Thirteen member states want the EU to agree on the broad outlines of a 2030 climate and energy policy as soon as possible. But at least four call for the EU not to “rush” into anything – they argue all decisions should be put on hold until UN climate talks in Paris in 2015. That was the main outcome of the EU environment and energy ministers meeting this week. European Heads of State and government will meet in Brussels on 20-21st March to talk EU climate, energy and industrial policy in 2030, but it looks unlikely that they will be able to come to an agreement.
There are those who argue that clarity over a 2030 EU climate and energy policy is urgent and essential, for business (to provide certainty for investments) and international influence (via the UN climate talks). They say that early decisions on an ambitious climate and energy policy are good news for competitiveness, jobs and climate change.
And there are those who say the opposite: that the EU will endanger all of the above if it plows on ahead, alone, to cut greenhouse gas emissions by at least 80% by 2050. That this will drive investments out of Europe and leave the bloc with no cards to play in Paris in December 2015. Climate change, they argue, will benefit little from the EU’s effort to cut its 11% share of global emissions.
These very different points of view rang out loud and clear when EU environment and energy ministers met in Brussels on Monday and Tuesday this week. These were member states’ first debates on European Commission proposals from 22 January for a 2030 climate and energy policy. The idea originally was for European leaders to endorse the Commission’s plans at their spring summit on 20-21st March. That now looks very unlikely. The debates saw two groups pitted against each other: a 13-member “Green Growth Group” versus a Central and East European bloc called the “Visegrad Group” (or V4).
Sweden: “The effect of climate and energy policy [on energy prices] is small and there is no real evidence of carbon leakage”
Green growth group
Thirteen member states – Belgium, Denmark, Estonia, Finland, France, Germany, Italy, the Netherlands, Portugal, Slovenia, Spain, Sweden and the UK – issued a statement on Monday calling on European leaders to “agree the core elements of a climate and energy framework for 2030” at their March summit. This includes agreeing on a 40% greenhouse gas emission reduction target and a binding EU-level 27% renewables target, they specified. They also backed strengthening the EU Emission Trading Scheme (ETS) and addressing energy efficiency as part of a 2030 framework.
An ambitious climate policy goes hand in hand with increased competitiveness insist these countries, united in a “Green Growth Group”. “The effect of climate and energy policy [on energy prices] is small and there is no real evidence of carbon leakage,” said Sweden on Tuesday.
Ed Davey, UK climate and energy minister, said: “Energy prices and competitiveness are not a climate issue but a North American shale gas issue.” In a turnaround from the UK’s previous opposition to any kind of renewables target, the UK can now support an EU-wide target of 27%, he added – provided it is not translated into national targets. Many member states echoed this sentiment. Some spoke out in favour of 30%; some still want no renewables target at all; none called for the 27% to be translated into binding national targets.
United Kingdom: “Energy prices and competitiveness are not a climate issue but a North American shale gas issue”
What member states have most problems with is the Commission’s plan for a new governance system to supervise the 27% target. It is proposing that member states draw up national energy action plans – which would cover everything from emission reductions to renewables to security of supply – for Brussels to approve through an iterative process à la the new bottom-up approach to the UN climate talks. The Netherlands summed up member states’ polite rebuttal nicely: “The Commission shouldn’t be approving national energy mix programmes.” Energy mix remains a national competence and most member states are very wary of the Commission extending its powers into this field.
EU energy commissioner Günter Oettinger responded: “We do need some kind of European governance… otherwise we could have 28 national policies that do not make it possible to achieve [the 27% renewables target]”. In other words, Brussels is requesting authority in an area where it doesn’t have authority. Perhaps this is why Belgium called the Commission’s proposals to achieve the 27% renewables target “unconvincing”.
The Netherlands: ‘The Commission shouldn’t be approving national energy mix programmes”
Closely tied up with the renewables discussion is state aid. A separate set of proposals for new state aid guidelines for energy and environment are due for adoption in July. These set out reforms to make renewables support schemes more competitive and permissible exemptions for industry from green levies (a form of support). On Tuesday, many member states spoke out in favour of the latter, notably Sigmar Gabriel, Germany’s new energy minister, who pointed out that the 27% renewables target would not do anything to reduce energy prices in Europe (although Germany supports it and indeed the right of member states to go further).
“We need a debate over how we can use state budgets to reduce the burden on industry,” Gabriel said. In the short term, this means relief from green levies and taxes, he added; in the long term, investments in energy efficiency. Oettinger acknowledged a need for both renewables subsidies and industrial relief from them: “Energy policy must be more than competition law.” He called for exemptions lasting more than a decade: “Ten years relief is not enough of an incentive to build new aluminium plants.” Germany is currently facing an investigation from the Commission into its exemptions for industry from green levies.
EU Commissioner Günter Oettinger: “We do need some kind of European governance… otherwise we could have 28 national policies that do not make it possible to achieve [the 27% renewables target]”
Efficiency, grids and transport
There was widespread support for more energy efficiency as a no-regret option. Denmark and Belgium explicitly called for a binding EU energy efficiency target for 2030. But efficiency also won praise from crisis-affected nations seeking jobs and growth (e.g. Greece) and many European governments looking to reduce energy bills for industry and households. Oettinger has promised fresh proposals on efficiency in the autumn, after a review of the 2012 EU energy efficiency directive this summer.
Member states were also unequivocal in their call for more emphasis on grids to connect up European energy markets. Spain and Portugal led this charge, pointing out that the interconnection capacity of the Iberian Peninsula with the rest of Europe is just 1-2% – far off the 10% interconnection target set in Barcelona back in 2002. They want interconnection targets – 20% for 2020 and 25% for 2030, suggested Portugal. Several countries, including Ireland and Latvia, also pointed to the potential for trade in renewables. A pending judgment from the European Court of Justice may force member states to open the subsidy gates to non-domestic renewables producers.
Transport in contrast, was relatively absent from this week’s debates – only the Netherlands and Belgium called for the fuel quality directive to be extended beyond 2020 to help green transport (it currently requires fuel suppliers to cut emissions from road fuels by 6% by 2020 relative to 2010). A few others – notably Finland and Italy – called for advanced biofuels to be incentivized in a 2030 framework. Slovenia pointed out that half of its greenhouse emissions currently come from transport (most of it transit) and suggested a European solution was critical. But if the Commission has so far left transport relatively untouched, most member states seem happy to leave it that way.
Germany: “We need a debate over how we can use state budgets to reduce the burden on industry”
The Commission’s headline target in its 2030 proposals is the 40% greenhouse gas emission reduction target for 2030. But despite the Green Growth Group, not everyone is convinced. Oettinger himself pointed out that it will require the EU to do in 10 years (2020-30) what it has achieved in 30 years (1990-2020). And as Poland pointed out on Tuesday: “There is no doubt that every decision on a policy framework for 2030 should be unanimous.” Meetings of European heads of state and government take decisions unanimously or not at all.
What’s the problem? “It is crucial to know the real cost of a new climate and energy policy,” said the Czech Republic. Members of the Visegrad Group (V4) – Hungary, the Czech Republic, Poland and Slovakia – point out that “the effects of rising energy prices… are significantly higher in member states with GDP below EU average” and completing the internal market “would not automatically mean the decrease of retail [energy] prices”. Some, such as Hungary, Slovakia and indeed France, spoke out in favour of regulated prices to protect vulnerable consumers. Others, such as Finland and Cyprus, support the Commission’s plea to use social, not energy, tools to address this. Regulated prices distort the EU internal energy market and the Commission longs to phase them out.
The V4 plus Bulgaria and Romania want national impact assessments of the 2030 proposals. Along with most other member states, they welcome the Commission’s plan to introduce new indicators for competitiveness and security of supply, but want to know how these will be used. “Fair” effort-sharing is critical for these member states to sign up to a 40% greenhouse gas emission target for 2030. And that 40% should be conditional on a global climate deal. They want “intra-European flexibility mechanisms” for the non-ETS sector; in the ETS, as Oettinger said “you can’t really talk about burden-sharing” since it’s an EU-wide market. The V4+2 see “no need” for any legally-binding renewables or efficiency targets.
Czech Republic: “It is crucial to know the real cost of a new climate and energy policy”
Innovation as solution
Italy was one of the only member states to explicitly point to innovation as a potential solution in the debates on Tuesday. But that may be exactly where the answer lies: innovation in policy-making, communication and above all vision, as well as technology.
The Green Growth Group brings together forward-thinking businesses as well as policymakers. It is trying to understand the macro-economics of the climate, energy and industrial policy debate and more specifically, how energy-intensive industries can be part of European decarbonisation. “Industries such as metals, paper, cement, chemicals and ceramics are engaging in a constructive debate with us on this,” says Sandrine Dixson-Declève, Director of the Prince of Wales’s EU Corporate Leaders Group and Executive Director of the Green Growth Group.
The Group’s broadening focus will soon take in power producers – from utilities to oil firms – and will tackle the financing of decarbonisation. All this with a view to helping the EU craft a united position on 2030 in the run-up to Paris in December 2015.
Everyone wants a policy that delivers on climate change, energy security, affordability, sustainability and competitiveness. Policymakers are under pressure to act. But as Austria said on Tuesday, the goal is not another Lisbon Strategy: fine-sounding words but nothing gets done. This means divisions will have to be overcome. If the EU’s leaders are unable to do so on 20-21 March, another summit in June offers a second opportunity – still ahead of Ban Ki-Moon’s global climate meeting in New York in September. But there are chasms to cross between now and then.
Join the Energy Post-Shell debate on “2030” in Brussels!
On the eve of the EU Leaders summit on 20-21 March, Energy Post is hosting a top-level conference in Brussels, sponsored by Shell, and featuring the new Director-General of Energy at the European Commission, Dominique Ristori: “Putting innovation at the heart of 2030”.
This meeting will offer a great opportunity to debate the EU’s energy and climate strategy with EU policymakers. For more information, please follow this link.