The European Council´s proposal for the 2030 Climate and Energy Policy Framework balances between the EU´s agenda for economic growth and the need to maintain the EU in the driver´s seat when it comes to climate action. Though it disappointed many environmentalists, the proposal shows balance and flexibility, which is the most that could be obtained given all the different interests at stake. An important say was that of Central and Eastern Europeans, showing that their voices are now beginning to matter more than before.
The European Council met, 24-25 October 2014, to discuss the 2030 Climate and Energy Policy Framework which is to replace the current 20-20-20 Climate and Energy Package as of 2020. The starting point was a document provided by the European Commission in January of this year (European Commission, 2014) proposing approximately the same targets as the ones agreed upon now.
The 2030 Framework is meant to put pressure on the rest of the world to come up with ambitious proposals ahead of the December 2015 Paris Climate Summit. The European Union (EU) is the first large emitter to name its ambitions, with the United Nations Framework Convention on Climate Change proposing March of next year as the deadline for proposals.
The 2030 Framework is seen as an intermediary step towards achieving the very ambitious 2050 target of cutting Europe´s greenhouse gas (GHG) emissions by 80% compared to 1990 levels. However, it is also a means of reconciling the divergent interests of member states in need of economic growth and a cap on carbon leakage. For these purposes, the Framework shows both commitment and flexibility, thus managing to please most parties involved. The least happy with the proposal, however, are environmentalists calling it “weak”, while advocating for “shock treatment” in tackling climate change (Euractiv, 2014).
As per the Council´s conclusions (European Council, 2014), the EU is committing to cutting GHG emissions by at least 40% by 2030, compared to 1990 levels; to renewables constituting at least 27% of the EU´s energy mix; to improving energy efficiency by 27% relative to 1990; and to increasing electricity interconnections between member states. Each of these will be addressed bellow.
The Council takes it upon itself to revert to the policies after the 2015 Paris Summit in what was deemed a “flexibility clause” (Euractiv, 2014) pushed for by Poland, Hungary and other Central and Eastern European states (Kanter, 2014). This means that targets can be reconsidered according to the commitments that other states will make in Paris, though Merkel and Hollande already suggested targets will not be lowered, regardless of the results next year. Moreover, according to European Council President Herman van Rompuy, should there be any revisions after Paris, the targets will only go upwards. Despite this optimistic view, however, any revision of the targets would take place in the European Council where unanimity is necessary, while states like Poland are likely to be reluctant in tackling climate change more vigorously.
The first objective, cutting GHG emissions by 40% by 2030 compared to 1990 levels is a binding target which is to be delivered collectively by the EU, in regard to both the Emissions Trading System (ETS) and non-ETS sectors (a 43% and 30% reduction of emissions compared to 2005 levels, respectively). This is to be achieved through the same ETS system that has been at the basis of the 20-20-20 climate policy, albeit with some improvements.
The price of carbon is currently low because of the large number of emission permits on the market, a mishap made possible by the giving away of allowances by the EU in order to prevent its industries from becoming uncompetitive. In order to address this low carbon price, the 2030 Framework puts excess allowances into a market stability reserve from where they will be returned to the markets only when demand tightens. Despite support from the United Kingdom and Germany, the mechanism is to enter into force only after 2020, a concession made to coal-dependent Poland.
The annual factor for reducing the cap of allowed emissions is to increase from the current 1.74% to 2.2% as of 2021, meaning that significant steps in taking allowances off the markets are not to be seen up to that point, though this is in line with the 2050 objectives.
A further concession was made for all of Central and Eastern Europe by continuing to differentiate between states relative to their GDP per capita levels. Those states with a GDP per capita level below 60% of the EU average (low-income states) will be allowed to continue giving away up to 40% of allowances up to 2030, instead of scraping them altogether as of 2020, the way that the 20-20-20 package had envisioned.
States are, at the same time, called upon to ensure greater transparency in the allocation of free permits, an indirect reference to the murky relations between Central and Eastern European governments and their (oft state-owned) electricity producers (Buchan, Keay, & Robinson, 2014).
As for the overall allocation of permits, 88% of these will go to all member states according to their current emissions, 10% will go to low-income states in order to provide governments with extra funds from the auctioning of the permits; and 2% will go into a modernization fund to address particularly investment needs of low-income states. This distribution mechanism shows the growing influence of Central Eastern European member states in Brussels when it comes to climate issues (Buchan, Keay, & Robinson, 2014).
Some changes will fall upon the non-ETS sectors (transport, agriculture and services) as well. Low-income states are allowed to increase non-ETS emissions until 2020 by up to 20% compared to 1990 levels, while high-income states have to lower them by 20%, thus creating a 40% gap between the two types of states. The same gap will be held after 2020, but starting from a 0% increase in emissions for low-income states.
The Council also addresses the problem of transport emissions, calling upon the Commission to come up with a new strategy for transport since curbing emissions in this sector has proved difficult.
In a sign of flexibility, the Council decided to allow high-income states to renounce, in a one-off operation, some of their ETS allowances in exchange for lower targets of reduction in non-ETS sectors. This opens the possibility for greater flexibility of the entire system and it finally links the ETS and non-ETS sectors (Buchan, Keay, & Robinson, 2014).
Renewables and energy efficiency
The 27% share of renewable energy in the structure of total energy consumption EU-wide is only binding at EU level, not at national level, and is to be achieved thorough contributions by member states, “guided” by the need to achieve the collective target. A governance system is to be set up in order to provide such guidance, so the responsibility will not fall upon the European Commission, as it had initially proposed in its January document. Member states will thus remain free in deciding their energy mix, a point much touted by the UK, which will now be free to increase the share of nuclear and fossil fuels in its energy mix to the expense of wind and solar projects.
The 27% energy efficiency target is merely “indicative”, meaning it is not binding at EU or national level. It is, however, set to be reviewed by 2020, with a level of 30% in mind, as requested by Germany and Denmark.
To offset the lack of integration with European Energy markets by the Baltic States, Spain and Portugal, the Council decided upon a 10% minimum target for electricity interconnections by 2020, to be upped to 15% by 2030. The Commission is to monitor progress, as well as inform the Council on all sources of financing. The targets will be achieved through the implementation of projects of common interest with EU co-financing to be made available. Electricity interconnectors are particularly important to the Baltic States as they remain connected to the Russian grid, while Spain and Portugal are isolated by their lack of connection with France.
In conclusion, Europe has managed to find a balance both between the competing interests of member states, and between climate targets and economic competitiveness. It has done so by basically putting the entire burden on reducing emissions, the only binding target in the Framework. This means that more pressure will be put on the ETS to deliver results, which in turn brings the need to significantly improve it if it is to succeed.
Central and Eastern European states have clearly played a big part in the negotiations, leaning the balance towards economic reasoning rather than climate efforts. It remains to be seen what the other major players will bring to the table, with Europe clearly skeptical about them, since it set for itself the option of modifying its targets after Paris.
Buchan, D., Keay, M., & Robinson, D. (2014, October). Energy and climate targets for 2030: Europe takes its foot off the pedal. London: Oxford Institute of Energy Studies. Retrieved November 01, 2014, from http://www.oxfordenergy.org/2014/10/energy-climate-targets-2030/
Euractiv. (2014, October 24). Retrieved October 25, 2014, from http://www.euractiv.com: http://www.euractiv.com/sections/eu-priorities-2020/eu-leaders-adopt-flexible-energy-and-climate-targets-2030-309462
European Commission. (2014, January 22). A policy framework for climate and energy in the period from 2020 up to 2030. Retrieved from http://eur-lex.europa.eu/: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52014SC0016&from=EN
European Council. (2014, October 24). European Council Conclusions (23 and 24 October 2014). Retrieved October 27, 2014, from http://www.consilium.europa.eu: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/145397.pdf
Kanter, J. (2014, October 24). E.U. Greenhouse Gas Deal Falls Short of Expectations. New York Times. New York: New York Times. Retrieved 2014, from http://www.nytimes.com/2014/10/25/world/eu-greenhouse-gas-deal-falls-short-of-expectations.html?_r=0
Anca Elena Mihalache is an Energy Policy Group Senior Analyst
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