Europe finds that cutting carbon emissions is far easier said than done.

The E.U. bureaucracy is locking horns with European heavy industry over climate-related laws that could take effect as soon as next year. In particular, regulators and some of Europe’s biggest companies are arguing about new legislation that aims to cut carbon dioxide emissions 20 percent by 2020. The bureaucrats intend to achieve this by rolling energy and other heavy industries into the European Trading Scheme (E.T.S.) and forcing them to buy greenhouse gas emission permits. But energy and other firms, anticipating giant cost increases, have decided to “vote with their feet.” They have begun cancelling investment projects worth billions of dollars, and some firms reportedly are contemplating leaving Europe altogether.

Johannes Teyssen, C.E.O. of the German utility E.On, said in February that “a lot of investment projects have been cancelled in the last couple of months.” On the occasion of presenting a new World Energy Council report, “Europe’s Vulnerability to Energy Crises,” Teyssen added, “You can’t count fast enough how many of them get cancelled now. Every week a project is cancelled.” Teyssen said he knew of at least four power station projects in Germany alone that have been cancelled since the beginning of 2008, with the potential cost of carbon dioxide permits cited as a major reason. And he warned the E.U. that “full auctioning [of carbon dioxide permits] could lead to more vulnerability.” Under current E.U. proposals, energy companies will have to pay for their carbon dioxide permits beginning in 2013, with other heavy energy-using industries gradually phased into the program thereafter.

Germany’s Der Spiegel reported in February that while energy profits generally are up, “Germany’s energy sector is in turmoil.” Germany’s nuclear power plants are due to be taken offline entirely by 2020, with others being mothballed. To replace them, some two dozen new coal-fired plants are set to be built over the next decade. However, the imposition of binding carbon targets presents a serious threat to their financial viability. In January, Hans-Peter Villis, chief executive of the German utility EnBw, said that Germany risks power shortages unless it builds more power stations, and may be forced to re-think its nuclear exit plan. And the cloud forming over new plans for coal-fired power stations is being felt beyond Germany. The U.K., Italy, Spain, and the Netherlands are among countries where coal is re-emerging as the fuel of choice for power plants; it is the one fossil fuel that is fairly abundant in Europe. Ironically, the E.U.’s self-imposed target of achieving 20 percent of its power from renewables (also by 2020) will require many new power stations to be built as back-up facilities, because of the intermittent nature of wind and solar.

Meanwhile, in a bid to meet ambitious E.U. renewable targets, companies are already rolling out expensive carbon-cutting plans. Germany’s RWE has just announced a $44.5 billion renewable investment plan to cut its carbon emission by 60 million tons per year by 2015. Analysts at Citigroup believe this can only limit future shareholder returns by diverting money into green technology instead of dividends. And to add to industry woes, the E.U. is considering including carbon capture and storage (C.C.S., another expensive and as yet thoroughly unproven green “technology”) into the trading scheme equation. Considered a crucial technology for the prevention of carbon dioxide emissions, it too will greatly add to electricity production costs. Yet E.U. Energy Commissioner Andris Piebalgs recently told a group of 14 major energy executives that, until 2013 at least, “there is no money” in E.U. budgets to support C.C.S. projects. Given the potential expense of the technology, neither public nor private sector funding is likely to be forthcoming on a commercial scale either. According to figures presented at the European Business Summit in Brussels, Europe’s overall investments and venture-capital flow into clean energies have been in decline since the 1980s, amounting to just one-third of the U.S. investments in the sector.

France-based Alstom SA, Europe’s largest builder of coal-fired plants, has stated that the current carbon strategy lacks funding of $18 billion. In January the E.U. called on its 27 member states to subsidize the necessary C.C.S. projects. While “clean coal” technology breakthroughs may increase the possibility of carbon dioxide capture, it seems that national governments and the energy companies themselves will bear the cost – which will inevitably be passed on to consumers.

As if all this were not enough, the E.U. continues to pursue the break-up of energy majors via its “unbundling” policy, aimed at allowing new competition into the market. However, eight countries, headed by Germany and France, are aiming to sink the proposal. Yet another summit meeting at the end of February failed to resolve the impasse. Major E.U. member states are clearly determined to defend against the break-up of their national champions. Weakened energy majors would not only leave disparate elements open to foreign takeover, but reduce their capacity to amass the financial muscle necessary to meet E.U. climate obligations.

Even so, in the face of mounting opposition European President José Manuel Barroso announced “historic” plans to make Europe “the first economy for the low-carbon age,” declaring the costs “manageable.” Having announced the E.U.’s “world lead” in fighting climate change last year, it seems Barroso is determined not to lose face. But if new data from the U.S. Energy Information Administration is to be believed, the E.U. is already losing face. In 2006, carbon dioxide emissions in the U.S. fell by 1.8 percent, compared to a 0.3 percent rise in emissions in the E.U. In fact, from 2000-06 the U.S. maintained an annual carbon dioxide emissions increase rate of just one-third of 1 percent, compared to more than 1 percent for the E.U. over that period. Despite all the berating of U.S. climate policy, it is the U.S. reliance on technological advances that continues to eclipse the E.U.’s climate rhetoric.

To cap it all, according to figures published in early March by the Hadley Center for Climate Prediction, average temperatures across the globe cooled in 2007, entirely wiping out the previous century’s warming trend. In the carbon fundamentalist scheme of things, how could this be? Global carbon dioxide emissions should still be climbing. The bottom line? Evidence for a menacingly high price tag for unproven carbon fundamentalist beliefs may yet prevent Eurocrat carbon fundamentalism from morphing into draconian climate laws. So will facts, being “durable things,” trump Eurocrat carbon fundamentalism? Energy and heavy industry leaders, and non-believers everywhere, could only hope so.