Nicholas Richardson
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Compromise

In the words of G. K. Chesterton; “Compromise used to mean that half a loaf was better than no bread. Among modern statesmen it really seems to mean that half a loaf is better than a whole loaf.” Since the EU lacks the divine power to make loaves and fish go a long a way, what are we to make of the latest example of self-congratulatory summitry on the exiting subject of carbon dioxide emissions?

As ever, it depends on your point of view. The retiring president of the European Council happily tweeted: “Deal! At least 40% emissions cut by 2030. World’s most ambitious, cost-effective, fair #EU2030 climate energy policy agreed.” In fact, although the EU did agree 40 percent cuts in carbon dioxide emissions by 2030, compared with 1990 levels, by way of compromise it also agreed to compensate poorer nations like Poland, which relies on coal for some 90 percent of its energy needs, theoretically making the cuts less expensive for industry. It also agreed to reduce the volumes of excess certificates in the EU emissions trading system.

The Polish prime minister, Ewa Kopcacz, claimed that Poland had won at the summit in Brussels on Friday as it had received everything it had asked for. Specifically, under the compromise agreed at the summit, Poland and other countries whose GDP is below 60 per cent of the EU average will be allowed to grant free emission certificates to their power companies until 2030. “The news for Poles is good,” Kopacz told the press. Poland had earlier threatened to veto any move by the EU that would increase electricity prices (please see Red Line).

And it gets better – or worse if you are picking up the bill – since those same countries will also share funds from a special-purpose reserve. This reserve fund will be financed from two per cent (the initial commission proposal had been one per cent) of overall carbon emission allowances and is intended to finance energy sector investments. According to some estimates Poland will receive a total of PLN 7.5 billion from this source by 2030.

Of course, Poland is certainly not out of the woods as PLN 7.5 billion is probably only about 10 per cent of what will have to be spent to modernize Poland’s power system and to meet current EU renewable energy targets. This will mean increase in the costs of electricity. It is disingenuous, therefore, to seek to place the blame for energy price wholly on the EU. Furthermore, there is a change in the way the funds are administered which, put simply, means that Poland will not be able to use them either to support state-owned coal plants or to disappear into the country’s general revenue, something not unknown in the past. The more closely one looks – and one might be forgiven for not looking at all – the more transitory the win.

Be that as it may, the summit was also notable for the breakout of a row over a backdated adjustment to EU contributions based largely on vice (please see Pretty Woman) being included in GNI. Needless to say, the figures suggest that the UK should contribute GBP 1.7 billion extra, with the Netherlands, Italy, Greece and Cyprus all being asked to contribute more while France is to receive a rebate of GBP801 million, Germany GBP 614 million and Poland GBP 249 million.

The EU budget commissioner, Jacek Dominik who is Polish, said he was surprised that the UK should be objecting now and suggested that the UK would be opening Pandora’s box for future negotiations by doing so. David Cameron vowed to check the figure carefully, and so he should. The European Court of Auditors Special Report No.11 deals with the failing of the Budget directorate to get GNI right. It points out the sloppy unfocused work of the directorate and the generous use of something called “the general reserve account” which as accountants will know is commonly referred to as “the cookie jar”. Need I say more? If anything was calculated to encourage those in the UK who wish to leave the EU, a demand for more cash now, based on questionable figures and delivered by a chap whose country is a net beneficiary, is probably it. After all, as Polish friend said to me, Poland has been turned into a compliant member (except on emissions, of course) which simply tows the line in exchange for money, as evidenced by the tone of the media here anytime time the UK expresses an opinion.

I suppose that’s why the European Economic Community had to become the European Union – it simply dropped economics as a discipline.

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