EU sets binding carbon emissions targets

28 January 2014


A new EU framework on climate and energy for 2030 was presented on 22 January by the European Commission. The centre piece is a series of caps on GHG emissions leading to a reduction of 40% below the 1990 level by 2030. The Commission has stopped short of mandatory renewable energy quotas but has set an EU-wide binding target for renewable energy of at least 27%, renewed ambitions for energy efficiency policies, a new governance system and a set of new indicators to ensure a competitive and secure energy system.
The 2030 framework is intended to ensure regulatory certainty for investors and a co-ordinated approach among member states, leading to the development of new technologies. The framework aims to drive 'continued progress towards a low-carbon economy providing affordable energy for all ... and increased energy security'.
The Communication setting out the 2030 framework, which will be debated by the European Council and European Parliament in due course (the European Council is expected to consider the framework at its spring meeting on 20-21 March) is accompanied by a legislative proposal for a market stability reserve for the EU emissions trading system (EU ETS) starting in 2021, to improve its robustness. A simultaneous report on energy prices and costs in Europe suggests ways in which rising energy prices can be partly mitigated.
Key points of the policy framework:
-A binding greenhouse gas reduction target: The 40% target would be met through domestic measures alone. The annual reduction in the 'cap' on emissions from EU ETS sectors would be increased from 1.74% now to 2.2% after 2020. Emissions from sectors outside the EU ETS would need to be cut by 30% below the 2005 level, and this effort would be shared equitably among the Member States. The Commission invites the Council and the European Parliament to agree by the end of 2014 that the EU should pledge the 40% reduction in early 2015 as part of the international negotiations on a new global climate agreement due to be concluded in Paris at the end of 2015.
-An EU-wide binding renewable energy target. Driven by a more market-oriented approach with enabling conditions for emerging technologies, an EU-wide binding target for renewable energy of at least 27% in 2030 is thought to be necessary to drive continued investment in the sector. However, it would not be translated into national targets through EU legislation, leaving flexibility for member states to adapt to national circumstances. But achieving the renewables target is left to a new governance system based on national energy plans.
-Energy efficiency. 'No transition to a competitive, secure and sustainable energy system is possible without energy efficiency'. Its role will be further considered in a review of the Energy Efficiency Directive due to be concluded later this year. The Commission will consider the potential need for amendments to the directive once the review has been completed. Member States' national energy plans will also have to cover energy efficiency.
-Reform of the EU ETS. The Commission proposes to establish a market stability reserve at the beginning of the next ETS trading period in 2021, to address the surplus of emission allowances that has built up and improve the system's resilience to major shocks by automatically adjusting the supply of allowances to be auctioned. The creation of such a reserve is said to be supported by a broad spectrum of stakeholders. The reserve would operate entirely according to pre-defined rules, leaving no discretionary powers to the Commission or member states.
-Competitive, affordable and secure energy. The Commission proposes a set of key indicators to assess progress over time and to provide a factual base for potential policy response. These indicators relate to, for example, energy price differentials with major trading partners, supply diversification and reliance on indigenous energy sources, as well as the interconnection capacity between Member States. Through these indicators, policies will ensure a competitive and secure energy system in a 2030 perspective that will continue to build on market integration, supply diversification, enhanced competition, development of indigenous energy sources, as well as support to research, development and innovation.
-New governance system. A new framework based on national plans for competitive, secure and sustainable energy is proposed. These plans will be prepared by member states under a common approach, guided by the Commission, and will 'ensure stronger investor certainty and greater transparency, and enhanced coherence, EU co-ordination and surveillance'.
The accompanying Report on energy prices and costs assesses the key drivers and compares EU prices with those of its main trading partners. Energy prices have risen in nearly every member state since 2008 - mainly because of taxes and levies, but also due to higher network costs. The comparison with international partners highlights rising price differentials, notably with US gas prices, that could undermine Europe's competitiveness. Nevertheless, rising energy prices can be partly offset by cost effective energy and climate policies, competitive energy markets and improved energy efficiency measures. European industry's energy efficiency efforts may need to go even further, bearing in mind physical limits, as competitors do the same and European industry decides to invest abroad to be closer to expanding markets. These findings inform the 2030 framework.

 



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