The main components of the package are:
– An EU-wide binding target to reduce greenhouse gases (GHGs) by 40%.
– An EU-wide binding target to have 27% of energy provided by renewable sources – but importantly no binding national targets.
– A proposal to make the EU Emissions Trading Scheme (EU ETS) more robust by creating a reserve that allows flexibility of supply to react to market conditions.
– A new governance system whereby member states develop national action plans for competitive, secure and sustainable energy.
– A new set of indicators relating to allow the EU to keep an eye on various aspects of the energy market, including price differentials with major trading partners, diversity of supply, reliance on indigenous energy sources and interconnection capacity between member states.
In a separate report, the Commission highlights the importance of “cost effective energy and climate policies, competitive energy markets and improved energy efficiency” in limiting the impact of higher energy prices. However, there was no announcement on a new energy efficiency target because the Commission is awaiting the outcome of a review of its Energy Efficiency Directive, due later this year, before it sets new targets.
The package needs to be seen in context – it is in part a response to enormous growth in renewable energy capacity and the support payments that have accompanied that growth, as well as to the manifest failure of the EU ETS to encourage a low-carbon economy. Many governments were concerned at the lack of flexibility in the 2020 targets and in the plethora of different measures to reduce emissions – at the EU level there are targets on renewable energy, energy efficiency and transport fuels, as well as the EU ETS and proposals to link EU energy markets. Then at national level, each country has its own renewable energy support scheme and market structure, which can often work in conflict with each other and which make it harder to create a single energy market.
It also reflects the alarm of European policymakers at the increasing difference between Europe’s energy costs – and therefore the competitiveness of European manufacturers – and its rivals’, particularly the US, where prices have been driven down by the shale gas and oil boom. And finally, it is the opening gambit in the run-up to the 2015 UN climate talks, which are meant to come up with an agreement that all countries will commit to reduce their GHG emissions – not just the industrialised countries, as is now the case.
Predictably, renewables companies and green groups were unimpressed, saying that the proposals fail to push for the targets climate science suggests are necessary, with the European Wind Energy Association calling the package weak and Greenpeace branding it “toothless”.
Meanwhile, and equally predictably, BusinessEurope, which has long argued against ambitious targets, warned that “the overall level of ambition for a 2030 greenhouse gas reduction target is only realistic if a binding international climate agreement can be concluded in 2015. We urge the European Commission and the European Council to make sure that Europe will not be once again a lone frontrunner without followers”.
However, many in business cautiously welcomed the package and the increased flexibility it allows countries in choosing how to cut their emissions. Katja Hall, chief policy director of UK business lobby the CBI said: “This package puts us on the right path to delivering a competitive, low-carbon future. It’s important that member states have flexibility to decarbonise in the most cost-effective way.”
But others pointed out that the Commission announcement was the very least Europe can to keep efforts to tackle climate change on track. “The European economy is on track for a 32% CO2 reduction by default,” said Martin Schoenberg, head of policy at Climate Change Capital, the environmental investment management and advisory group, while
Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change, said: “A 40% emissions reduction target is the minimum necessary to keep Europe on course for a low-carbon economy.” She added that, to be effective, the proposals must be adopted quickly to give investors the certainty they need to commit their money to new projects.
The other major worry is that the announcement falls short of what the science says is required. As Jennifer Morgan, Director of the Climate and Energy programme at the World Resources Institute, says: “This is a critical moment, and year, for climate action. The science behind climate change is clear and irrefutable. Countries should be looking to raise their level of ambition to reduce emissions and expedite the shift to clean energy.
“The [EU] proposal does not yet ensure a clear pathway to a low carbon economy, nor is it clear that the Emissions Trading System reforms will create a high enough price on carbon to shift away from carbon-intensive sources of energy. WRI’s analysis finds that binding national targets and policies are required to drive further renewables development. The European Commission’s proposal replaces national targets with a regional target – leaving implementation open to chance – a risky proposition as other countries forge ahead on renewables development.”
It is for this reason – and because binding targets can actually reduce the cost of financing renewable energy projects – that Germany, Denmark and others still want national targets. The absence of a mandatory target for renewable energy was widely seen as a victory for the UK, whose energy and climate minister Ed Davey said that the proposals “provide the flexibility to tackle climate change in the most cost-effective way, so that consumers aren’t paying over the odds to go green” although it is hard to see how alternatives such as nuclear and carbon capture and storage are going to be any cheaper than renewable energy.
The UK’s slightly schizophrenic approach to climate change was encapsulated in Davey’s additional comment that Europe should be more ambitious if other countries come up with strong targets. “Britain has been clear that Europe must be ready to adopt a 50% target if the rest of the world is prepared to sign an ambitious global climate deal in 2015,” he said.
Taken in isolation, the measures look like a scaling back of the EU’s climate ambitions amid concerns about competitiveness. Given divisions between the Commission, the Parliament and member states; divisions within the Commission (between the climate and industry directorates) and divisions between member states, the measures were – depressingly – probably the best the Commission could do. If they provide the foundation for a strong energy efficiency target, a more robust and effective ETS, a pan-European energy market and a global climate change agreement, history will judge them kindly. But that is a very big “If”.