EC's Climate, Energy Package Accepted by European Parliament
December 19, 2008 // Published as a news service by IHS
On Dec. 17, the European Parliament voted to accept an amended version of the climate and energy package proposed earlier this year by the European Commission (EC). The vote finalized a deal that will help the European Union (EU) increase energy security and transform itself into a low-carbon economy.
Fully in line with the EC's proposals in January 2008, agreement was reached on legally binding targets, by 2020, to cut greenhouse gas emissions by 20%, to establish a 20% share for renewable energy and to improve energy efficiency by 20%.
Deals were hammered out on revisions to the EU's Emissions Trading Scheme (ETS), the distribution of the reduction effort outside of the ETS among EU member states, and a legal framework for environmentally safe carbon capture and storage (CCS), as well as on the related proposals for CO2 emissions from cars and fuel quality.
As the first region in the world to commit to such far-reaching and legally binding emission reductions, Europe is leading the fight against climate change. The EC says the Dec. 17 vote is an important contribution towards an ambitious international climate agreement to be reached in Copenhagen by the end of 2009.
EC President José Manuel Barroso said, "The EU's climate and energy package is part of the solution, both to the climate crisis and to the current economic and financial crisis. It represents a green 'new deal' which will enhance the competitiveness of EU industry in an increasingly carbon-constrained world. Moving to a low-carbon economy will encourage innovation, provide new business opportunities and create new green jobs."
Stavros Dimas, EC environment commissioner, said, "Today's decisive votes send a clear signal to our international partners about our determination to address climate change and should convince them to follow our example. This package the concrete measures the EU needs to deliver on its target to reduce greenhouse gas emissions by 20% by 2020. And it reconfirms our commitment to moving to a 30% reduction as part of a comprehensive international agreement when other developed countries undertake similar commitments."
Andris Piebalgs, EC energy commissioner, said, "I am very pleased with the outcome. There has been some tough negotiation and some long nights of debate, but the result is a truly remarkable piece of legislation which puts the EU on track towards a low-carbon energy economy in which renewable energy sources play a key role."
Environmental integrity maintained
The new agreement maintains the architecture of the proposals put forward by the EC on Jan. 23, 2008. At its heart are three commitments to be met by 2020: to reduce greenhouse gas emissions by at least 20%, to ensure that 20% of final energy consumption is met with renewable sources and to raise energy efficiency by 20%.
The package also contains a clear offer to go further and commit to a 30% cut in the event of a satisfactory international agreement being reached.
The vote is a historic agreement on long-term binding emission reduction targets for all sectors of the economy. No other group of countries anywhere in the world has agreed on similar targets in the run-up to 2020.
Binding targets for renewable energy
The directive sets legally binding targets for each EU member state in order to reach the overall EU target of a 20% share of renewable energy in 2020. It creates cooperation mechanisms so that member states can achieve the targets in a cost-effective way.
It also removes administrative barriers and other burdens, confirms the 10% target for renewables in transport and fixes biofuels sustainability criteria to ensure that only biofuels that have no negative environmental impact are supported.
A more ambitious Emissions Trading Scheme
The extended EU Emissions Trading Scheme is the world's largest greenhouse gas emissions trading system and could now serve as the nucleus of a much larger global carbon market. The improvements mean that, from 2013, an emissions cap will be set at the EU level and cut each year to reach a 21% reduction in 2020.
The agreement will increase the level of auctioning in the system. Whereas there is an option for transitional free allowances that most new member states could apply for, the rule for power companies will be that they have to buy allowances.
Industry installations not subject to carbon leakage will be required to buy 20% of allowances in 2013, rising to 70% in 2020 and 100% in 2027.
Operators at risk of carbon leakage that invest in the most efficient technologies will receive allowances for free in accordance with a benchmark based on best available technology. Overall, more than 50% of allowances will be auctioned from 2013, and the proportion will rise each year.
The revised ETS allows the use of offset credits from outside the EU, but this amount remains below half of the reduction effort in order to ensure a sufficient level of emission reductions inside the EU.
Member states should now use at least half of their auctioning revenues on measures to combat climate change.
A fair contribution from all member states
The agreement also has implications for small-scale emitters in such sectors as transport, buildings, agriculture and waste, which represent some 60% of total greenhouse gas emissions in the EU. By 2020, emissions from these areas are to be reduced by an average of 10% compared to 2005, shared between member states according to differences in gross domestic product per capita.
The agreement maintains the national targets for member states, together with a linear legally binding trajectory for the period 2013-2020, with annual monitoring and compliance checks. Additional flexibility has been added to the trajectory.
A framework for carbon capture and storage
A directive on geological storage of CO2 provides a legal framework to manage possible environmental risks and liability issues.
The reinforced carbon market will provide a long-term incentive for investment, while up to 300 million allowances in the new entrants reserve under the EU ETS will be made available to stimulate the construction and operation of up to 12 commercial demonstration projects to capture and store CO2, and for innovative renewable energy demonstration technologies in the EU.
Binding targets for emissions from the new car fleet
Agreement was also reached on the proposal to set emissions standards for new passenger cars, which is an important tool to assist member states in meeting their emissions targets in the non-ETS sectors.
The new legislation (along with complementary measures, such as the fuel quality directive) will set binding emissions targets to ensure that emissions from the new car fleet are reduced to an average of 120 grams of CO2 per kilometer.
Although the agreed upon legislation provides for a phasing-in of the targets over the period 2012 to 2015, the overall ambition level of the EC's proposal is maintained through the setting of a stringent long-term target of 95 grams of CO2 per kilometer by 2020. This proposal will, on average, contribute about one-third of the reductions required from the non-ETS sectors.
The agreement on the fuel quality directive will place an obligation on suppliers to reduce greenhouse gases from the entire fuel production chain by 6% by 2020. A review in 2012 will consider increasing the ambition level to a 10% greenhouse gas reduction by 2020 through the inclusion of international projects and CCS, as well as electricity for cars.
A message to rest of the world
The adoption of the package means that the EU now has a strengthened set of far-reaching legislative tools to share with the rest of the world.
The next step will be the technical implementation of the new agreement, including the establishment of rules for auctions, determining the benchmarks for free allocations and preparing regulations on reporting.
Further adjustments will also be needed when an international agreement on climate change is reached in Copenhagen in 2009.
The revisions render the EU's ETS fit to go global and constitute an important building block for the establishment of a truly global carbon market.
Further information
For more information on the amended climate and energy package provisions, see:
Source: European Commission.