The results of the European Council’s proposals on energy efficiency are in: they will reduce the current EU energy efficiency target from 1.5% per year to less than half of that. That is, in the most optimistic scenario. In a worst-case scenario, the target could plummet to 0.04%, writes Jan Rosenow of the Regulatory Assistance Project (RAP). According to Rosenow, this will make it nearly impossible for the EU to deliver on “Paris”.
Energy efficiency is key to achieving the ambitious carbon reduction goals set out in the Paris Agreement. According to the International Energy Agency (IEA), half of global emission reductions can be achieved at least cost through energy efficiency measures. The Intergovernmental Panel on Climate Change (IPCC) and other respected institutions have come to the same conclusion.
With this—and the multiple societal benefits delivered by energy efficiency—in mind, the European Commission adopted the principle of “Efficiency First” in its “Clean Energy for All” package published on 30 November 2016. A key part of this package is the Energy Efficiency Directive (EED), designed to deliver energy savings of 30 percent by 2030.
Article 7 of the EED outlines requirements for energy efficiency obligations that would deliver about half of the Directive’s entire savings and as such would be a key driver of energy efficiency in Europe.
However, the European Council, i.e. the EU Member States, apparently don’t feel the same urgency to save energy. At an Energy Council meeting on 26 June, the EU energy ministers adopted proposals that water down Article 7 substantially.
Prior to this meeting, RAP published an impact analysis of the amendments to Article 7 that had been proposed by Malta, which then held the rotating EU presidency. We calculated that, if accepted, these proposals would reduce the Article’s current scope of ambition for energy efficiency by more than 80 percent—and perhaps by as much as 100 percent—depending on how Member States would implement them.
As it turns out, the final outcome of the Council negotiations struck down some of the proposed loopholes, but adopted others:
- The headline target was reduced from 1.5 percent annual savings to just 1.0 percent after 2025, unless an assessment to be made by the European Commission will result in the recommendation of an increased target.
- The proposal allows for four exemptions that may be applied in the obligation period from 2021 to 2030. The limit of the combined exemptions has been raised from 25 to 35 percent. Excess savings from the current Article 7 period (2014–2020) may be applied to lower the minimum savings for the period from 2021 to 2030.
- Energy savings from new buildings standards and codes may potentially be double counted.
- Additionality provisions have been weakened, resulting in looser interpretation of the requirements for energy savings counting toward the Article 7 target. Previous analysis identified that the lack of specific requirements led to an inconsistent and potentially less sound approach.
- The target for small insular states was lowered to just 0.8 percent of annual energy sales for the period from 2021 to 2030.
RAP carried out a detailed analysis of the final Council position on Article 7. Our analysis shows that the 1.5 percent target will still be reduced by well over half and, in the worst-case scenario, it could plummet to just 0.04 percent.
Overall, the proposed loopholes will reduce the current ambition levels in the Commission proposal from 0.71 percent annual savings from efficiency (after exclusions and exemptions), to less than 0.56 percent, at the very least. This represents a 21 percent reduction in ambition—again, in the most positive case.
It should be noted that there is considerable uncertainty surrounding the exact amount of excess savings and the extent to which savings from new buildings may be fully counted (the Council text is ambiguous). In the worst-case scenario—if high excess savings from 2014 and 2015 continue over the entire period from 2014 to 2020, and all savings from new buildings are fully counted—this could in effect reduce the annual savings target to just 0.04 percent, as mentioned.
In the most optimistic scenario, excess savings would be minimal and few Member States would use the option of counting savings from new buildings. At this stage, it is not possible to assess with any certainty the actual savings based on the Council’s proposal. It is clear, however, that there is a risk that the energy savings goals of the EED will be significantly watered down if excess savings are uncapped and if savings from new buildings may count fully toward the target.
The first half of 2017 has been used to weaken the proposals made in the Clean Energy for All Europeans package. The second half of the year offers a chance to rectify this. Negotiations in the European Parliament are already under way and the European Parliament is now in a position to not only mitigate the potential damage, but to draft robust amendments for Article 7 that will help deliver the 40 percent improvement in energy efficiency that the European Parliament voted for in 2016.
The EU may not leave the Paris Agreement, but if it wants to be serious about the climate agreement, it will need to get its act together on energy efficiency.
The Regulatory Assistance Project (RAP) is a globally operating independent and nonpartisan team of experts dedicated to accelerating the transition to a clean, reliable and efficient energy future.
Dr. Jan Rosenow is a Senior Associate at RAP, a Senior Research Fellow at the University of Sussex, SPRU and an Honorary Research Fellow at the University of Oxford, Environmental Change Institute.