10 June 2011: Strengthening the EU’s climate and energy package

This week, I went to a seminar organised by the Institute for Sustainable Development and International Relations (IDDRI) and the academic network Climate Strategies. IDDRI and Climate Strategies have written a report called Strengthening the European Union Climate and Energy Package: to build a low carbon, competitive and energy secure European Union (http://www.climatestrategies.org/research/our-reports/category/57/326.html).

Emmanuel Guerin, director of IDDRI’s climate and energy programme and lead author, presented the results. The report argues that strengthening the climate and energy package would be a more economically efficient route to meeting the EU’s target of reducing greenhouse gas emissions by at least 80% by 2050. They have used a model which pays particular attention to the inertia of capital stock in some relevant sectors (for example, buildings and transport) and to labour market rigidity.  The authors also argue that strengthening the climate and energy package would enhance EU competitivenes and be good for energy security. On carbon leakage (when policies simply lead to industries in Europe closing down and the products being imported from, for instance, China), they argue that ceramics and iron and steel will be most affected and need special treatment. They’re less worried about cement.

They recommend increasing the carbon reduction target from 20% by 2020 to 30%. However desirable, this almost certainly won’t happen given the German government’s decision to close nuclear stations. They also recommend strengthening the cap-and-trade Emissions Trading Scheme (ETS) and making it more predictable. They argue that the ETS price will remain too low until 2020, and that the post-2020 cap reduction – 1.74% a year – is not high enough. So they recommend a stringent 2030 cap, to be announced as soon as possible.

In panel discussions, a man from the Hungarian Ministry of National Development said that improving the energy efficiency of building was sensible and had many benefits. (Hungary has done quite well on this – see Hungary – climate and energy statistics.)

Jos Delbeke, who is director general of DG Climate Action and so in charge of ETS, made the following important comments:

  • The ETS is the EU’s most important policy tool.
  • The price of carbon should not be allowed to fall further.
  • The EU budget will in future give more money to energy efficiency.
  • The era of cheap energy is over.

He then said that strengthening of the ETS needs to take account of international law. For example, border tax adjustments to deal with carbon leakage would almost certainly lead to legal challenge, as the inclusion of aviation in the ETS is doing now. He also stressed that ETS is now co-decision, so the European Parliament must be involved.

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