Protecting the climate is expensive - but doing nothing is even more expensive. There is a broad political consensus that failing to limit the maximum temperature increase to two degrees Celsius will have a huge negative effect on the global economy, with resulting ecological and social impacts. To prevent this we need to halve global CO₂ emissions by 2050. For industrialized countries this means cutting CO₂ emissions by 80 percent. The good news is that we believe this is achievable, if market forces are mobilized and if all global issuers are involved.


Europe as Pioneer

The EU launched a promising market tool for climate protection in 2005 with the European Emission Trading System. Under this system, uniform emission ceilings are intended to create competitive advantages for environmentally friendly technologies. At E.ON we support the EU Commission's approach.


Creating a Secure Investment Climate

State regulation isn't always beneficial to the market. However, in the case of long-term investments in power plants, networks and R&D we do need clear political signals and a consistent global framework. From our perspective as a power and gas utility, a promising climate protection framework agreement needs to fulfill three core requirements:

• Long-term reliable upper emission limits to ensure quantity and price stability in the emissions trading markets
• A uniform CO₂ trading system for all industrialized and emerging countries, to prevent the shifting of production of CO₂-intensive industries to non-participating countries (carbon and job 'leakage')
• The gradual global roll-out of the auctioning of CO₂ certificates to avert both a sudden devaluation of existing assets and the associated supply security risks.

As long as emissions trading continues to be implemented on a purely EU or regional basis, it disadvantages the European economy in favor of countries and industries that aren't involved - and the contribution to climate protection threatens to fizzle out. Even a carbon trading system comprising the 34 member states of the Organization for Economic Co-operation and Development won't have a real impact as long as major CO₂ emitters such as India, China or Russia are not included. Ultimately there is therefore no alternative to a climate-protection agreement that is as internationally binding as possible.


Extensive Investment in More Efficient Technologies

International discussions made good progress in December 2010 at the Cancun Climate Conference, even though no internationally binding agreement was signed nor any quantitative emission limits set. Hopes now rest on the next climate protection conference to be held in November 2011 in Durban, South Africa. As part of E.ON's new cleaner & better energy strategy, we are committed to halving the CO₂ emissions of our power plants in Europe by 2020 (compared to 1990 levels). By doing this, we're sending a clear signal that given secure framework conditions E.ON intends to make a substantial contribution towards achieving climate protection targets. We intend to achieve this goal both by using more efficient fossil fuel generation technologies and by continuing to expand our use of renewable energy sources. Nuclear energy is an important pillar in achieving the further reduction in CO₂ intensity that we are planning. Therefore, the CO₂ goals of our nuclear power plants are currently being evaluated before the early shutdown takes place. At the same time, to achieve this we need a flexible CO₂ market that is as global as possible. When it comes to investing in climate protection, as a rule every euro is to be invested where the greatest CO₂ reduction effects are to be expected.


Global Project Partnerships to Reduce Emissions

E.ON is not only driving forward CO₂ emissions reductions in established markets. We are also supporting developing and developed countries outside the EU with their climate protection projects. This enables us to prevent the emission of greenhouse gases that harm the environment, and to support the transfer of technology between economies developing at different speeds. For this purpose we use two emissions trading mechanisms - the Clean Development Mechanism (CDM) and the Joint Implementation (JI) mechanism - that are monitored by the UN as part of the Kyoto Protocol. Under the CDM, emissions-reduction projects in developing countries can earn certified emissions reduction units (ERUs), while under the JI mechanism ERUs can be earned from emissions reduction projects in developed countries. The focus of our CDM projects is on South East Asia, the Middle East and North Africa. Our Shatura new-build project was recently recognized as E.ON's first Russian JI project thanks to its low environmental impact. According to today's standards, this combined-cycle gas turbine (CCGT) plant is the most efficient and modern power plant in Russia, with an efficiency of 56 percent. Compared to older, less efficient plants, this plant can achieve CO₂ emissions savings of over 1 million tons. Beyond the offsetting calculation mechanisms, we ensure that individual climate protection projects are implemented in a responsible way at their relevant locations - and at the same time, that social and ecological aspects are taken into consideration.