European leaders are currently meeting to discuss the future of the region’s climate and energy policy. Today, representatives of the gas industry called for ambitious changes to ensure the EU hits its ambitious emissions reduction goal without jeopardising their commercial interests.

“Dealing with climate change is a long term issue,” Elisabeth Tørstad, CEO of fossil fuel industry advisers DNV told an audience of experts at the Financial Times’ gas summit today. Tørstad was part of a panel tasked with assessing current threats to the European gas industry.

So how enthusiastic is the gas industry feeling about climate policy?

Carbon pricing

If the gas industry wants to help cut emissions and boost it’s own prospects, the biggest obstacle is Europe’s dysfunctional carbon market, the panel agreed.

EU leaders are due to discuss a suite of reforms to the emissions trading scheme (EU ETS) this week. Passing those reforms is an “opportunity that has to be seized”, says Dick Benschop, vice president of Shell’s gas market development.

It might seem odd that an industry that would bear much of the economic cost of those reforms should be so keen to see them implemented. But there’s an obvious reason for the gas industry to support a price on carbon: it could help squeeze coal out of Europe’s energy mix.

The panel disagreed about what level the carbon price would need to hit to encourage a switch from coal to gas. Brian Ricketts, secretary general of industry group EURACOAL, says it would need to hit â?¬55 per tonne. Others have estimated a price of around â?¬30 would be enough. The current carbon price is around â?¬6.

An alternative to reforming the ETS could be implementing an emissions performance standard. This is a regulation requiring power plants to curb their emissions or shut down. European leaders are considering setting an EPS requirement on support for poorer member states as part of the EU’s new 2030 climate and energy policy.

Germany, France and the UK want the European Investment Bank to manage modernisation funds that will help upgrade the energy systems of poorer nations.

The bank already attaches an EPS to any funds it hands out. So if the modernisation fund proposal is approved, the EU’s developing economies could find themselves at least partially subject to an EPS. This would make it harder for countries like Poland to use money from the ETS to prop up its coal industry. It’s still far from clear whether countries will agree to this proposal, however.

Carbon capture and storage

It’s not just new policies that are needed to help the gas industry thrive in a carbon constrained world. The EU also needs to do more to encourage the development of carbon capture and storage technology (CCS), the panel says.

The Intergovernmental Panel on Climate Change’s recent report showed CCS is going to be vital if the world is going to avoid warming of more than two degrees above pre-industrial levels. The panel pointed to the example of a recently opened plant in Texas as proof that CCS could work on an industrial scale.

There are currently five CCS projects planned in the UK, but none have reached the construction phase. Norway currently has the only two operational CCS projects in Europe. When it comes to getting CCS up and running, Europe simply “isn’t moving fast enough”, says Benschop.

Global deal

Fixing the EU’s climate and energy policy may not be enough to avoid the worst impacts of climate change, Tørstad argues. The world needs a global deal if it is serious about cutting emissions in the long-run, she says.

As the energy market is global, coal and gas will continue to be used somewhere in the world even if the EU cuts back on its own consumption – a problem known as carbon leakage.

“We have global markets, we have a global effect of emissions and we make local decisions in different regimes”, Tørstad says. That’s inefficient, she argues.

Instead, policymakers should “align various policies to the global market”. That could either be in the form of a global emissions performance standard, or a global carbon price, she argues.

Negotiators have struggled to find common ground in recent years, however. If they can’t agree on targets to cut emissions, it’s unclear whether they’d be able to agree on more specific policy recommendations.

Dual goals

The industry suggestions were offered with two goals in mind.

The gas industry seems ready to embrace the idea of a carbon constrained world, particularly if it helps squeeze its main competitor – coal – out of the market.

But the industry’s survival remains its main concern. That means it may not always want to promote policies aimed at cutting emissions.

World leaders often emphasise how important the industry’s backing is if they are to agree a new global climate deal. As that deadline approaches, it’s interesting to see which policies the industry behind what is often touted as a vital “transition” fuel is willing to support.