The European Commission has recommended a low greenhouse gas reduction target for 2030, because it says that higher targets would hurt the European economy. But according to its own impact assessment, the opposite is true, writes Brook Riley of Friends of the Earth Europe. According to Riley, the Commission’s impact assessment shows that a more ambitious target has a more positive impact on GDP than a less ambitious one.
To the disappointment of those who are fighting for a strong climate policy, the European Commission in its climate and energy package published in January, proposed a greenhouse gas emission reduction target of just 40 percent by 2030. This is likely to be officially adopted by the European Council later this year.
As many NGO’s have pointed out, a 40 percent reduction is out of line with the climate science. They say at least a 55-60 percent cut is necessary. As my own organisation, Friends of the Earth Europe, argues, the 40 percent target assumes a fifty-fifty chance of exceeding devastating levels of global warming. In addition, this target will hardly provide a solid foundation for a meaningful result at the crucial 2015 global climate talks in Paris.
However, according to the Commission, a 40 percent target is the best that can be achieved in the EU at this moment. The reason for this modest ambition is economic. As Commission President Barroso pointed out when he presented the proposals, 40 percent was the most “cost-effective option” according to the EU”s own low-carbon roadmap.
When discussing the issue with Commission officials, they keep repeating the same argument: “The EU needs to balance environmental protection with competitiveness,” they say.
The problem with this argument, however, is that it is completely false. It is false even according to the Commission’s own figures.
First of all, in its Impact assessment accompanying the communication ‘a policy framework for climate and energy in the period from 2020 up to 2030’, the Commission notes (on page 81 and in table 16) that a 40 percent greenhouse gas reduction leads to a loss of between 0.1 percent and 0.45 percent of GDP. But the Impact Assessment then goes on to state that bigger emission cuts (and targets to save energy and increase the share of renewables) have a positive effect on GDP!
Table 18 on page 82 of the Impact Assessment shows that the so-called GHG45 EE RES35 scenario, which assumes a 45 percent reduction in emissions (the most ambitious scenario the Commission considered) actually leads to a 0.53 percent growth of GDP:
Secondly, officials working on the dossier have admitted that the Commission has only looked at the costs of the emission reduction scenarios for 2030, rather than the balance of costs and benefits.
Thus, for example, health benefits due to reduced air pollution were not taken into account. The economic impacts of climate change – such as flooding and loss of food production – were not even modelled. This made the 40 percent scenario look cheaper than more ambitious policies.
Thirdly, to ‘justify’ the 40 percent target very high costs for energy efficiency were assumed (the Commission’s more ambitious 2030 scenarios rely heavily on reducing energy use). This was done by manipulating the discount rates. A high rate reflects high risk and high costs. It therefore scores badly in the Commission’s cost-is-everything method of selecting the optimal 2030 scenario.
The Commission used a discount rate of 12 percent for the industry sector, 9 percent for the power sector, 8 percent for the public sector, 11 percent for the tertiary sector, but an unjustifiably high 17.5 percent for private buildings, where most of the EU’s energy savings potential is concentrated.
The result: the more ambitious 2030 scenarios with high amounts of energy efficiency had no chance of competing with the 40 percent emissions-only scenario.
Meanwhile, the Commission itself has carried out analysis showing that a 17.5 percent discount rate is too high. This analysis shows that ambitious targets for energy efficiency would mean greater involvement of energy service companies (ESCO’s), which would bring the discount rate down to around 10 percent. (An ESCO helps households by raising awareness of the benefits, providing up-front financing, helping resolve bureaucratic issues, etc).
The two following extracts are from pages 74 and 165 of the 2030 impact assessment:
But this analysis was ignored. The Commission persisted with the 17.5 percent figure when calculating the costs of each scenario (see page 74):
So why would the Commission ignore its own analysis and adopt a lower target than is needed?
What I have been told by senior officials is that 40 percent is the best the EU can do in today’s political climate. “You need to get real,” I was told when I pointed out that a higher target is called for.
In other words, President Barroso and many of the Commission officials working on the dossier are being defeatist. They would rather propose a weak 40 percent target, which they think member states are more likely to support, than fight for action on the scale genuinely needed.
Barroso may also have an eye on his legacy. His mandate runs out in October, and he would no doubt like to have a deal made under his presidency.
Opposition from the heavy industry and fossil fuel lobbies is another factor. Markus Beyrer, the director general of BusinessEurope, declared last year that “climate targets are too driven by climate”. His organization has repeatedly (and without evidence) claimed that ambitious 2030 climate and energy policies will force industry to leave Europe. Commission officials tell me they need to take these arguments into account, even if the threat is imagined.
But I have been told by sources inside the Commission that there is another factor at work, namely opposition from those in the Commission’s climate department who strongly support a central role for the EU Emissions Trading System (ETS) in European climate policy. Apparently they believe the EU will never agree to more than 40 percent emission cuts. They desperately want the ETS – which they created – to be a success. They therefore want to lock in the 40 percent emissions-only scenario (i.e. with no targets for energy efficiency and renewable energy, as proposed by the Commission), and ensure a leading role for their brainchild.
Just a few days ago, I learnt that the Commission’s energy department, which is currently modelling the EU’s energy savings potential for 2030, has been told that it must not recommend scenarios which imply more than 40 percent emissions cuts.
The Commission is setting artificial limits on climate and energy policies, then spinning its proposals as ambitious and cost efficient. People need to know there is nothing legitimate about the Commission’s 40 percent proposal. It’s the worst possible basis for a common EU position on climate action.
But it’s not too late to turn things round.
Commission decision makers have two options. They can bury their heads in the sand and ignore all the evidence against 40 percent (and in favour of a higher target). But this is risky: the press is catching on and the Commission will rightly be accused of sabotaging the fight on climate change.
Or they can accept the facts and find a face-saving way to improve the 40 percent proposal. The Ukraine crisis – and the request from national governments to look into ways to reduce dependency on Russian oil and gas – may provide a way out. As you’d expect, the Commission’s impact assessment shows that increased climate action (i.e. 45 percent emission cuts coupled with energy efficiency and renewables) leads to lower net energy imports and lower net gas imports than the 40 percent reduction target (see page 137).
For this to work, the Commission must scrap its flawed analysis and assess the EU’s real energy savings potential. In February, the European Parliament showed the way by recommending far-reaching energy savings policies which would mean up to 54 percent greenhouse gas cuts. Everything is still to play for, providing the Commission starts fulfilling its duty to act in the long-term interests of Europe and its citizens.
Brook Riley, climate and energy campaigner at Friends of the Earth Europe
Mike Parr says
Good article by Mr Riley.
One wonders if the EC is pitching its impact assessment for the Booker prize (awarded for the best fiction). What follows addresses in more detail the issue of “cost of capital” wrt energy efficiency.
When I buy a house the interest rate (if I take out a mortgage) reflects, amongst other things, the security of the asset/land. Mortgage interest rates are, as a simple fact, lower than, for example, interest rates given to companies – reflecting the low risk. In the UK mortgages at the moment have interest rates in the range 2.1% through to 5.5%.
If I then want to, for example, renovate the house wrt energy efficiency I can take out an additional mortgage (at the rates mentioned above). This is the “cost of capital”. If I spend £10k on energy efficiency measures I would need to see at least a return of: £200 to £550 per year i.e. energy savings equivalent to this. In fact this is not unreasonable given an HH energy bill in the UK is around £1400/year.. Furthermore, energy efficiency improvements become part of the fabric of the building. The above example shows how important the cost of capital is.
The “rate of return” (or internal rate of return) is something quite different and corresponds to when the NPV of a project = 0. The failure of the EC to define the discount rate (is it cost of capital or IRR?) suggests:
a) people in the EC are economic simpletons (unlikely)
b) they are unfamiliar with discount cash flows, NPV and IRR (if this is the case – perhaps they need to be moved out of the jobs they are in?)
c) they have cobbled something together to fit the bill and may by accident win the booker prize.
Given Mr Riley’s comments, Point C seems very likely. The problem is, if this is the case then the European Commission & its Commissioners are KNOWINGLY LYING to member states and the European public. Tell me Jos (Del Boy) – you would not happen to be lying would you? Care to have a debate on the subject (discount rates) – in public?
Unpicking the 17% unravels the whole 2030 package. The devil in this case is the detail and all the imps appear to be in DG Clima.(tell me Connie – are you aware of this? – silly question – of course you are).
Jeffrey Michel says
Mr. Riley neglects to clarify why any EU greenhouse gas reduction target should be of significance for the progress of climate change and ocean acidification. Since Europe is responsible for about only a tenth of global emissions, a 40% reduction target is reduced to an insignificant 4% of delayed climate impact. Any coal or oil not imported by the EU due to decarbonization will also find its way to developing countries that are expected to buy European products. The EU automobile industry exports increasing numbers of excessively overpowered automobiles to such regions. A Porsche Cayenne has up to 38% more horsepower than a WWII Sherman tank. While it is encouraging that Friends of the Earth favors “more ambitious 2030 scenarios with high amounts of energy efficiency”, it fails to respond to everyday opportunities for demonstrating its convictions. Household power meters invented in the 19th century continue to impede responsive interactions with personal energy usage. A similar deficiency of perception is evident in the author’s call for “Commission decision makers” to “turn things round”. He apparently believes that the very bureaucrats responsible for fundamental blunders of climate policy remain best qualified to remedy them. The cultivated symbiosis between the Commission and its critics finally only serves to postpone a reckoning with the cumulative effects of fossil fuel usage that coming generations will be even less capable of reversing than mounting debt. New money can be printed, but not a new planet.
Mike Parr says
I agree with some of your comments Mr Michel & disagree with others. At a fundamental level, FoE and the other NGOs could leave the lobbying floor to the doorknobs in BusinessEurope (motto: we want Euro companies to waste money),… or not.
In terms of the trope “Europe and its emissions makes little difference” …. the Chinese keep pointing the finger at us and the USA (as an excuse for them to do little/nothing). There is also the aspect, if we develop RES & energy efficiency we could sell it to others, oh hang on … which company is the largest WT manufacturer in the world? Vestas…. gosh I wonder where they come from?
Where we converge is the Euro car manufacturers and the hypocrisy of allowing this lot to continue to produce cars such as the Cayenne (did you know that the Pajero is Spanish slang for “masturbator” – perhaps a reflection on types of people that drive such cars).
In the case of electronic energy meters (smart meters), the issue is the availability of info to people showing how much or how little they consume. This can be accomplished with a CT, wifi link and home display. Oddly, British Gas implemented just such a system (using AlertMe devices) and self reading each month of gas and elec meters. This led to participants (circa 40,000) saving around 12% on their energy bills. Given such circumstances questions to ask include: why did the NRAs not pick this up and mandate for all energy companies, or, why did not other energy companies emulate. I can give you some answers, but I rather think that due to lack of space Karel might cut me off.
As far as symbiosis (NGOs & EC) goes – I am certain that the NGOs would rather the problems they address did not exist, but they do , furthermore given the existence of orgs like BusinessEurope (prop: the Koch Corp) we need the NGOs as a counter weight.
Finally, I agree 100% with your final statement & have some most excellent ideas with respect to “new money”.
Brook Riley says
Thank you both for your comments.
Mr Michel: you ask why the EU’s greenhouse gas target should be of significance. My view is that other big emitters – the US, China… – will see the EU’s 2030 greenhouse gas target as a kind of gold standard. They’ll assume, or at least pretend to assume, that the EU’s number is very ambitious, and will almost certainly aim several notches lower. So the risk is that an inadequate EU target will bring about a chain reaction of even weaker targets from other countries.
As for the EU representing only 10% of global emissions, this is one of BusinessEurope’s standard excuses for delaying action on climate change. They claim there’s no point acting until other big emitters act as well. The thing is, BusinessEurope’s counterparts are making exactly the same point in the US and elsewhere. If we listen to them, we’ll never do anything.
Take Canada, which accounts for ‘just’ 2% of global emissions. Obviously, this doesn’t mean there’s no point in Canada taking action on climate change – for instance by moving off tar sands.
You say that if the EU doesn’t use oil, coal or gas, the stuff will simply go to other countries. I agree – it’s a real risk. That’s why, for instance, we’re trying to curtail the use of tar sands, and block fracking for shale gas. We’re also counting on the fact that renewables and energy efficiency will be recognised as cheaper than fossil fuels and nuclear.
As for my calling on Commission decision makers to turn things around, there are strongly competing interests within the Commission (and within each Commission department). At the moment the low ambition faction is winning – I’m hoping to reverse this. But yes, sometimes you have to wonder if the Commission will ever see the light, and it would be a big mistake for us to rely purely on lobbying the decision makers. We’re also working at national & local levels to get people more interested and involved in renewable energy and energy efficiency projects. As more and more people get involved, decision makers will start listening – just look at what happened in Denmark with wind energy.