European Commission Proposes Energy & Climate Change Package

Jan 23: The European Commission agreed on what they called "a far-reaching package of proposals that will deliver the European Council's commitments to fight climate change and promote renewable energy." According to a release the proposals demonstrate that the targets agreed last year are technologically and economically possible and provide a unique business opportunity for thousands of European companies. They said these measures will dramatically increase the use of renewable energy in each country and set legally enforceable targets for governments to achieve them. All major CO2 emitters will be given an incentive to develop clean production technologies through a thorough reform of the Emissions Trading System (ETS) that will impose an EU-wide cap on emissions.

The package seeks to deliver the European Union to reduce greenhouse gases by at least 20% and increases to 20% the share of renewable energies in the energy consumption by 2020, as agreed by EU leaders in March 2007. The emissions reduction will be increased to 30% by 2020 when a new global climate change agreement is reached. Commission President, José Manuel Barroso said, "Responding to the challenge of climate change is the ultimate political test for our generation. Our mission, indeed our duty, is to provide the right policy framework for transformation to an environment friendly European economy and to continue to lead the international action to protect our planet. Our package not only responds to this challenge, but holds the right answer to the challenge of energy security and is an opportunity that should create thousands of new businesses and millions of jobs in Europe. We must grasp that opportunity".

Commissioner for the environment, Stavros Dimas said, "Building on Europe's pioneering emissions trading system, this package demonstrates to our global partners that strong action to fight climate change is compatible with continued economic growth and prosperity. It gives Europe a head start in the race to create a low-carbon global economy that will unleash a wave of innovation and create new jobs in clean technologies. These proposals implement the commitments made by EU leaders last year through a fair share-out of the effort. Now all Member States must make their full contribution."

Building on the EU Emission Trading System (ETS), the Commission proposes to strengthen the single, EU-wide carbon market which will include more greenhouse gases (currently only CO2 is included), and involve all major industrial emitters. The emission allowances put on the market will be reduced year-on-year to allow for emissions covered by the ETS to be reduced by 21% from 2005 levels in 2020.

The power sector -- forming the majority of EU emissions -- will face full auctioning from the start of the new regime in 2013. Other industrial sectors, as well as aviation, will step up to full auctioning gradually, although an exception may be made for sectors particularly vulnerable to competition from producers in countries without comparable carbon constraints. In addition, auctions will be open: any EU operator will be able to buy allowances in any Member State. Revenues resulting from the ETS will accrue to Member States and should be used to help the EU to adjust to an environment friendly economy by supporting innovation in areas such as renewables, carbon capture and storage and R&D. Part of the revenues should also go towards helping developing countries adapt to climate change. The Commission estimates that the revenues from the auctioning could amount to €50 billion annually by 2020.

The Commission said the EU Emissions Trading System, now in its fourth year of operation, has proved an effective instrument to find a market-based solution to provide incentives for cuts in greenhouse gas emissions. At present the system covers some 10,000 industrial plants across the EU -- including power plants, oil refineries, and steel mills -- accounting for almost half the EU's CO2 emissions. Under the new system over 40% of total emissions will be covered by the ETS. To reduce the administrative burden, industrial plants emitting less than 10,000 tonnes of CO2 will not have to participate in the ETS.

The proposal also addresses the minimum target of 10% for use of biofuels in transport in the EU to be reached by 2020. This is the same for each Member State. Sustainability is essential in implementing this target -- the directive includes clear sustainability criteria. The Commission has also adopted new State aid guidelines on environmental protection which will help Member States to develop a sustainable European climate and energy policy. In comparison with the 2001 guidelines, these new guidelines broaden the scope of aid projects as well as increase the aid intensities. The guidelines set out new conditions for State aid measures to promote environmental protection and strike a very important balance between delivering larger environmental benefits and minimizing distortions of competition.

Access a release from the Commission with further details (click here). Access details of the Commission's proposals (click here). Access a statement from Neelie Kroes European Commissioner for Competition Policy Guidelines (click here). Access a statement from Stavros Dimas Commissioner for the environment (click here). Access a EurActiv article on reactions to the proposals with numerous links to additional information (click here). [*Climate, *Energy]