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February 1, 2014

Following a public consultation and much heated debate, the European Commission published its Climate and Energy Policy Framework for 2030 on Wednesday, 22 January 2014. Notes 1, 2. This Policy Framework will have huge consequences for climate change and the evolution of energy markets across the EU. In summary, for the period between 2020 and 2030 it advocates:

• the introduction of a 40 per cent greenhouse gas (GHG) target at EU level to be supported by binding national targets;

• the reform of the Emission Trading Scheme (ETS);

• the introduction of a 27 per cent renewable energy target at regional level, supported by Member State plans;

• a future review of policy relating to energy efficiency and

• no immediate requirement for further renewable energy targets for the transport sector.

Unsurprisingly, it has been met with strong and mixed reactions. This commentary will discuss the reasons for these reactions by briefly considering the controversial background to the finalisation of the Policy Framework and by evaluating it, with a particular focus given to its implications for energy in Ireland and the UK.

 1. From the ‘20-20-20 targets’ to the much less catchy ‘40-27 targets’

The EU currently has a Climate and Energy Package running until 2020. This Package is primarily driven by three regional EU targets, to reach: a 20 per cent share of renewable energy, a 20 per cent reduction in GHGs and a 20 per cent improvement in energy efficiency by 2020 (the 20-20-20 targets). Two of these targets are legally binding, while the third (the energy efficiency target) is aspirational. The renewable energy target and the GHG reduction target are further broken down, with Member States required to meet specific national targets. Ireland, for example, is obliged to attain a 16 per cent renewable energy share and a 20 per cent GHG reduction by 2020. The UK is obliged to reach a 15 per cent renewable energy share and a 16 per cent GHG reduction by 2020. National GHG reduction targets cover those sectors not included in the EU’s Emission Trading Scheme, EU ETS (i.e. transport, heating in buildings, and waste). Member States were also assigned sub-targets to increase the renewable resources used in transport.

The Package is not without its problems. Consequently, the Commission’s assertion that the EU is ‘now well on track to meet the 2020 targets for greenhouse gas emissions reduction and renewable energy’ tells only part of the story. Note 1. Although renewable energy consumption did reach a 13 per cent share in the EU in 2012, this 13 per cent share was averaged across the EU to include the large renewable energy shares of certain States (such as Norway and Sweden). As a result it hides the fact that 13 Member States (including Ireland and the UK) will not reach their national renewable energy targets by 2020 without additional measures. Notes 3, 4.

EU averaged GHG levels could similarly mislead the casual observer into thinking that the current Package is an out-and-out success. Again it is true that overall EU GHG levels decreased by 18 per cent relative to 1990 levels. Note 1. However, this reduction was largely the result of the economic crisis. Even with the crisis, it is predicted that certain Member States (again including Ireland and the UK) will soon be off-target to reduce their GHGs by the required amounts by 2020. Worse, due to an overabundance of EU ETS allowances and a low carbon price there has been a huge rise in the levels of coal consumed across the EU. In Ireland a doubling of coal consumption occurred during the first 11 months of 2012. Note 5.

Before the publication of the Climate and Energy Policy Framework for 2030, the Commission launched a public consultation which discussed prevailing issues such as: the surplus of EU ETS allowances, policy fragmentation, gaps in electricity infrastructure, renewable energy variability, security of electricity supply and affordability of energy for households and businesses. Furthermore it posed questions as to the appropriate number, level, ambition and scale of future targets. Responses varied both across industry sectors and between Member States, however two competing arguments surfaced time and again. The first was that the Policy Framework should consist solely of a regional GHG reduction target, supported by an effective EU ETS. This required no regional or national renewable energy targets. It was based on the idea that an ambitious GHG reduction target could simultaneously stimulate renewable energy development without incurring the problems associated with allocating national renewable energy targets (i.e. market distortions and market fragmentation). The UK supported this argument for reasons which will be discussed below.

The second was that the Policy Framework should include a renewable energy target (at least at regional level) to drive the investment needed to increase renewable energy after 2020. Those in favour of this argument can further be divided into two groups: those who believe in a regional target supported by individual national targets; and those who believe solely in a regional target. In December 2013, the Irish Minister for Energy, Pat Rabbitte was one of eight energy ministers (along with ministers from Germany, France, Denmark, Italy, Austria, Belgium and Portugal) to sign a letter calling for a regional 2030 target for renewable energy. The letter did not call for the renewable energy target to be binding, or for it to be broken down into individual Member State targets. Note 6. Later, on 9 January 2014, Members of the European Parliament called on the Commission and Member States to set three binding targets at regional level to reach: a 40 per cent reduction in GHGs, a 30 per cent share of renewable resources in energy consumption, and a 40 per cent improvement in energy efficiency by 2030. It was proposed that each of these targets would be supported by specific legally binding goals for individual Member States. Note 7.

2. The ‘40-27 targets’

Following this, on the 22 January 2014 the Commission published its Climate and Energy Policy Framework for 2030 complete with: (i) a binding regional target to reduce GHGs by 40 per cent below 1990 levels by 2030 (to be supported by individual national targets at a later date) and (ii) an aspirational regional target to reach a 27 per cent share of renewable energy by 2030. A target for energy efficiency was not included. Neither was a renewable energy target for the transport sector. Reform of the EU ETS was advocated through the introduction of a market stability reserve to operate from 2021 and to automatically adjust the number of auctioned allowances following a pre-defined set of rules.

Global DisasterIf you genuinely believe that ambition is needed to tackle the problem of climate change, this Policy Framework is deeply disappointing. True, the 40 per cent GHG reduction target is in line with the aims outlined in the EU’s 2050 Roadmap, i.e. with a 40 per cent GHG reduction target the EU continues to be on track to reduce GHGs by 80-95 per cent by 2050. True, this 80-95 per cent goal was originally arrived at by the panel of experts who form the Intergovernmental Panel on Climate Change, in estimating the cuts necessary from developed countries to keep the global temperature from rising above 2 degrees Celsuis (the level at which dangerous consequences are predicted). However, these percentages remain estimates. Their value rests on a large number of variables and they were made in 2011. A lot has changed since then and a lot will continue to change between now and 2030. Furthermore, the 40 per cent GHG reduction target is lazy. The EU is already predicted to reduce GHGs by 32 per cent by 2030 without further measures.

For these reasons, this 40 per cent GHG reduction target has met with disapproval from green activists and NGOs. It is also likely to lead to much disagreement (and most likely horse-trading) as a methodology is devised to divide it into national targets. For Ireland, a high 2030 GHG reduction target could be difficult to attain. Most of Ireland’s GHGs come from its agriculture sector and an Irish policy to increase this sector is in place which will continue up until 2020. Note 8. This planned increase in agriculture could impede Ireland’s successful attainment of a future more ambitious GHG reduction target.

The renewable energy target has also met with disapproval. This has been both from those in favour of a more ambitious target and those oppose to any renewables target whatsoever. Thomas Becker, CEO of the European Wind Energy Association, said that the renewables target is too weak and will cost potential jobs as a result. (According to the Impact Assessment, which accompanied the 2030 Climate and Energy Policy Framework, if combined with a 40 per cent GHG reduction target, a 30 per cent renewables target could have created 1.25 million additional jobs.) Conversely, Ed Davey, the UK’s Energy and Climate Change Secretary, was quoted to state ‘the UK remains concerned about any renewables target.’ Note 9.

The UK’s concern is understandable. On-shore wind farm construction has met with considerable opposition in the UK and recent newspaper reports indicate that the UK hopes to lower its post-2020 GHGs primarily through increasing nuclear power generation and shale gas extraction. Depending on its final formulation, an EU renewable energy target could jeopardise this strategy. The renewable energy target also raises concerns in Ireland (albeit for very different reasons). Ireland has a significant wind sector. While the 27 per cent regional renewable energy target gives this sector some hope post 2020, national legally binding targets would have given it certainty. Without these, individual governments are under no obligation to increase renewable energy. As a result, investor concerns remain as to whether renewable support schemes will be maintained or topped-up by the Irish government in the period after 2020.

Conclusion

The Climate and Energy Policy Framework for 2030 has not been finalised and will be subject to an extensive inter-institutional process. On the 21 and 22 March it will be discussed in the European Council (comprising heads of state and government). It must also be endorsed by the European Parliament and the Council. While the Policy Framework is a step in the right direction for climate change, it is a very small one. Overall, the Policy Framework suits neither Ireland nor the UK. Doubtless, there is wisdom in seeking to finalise a Climate and Energy Framework early to provide investors with market certainty. However, at present the financial capital and will required to support ambitious long term polices is low. Moreover, 2020 is not for another six years. Consequently, considering the weak Policy Framework which has been proposed, the wisdom of launching this policy in 2014 is open to debate. One cannot help but wonder if investors (and indeed Member States) would have been better served by a Policy Framework finalised at a later date in more favourable surrounding circumstances.

 

Eva Barrett is a Lecturer in Law at National University of Ireland Maynooth, a PhD candidate in Energy & Environmental Law at Trinity College Dublin, and a Solicitor.

 

Note 1: Commission, ‘Public Consultation, Green Paper on a 2030 framework for climate and energy policies’ (Brussels, 27 March 2013) ec.europa.eu/energy/consultations/20130702_green_paper_2030_en.htm     accessed 29 January 2014.

Note 2: Commission,’ A policy framework for climate and energy in the period from 2020 to 2030’ [2014] COM(2014) 15 final. ec.europa.eu/energy/consultations/doc/com_2013_0169_green_paper_2030_en.pdf     accessed 29 January 2014.

Note 3: Commission, ‘Renewable energy progress report’ [2013] COM/2013/0175 final. ec.europa.eu/energy/renewables/reports/doc/com_2013_0175_res_en.pdf     accessed 29 January 2014.

Note 4: European Commission, ‘Climate Action’ (Brussels, 22 January 2014) ec.europa.eu/clima/policies/g-gas/progress/index_en.htm     accessed 28 January 2014.

Note 5: Commission, ‘Energy Challenges and Policy. Commission Contribution to European Council of 22 May 2012’(Online Paper, 22 May 2013) ec.europa.eu/europe2020/pdf/energy2_en.pdf     accessed 28 January 2014.

 Note 6: Tom Revell, ‘EU urged to set 2030 renewable energy target’ (Blue & Green Tomorrow, 9 January 2014)< blueandgreentomorrow.com/2014/01/09/eu-urged-to-set-2030-renewable-energy-target/>     accessed 28 January 2014

Note 7: Parliament. ‘Committee MEPs for binding 2030 climate goals, 40% co2 cuts, 30% renewables’ (Press release, 9 January 2014)< www.europarl.europa.eu/news/en/news-room/content/20140109IPR32214/html/Committee-MEPs-for-binding-2030-climate-goals-40-co2-cuts-30-renewables>     accessed 28 January 2014.

Note 8: Department of Agriculture, Fisheries and Food, ‘Food Harvest 2020 – A vision for Irish agri-food and fisheries’ (Dublin, 9 August 2010) www.agriculture.gov.ie/media/migration/agri-foodindustry/foodharvest2020/2020FoodHarvestEng240810.pdf      accessed 29 January 2014.

Note 9: Fiona Harvey, ‘EU sets binding new targets on emissions and renewable energy, but not energy efficiency’ (Guardian Sustainable Development, 22 January 2014) www.greenwisebusiness.co.uk/news/eu-sets-binding-new-targets-on-emissions-and-renewable-energy-but-not-energy-efficiency-4226.aspx#.UugIvrSnyM8      accessed 28 January 2014.

 

Image: Copyright Kwest – Fotolia.com

 

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