As sign-off nears for the EU 2030 climate and energy package, “flexibility” measures could turn 40% emissions cut into 26%
By Megan Darby
The European Commission has been consistently plugging a trio of 2030 climate goals for months it describes as “ambitious but achievable”.
The bloc is set to cut greenhouse gas emissions 40%, get 27% of energy from renewable sources and improve energy efficiency 30%.
But as the sign-off date approaches, analysts say loopholes in the design could allow much lower emissions cuts – and Poland to build more coal plants.
A draft agreement seen by RTCC and dated 7 October leaves wriggle room for the commission to water down the carbon cutting commitments.
The text makes no mention of the potential to ramp up ambition in the event of a strong global agreement in Paris 2015 – an idea promoted by the UK government.
There is still time for member states to negotiate amendments before leaders finalise the agreement at a meeting 23-24 October.
Hot air bubble
While the headline carbon target of 40% may sound substantial, ramping up from 20% in 2020, Carbon Market Watch says the reality will be weaker.
Its analysis shows that, depending on the details of the package, the EU could get away with emissions just 26% lower than the 1990 baseline.
The exact figure depends on how much credit for pre-2020 emissions cuts member states are allowed to carry over to the next decade.
The think-tank estimates that by 2020, the EU could build up a surplus worth 3.9 billion tonnes of carbon dioxide emissions.
This is down to a mix of low initial ambition, a slump in demand following the financial crash and the availability of cheap international carbon offsets.
“It is not the result of good early action, it is the result of hot air,” says researcher Femke de Jong.
Poland, which depends on coal for 90% of its electricity, is pushing for the right to bank any pre-2020 surplus. That would allow it to do less to tackle emissions between 2020 and 2030.
The country’s emissions fell substantially following the collapse of the Soviet Union, as heavy industry declined. But the government has dragged its feet on low carbon investment, preferring to protect its domestic coal sector.
In a joint statement with five other Eastern European countries last month, Poland said emissions goals must be set “realistically”.
Yesterday’s draft text hints that allowances could be carried over, with talk of “flexibility”, but stops short of explicitly endorsing such a move.
It says: “In order to ensure cost-effectiveness of the collective EU effort and convergence of emissions per capita by 2030, the use of flexibility instruments will be significantly enhanced.”
That passes responsibility for the detail on to the next cohort of European commissioners, due to start on 1 November.
Eastern Bloc countries are also demanding compensation from richer member states to help them meet their obligations.
They have some of the greatest potential for energy efficiency savings and renewable energy growth in Europe, but limited resources to invest.
A report by Greenpeace, CAN Europe and WWF says Europe will need to transfer some €3 billion a year from rich to poorer states to meet its climate goals.
The principle of redistributing wealth across the EU is generally accepted, with some €12 billion due to be transferred under the “effort sharing decision” between 2013 and 2019.
But the report found Poland had spent the vast majority (82%) of its share to date on fossil fuel capacity and just 8% on renewables.
A further €9 billion or thereabouts is being shared through the “solidarity mechanism”.
The commission recommends this be spent on measures to tackle climate change, but this is not enforced – and Poland plans to use its allocation to reduce the budget deficit.
If funds offered under the EU2030 package go to build new coal plants, it could seriously dent Europe’s credibility in international climate talks.
Negotiators are aiming to strike a global deal in Paris next year, and major emitters are scrutinising each other’s plans carefully.
Nick Mabey, chief executive of think-tank E3G, says the idea Europe would subsidise new coal on the system is “pretty impossible” for other European leaders.
“It would require the UK taxpayer to illegally subsidise new Polish power stations,” he adds.
At issue is not just the volume of emissions from Europe, but how consistently it is investing in low carbon infrastructure.
“It really matters that we can tell this story that Europe is on a structural path to a zero-carbon energy economy,” says Mabey.
“That’s what Europe is going to be arguing for as a goal in Paris, and the irony is that trajectory would be a more efficient and productive trajectory than the one we’re going on at the moment.”
Poland is not the only country to rely on coal. Germany and the UK, for all the green rhetoric, continue to get much of their power from coal.
Coal generation accounts for 20% of EU emissions and is roughly twice as dirty to burn as gas.
When the EU emissions trading system (ETS) launched, it was thought the carbon price would make it too expensive to burn coal.
That has not happened, with a chronic oversupply of carbon permits pushing the price down.
The commission is proposing reforms to make the ETS more effective. These involve withholding surplus allowances under certain conditions, but do not offer a permanent fix.
Carbon Markets Watch says the excess permits should be cancelled altogether.
European legislation to limit nitrous oxide (NOx) emissions was also expected to force coal plants to shut down.
Instead, it prompted innovation in technology to scrub NOx from coal fumes, making it cheap enough to keep coal on the system.
The UK has even allowed coal generators to bid for “capacity payments” to stay online, in an effort to secure energy supplies.
This amounts to a subsidy for old coal, think-tank Sandbag says.
Dave Jones, policy analyst at Sandbag, says: “Without ETS reform, the EU carbon price is likely to continue its slide towards zero, so it will not act as a brake for coal generation which is what most policy-makers are assuming.
“The situation is being worsened in some countries such as the UK by capacity mechanisms, which are giving additional revenue streams to keep old power stations alive.”
While many of these issues can be thrashed out in the legislation to follow, the top lines must be agreed this month if the EU is to have robust plans to take to Paris.
And Portugal is threatening to derail the entire project over an element of the plan that has had a relatively low profile until now.
Along with Spain, it wants to build gas and electricity links with the rest of the continent, through France.
E2G’s Jonathan Gaventa says: “For Spain and Portugal particularly, it is one of the key components they have been pushing for. It seems to be one of the real outstanding issues that is still being fought over.”
Portugal’s environment and energy minister, Jorge Moreira da Silva, is promising to block the package unless it includes a binding interconnection target for 15% of national capacity.
The draft text includes a non-binding target, but that is not good enough for Portugal, which has been let down before.
The existing link across the Pyrenees is less than 2% of capacity, despite a goal set in 2002 to make it 10%.
The Iberian countries argue these links will help other countries access their abundant renewable power and gas from import terminals.
France has resisted, raising concerns about wind and solar generation from the peninsula causing problems for its power grid.
Unlike the nuclear fleet that provides most of France’s energy, wind and solar generates intermittently.
That affects the market, with power prices dropping to zero at times of low demand and high generation. In 2012, Spain had 44 hours of zero power price, according to consultancy Sia Partners.
A power link would force France to deal with “what they see as Spanish volatility”, says Gaventa.
From the climate perspective, Poland’s objections are the bigger issue.
Prime minister Eva Kopacz has also raised the prospect of a veto, albeit on more mutable grounds.
She will not accept a package that would put up Polish power prices, according to Polskie Radio.
In practice, this will mean pushing for exactly the loopholes identified above, so Poland can continue to exploit cheap coal.
But there is a political reason to believe Poland will not, ultimately, play hardball.
If it wrecks the consensus, former Polish prime minister Donald Tusk will have to clean up the mess in his new role as European Council president.
National negotiators have two weeks to get an acceptable outline deal before the heads of state meeting. But that is just the beginning.