Antony Froggatt
Senior Research Fellow, Energy, Environment and Resources
Shane Tomlinson
Shane Tomlinson
Former Senior Research Fellow, Energy, Environment and Resources
The EU’s climate and energy package represents an important step ahead of a potential global deal next year in Paris. But a disappointing approach to energy efficiency and uncertainty over governance threatens to undermine delivery.
German Chancellor Angela Merkel talks with European parliament president Martin Schulz during an EU climate summit on 23 October 2014. Photo by Getty Images.German Chancellor Angela Merkel talks with European parliament president Martin Schulz during an EU climate summit on 23 October 2014. Photo by Getty Images.

The European Union has reached agreement on its 2030 climate and energy package in preparation for the next major international climate summit in Paris in December 2015. In the agreement member states have signed up to reducing greenhouse gas (GHG) emissions by at least 40% by 2030 – compared to 1990 levels. Currently emissions are approximately 20% below 1990 levels and so the 2030 target represents a continuation of current decarbonization trends, but it is below the rate of reductions required to meet the longer term objective of cutting emission by 80-95% by 2050.

However, the overall 40% reduction will still drive structural changes in Europe’s economy and the energy sector. This could and should be seen as an opportunity for the EU to become a world leader in the innovation of both the new technologies and systems, such as electricity storage, dynamic demand responses and the deployment of electric vehicles, all of which are experiencing a rapid increase in the size of their global markets.

But there are some concerns. The climate and energy package has put forward a collective target to double the current level of renewables so that it will provide at least 27% of energy by 2030. However, the target is binding on the EU as a whole but not on individual member states, which creates uncertainty and is further complicated by a lack of clarity on the enforcement mechanism, which remains vague. To avoid loss of investor and industrial confidence a transparent process needs to be rapidly developed that ensures compliance. 

The EU has also failed to give energy efficiency the priority it deserves, downgrading it to an indicative target (i.e. one that is aspirational only) of a 27% reduction in energy use from business as usual. However, this is equivalent to, at most, a 19% reduction from Europe's pre-recession trajectory. The weaker energy efficiency and renewable energy elements of the package reflects the resistance of a relatively small number of countries to further EU-wide legal commitments, either because they prefer market inducement or due to their reluctance to reform their energy sectors. The package also makes clear that the a reformed Emissions Trading Scheme will be the main instrument to achieve the GHG reduction target and proposes to accelerate the reduction of the cap on maximum permitted emissions. However, this would only kick in after 2021, meaning the scheme will remain relatively ineffective for at least another five years. 

The crisis in Ukraine and the potential implications for security of supply once again highlights the importance of both domestic energy production and common European approaches to energy suppliers. Every 1% of energy saved across the EU reduces gas imports by 2.6%, and a stronger target would do more to reduce dependence on Russian gas imports. The EU’s failure to adopt a more far reaching and binding target on energy efficiency is a missed opportunity given that it is one  of the only approaches that delivers on the three pillars on energy policy, namely environmental protection, competitiveness and security of supply, simultaneously.

It is important to note the progress that the EU has made in both meeting its climate targets over the last decade and the impact that this has had on its other energy policy objectives. Currently, the EU’s 2020 target for reducing GHG emissions by 20% has or is very close to being met, in part due to the economic downturn, but also due to efficiency, renewable energy and changing industrial patterns and technologies. Furthermore, the use of renewable energy is now estimated to save around €30 billion per year in imported energy, improving balance of payments and improving security of supply. Likewise improvements in energy efficiency have been shown since the turn of the century to have contributed to a 1% annual reduction in energy consumption in the EU.

But the EU is not alone in preparing national carbon reduction targets for the UNFCCC conference in Paris 2015. Both China and the US, the world’s first and second largest emitters, are preparing their own emission reduction plans. China announced in September that it would put forward a new target for the peaking of its carbon dioxide emissions as early as possible. It is suggested that this might be as early as in 2025, with the potential for peak coal use coming even earlier in 2020. The US has proposed to set limits on the emissions from new coal-fired power stations and a 30% reduction in US power sector emissions by 2030 (relative to their 2005 baseline), and President Obama is expected to go further with new climate measures next year.

In the year ahead all countries that are party to the UNFCCC are expected to put on the table their national carbon abatement plans for 2030.  Some will be conditional upon further international assistance and commitments. The package agreed by Europe has scope to respond to increased efforts by other countries. This could include increasing the EU’s own domestic target (currently framed as ‘at least 40%’) or through international offsets and climate finance. How the EU responds to other countries efforts will be a test of its global leadership on climate issues.

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