht Treaty) has failed as CO2taxation implies fiscal character (Svendsen 2003). Thus, in response toEuropean Climate Change Program launched by the Commission in June 2000, adecision to introduce a permit market, which is an integral part of theProgram, seems to be a feasible solution because it must be settled upon byqualified majority meaning that no single member state can object theimplementation of the Directive Proposal. According to the final Directive CO2 emission trading allows companiesto trade emission permits that have been allocated on historical basis
(grandfathered emission allowance based on the levels in 1990). The tradetakes place if cutting in CO2 emission is too costly rather than buyingpermits on the market. A permit is the right to emit one tone of CO2. Oncethe permit has been used, it will be withdrawn from the market incompliance to the reduction level. The idea is that the aggregate emissionlevel is reduced to agreed levels, but this reduction takes place where itcost least to do so. According to the Kyoto protocol the EU committed itself to meet 8%greenhouse gas reduction during the period 2008-2012 in comparison withtheir levels in 1990 In practice, this implies an estimate reduction of 14%compared to ‘business as usual” forecast (CEU, 2001b) . The Kyoto Protocolemission trading is planed to “kick off” in 2008. For this purpose the EUCommission has introduced the Directive establishing a framework for CO2trading within the EU (CEU, 2001c). Together with other policies andmeasures, emission trading will be an integral and major part of theCommunity’s implementation strategy. The Directive is the final outcome ofthe process that was initiated by the Commission when it introduced TheGreen Paper and had numerous dialogs with parties concerned. This frameworkshould be operational in the year 2005 subsequently leading to thereduction of CO2 emission by the year 2012.1.2 Statement of the problem
Among other forms of allocation of CO2 quotas the Green Paper statesthat auctioning-off permits is technically preferable, gives fulltransparency to the emission trading, fair competition among incumbents andnew entrants. But, as it can be seen from the final Directive the optimalsolution of auctioning-off the permits was politically unattainable as itwas the case in introducing uniform CO2 tax across EU. The upshot off allthis deliberation process is that from 2005 to 2008 all Member States willallocate 95% and 90% for the period of 2008-2013 allowances toparticipating installations for free of charge. (CEU, 2001c). That is, thecore principle is chosen to be grandfathering and for auctioning allocationis left only a marginal part. That implies that this is a clear victory ofindustrials as rent gains are obvious for participants of the CO2 market. This paper concerns the interaction between policy makers and interestgroups in the process of introducing the emission trading within EU. TheLafarge case can be useful example of how interest group pursues itsobjectives in affecting the EU legislation in the emission trade area. Themain question I will attempt to answer is how the concerned interest groupinfluences the EU decision making progress and to what extent the finalDirective reflects the influence of this lobbying group.
2. Theory (lobbyism)
As institutional theory suggests, the way the interest groups act toachieve their goals is determent by institutional set up of any politicalentity, in this case EU. It can be assumed that both political and economicagents interact towards well specified utility function, while at the sametime being constrained by the institutional setup to regulate thisinteraction. In other words, the valuation of the process determiningpolitical decision trend can be based on utility-maximizing behavioralassumption of economics. (Svendsen, 2003, p.6) The institutional setup inEU is highly dynamic, complex, multi-level and consensus buildingorientated, and thus this complexity provides a variety of formal andinformal channels trough which the interest groups can influence thedecision making. Lobbying in the EU institutions is not possible without thoroughunderstanding of how they work, what their competences are and were sourcesof power and action are located. Two out of the three pillars on which EUis based on are quite resistible to the influence from the interest groups.That is: common foreign and security policy and police and judicial co-operation in criminal matters. This intergovernmental playground featured
by the European Council or the Council of Ministers is relatively closed tolobbying. The only way to influence these policies is by getting around andexerting pressure on national government domestically or internationally. Obviously, the EC pillar provides the greatest potential to lobby theEU institutions because it comprises the big share of the Union’sregulative policies including environmental. The main institutions thatattract lobbyist’s attention are: The Commission, The Council, The EuropeanCourt of Justice, The European Parliament and the Economic and SocialCommittee. The magnitude of influence applied on these institutions dependson their political powers receptiveness to initiate, draft and finallyapprove and implement regulations EU wide (Cini, 2003). My point is to make the inductive analysis how lobbying pursued bycertain interest groups fits in the theoretical framework of lobbyismconducted at the EU level.3. Why would have interest to lobby? As it has been noted, the Directive (CEU, 2003a), proposes CO2 emissiontrading based on grandfathering system which was preferred by industrialsto auctioning allocation. In theory, allowing companies to trade emissionpermits cuts the cost of compliance overall. If it has an emission cap, thebenefits of trading from a company’s point of view are clear, since it canpurchase a permit representing a tone of CO2 if it costs less than thecompany’s own cost of reducing a tone of CO2. So the emission cut takesplace were it cost least to so while the overall reduction of emission isthe same. According to Svendsen, in this system the winners are allexisting firms because the permit limits are granted for free on historicallevels, whereas the looses are future firms who have to by all theirpermits from existing firms. The loser is also the society assuming thatproceeds raised from auctioning by governments could be redistributed in anumber of ways to enhance social welfare. It could be argued that thegrandfathering systems is detrimental to new entrants by questioning equaldistribution in Member States, by enhanced accessibility to capital asincumbents are granted a realizable asset, by threat of exercising marketpower by incumbents (CEU, 2001b), Even more, Svendsen argues that grandfathered regulation iseconomically advantageous for incumbents even compared to the situationwithout any CO2 regulation, let alone compared to CO2 taxes (Svendson,2003, p.105-106) where it claims that total reduction cost and lobbyingcost possibly be lower than the rent from grandfathering and thus, net gainfrom trade. The paper by Svendsen (Svendsen 2) also clearly indicates the potential‘losers’ and ‘winners’ (respectively households and industrials) whenchoosing between grandfathering and auctioning permits in the EU. Theresult of the analysis presented in this paper lead to a hypothesis onrational interest group behavior in the EU and an asymmetrical politicalpressure in favor of grandfathering. It is so because large group ofhouseholds have difficulties in becoming organized as net benefits forindividual household action are negative so it does not pay to getorganized and reap the total net benefits (Svendsen, 2003, p. 126). Not all industrial sectors are supposed to participate in the CO2market. The Commission takes view to environmental effectiveness, economicefficiency, the potential effects on competition, administrativefeasibility and possible existence of alternatives policies and measures(CEU 2001b). The initial participating sectors should cover approximately45% of EU carbon dioxide emissions. Table 1 illustrates the participantsectors that include all plants with thermal capacity of greater the 50MWth :
Table 1: Possible industries to include in the emission trading system|Sector |Percentage of EU 15 CO2 || |Emissions || |(EUROSTAT 1997 figures) ||Electricity and heat production |29.9 % ||Iron and Steel |5.4 % ||Refining |3.6 % ||Chemicals |2.5 % ||Glass, pottery and building materials |2.7 % ||(including cement) | ||Paper and printing (including paper |1.0 % ||pulping) | ||Total |45.1 % |
Source: CEU (2001b) It has to be mentioned that leaving out some sectors or smaller
emission sources within the covered sector should be covered by equivalentpolicies and measures in order to avoid competitive distortions. From the table above is clear that EU electricity producers are themain emitters of CO2 with almost a third of total CO2 emission in the EU,and therefore their participation is crucial to the liquidity of the marketand environmental success. The interests of the electricity producers aremainly represented by Eurelectric. Eurelectric is clearly in favor ofgrandfathered emission trading (Svendsen, 2003, p. 114-117). As it wasstated by Elsam, Danish energy producer and member of Eurelectric, theclimate change and Kyoto protocol is a fact and in the presence of alreadyexisting national regulations (Danish CO2 cap and trade regulation) havingEU regulation is less detrimental to competition (Peter Markussen) Iron and Steel industry is represented by the European Confederation ofIron and Steel industries (EUROFER). As it is energy intensive sector,enhancing energy efficiency implies increased productivity and thus,reduced production costs. For this reason it also favors for emissiontrading based on historical levels (Svendsen, 2003, p. 114-117). International Association of Gas and Oil Producers (OGP) represents theoil and gas industry. It is highly motivated to implement the KyotoProtocol as it implies gas market booming when one of the options forindustries to reduce CO2 is to switch from coal inputs to less CO2 omittinggas inputs. The position of gas and oil industry is identical to thosementioned above, namely they prefer permit trade and grandfathering as theallocation rule (Svendsen, 2003, p. 114-117). The only industry from the table above is the chemicals that will notparticipate in the emission trading system. Their motivation is that itconstrains their competitiveness and ability to grow. Besides, anyreduction for them is not economically feasible as they have alreadyimproved efficiency through a Voluntary Energy Efficiency programme.Besides, the insignificant emission of CO2 and vast amount of plants inthe industry (administrative burden) made the Commission to succumb andexclude chemicals from the emission market (Svendsen, 2003, p. 114-117).Indeed, the exclusion of chemicals in the emission reduction process can beseen as a victory for the industries concerned (aluminum), compared toother industries like cement which has conceptually very similar processemission (Pedler, 2002). The paper and pulp industry is represented by the Confederation ofEuropean Paper Industry also favors allocation rule which is based oncommon guidelines at the EU-level through grandfathering based on commonbaseline. In a sense, the industry has partly lost as they initially wantedthe targets to be set by negotiation and compliance on a community level –still, they are winners as the system includes grandfathering as theallocation rule (Svendsen, 2003, p. 114-117). Building materials comprise two industries that are cement industry andceramic industry represented respectively by CAMBUREU and CERAMIE-UNIE(Svendsen, 2003, p. 114-117). The ceramic industry is the only that favorsauctioning allocation not like cement industry. Cement industry is ofparticular interest for me as I want to look with greater detail howlobbying pursued by particular company can bring substantial benefits forit. My targeted interest group is a French Lafarge cement company which isto be affected by policies to mitigate climate change. Cement manufacturingis among major contributors to CO2 emissions, hence in the interests ofLafarge which is world leader in producing constructional materials,including cement. The company is aware that some policies would be veryharmful to their business, others less so. Lafarge’s public affairsobjective is to get the least harmful policies (Pedler, 2002). It ishelpful to look how the company adapts to these new conditions early, howit even might squeeze some gain out of it by lobbying for reasonablepolicies and preparing the company to cut greenhouse gas emissions. I willmake an attempt to look were the company lobbying at EU level is succeedingand what insight can be inferred.4. Lobbying Lobbying on emission trading has concentrated in Brussels and Paris asfar Lafarge is concerned. For that reason it useful to distinguish a numberof different stages in the process of passing any EU legislation and whichrequire different tactics to lobby. These tactics apply as much to the EUemission trading as other issues.4.1 The idea is debated Interest groups do need to participate in the discussion by presentingown arguments on issues that will have direct effect. An effective lobbyistwill start to influence the Commission before they begin drafting anyparticular proposal. Among the EU institutions the Commission is the mostimportant to lobby for interest groups as it has wide mandate in policyinitiation within the EC pillar. Furthermore, the EU Commission highlyexposed to affection by interest groups in the process of policyformulation. This is due the fact that EU Commission is understaffed andclearly lacks expertise knowledge on certain aspects. Officials aretherefore happy to dialogue and receive information on issue policies,especially if it is constructive (Pedler, R.H., 2002, p. 80). As it hasbeen noted, the contacts between interest take several ways. Mainly theseinclude : – face-to-face meetings between Commission officials and interest groups representatives – conference and workshops – permanent and ad hock advisory committees – telephone conversation and correspondence When interest groups are not able to present their arguments face-to-face is also efficient to influence opinion by providing arguments in theform of research reports, policy documents, and briefings on matters ofinterests (George, S. and I. Bache, 2001, p.296). It is also important not to neglect relations with public, politicians,non governmental organizations (NGO) in shaping public opinion on certainpolicy matters. The Lafarge lobbying policy is no exception here – its view is that theway to persuade someone of its ideas is through rational argument. In turn,getting the right results requires not only good arguments, but they mustbe well presented to the right people at the right time. The company’sexecutives, either at the level of Bertrand Collomb, the Chairman and CEOof Lafarge, or others use these windows to get their messages heard.Letters to the press, public interviews, participation in conferences andworking groups, formal position papers and other means are also part ofLafarge lobbying activities. That helps publicity, especially someenvironmental NGO, to see the merits of moving forward in to action toreduce emission, rather continuing for their ideal solution. Lafarge’spartnership with Worldwide Fund of Nature (WWF) which is involved in natureconservation and has a strong influential presence in Brussels has helpedpersuade them of the advantages of emission trading, while at the same timeshowing serious intents in ensuring environmental integrity in the system.Lafarge also have contacts with Environmental Defense, a Washington-basedNGO that has set up an initiative to encourage companies to take voluntarymeasures to reduce greenhouse gas emissions linked to trading CO2. Throughthe membership of the World Business Council for Sustanable development(WBCD) and other business organizations, Lafarge also has contacts withnumerous other environmental NGOs active in the climate change debateworlwide. Even though a big company as Lafarge, currently employing 66 000people, is far from being influential to debate on its own. Thus, being amember of industry federations and other groupings play especiallyprominent role in having the weight to influence meters. As has beenmentioned, the cement industry is represented by CEMBUREU, the Europeancement industry federation. At the European level, another importantgrouping is the European Roundtable of Industrialists (ERT). The WBCSD andERT are especially important since both these organizations have builtcredibility from the past actions that help add weight to the messages they
give. Finally, at the national level, Lafarge is active in national cementindustries wherever they are present. Plant directors are encouraged todevelop contacts and carry the same climate change message with localcommunities and politicians. In this way, the time spend ensures thatcitizens understand Lafarge’s position on environmental policies and why ithas been adopted.4.2 Proactive attitude helps The arguments provided by industries are quite compelling and evenaccepted by some but only resisting to every measure proposal to mitigatethe climate change is a stalemate with loses eventually on both sides. Theenergy tax was the main issue that hovered on EU political agenda and was asubject of great resistance by industrials. Matter a fact, the allocationrule based on auctioning by many industries is perceived to be tantamountto additional taxation and is countervailed by industrials as well. In general, the European industry has taken a more proactive line.On the other hand, the US companies still opt for planting trees and buyingHot Air in Russia or receiving emission credits for simple forestconservation in the Amazon basin (Pedler, R.H., 2002, p. 93). But sooner orlatter, emission of greenhouse gases will be constrained, so it might beless costly to move early and be prepared, than to resist and be forced tomove later. Thus, Lafarge is realizing that by moving beyond the basic antitax resistance is for their own interest. They go quite explicit onindicating which strategies should be put in place instead of energy taxes.They advocate a system which is based voluntary or negotiated commitmentsas the right way forward. That is somewhat of policy measures as indicatedin the final directive (CEU, 2003c). Of course, accepting commitments,especially accompanied by sanctions is a bitter ‘peace of cake’ to takeupon companies. They are worried about the cost of meeting the commitmentsand hope to avoid it. Thus, a prompt respond to the evolution of the debateis important. The debate evolves in time and different levels, so theapproach must be well-matched to the circumstances. The institutions andorganizations targeted are the same as those mentioned in the first stageonly the delicate issue is how to present well matched arguments. “Movingto early to a proactive stance can fog the message of opposition, movinglate can compromise a proactive strategy” (Pedler, 2002) Above all, hardwork in preparation future positions is essential. If this hard work is notput in, then it will not be surprising that poor decisions are made.
4.3 The drafting stage and implementation Here the European Commission takes the outstanding position as theexclusive initial drafter of legislation, which is the principal source ofits influence on the Brussels scene. It also has important powers to re-examine a document draft in the light of the EU Parliament’s amendmentsunder both the co-operation and co-decision procedure. As has beenmentioned above, the European Commission is relatively transparent as itpromotes the inclusion of affected interests groups in policy formulation.The proactive attitude in lobbying for one’s interests comes in play again.The key issue is to come up with well prepared arguments and gear thosearguments in to the objectives of the drafter. These arguments have tofollow all the levels starting from individual officials involved indrafting the text then following to cabinets and finally Commissioners. After a draft proposal leaves the Commission, lobbying efforts need tomove to the national capitals and the European Parliament whereargumentation often needs to start from the beginning ones more.Influencing national governments is important as it might be the only wayto influence the Council. The political developments at the national levelshould not be neglected if interests are to be well presented and defended.
Besides, interests groups in one member state might seek to influencegovernments in other member states. The proposal put forward by the Commission is a subject of approval bythe Council of Ministers where members are nationally elected. Thus, theenvironmental ministers have worked on the new directive for greenhouse gastrade in the EU. While the environmental policy falls under qualifiedmajority rule it is important to have national support because the weightof the votes ensures that only measures that are supported by governmentsrepresenting a substantial majority of the Community’s population can bepassed or blocked. Therefore, owing to its importance, the EU Council is ahighly relevant contact for interests groups. However, it doesn’t happenoften that the Council and its administrative machinery, the Committee andPermanent Representatives (COREPER) and the Council Working Groups, wouldbe lobbied directly (Cini, 2003). Although, influencing the Council throughthe COREPER might be realized from the national interests basis. COREPER isin charge of the preparatory work for Council meetings, and provide a linkbetween the European Council and national governments. The COREPER staffwill likely have good expertise in a wide range of the subjects beinglegislated in Brussels. Members of Working Groups also are clearly veryimportant allies to have since these groups consist of national civilservants whose role is to represent the national interests at EU level andwill naturally be inclined to represent interest essential in their owncountry in proper direction as well as providing valuable intelligenceabout the course of negotiations that are taking within the working groups.To sum up, the Council keeps a close eye on the developments in the EU,therefore a full scale lobbying campaign should involve lobbying thebureaucrats at all Member States (Stern 19941, p.100-101)As European Parliament does not wield much power it is less importantfor industrial groups like Lafarge, although, it is getting momentum toaccumulate its influence in EU policy shaping. Until the introduction ofthe Single European Act the Parliament was seen a consultative body whoseinfluence on the outcome of legislative proposal was minimal. The SEA hascompletely changed this, and as a consequence the attitude of lobbyists tothe Parliament (Stern 1994, p.101). Based on this, I would presume that theinfluence exerted by Lafarge on the parliament is not adequate.Interestingly, as the Parliament is elected by citizens, most likely itwill be prone to support consumer and environmental organizations to gainpopularity among electorate. For this reason, some analysts perceive thelinks between interests groups and Members of the European Parliament(MEPs) as ‘coalitions of the weak’ (Cini, 2003, p.195) Within the Parliament, the heads of the Standing Committees and therepporteurs responsible for particular dossiers are the most importantaddressees for interest groups. Lobbying the European Parliament startswhen Commission proposals are debated first by a Parliamentary Committee,selected by the president of the Parliament. In this stage a repporteur ischosen by the committee coordinators to study the proposal in detail whowill prepare a draft report on the proposal in question. There are alsoShadow reporters appointed by each political group in the Parliament tomonitor the activities of the Parliamentary Committee and to develop theirown positions on the proposal. Clearly, the most important person for thelobbyist to influence in the parliament will be the rapporteur. It isimportant, therefore for the lobbyist to get in contact with therepporteur and shadow repporteur and to identify who will be potentialsupporters of the interest he or she is representing (Stern, 1994, p.102)Most likely the rapporteur and his assisting team will be under-resourcedand would welcome any assistance i.e. gathering information and eventdrafting reports. Not like the Commission official why may have expert
technical knowledge of his or her area of specialty, the MEP is a careerpolitician and will not have the same grasp of technical detail (Stern,1994, p.103). It is also essential to have understanding of the politicalgrouping and the positions most likely assumed by these groupings ondifferent issues. With this knowledge potential allies in the committeescan be located to exert influence. National political parties in MemberStates of MEP can be also targeted for considerable influence to supportcertain views. To sum up, if the European Parliament is viewed as a lobbyingorganization itself, rather then an EC institution, and its keyparliamentarians can be persuaded to support a lobbyist cause then itspower emerges large indeed. Nevertheless, the European Parliament is not amajor player in the emission trading debate; although the Parliament willissue resolutions on climate issues but these are followed up and are notformally influential in shaping EU policies (Pedler, R.H., 2002, p. 97). As the EU’s judiciary, the European Court of justice (ECJ) monitors theobservance and interprets the EU law. The only way for interests groups toexert their influence is by challenging the compatibility of domestic andEU law. And even when this is the case, the outcome of such litigation isuncertain, the process is lengthy and expensive, which means that thischannel is not clearly available to all citizens and interest groups, andwill only be worthwhile when the stakes are high (Cini, 2003, p.195).Definitely, the stakes in emission trading which starts in 2005 will behigh and close eye will be kept on how the Final Directive is transposed into national law of Member States. The national allocation discretionretained by Member States might also be subject to be challenge before ECJas Member States could be tempted in one other form to favor nationalindustries in the regulation of emission market. It will be interesting tomonitor how the implementation of the single emission market will beenforced by ECJ if challenged by industrials or any other interested party. Finally, there is one more institution worth mentioning as beingpotential for lobbyism. It is the Economic and Social Committee (ESC). Asit consists of representative of producers, farmers, workers,professionals, and of general public to channel the opinions of organizedinterests within the European policy process, it should be seen as a placeattracting a lot of lobbying interests. Nevertheless, direct contactsbetween the EU institutions and interest organizations make this potentiallobbyism redundant or at least, of marginal importance. Much the same canbe said about Committee of Regions (CoR) (Cini, 2003, p.195).Conclusions
One may ask, what did the stakeholders get for all lobbying? In gettingunderstanding of a complex emission lobbying process I can assume that anyregulation (taxes, grandfathered quotas, or auctioned permits) will bringdown to any level of pollution in a cost efficient way. But due to intenselobbyism efforts by industrials the grandfathering system was chosen as astarting point. Although, some environmentalists claim that policies andmeasures agreed until now are far from being capable to stabilize climatechanges, for the time being it is most advanced politically feasiblecompromise between economic optimality and political feasibility. TheLafarge case shows that practical approach to combat global warming shouldbe applied as it helps to reach best trade-off among parties and bringbenefits. The benefits achieved by industrials can be summed up in thefollowing way: – Avoided higher application of energy tax on energy-intensive industries, although, the draft proposal remains on the Commission’s desk and one may question how long will it take for finance ministries looking for resources to come up with energy taxes again. – Grandfathered permit system is chosen as a base for allocation CO2 permits. This is favored by industry as it minimizes private emission
reduction costs, creates a rent for existing firms and to certain extent gives the edge over new entrants in the market. Although, some allocation percentage based on auctioning will be implemented in the system but it is much lower in the final Directive than it was proposed in the Directive Proposal (respectively 5 and 10 percents). – Number of sectors participating in the emission market is reduced to fife by excluding chemical industry. That could be attributed to the wining by chemical industry as they clearly were against such emission trading. However, the main reason for excluding chemical sector is rather administrative then political but the future, as emission market evolves, most likely will bring up this question again. – Not only did industrial groups promoted for establishing grandfathering system, they also achieved implementation and settlement of permit allocation among sectors at the national level. This leaves open possibility to influence national governments and achieve favorable allocation. – Clear progress in convincing skeptics and environmental organizations that emission trading system can work to the benefit of the environment, in particular when the European Commission now takes a clear line in favor of emission trading From Lafarge case it is clear that proactive approach in lobbying canbe very fruitful; it implies the recognition that changes are necessary andis about influencing the choice of policy measures, for example byproposing voluntary commitments to reduce emission instead of taxes. The EU emission trading and afterwards the Kyoto protocol is expectedto be only the first step in a much longer process that will need to lastfor years to come if global warming is to be kept under control. Inparticular the developing world will need to take on reduction commitmentsas their emissions are set to overtake those of the richer countries by2010. Thus many of the elements of EU emission market and Kyoto protocolwill stay on the political agenda much beyond 2010, which only adds to thesignificance of lobbying efforts in this field.Literature: • Birgit Schmidt am Busch (2002), – European Institutions. Strategies for exerting more influence.
• CEU (2001a), Green Paper on greenhouse gas emissions trading within the European Union, Commission of the European Communities, Brussels, 8 March.2000, COM (2000) 87 final http://europa.eu.int/comm/environment/docum/0087_en.htm (access date 13 October 2004).
• CEU (2001b), Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (presented by the Commission) Brussels, 23.10.2001, COM (2001) 581 final, 2001/0245 (COD) http://europa.eu.int/eur- lex/en/com/pdf/2001/en_501PC0581.pdf (access date 13 October 2004).
• CEU (2003c), DIRECTIVE 2003/87/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (presented by the Commission) http://europa.eu.int/eur- lex/pri/en/oj/dat/2003/l_275/l_27520031025en00320046.pdf (access date 21 October 2004) • Cini, M. (2003), European Union Politics. UK: Oxford University Press
• George, S. and I. Bache (2001), Politics in the European Union, UK: Oxford University Press.
• Pedler, R.H. (2002)(ed): European Union Lobbying. Palgarve Macmillan, UK.
• Peter Markussen, ELSAM: The Energy Sector and EU Lobbyism, lecture handout from the presentation that took place at Arhus School of Business on September 24, 2004
• Stern (1994), – Club de Bruxelles. Lobbying in Europe after Maastricht. “How to keep abreast and wield influence in the European Union”
• Svendsen, G.T. (2003): Political Economy of the European Union: Institutions, Policy and Economic Growth. Edward Elgar, Chentelnham, UK
• Svendsen, Lobbyism and CO2 trade in the EU, paper presented at the 10th Symposium of The Egon-Sohmen-Foundation in Dresden, http://www.hha.dk/nat/wper/02-16_gts.pdf (access date 16 October 2004)