EU: CLIMATE AND RENEWABLE ENERGY REGULATION · Doha Conference; UNDERLINES the need ... •non-EU...

EU: CLIMATE AND RENEWABLE

ENERGY REGULATION

Oslo March 2013

Justin Wolst, THEMA Consulting Group

The European Union: facts and figures

• 7% of the world’s population

• GDP (€12,268,387 million

2010)

• Responsible for 16,67% of

worldwide GHG emissions

• Depends on imports for more

than 50% of its energy needs

• Taking the initiative in Climate

Change

THE EU: LEGAL FOUNDATION

Treaties:

• Treaty establishing the European Coal and Steel Community (entered into force 1952)

• Treaty on the European Union – Maastricht Treaty (entered into force in 1993)

• European Economic Area (1994 EFTA)

• Treaty on the Functioning of the European Union – Lisbon Treaty (entered into force in 2009)

Article 191 TFEU

1. Union policy on the environment shall contribute to pursuit of the

following objectives:

— preserving, protecting and improving the quality of the environment,

— protecting human health,

— prudent and rational utilisation of natural resources,

— promoting measures at international level to deal with regional or

worldwide environmental problems, and in particular combating climate

change. (emphasis added)

THE EU: MANDATE - IS THE EU COMPETENT?

Position Member States and EU Commission

- Exclusive competence

- Shared competence

- No competence

Energy – Environment - Art. 4 Treaty on the Functioning of the EU: Shared competence

Principles of proportionality and subsidiarity

• Art. 5(3) Treaty on European Union

• Protocol (No 2) on the application of the principles of subsidiarity and proportionality

proportionality – ‘the involvement of the institutions must be limited to what is necessary to achieve the objectives of

the Treaties’ –

a necessity check to exercise legislation the EU level for every legislative action.

subsidiarity – ‘decisions are taken as closely as possible to the citizen and that constant checks are made to verify

that action at Union level is justified in light of the possibilities available at national, regional or local level’

lowest possible level of government

Bodies of the EU:

• Commission

• EU Parliament

• Council of the EU

• Council of Minsters

• European Court of Justice

THE EU IN THE UNFCCC

27 countries, one position:

‘The 27 members of the European Union meet in private to agree on common negotiating positions.

The country that holds the EU Presidency - a position that rotates every six months - then speaks for

the European Union and its 27 member states. As a regional economic integration organization, the

European Union itself can be, and is, a Party to the Convention. However, it does not have a separate

vote from its members.’ (UNFCCC website)

Council Decision of 25 April 2002 concerning the approval, on behalf of the European

Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate

Change and the joint fulfillment of commitments thereunder (2002/358/CE)

Representation of the EU:

- EU presidency

THE EU IN THE UNFCCC

EU mandate for the EU’s position in the UNFCCC negotiations

• Draft of a

proposed text of

the EU position

that is the basis

for the mandate

• Agree on the

final details (if

necessary) and

confirm the

council

conclusions

• Negotiation on

the last details

of the text and if

possible agree

on the council

conclusions

• Negotiation on

the last details

of the text

• Comment on

text after

continuous

agreement at

national level

EU

Presidency

Working

groups of

National

Experts

Permanent

Representati

ves

Committee

Council of

Environment

Ministers

Council of

the EU

At the negotiations, every morning before normal negotiations, during lunch and after the negotiations, additional

negotiations of the heads of delegation (or experts for special things) of the 27 MS.

• EU Presidency

and the

Commission

• 27 National

experts

• 27 Member

States internally

agree

• Diplomats

agree on the

difficult issues

• EU Presidency

and the

Commission

• EU Presidency

and the

Commission

THE EU IN THE UNFCCC: MANDATE

UNDERLINES its commitment to agree in Doha a ratifiable amendment to the Kyoto Protocol that enables a

second commitment period to the Kyoto Protocol, in the context of balanced progress on all elements of the

package agreed upon in Durban; UNDERLINES that the second commitment period starts in 2013 and

should end in 2020, emphasising that the new global legally-binding agreement should enter into effect no

later than 1 January 2020; in this context, CALLS upon all Annex B Parties that have not yet done so to

submit their quantified emission limitation or reduction objective (QELRO) well before the start of the

Doha Conference; UNDERLINES the need for wide participation and sufficiently ambitious targets in the

second commitment period and CALLS upon all Annex B Parties to ensure a high level of ambition of their

QELRO during the second commitment period; URGES all Annex B Parties to put forward QELROs that are

more ambitious than their own QELRO for the first commitment period and lead to a significant deviation from

business as usual; RECALLS the EU and its Member States’ submission of 19 April 2012 relating to the

information on the QELROs for the second commitment period under the Kyoto Protocol; in this context and

subject to the applicable rules being agreed, AGREES with the inclusion of the EU in a revised Annex B of the

Kyoto Protocol with a QELRO of 80 and NOTES that Member States propose to be included in a revised

Annex B of the Kyoto Protocol with each a QELRO of 80 (percentage of base year or period); AGREES that

the written consent for an amendment to Annex B concerning the European Union will be given by the

European Commission and NOTES that the written consent concerning the Member States will be given

by each Member State individually.

Source: Council Conclusions Oct. 2012 just before Doha

THE EU: LEGISLATIVE ACTS/INSTRUMENTS

EU Policy

Strategy

Flagship Initiatives

Roadmap

White Paper

Directive

Regulation

Initiative

Impact Assessment

Communication

Visionary/

Strategic

Legis-

lative

Strategy (in EU perspective)

Long-term plan of action: Europe 2020 strategy for smart sustainable

and inclusive growth

Flagship Initiatives

(7) Areas that have been identified as new engines to boost growth

and jobs (as part of the Europe 2020 strategy)

Roadmap

A (policy) strategy in more detail including a way or path to achieve

the set goal

White Paper

A document containing proposals for Community action in a specific

area

Directive

Legislative Act, that sets legally binding goals, without dictating

the way to achieve the goals to the member states

Regulation

Legally binding legislative act for all member states

Decision

Legally binding legislative act for a special case or member state.

Initiative

Non-binding policy paper that pursues a certain objective by

stimulating policy

Impact Assessment

A document that evaluates the possible impacts of a Commission

proposal and is mandatory before every proposal

Communication

Position paper from the Commission that often signals the start of a

proposal

EU CLIMATE AND ENERGY PACKAGE

Climate and Energy Package: “20-20-20” targets. March 2007

• A 20% reduction in EU greenhouse gas emissions from 1990 levels;

• Raising the share of EU energy consumption produced from renewable resources to 20%;

• A 20% improvement in the EU's energy efficiency

The Climate and Energy Package is a set of legislative acts aiming in achieving of the “20-20-20”

targets. It addresses:

• The EU emissions trading scheme

• Target for non-ETS sectors

• Renewable energy targets

• Carbon capture and storage

Energy efficiency addressed in 2011

EU CLIMATE CHANGE LAW

Decision No 280/2004/EC (revised) of the European Parliament and of the Council of 11

February 2004 concerning a mechanism for monitoring Community greenhouse gas emissions

and for implementing the Kyoto Protocol

• Annual reporting on GHG emissions

• Annual report by the European Environment Agency on Member States’ Progress

• Current revision (status: public consultation)

• Assist in keeping track towards 2020

• Quality of data

• Comply with new international standards (Cancun Agreements)

• Facilitate policy development for land use change and forestry (LULUCF), aviation,

maritime transport and adaption to climate change

• Rules for reporting on use of revenues of auctioning under EU ETS

EU CLIMATE CHANGE LAW: ETS

Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003

establishing a scheme for greenhouse gas emission allowance trading within the Community

Based on art 17 UNFCCC

EU Emission Trading Scheme:

1st phase: 2005-2007

• Approx 40% of emissions covered

• Free allocation

• Energy generation

• Setting-up of national registries

2nd phase: 2007-2012

• Linking directive: UNFCCC market mechanisms CDM – JI

• Including Norway, Iceland and Liechtenstein

3rd phase: 2013-2020: full activation of the ETS

• 50% of emissions covered

• A single EU wide cap on emissions

• Auctioning, not free allocation, is now the default method

for allocating allowances

• Some more sectors and gases are included

• limiting banking of allowances between Phases II and III


Carbon leakage

International linking

• Australia from 2016?

• New Zealand

• Switzerland, ongoing negotiations

• California, China, in the future?

Aviation

• 2011 US airlines case at the European Court of

Justice

• 2011 climate summit of the BASIC nations

issued an official objection

• 2011 joint declaration of 29 countries including

China, the United States, India and Russia

• Indicated a round of counter-measures to the

EU’s legislation

• non-EU flights have been exempted 2013 (last

week)

Shipping - IMO


Low carbon price (currently 4,66 Source: Point Carbon)

• Financial downfall last years – financial crisis

• Over production of ‘cheap’ alternative market allowances

Temporary solution

• back-load allowances (currently being discussed in EP)

Possible solutions:

1. Increasing the EU’s greenhouse gas emissions reduction target for 2020 from 20% to 30%

below 1990 levels;

2. Retiring a certain number of phase three allowances permanently;

3. Revising the 1.74% annual reduction in the number of allowances to make it steeper;

4. Bringing more sectors into the EU ETS;

5. Limiting access to international credits;

6. Introducing discretionary price management mechanisms such as a price management reserve.

EU CLIMATE CHANGE LAW: ESD

Decision No 406/2009/EC of the

European Parliament and of the Council

of 23 April 2009 on the effort of Member

States to reduce their greenhouse gas

emissions to meet the Community’s

greenhouse gas emission reduction

commitments up to 2020

Effort-Sharing Decision: 10% mandatory

emission reduction targets for all non-ETS

emissions:

- transport (except aviation)

- buildings

- agriculture

- waste

Targets have been set by Gross Domestic

Product per capita (GDP)

Responsibility of the Member States to

achieve its target – national measures

EU CLIMATE CHANGE LAW: ESD

In case of non-compliance:

Any shortfall in emission reductions will

have to be achieved in the next year,

multiplied by a factor of 1.08 as a penalty.

Member States will have to submit a

corrective action plan to the Commission

detailing, among other things, how and

when they intend to get back on track

towards meeting their 2020 targets.

The EU is making good progress

towards achieving this target. 15%

and on track.

EU CLIMATE CHANGE LAW: CCC

The Climate Change Committee is a body within the legislative process that advices on climate change

legislation and decides on details in the so called:

• Comitology-process: implementing powers attributed to the Commission that is assisted by Member

States at national experts level (less inclusion of EU Parliament)

• Implementing powers on legislation at a technical level

• comment and give recommendations on the Member States plans

• suspension of the Member State's eligibility to transfer any annual emission allocations and JI/CDM

rights to another Member State.

• Decision on allocation of surplus allowances (Denmark, Cyprus and Croatia on their ascension)

EU ENERGY LAW

Three main area’s:

• Renewable energy

• Energy efficiency

• Internal energy market

EU ENERGY LAW: RES

Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the

promotion of the use of energy from renewable sources

3 types of Renewable energy sources (RES):

• Electricity (RES-E)

• Heating and Cooling (RES-H&C)

• Transport (RES-T)

National support schemes:

e.g. Subsidies, Loans, Feed-in tariffs, Premiums, Quota System, Tax regulation, Net-metering,

Tendering etc.

Measures of international cooperation between Member States:

• Statistical transfer between Member States (all types of RES)

• Joint Projects between Member States (only for RES-E and RES C&H)

• Joint projects between Member States and third countries (only for RES-E)

• Joint Support Schemes (only for RES-E and RES C&H)

EU ENERGY LAW: RES – PROGRESS

• 2009 Forecast

• 2010 National Renewable Energy Action Plan

• 2011 (for period 2009-2010) Annual Reports

Member State Share in

2005

Target for

2020

Reported

progress in

2009-2010

Indicated surplus/deficit

in 2009-2010

Austria 23,3 34,0 30,8 +

Belgium 2,2 13,0 5,1 +

Bulgaria 9,4 16,0 12,6 +

Cyprus 2,9 13,0 5,8 -

Czech Republic 6,1 13,0 8,3 +

Denmark 17,0 30,0 21,8 +

Estonia 18,0 25,0 24,0 +

Finland 28,5 38,0 33,1 +

France 10,3 23,0 12,8 +

Germany 5,8 18,0 11,3 +

Greece 6,9 18,0 9,7 +

Hungary 4,3 13,0 8,8 +

Ireland 3,1 16,0 5,5 =

Italy 5,2 17,0 10,1 +

Latvia 32,6 40,0 32,5 +

Lithuania 15,0 23,0 19,7 +

Luxembourg 0,9 11,0 3,0 =

Malta 0,0 10,0 0,9 +

the Netherlands 2,4 14,0 3,7 -

Poland 7,2 15,0 9,5 +

Portugal 20,5 31,0 24,6 +

Romania 17,8 24,0 22,4 +

Slovak Republic 6,7 14,0 10,2 +

Slovenia 16,0 25,0 19,9 +

Spain 8,7 20,0 13,5 +

Sweden 39,8 49,0 47,8 +

United Kingdom 1,3 15,0 3,3 =

EU ENERGY LAW: RES – CHALLENGES

Indirect land-use change (ILUC)

- Amendment to 5%

Other impacts:

- Nuclear phase out Germany

- Financial crisis

Measures of cooperation:

- Elsertifikater

- New research in promotion of cooperation mechanisms (national reports)

- Based on the surplus, all countries want to export – statistical transfer

EU ENERGY LAW: ENERGY EFFICIENCY

DIRECTIVE 2012/27/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 25

October 2012 on energy efficiency

Art. 3: Energy Efficiency targets:

‘Each Member State shall set an indicative national energy efficiency target, based on either primary or

final energy consumption, primary or final energy savings, or energy intensity. Member States shall

notify those targets to the Commission …’

The EE Directive introduces:

• Energy savings obligations scheme – annual final energy reduction of 1,5%

• Public building efficiency (potential of 30% EE)

• Promotion of energy services market – smart-grids, information on actual usage of electricity

• Minimum performance requirements for energy generation and mandatory and priority access of

high-efficiency cogeneration to the electricity grid

• Light form of annual reporting and monitoring for Member States

EU ENERGY LAW: ENERGY EFFICIENCY

In case of non-compliance:

Art. 13: penalties:

‘Member States shall lay down the rules on penalties applicable in case of non-compliance with the

national provisions adopted pursuant to Articles 7 to 11 and Article 18(3) and shall take the necessary

measures to ensure that they are implemented. ... Member States shall notify those provisions to the

Commission by 5 June 2014 and shall notify it without delay of any subsequent amendment affecting

them.’

• Regulations took direct

effect on 3rd of March

2011

• ACER and ENTSOs are

up and running and have

started working on

developing technical

rules at EU

• Member States are

progressing well on

transposition of

Directives – No full notification of

complete transposition

measures yet

– But several Member States

are in final phase of their

legislative process

Milestones

• Provide a new

framework for

competition in the energy

sector

• Electricity Regulation – on conditions for access to

the network for cross-border

exchanges in electricity

• Gas Regulation – on conditions for access to

the natural gas transmission

networks

• ACER Regulation

• Electricity Directive – concerning common rules

for the internal market in

electricity

• Gas Directive – concerning common rules

for the internal market in

natural gas

What does it say?

• «Unbundling» – Structural separation

between transmission

activities and

production/supply

activities of vertically

integrated companies

• Stronger powers and

independence of national

energy regulators

• harmonize market and

network operation rules

at pan-European level – -new tools

• A new institutional

framework: – ACER and the ENTSOs

Relevance

EU third energy package – Directives/Regulations On the internal electricity and gas markets

Source: EU

• 80% domestic emission

reductions required by

2050

• Milestones on the way: – 25 % in 2020,

– 40 % in 2030,

– 60 % in 2040,

– All compared to 1990-levels

Milestones

• Longterm strategies to

form EU’s climate policy

and to make the EU a

competitive low carbon

economy

• To keep the rise in

temperature below 2

degrees, GHG

emissions in 2050 must

be reduced with 80-

95% compared to 1990

• EU member countries

must have longterm

strategies for a low

carbon development

What does it say?

• Is base for more specific

(legislative) EU-regula-

tion with a focus on: – more efficient use of

resources and electricity

– electric and hybrid cars and

– cleaner cities with less air

pollution and better public

transport.

– reduce use of key resources

like oil and gas, raw

materials, land and water,

therefore a focus on

renewable energy.

• If implemented, would

lead to an almost

complete

decarbonsation of

power sector by 2050

• First initiative: white

paper on transport

Relevance

EU Roadmap 2050 (Vision) Roadmap for moving to a competitive low carbon economy in 2050

EU Roadmap 2050 (Vision) Decarbonizing the power, transport and residential sector

Source: EC communication to European Parliament: A Roadmap for moving to a competitive low-carbon economy in 2050

Power sector:

-93 to -99%

Toolbox

• Sufficient CO2 price

signal and long-term

predictibility

(revisiting reduction

of CO2 cap)

• Energy taxation

• Technology support

Thank you for your attention

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