How many decarbonisation targets does the EU need?

By Joseph Curtin

The European Commission is consulting on how to sustain decarbonisation momentum, and its leadership position on climate action beyond 2020.

Two broad opposing positions can be identified.

One broad coalition have expressed a preference for at least two legally binding targets – for emissions reductions and renewables, with many also supporting a legally binding target for efficiency.

They including the Dutch and Danish Governments, the Energy and Climate Commissions within the European Commission, IRENA, several NGOs and renewable and efficiency industry lobby groups.

Some among them argue that three targets would somehow deliver all of the EU’s (somewhat contradictory) objectives in this space (see table below).

Others make a somewhat more nuanced argument that carbon pricing cannot deliver sufficient energy efficiency (because of the multiplicity of market failures) or renewables deployment (because of inertia in energy systems planning).

Even if competitiveness is damaged in the short-term, they would argue that in the long-term these targets will deliver lower energy costs, and of course a sustainable energy future.

EU member states are divided on what should be included in the bloc’s new clean energy targets (Pic EU)

Another broad coalition, including Polish and UK Governments, the Commissioners for Industry and Budget within the European Commission, and other industry representative groups, are opposed to legally binding targets for renewables and efficiency.

The Polish Government even believes that there should be no emissions target, at least no until after a global deal (in 2015?).

It argues that the EU ETS is being undermined by overlapping renewables and energy efficiency targets. Why not set a target for emissions reduction, including a tight EU ETS cap, and let the market decide how to deliver (renewables, energy efficiency, nuclear or carbon capture & storage)?

It also argues that renewables are rapidly becoming competitive with fossil fuels, and a carbon price alone (delivered by an effective ETS) should allow these technologies to stand on their own feet by 2020.

The EU consultation document states that the 2030 framework must “draw on the lessons from the current framework: what has worked, what has not worked and what can be improved”.

With this in mind the table below looks at the stated objectives of EU policy, and relates them to the instruments (including targets), which have been deployed to achieve these objectives.

The markings ✔ and X are used in cases where there is evidence to suggest that the instrument has/has not played a part in delivering an objective. Judgments are my own and are somewhat subjective.

This analysis in the first place highlights the sheer complexity of how objectives relate to means (instruments and targets). It is important to be aware of simple narratives within this context, and that trade-offs must be acknowledged where they exist. Not everyone involved in the debate plays by these rules.

Second, it is challenging to assess the extent to which mitigation targets themselves, and the EU ETS, have performed in meeting their primary objectives. The multiplicity of instruments makes the outcome (reduced emissions or increasing energy security) challenging to ascribe. Assessments have ascribed a marginal impact to ETS, at best.

Third, the controversial renewables target has been highly effective in achieving its primate objective: the effective deployment of renewables.

It is also the underlying factor behind rapidly falling deployment costs globally for PV and on-shore wind; and has enhanced energy security and reduced emissions.

Job creation, however, has not significantly occurred within the EU (something which there are attempts to address), and the costs of deployment has been significant in countries such as Germany and Italy (where feed in tariff have been victims of their own success to some extent).

Combined with the shale gas boom in the US, competitiveness of the EU is therefore threatened, at least in the short-term. Some worry that a further renewables target could impose further costs.

Fourth, it is far from clear that the legally binding target for renewables in transport, despite success in deploying biofuels, has achieved anything from an environmental perspective; although energy supply has been diversified, thereby enhancing security.

Fifth, energy efficiency policy has delivered cheap energy savings across many countries, although progress has been slower than hoped for. It is unclear, however, if it is the targeting itself, or discrete interventions which address barriers to investment which are more effective (targets and subsequent regulations are probably related in any case).

The Energy Efficiency Directive and individual regulations (see below) will certainly continue to drive investments in energy efficiency.

Last, the role of discrete regulations has and will continue to have a profound impact. Regulations for vehicles, for example, continue to drive innovation and reduced emissions. To take another example, an obscure new regulation setting efficiency standards for boilers has the potential to be as significant in its impact as the EU ETS in the period to 2020!

Final analysis

What does all of this tell us about targeting 2030?

It is clear that competitiveness and jobs are increasingly prominent considerations in policy making within the EU.

The rejection of the ETS backloading proposal, for example, suggests that a cost-effective policy mix is increasingly necessary to ensure continued support for climate protection. Understanding the potential trade-offs with energy and climate policy is therefore of growing importance.

A less complex and overlapping set of targets could perhaps offer some benefits, with discrete regulatory initiatives introduced in a targeted manner.

The caveat being that a stretch emissions reduction target and a reformed ETS are essential in this scenario. Given the rapid march of many renewables to grid parity, the costs of additional targets may well outweigh the benefits.

Joseph Curtin is Senior Research Associate with the Institute of International and European Affairs. He has worked for the OECD, NESC (an advisory body to the Irish Prime Minister), and the Sustainable Energy Authority of Ireland, on climate and energy policy-related issues.

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