Author: Martin Nesbit

There is a tortuous mix of good and bad news in the package of climate and energy targets adopted by the European Council on Friday October 24th. The headline of a 40per cent reduction in greenhouse gas emissions by 2030 is probably not ambitious enough to keep us on track for the reductions needed by 2050. However, Heads of Government made clear that their commitment was to “at least” a 40 per cent reduction; and they committed to return to the subject after the crucial Paris conference of the parties to the UNFCCC at the end of 2015. The door is therefore open to deeper cuts in European emissions in the event of a global deal. This is a non-trivial achievement in view of the pronounced opposition of several governments. 

In order to reach a deal, the European Council compromised by allowing for significantly greater subsidies for polluting industries through free allocations of Emissions Trading Scheme (ETS) allowances. This is clearly a step backwards. Nonetheless, it is worth noting that the European Council also made it clear that so-called “carbon leakage” concerns were only relevant so long as comparable efforts were not being adopted by other non EU countries. The implication is that the scope for free allowances might need to be reduced if the Paris talks are sufficiently ambitious. The deal also includes an enhanced use of the revenues from auctions of ETS allowances to support low-carbon innovation, which is to be welcomed. This is aimed particularly at Member States with lower levels of GDP per capita. 

Many of the conclusions relating to energy policy are more troubling, however. Concerns over Member States’ freedom to determine their own energy mix have led to a very loose framework of targets on energy efficiency and renewable energy. For renewables, a target of 27 per cent is described as “binding at EU level”, but very explicitly not binding on individual Member States – which makes it difficult to see who, if anyone, is bound by it, or how. The EU energy efficiency target is also set at 27 per cent, rather than the 30 per cent that incoming Commission President Juncker described as the minimum acceptable. In effect, this is a slowdown in the rate of energy efficiency improvement relative to that implied by the 2020 targets. The energy efficiency target is also described as “indicative”, even at EU level. To keep some momentum alive the Commission has been asked to come forward with proposals for priority sectors, and ways to address them at EU level. This could create opportunities for a more ambitious approach in practice. 

Taken together, however, it is difficult to see how the two targets and their currently proposed governance provide the sort of certainty that investors need to commit to renewables or other low-carbon technologies, or the sort of signal that could kick-start a process of vigorous energy efficiency improvements in the EU’s buildings stock. And this, critically, could mean that even if the EU delivers on the 2030 targets, it may do so largely through reliance on gas-fired generation. Europe would be left without the early investment in energy decarbonisation needed if it is to adopt the sort of trajectory for emissions through the 2030s and 2040s which is now required. 

There is much still to play for in setting the detailed governance arrangements for the targets, however. There remains some scope to ensure that they require Member States and the EU collectively to approach the climate challenge with the right long-term mind frame as well as sufficient incentives to act. Also, in some sectors with sizeable emissions a variety of policy options have been opened or left in the air. These include for agriculture and land use (where the Commission has been asked to examine measures to deliver sustainable intensification, to look at how to optimise mitigation by the sector and to work out how to bring carbon sequestration from land use into the EU’s target framework). In the important transport sector the Commission has been asked to examine new instruments and measures, and the door has been left half-open to Member States who want to opt transport in to the ETS. IEEP will continue to contribute to the analysis of these options and look for policy solutions that help to deliver the emissions reductions we need in ways which ensure long-term certainty, and reduce long-term costs.