The European Commission will present on Wednesday the final version of its climate action and renewable energy package, amid fierce criticism from member states, companies and industrial organisations.

Speaking in London, European Commission president Jose Manuel Barroso said he hopes member states will react positively to the proposals which they agreed to in March 2007, but is ‘ready for criticism from some national politicians.’

At a summit last March, EU leaders agreed to cut carbon dioxide emission levels so that by 2020 they are 20 pct lower than in 1990. This target could go up to 30 pct, depending on the outcome of talks with international partners.

They also agreed to a 20 pct increase in the use of renewable energy and for biofuels to make up 10 pct of all transport fuels in the EU by 2020, if production is sustainable and second generation biofuels are commercially available.

Apart from emissions and renewable energy commitments, the commission is set to table in its package national targets and extend the Emissions Trading Scheme (ETS) for beyond 2013 to include more greenhouse gases and all major industrial emitters.

Barroso noted, however, that energy intensive industries face a ‘particular challenge during (this) transition’.

‘There would be no point in pushing EU companies to cut emissions if the only result is that production and indeed pollution shifts to countries with no carbon disciplines at all,’ he said.

Barroso said the EU executive should be ready to continue to give such industries ETS allowances free of charge, or to make importers obtain allowances alongside European competitors, when such a system is compatible with World Trade Organisation requirements.

The commission is also expected to present a law for carbon capture and storage (CCS) — storing carbon dioxide underground instead of releasing it into the atmosphere — as well as auctioning emissions permits to member states which are currently distributed free up to certain levels, beyond which companies must pay.

Some of the proceeds from auctioning will be used to find research into renewable energy sources and combating climate change.

In addition, the EU executive will present environmental state aid guidelines which will outline the the conditions under which state aid will be justified for projects and investments to combat climate change.

Some of the proposals have already met opposition from several member states which claim individual targets are too strict and will damage economies.

German newspaper Handeslblatt cited unnamed EU diplomats as saying energy commissioner Andris Piebalgs wants Sweden to lift its ratio of energy coming from renewable sources to 50 pct, while the proposed target for Austria is 34 pct, 20 pct for Spain and 18 pct for Germany.

The rate in Germany was 9 pct in 2007, according to the BEE association of renewable energy companies.

On carbon dioxide reduction targets, Romania is concerned its 20.7 pct target by 2020 would threaten 20,000 jobs and increase heating bills and other costs for companies, Mediafax reported, citing an official document.

The document estimates the additional costs, particularly for companies in the domestic energy sector, at 691 mln eur, which could rise to 1.9 bln eur, when taking into account potential fines, the report said.

These costs would lead to a rise in electricity prices, which would have a negative impact on industry and households, it said.

Romania complained to the EU last December, in an attempt to contest its carbon emissions quota.

Meanwhile, Germany has criticised the commission’s proposal to auction emissions permits. Because the present limits are generous, such excess payments have been rare, resulting in thin trading of carbon dioxide emission credits on Europe’s carbon trading market.

Prices there have remained below a level that would encourage investment in cleaner technologies.

‘The European Union cannot ignore the question of how to preserve the international competitiveness of industries that consume lots of energy,’ such as cement, steel and chemicals, all key sectors of the Germany economy, environment minister Sigmar Gabriel told German deputies.

Sectors ‘which have reached their average for reductions of carbon dioxide emissions must be able to obtain free emission rights to be able to remain in Europe,’ he added.

Many European industries could be forced to relocate elsewhere in order to maintain competitive prices on international markets.

Gabriel slammed the weakness of the commission’s project in terms of developing renewable energies, which he said threatened national support for such energies, as in Germany where significant measures in this direction have been voted.

For Germany — which has a target of 40 percent reductions by 2020 — to remain the biggest EU contributor to emission reductions, the commission must take economic conditions into account, Gabriel said.

Criticism over biofuel policy has come from the UK. A House of Commons report has claimed that the environmental effect of the commission’s existing biofuel policy is negative.

Energy commissioner Andris Piebalgs said he ’strongly disagrees’ with the report, claiming that the policy is delivering ’significant greenhouse gas reductions,’ compared with the alternative, oil.

On top of that, an EU internal report seen by Agence France-Presse criticised the use of biofuels in transport, concluding that the costs outweigh the benefits.

The unpublished working paper by the Joint Research Centre, the commission’s in-house scientific body, says current EU proposals will cost the taxpayer 33-65 bln eur between now and 2020.

The cost-benefit study looks at whether using biofuels reduces greenhouse gas emissions, improves security of supply and creates jobs. It delivers an unenthusiastic opinion on all three counts.

‘What the cost-benefit analysis shows is that there are better ways to achieve greenhouse gas savings and security of supply enhancements than to produce biofuels,’ the report says.

‘The costs of EU biofuels outweigh the benefits,’ the researchers stated.

In response, a commission energy spokesman stressed the study was just a working paper and one of several opinions being taken into consideration, as talks continued ahead of Wednesday’s decision.

From industry’s point of view, European companies fear the climate package proposals harm competitiveness.

In a letter to the commissioner for enterprise and industry Gunter Verheugen, Royal Dutch Shell (nyse: RDSA - news - people ) chief executive and the chairman of the energy and climate change working group of the European Roundtable of Industrialists warned that auctioning plans will encourage protectionist measures and damage competitiveness, according to a Financial Times report.

Separately, in a letter to commission president Jose Manuel Barroso, the Confederation of European Business expressed European companies’ strong concerns over how the ETS proposals could open the way to a serious weakening of European industry and its capability to innovate successfully and invest for protecting the climate.

In response to such complaints, the EU executive said there is ‘no clash’ between the objectives of its upcoming climate package and those of industry competitiveness.

‘The commission in no way sees a clash between the objectives of the package and the objectives of industrial competitiveness,’ a spokesperson told reporters here.

‘The two go hand in hand’.

The spokesperson added that the ’specific problem’ of energy intensive industry is ‘one of the challenges at the heart of the package’ and that the commission was working to find a solution.

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