Stephen Hale: We've reached the moment of truth on climate change

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While Alistair Darling can and must use his first Budget today to deliver a step-change in Labour's approach to climate change, we should remember that it is in Europe, not Westminster, that British politicians will take the decisions that could avert catastrophe.

The really big climate event this week is tomorrow's summit of European leaders. It is the approach taken there by the Chancellor and Gordon Brown that will make the difference between success and failure. We should judge all parties on their willingness to agree to the European action necessary to secure a stable climate. This is an important week for the UK's climate change policy. On Monday, the Committee on Climate Change, chaired by Lord Adair Turner, was launched. It will advise the Government how to meet the emissions reduction targets laid out in the Climate Change Bill.

Meanwhile, ahead of the Budget, a range of modest environmental taxes have been widely trailed, mainly directed at road transport. The Treasury spin machine went into overdrive over the weekend, predicting Labour's greenest Budget yet. Then it went into reverse, with suggestions that new green taxes will be deferred and subject to potential impact on the economy.

We will find out the truth today, but the signs so far are of tinkering rather than radical reform. Labour's climate-change policy continues to suffer from acute contradictions, with excellent initiatives such as zero-carbon housing undermined by its commitment to aviation expansion and, it seems, to dirty coal.

The week culminates tomorrow and on Friday with Mr Brown's attendance at the spring summit of European heads of government in Brussels. A year ago, Tony Blair was a critical player at the same meeting, securing agreement to some ambitious targets for European action on climate change – to reduce emissions by 30 per cent by 2020 if other countries follow suit, and to produce 20 per cent of European energy from renewable sources by 2020.

These agreements are having a dramatic impact on UK policy, above all on renewable energy. To fulfil our share of this, Britain will need to generate about 45 per cent of its electricity from renewables, rather than the current 5 per cent and the 15 per cent to which we were previously committed. UK policy on emissions trading and fuel efficiency is already being made at a European level, not in the UK. But EU leaders now need to will the means to deliver those targets.

It is a critical moment. Europe must use this year to agree policies that deliver on the emissions targets that it preaches to the rest of the world. Critically, it must also put in place the finance to support the transition to a low-carbon economy in the emerging economies and to help the poorest countries adapt to climate change. A successful outcome by the end of 2008 is a pre-requisite for global agreement next year.

The European Commission made proposals to strengthen the EU Emissions Trading Scheme by establishing a central European cap for emissions; to require companies in the power sector to buy these allowances through an auction; to require almost all companies to do likewise by 2020; and to build 10 to 12 (as yet unfunded) capture and storage demonstration projects. These will be the subject of intense negotiation. If Gordon Brown wants to continue the leadership shown by his predecessor, he must use this week's summit to show Britain's commitment to a fast-track negotiation and an ambitious set of final agreements.

The Treasury is a critical player in those negotiations, above all on the auctioning of emissions trading allowances. This is not easily explained on the Clapham omnibus. But we all know a big number when we see one. As the Stern Report made clear, the threat of catastrophic climate change requires us to make big investments now to avert devastating economic, social and environmental costs in the future. The auctioning of these allowances will raise €30bn to €60bn. Most member states want to use that to finance action on climate change. The UK, led by the Treasury, is almost isolated in its opposition to this.

Let's hope today's Budget is a green one. But British climate policy and the global process is largely being shaped in Brussels, not London. Brown must work with Sarkozy, Barroso, Merkel and others to secure European action on the scale so urgently needed. Climate change is a global problem that requires global collective action. It is a cause par excellence for the European Union of the 21st century. It's about time that our domestic political debate focused on that fact.

Stephen Hale is the director of the Green Alliance