Bloomberg News

EU to Start Debate on Energy, Climate Rules Amid Crisis

March 27, 2013

The European Union’s executive started a debate today on EU climate and energy rules as the crisis-ridden bloc seeks a long-term plan to cut greenhouse gases and promote clean power technologies.

While the 27-nation bloc is making “good progress” toward its 2020 goals to boost the share of renewable energy and cut greenhouse gases, a framework for the subsequent decade is needed to give investors legal certainty, spur innovation and prepare for a global climate deal, the European Commission said in a consultation paper published in Brussels.

The commission invited member states, the European Parliament, industry groups and non-governmental organizations to submit until July 2 their views on EU objectives for 2030.

“Despite of all the challenges, we need to start this new chapter of the European climate and energy policies,” Climate Commissioner Connie Hedegaard told a news conference. “The trick is to understand and reflect in all our policies that we do have three crises: an economic crisis, job and social crisis, but we also still have a climate, energy and resource crisis. The sooner we get this the better.”

The EU, in the fourth year of the sovereign-debt crisis, wants to remain the leader in the global fight against climate change while ensuring the security of energy supply and fostering competitiveness. The new rules must draw on the lessons from the current framework and identify how to best use synergies and deal with trade-offs between various policy objectives, the commission said.

Climate Goals

“Climate and energy policies need long-term perspectives, there’s probably no sector which depends on long-term planning as much as the energy sector,” Energy Commissioner Guenther Oettinger told the conference. “You could say that 2020 was yesterday for the energy sector and 2030 is tomorrow.”

The energy and climate consultation document, known as a green paper, builds on the commission’s earlier assessments, which showed that the most cost-efficient way for the EU to attain its long-term climate goals is to cut greenhouse gases by 40 percent in 2030. Leaders of the bloc, which has a binding target to reduce emissions by 20 percent in 2020 compared with 1990 levels, voiced political support for cutting pollution by at least 80 percent in 2050.

Serious Threat

“A great number of reports from various international organizations have underlined the threat (EUGNEMUQ:US) of a rapidly changing climate to our economies, our security, our natural resources and our food supplies,” the Greens group in the EU Parliament said in a statement. “The threat is too serious for Europe to continue to fail to understand the necessity of tackling both the climate and the economic crisis (EUGNEMUQ:US) at the same time.”

While the document published today is aimed at triggering a debate among policy makers on the future policy framework, the commission wants to present concrete legislative proposals toward the end of this year, Oettinger said. A new set of goals could become binding toward the end of 2014 or in 2015 at the latest, he said.

Investors in the EU emissions trading system, the world’s largest, have been urging lawmakers to set a binding climate target for 2030 as soon as possible to prevent carbon prices from declining further after they slumped to a record low of 2.81 euros a metric ton in January.

Coherent Framework

The challenge will be for the EU to design a coherent framework that takes into account ambition, competitiveness, economic viability and differing capacities of member states. Under the current climate and energy package, the EU also has a binding goal to increase the share of green energy to an average of 20 percent by the end of this decade and a political target to boost energy efficiency by one-fifth. Among the issues that the commission will seek opinion on is whether Europe needs binding targets for those two areas after 2020.

“It’s very important, if we decide in the end that we’re going to have three targets, that we consider the interaction between them,” Hedegaard said in an interview today. “That’s probably one thing that was done good enough when the last set of targets were set. That’s very important.”

Under the current design, demand for emission permits in the EU cap-and-trade program is being undermined by overlapping renewables and energy-efficiency measures, according to Jesse Scott, head of the environment policy unit at power industry association Eurelectric. The lobby includes EON SE, Germany’s largest utility, and Enel SpA (ENEL), Italy’s biggest electricity producer.

Greenhouse Gases

“Subsidies for renewables create an implicit carbon price which competes with the explicit price of allowances,” Scott said by e-mail. “This problem is undermining the ETS as a market tool, and has the potential ultimately to destroy the competitive electricity market, at the expense of customers or taxpayers. We are especially pleased that the green paper recognizes this issue.”

When designing the future policy framework, the EU will also need to take into account the cost of energy, the commission said. In this context, it’ll need to address several issues, including full enactment of its existing energy market legislation, the future exploitation of conventional and unconventional gas in Europe and slow progress in international efforts to curb greenhouse gases, according to the EU executive.

The Climate Action Network environmental lobby criticized the commission’s draft, saying it barely addresses climate change, instead mainly focusing on issues of competitiveness and energy security.

“By neglecting the urgency of the climate crisis, the commission does not recognize the reality of the planet we are living on,” Wendel Trio, a Brussels-based director of CAN Europe, said by e-mail. “The cost to our economy from inaction on the climate crisis will be enormous. By setting ambitious and binding targets for renewable energy and energy savings, we could begin to tackle the problem,” Trio said.

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net


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