On 23 January, the European Commission adopted a new package of proposals for EU legislation on climate change and energy. The significant elements of the package are a proposed directive on the promotion of renewable energy, a directive amending the existing framework of the EU Emissions Trading, and a decision on the individual efforts by member states to jointly reduce their greenhouse gas emissions. Other elements of the package include a proposed Directive on Carbon Capture and Storage.

Europe set itself up in Bali as a world leader on tackling climate change, and these proposals show that the EU is serious about making legally binding changes to how it uses energy. However, the proposals are weak in addressing concerns about the impact of climate change on poor and vulnerable people in developing countries. For example, biofuels could be a part of the solution to tackle climate change and poverty alleviation, but not under the EC's current proposals. Oxfam is seriously concerned that that the EU's biofuels strategy fails to protect the land, livelihoods, and human rights of vulnerable people, creating a threat to sustainable development, as the EU's 10 per cent target for transport fuels by 2020 has already caused a big scramble by developing countries to cash in. Oxfam believes that the EU should scrap its current plan for biofuels, and ensure that future plans include effective social standards. (see Oxfam's paper Bio-fuelling Poverty: Why the EU renewable-fuel target may be disastrous for poor people.)

The European Commission must also rethink its targets for emissions cuts by member states. The current calculations that focus on a 20 per cent cut in emissions will mean Europe has to abandon its objective of keeping temperature increase below the EU-approved target of two degrees Celsius. The EU's 30 per cent challenge was essential to pushing other governments around the world to do more in 2007. EU leadership now requires member states to plan on the accepted science-based target. In Bali, the EU was negotiating for a 25-40 per cent reduction for rich countries in Bali. Oxfam believes that the EU must include figures for both 20 and 30 per cent reductions by 2020 in its plans, at a minimum, and calls on member states to rise to the 30 per cent challenge the Union put to other governments in 2007. Oxfam believes that emissions trading can be part of the solution to climate change, although it will be insufficient on its own. Carbon allowances must be auctioned, not gifted, and emissions levels tightly capped and managed. However, the response of the European Round Table of industrialists to the EU proposals aimed at strengthening carbon markets was predictable and depressing, and our response to the private sector was detailed in a letter to the Financial Times on 21 January 2008, reproduced below.

The Commission's proposals will be debated by the European Parliament and European ministers throughout 2008. Legislation may not come into effect until mid-2009.

Oxfam sent the following letter to the Financial Times on 21 January 2008, outlining our concerns:

The response of the European Round Table of industrialists to emerging EU proposals aimed at strengthening carbon markets was all too predictable - and predictably depressing (Financial Times, January 21).

It is not difficult to see why some companies are so hostile to the auctioning of carbon allowances under the EU Emissions Trading Scheme. After all, the power sector has reaped windfall gains from the current system of free allocations. For poor people around the world, this system just adds insult to injury: On top of maintaining emissions that are way above the EU's fair share, it rewards its biggest polluters with emissions rights - with no regard for the impacts of resulting climate change on the poorest people.

Introducing a graduated expansion of auctioning would generate multiple benefits. It would reduce the scope for corporate lobbying and give governments proper information on firms' abatement costs, helping them set a proper cap and cut emissions. Most importantly, the stream of revenue generated could be invested in creating incentives for low carbon technologies, and used to finance climate change adaptation in the poorest countries.

The world's poorest people are worst affected by climate change but least responsible. Carbon cuts must be deepest and quickest in the countries that are historically responsible and leadership by the EU is essential. Of course, we acknowledge that the EU will face adjustment costs - and that these will have to be managed. But Europe must also look to its wider responsibilities.

Having issued no end of encouraging statements on climate change, it is time for the business community to stand up and be counted.

Phil Bloomer, Campaigns and Policy Director, Oxfam, Oxford