Monday, 18 February 2013

EU's environmental failures expose its structural flaws

EUobserver reports today yet another high profile failure in the EU's grand-style, centralised policy-making, adding to a list that includes, most notably, the huge waste and imbalances of the Common Agricultural Policy, the depleted fish stocks of the Common Fisheries Policy and the euro austerity crisis.

Around 75 'green' NGOs are calling jointly for the EU to scrap its flagship environmental scheme for trading carbon emissions - the ETS - accusing the scheme of actually increasing carbon emissions instead of reducing them.

According to the EU, the ETS scheme is "a cornerstone of the European Union's policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively." It covers more than 11,000 power stations and industrial plants in 31 countries, as well as airlines.

But environmental groups, including Friends of the Earth and Carbon Trade Watch, say that by distracting from the task of reducing consumption and dependency on fossil fuels, the scheme has caused emissions to rise.

They also highlight how the EU-ETS facility to import cheaper emissions permits from abroad in return for the polluter supporting 'offset' projects in developing countries has provoked land-grabs, human rights violations and related environmental damage in poverty-stricken regions.

'Life support'

In recent months the EU-ETS has been described as being on "life-support" due to a collapse in the price of its carbon permits - the opposite of the scheme's intention. The EU hoped that higher carbon permit prices would incentivise businesses to cut emissions or invest in clean technologies.

Companies have blamed government handouts of too many free permits in order to limit the initial impact of the scheme on the highest polluters and are supporting a European Commission proposal to suspend future permit auctions, hoping that consumption of credits in the interim will prop up prices. MEPs on the European Parliament's environment committee are due to vote tomorrow on the Commission's proposed reform.

The scheme's faults mirror the EU's similarly ill-judged rush to promote biofuels through dramatic targets and offering generous subsidies to grow fuel crops. The result has been large-scale deforestation in developing countries as land was cleared for growing these newly lucrative crops, together with a dramatic rise in food prices as farmers cashed in by switching millions of acres from food production.

Faulty structure

There are huge questions here, of course, about the merits or otherwise of biofuels and about how best to manage and preserve our natural environment.

But t
he far more fundamental question these failures should provoke is about whether the EU represents the best structure for effective decision-making on the now wide range of policy areas affecting our lives over which it has control.

The course of the EU's development has now demonstrated repeatedly through the increasing number of 'grands projets' emerging from its structure that over-centralised decisions, made by institutions too far removed from democratic accountability, are much more likely to be of poor quality and detrimental to Europe's security and prosperity.

Break down the elements of EU decision-making and its easy to see how this comes about.

First policy ideas are boiled down to the lowest common denominator in order to secure majority support in the Council of Ministers, often involving persuasion based not on the merits of the policy in question but on horse-trading over the benefits a country or countries could gain from a completely separate forthcoming EU decision. 

Second, the counter-balancing and constructive pressure of having to answer to voters on pain of losing their jobs, perks and privileges is not something felt by the vast majority involved in make EU decisions. Not even large numbers of MEPs who, thanks to the list system the European Parliament employs, enjoy safe seats by virtue of being near the top of their party's slate of candidates.

Third, majority voting on most policy areas in the Council of Ministers prevents those countries that disagree with an EU policy or strategy (perhaps rightly) opting out of its effects, resulting in these poor quality decisions and the resulting damage being imposed uniformly on a pan-continental scale.

Finally, when policies go wrong, the cumbersome structure and huge turning circle of the EU means that changing course and limiting the damage takes years. Despite EU biofuels policy having being roundly criticised now for several years, no change is expected before 2020. Even then, the EU's inherent faults mean new decisions are unlikely to be better constructed.

EU unfit

The growing evidence of failed policies confirms the view of many that the EU's structure simply isn't fit to make decisions of the quality required in the huge areas of policy with which it is today entrusted.

Its activities on the environment have shown vividly the damage its poor decisions can cause, but this is likely to be the tip of the iceberg relative to the effect of EU decisions in the many other policy areas in which it governs with longer or more obscure feedback cycles. 

Damage to the environment is bad enough. The detrimental impact of intrinsicly poor EU decision-making on a wide range of policies imposed over an entire continent should give far greater cause for worry with respect to Europe's future prospects.

The best solution would be for the accountable leaders of the EU's member governments to open their eyes and take steps to reinvent fundamentally the EU's structure to become more flexible, dynamic, accountable and attuned to Europe's 21st century needs rather than those of the 1950s.

Since the multiplicity of interests propping up the existing structure makes this highly unlikely, it is Britain's relationship with the EU that must in fact be rebuilt from first principles - those of trade, co-operation and cultural exchange, rejecting outdated and flawed centralisation.

Wednesday, 6 February 2013

EU admin costs to be focus of new budget summit

EU leaders will meet in Brussels tomorrow for talks aimed at reaching a deal on the next seven year EU budget (Multi-annual Financial Framework) starting in 2014. 

Negotiations on the new MFF broke down in November, according to the Prime Minister due to the dissatisfaction of several countries over the EU Commission's refusal to cut administration costs.

The most recent MFF draft, circulated by EU Council president Herman van Rompuy before the last summit and revealed by Open Europe, proposed spending of €973.5bn.

However, it also proposed large reductions to the UK rebate and showed the Administration budget remaining at €62.6bn - a 12.8% increase over the €55.5bn in the 2007-13 MFF - rather than falling with other public administration cuts in EU member countries.

The Commission, supported by the European Parliament, originally proposed a 5.8% rise in the overall budget framework to €1.033tr, which included a 6% share for Administration.

Speaking to the European Parliament this week, the French President Francois Hollande said that he would accept a reduced EU budget settlement worth around €960bn, which aligns with a German figure circulated at the time of the last summit.

The British government's initial proposal was for a budget of €886bn but is now thought to be arguing for a total of around €940bn over the seven year period.

However, EU Parliament president Martin Schultz last week warned that MEPs would reject any deal that strayed too far from the Commission's original proposal.

EU taxes

Herman Van Rompuy has indicated that he will not circulate any new calculations before talks begin on Thursday. It is also not clear to what extent discussion over direct EU taxes are forming part of the EU budget negotiations.

The EU Council president before Christmas tried to turn the spotlight on Britain by proposing that proceeds from a new Financial Transactions Tax - in which Britain will not participate - should be contributed to Brussels and the amount offset against a country's contributions to the EU budget.

In 2011, the European Commission also proposed replacing the existing VAT-based contribution to the EU budget with a "modernized VAT" to arise "directly from the citizen to the EU".

The plan is thought to entail VAT levied at a fixed percentage by all member states in addition to national rates - likely to be a 1% uniform rate, rather than the 0.3% share of UK revenues the EU collects currently - and then transferred directly to the EU budget.

On the new MFF, David Cameron has pledged "at best a cut, at worst a freeze" in the seven-year spending limits, although Britain's contribution may rise in any case. On 31 October 2012, rebel Conservatives and Labour MPs teamed up defeat the government, with a majority voting for a real terms cut in the EU budget.

2013 budget rises

The EU's next MFF requires unanimous approval of EU member governments. If no agreement is reached in time to allow for legal ratification of the new deal by the end of 2013 - under a political, rather than legal, Inter-Institutional Agreement - the 2013 budget will be rolled over year-by-year with a built-in 2% rise to cover inflation.

Voting in Strasbourg just before Christmas, MEPs approved a €132.8bn (£107.2bn) annual EU budget for 2013. This included a 1.85% increase in the EU's admin costs from €8.277bn (£6.7bn) to €8.430bn (£6.83bn), at a time when member states on the other hand are making cuts to public services and national administration costs.

At €8.3bn (£6.7bn), EU administration costs amounted to 5.6% of the EU budget in 2012, but this will rise to 6.35% in the 2013 budget, showing that the EU's running costs - such as pay and perks for EU staff, plus the cost of buildings and facilities - are growing as a proportion of the overall budget despite Europe's financial difficulties.

Much of this is very visibly wasted on excessive EU pay, perks and grandiose facilities, together with EU self-aggrandisment. Examples include the EU's £45m tribute to itself, the House of European History, and a £250m refurbished 'RĂ©sidence Palace' building for the EU Council and its president Herman van Rompuy, due to open next year.

The 2013 deal also includes an extra €6bn (£4.86bn) added to the 2012 budget to cover EU overspending last year. This is less than the €9bn (£7.29bn) the Commission was demanding, likely resulting in a further request for additional funding being made by the EU as early as September 2013.

The addition of this extra €6bn to the 2012 budget gives the appearance that EU spending in 2013 will fall in comparison. But this does not take into account extra requests for funding predicted by the Commission later next year.

Cameron's challenge

This process of annual and subsequent amending budgets to make up funding shortfalls is making the patterns of the EU's actual spending more and more opaque.

EU Ministers must still formally approve the 2013 deal, but difficulties are not foreseen since the EU's annual budgets are agreed by majority vote. Member governments demanding a budget freeze or cuts are likely to be over-ruled by the majority (17) of net beneficiaries.

David Cameron was powerless to stop Britain's payments to the EU rising in 2013 and must now focus on the 2014-2020 budget framework negotiations to stem our liability to funding the EU's ever-increasing demands for public money.

Tomorrow's summit is a key test of the Prime Minister's EU negotiating abilities because if he cannot get a meaningful cut in Britain's contributions to the EU budget when he has billions of pounds in UK contributions to put on the table, confidence in the prospect of a broader renegotiation of the EU's powers will be significantly undermined.