Europe’s climate policy proposals reflect the lowest level of ambition required to keep global warming at 2°C, while its goals on renewable energy are “disappointing” and bad news for the industry, according to a new report by banking giant HSBC.
Released on Wednesday, the report is based on the publication of the European Commission policy framework for climate and energy in the period from 2020 to 2030, which it describes as “a first indication of the EU negotiating position in the run up to a global climate deal in Paris 2015.”
In a nutshell, the EU 2030 climate and energy package proposals are for a 40 per cent reduction in greenhouse gases (GHG’s) and an EU renewables share of at least 27 per cent in energy consumption, with no individual country goals.
The HSBC report describes the 40 per cent by 2030 GHG aim as “modest” but expected, adding that it “implies a 2% CAGR (compound annual growth rate) for GHG reduction from now on, increasing ambition from the 0.2% pa rate of reduction left for delivery of the 2020 goal.”
But in the context of the long-term goal of an 80 per cent cut in greenhouse gases by 2050, the bloc’s proposals “offer the lowest level of climate ambition” possible, says the report.
“This is the lower end of the GHG emission reduction range (80- 95%) expected from the developed countries by 2050, to limit the global temperature increase to 2°C,” says the report.
“The 2030 GHG reduction target needs to be translated into national GHG targets for the non-ETS sectors before 2021. In addition, member states need to draw up their national plans for competitive, secure and sustainable energy for the period up to 2030.”
On renewables, HSBC describes the 27 per cent goal for the proportion of renewable energy in the overall mix by 2030 as “disappointing,” noting that it suggests growth of renewables in the energy mix will actually slow from a rate of 5 per cent per annum in 2010-2020, to 2 per cent during the 2020-2030 decade.
“The proposed target implies a decline in the growth rate of renewable installations from 2021-30 compared with 2011-20,” says the report (see charts below). “For electricity, from 2020-2030 we estimate 150GW of total new renewable capacity addition, compared with 210GW during the previous decade.”
And while the report notes that this scenario is “marginally better” than the EU trends to 2050 scenario, which points to just a 1 per cent renewable energy growth rate in 2020-30, it stresses that the 2030 package is, on balance, “a negative” for Europe’s renewable energy industry, with no new target for energy efficiency.
“(The research) shows more differences in views in Europe on renewable energy targets than for GHGs,” says the report. “For instance, the UK and Poland have strongly opposed any mandating of renewable targets, whereas Germany and France favoured it.”
The proposed package also provides nations like the UK with the option to choose nuclear technology over renewable expansion. In particular, says the report, there appears to be “increased risk for the offshore wind technology given its higher capital costs and project development risks.”
“Recently, Germany announced its plan to scale down its 2020 offshore wind target from 10GW to 6.5GW, while also limiting annual wind and solar installations to 2.5GW each.”
“We now see increasing downside risks for offshore wind targets in the UK, the largest offshore wind market, not only in entire Europe but also globally. In case of a scale down in the UK offshore wind expectations, supply chain development and technology cost reductions are likely to slow down, thereby adversely impacting the offshore wind installations globally.”
In the absence of country-specific renewable targets, the report points to the carbon price as “an important driver for the economics around renewable capacity additions.”
“The European Commission, rather ambitiously in our view, expects carbon prices to increase to €40/tonne in 2030 under the proposed framework, from an estimated price of €5/tonne in 2020,” says the report. “Prices at €40/t would help accelerate a switch from coal to gas and renewable technologies.”
Following intense negotiations the European Union has announced a series of climate-based goals for the whole Union as part of the new EU framework on climate and energy for 2030.
Announced on Wednesday, the new framework includes a reduction in greenhouse gas emissions of 40% below 1990 levels, a Union-wide binding target for renewable energy of at least 27%, renewed ambitions for energy efficiency policies, a new governance system, and a set of new indicators to ensure a competitive and secure energy system.
“Climate action is central for the future of our planet, while a truly European energy policy is key for our competitiveness,” said European Commission President José Manuel Barroso. “Today’s package proves that tackling the two issues simultaneously is not contradictory, but mutually reinforcing.”
“It is in the EU’s interest to build a job-rich economy that is less dependent on imported energy through increased efficiency and greater reliance on domestically produced clean energy,” continued Barroso.
“An ambitious 40% greenhouse reduction target for 2030 is the most cost-effective milestone in our path towards a low-carbon economy. And the renewables target of at least 27% is an important signal: to give stability to investors, boost green jobs and support our security of supply.”
While the 27% is a step in the right direction, some critics are suggesting that it doesn’t go far enough, specifically in regards to the lack of nationally binding targets.
“While it is pleasing to see the EU Commission recognise that renewable energy is a key part of future energy solutions across Europe, the lack of ambition in not ensuring there are national binding targets for renewable energy is a disappointment,” said RenewableUK Chief Executive Maria McCaffery.
”This is a missed opportunity for member states to take collective and serious action on the drive for clean, sustainable, renewable energy, which is the best option for reducing our carbon emissions.”
The United Kingdom was one of the loudest voices during negotiations, calling for at least a 40% cut in greenhouse gas emissions, and RenewableUK hope that the UK will similarly lead the way with binding renewable energy targets.
“The Commission has gone out of its way to point out that member states are still free to set their own nationally binding renewable energy targets, so it is not too late for the UK Government to take leadership on this issue,” said McCaffery. “To meet the binding Greenhouse Gas targets and also the UK Government’s stated aim of tackling climate change, we need to keep investing in the world beating renewable sources we have, which can also bring thousands of jobs and help our energy security.”
The 2030 framework will be supported by a detail analysis on energy prices and costs, which assess the key drivers and compares prices across the European Union with those of its main trading partners.
Joshua S Hill I’m a Christian, a nerd, a geek, a liberal left-winger, and believe that we’re pretty quickly directing planet-Earth into hell in a handbasket! I work as Associate Editor for the Important Media Network and write for CleanTechnica and Planetsave. I also write for Fantasy Book Review (.co.uk), Amazing Stories, the Stabley Times and Medium. I love words with a passion, both creating them and reading them.
The European Union could cut its carbon emissions by as much as 40% (against 1990 levels) by the year 2030 using nothing but “low-cost” measures, according to a new study from the Potsdam Institute for Climate Impact Research.
The study — undertaken with the aid of 11 other notable research groups — makes it clear that significant cuts can be made to the EU’s greenhouse gas emissions, even relatively rapidly, while having only very negligible negative effects (if any) with regard to the economy. To be precise, the study predicts that such cuts “would be likely to cost less than an additional 0.7% of economic activity.”
The findings were released today ahead of the announcement next week of the European Commission’s proposals for a new set of climate targets and policies to replace the current targets for 2020s. According to various reports, key figures within Brussels still remain divided on the level of emission reduction targets that should be adopted for 2030, with speculation mounting that the bloc could opt for a weaker than expected target of 35 percent. Moreover, it remains uncertain as to whether or not member states will opt to extend current targets for the use of renewable energy and energy efficiency measures through to 2030 or back UK calls for such technology-specific targets to be shelved. The new report argues that more ambitious emissions targets of up to 40 percent can be met using existing and cost-effective technologies.
“In the next two decades, it is possible to achieve the transformation using existing technologies,” stated lead researcher Brigitte Knopf of the Potsdam Institute for Climate Impact Research. Who also noted that “the modelling showed that after 2030 new technologies would be required to deliver the deep 80 percent emission cuts the bloc has pledged to provide by 2050.”
Continuing along that line of reasoning, Knopf argued that aggressive new targets and policies are a necessity — both with regard to achieving cuts now, and also with regard to spurring the development of “innovative new technologies”.
“A clear price signal has to be set today, for instance in the European Emissions Trading System,” she said. “It would provide an incentive for innovation that would prevent energy systems from being locked into long-lasting investments in CO2-intensive technologies, such as coal-fired power plants.”
Interestingly, the modeling from the new study also suggests that there are a number of quite different options available to policymakers for achieving the goal of a 40% cut by 2030 — anything from ramping up the deployment of renewable energy technologies, to improving energy efficiency, to building more nuclear power plants, etc.
Nathan For the fate of the sons of men and the fate of beasts is the same; as one dies, so dies the other. They all have the same breath, and man has no advantage over the beasts; for all is vanity. – Ecclesiastes 3:19
The impacts of rising sea levels, temperatures, and extreme weather keep adding up for America’s communities, but real action at the federal and international level keep getting pushed off to a later date – so what are local officials left to do?
First, Boost Grid Resiliency Against Extreme Weather
Governor Patrick’s plan focuses on strengthening the state’s power grid against the rising tide of extreme weather. $40 million of the total plan will go directly into a municipal resilience grant program administered by the state Department of Energy Resources that funds clean energy technologies to harden energy services and boost distributed generation.
In addition to adding clean power generation across the grid, Massachusetts’ Department of Public Utilities will coordinate efforts to harden the state’s electricity transmission and distribution system against extreme weather while deploying new microgrid systems.
This may all sound like it’ll cost taxpayers a pretty penny, but the grid resiliency efforts will be paid by retail electricity suppliers operating in Massachusetts who aren’t able to meet their compliance obligations under the state’s renewable portfolio standard. These Alternative Compliance Payments will fully fund the grid hardening effort and hold taxpayers harmless.
Second, Protect Coastal Communities And Public Health
But Massachusetts’ climate resiliency efforts won’t just focus on the power grid. The remaining $10 million will come from existing capital funds and be split among projects to repair dams and coastal infrastructure damaged by extreme weather in recent years, including two separate $1 million grant programs to address sea level rise along the coast and fund green infrastructure coastal resilience pilot projects.
State agencies will also work to create best practices and resources to share among local officials. The state’s Department of Public Health will work to identify additional issues local government should consider, boost training, analyze the spread of diseases resulting from warmer temperatures, and assess vulnerable water infrastructure. $2 million in additional funding proposed in the state’s fiscal year 2015 budget will cover these interagency efforts.
But with this plan, Massachusetts joins the vanguard of local governments working to protect their communities even if the federal government won’t. “We have a generational responsibility to address the multiple threats of climate change,” said Governor Patrick. “Massachusetts need to be ready, and our plan will make sure that we are.”
Behind the heated debate in Brussels about climate and renewable energy targets, what is really happening is that concern over high energy prices has taken precedence over climate concerns in Europe. Competitiveness has caught up with climate policy. Indeed, the two issues have become so intertwined that when the European Commission will present its new climate and energy policy on 22 January, it will at the same time launch a new industrial policy. Similarly, EU leaders, who were to meet twice in February and March to discuss energy prices and climate policy separately, have merged these meetings into a single summit to address both issues at the same time. Our correspondent Sonja van Renssen digs behind the climate and energy headlines.
EU climate commissioner Connie Hedegaard and energy commissioner Günther Oettinger still don’t agree on what greenhouse gas emission reduction target the EU should adopt for 2030. Hedegaard wants 40%, Oettinger 35%.
This is the news that emerged from a deadlocked meeting within the Commission on 10 January that was supposed to agree the 2030 proposals internally.
Many believe that 40% will prevail. If it does, it is also the only target the Commission is likely to propose: forget a new renewables target – if there is one at all it will be non-binding and less than 30%, which, according to the Commission’s own new 2013 reference scenario, published over Christmas, is really nothing more than business as usual.
A new energy efficiency target long ago disappeared from the Commission’s agenda.
Thus, the famous 20-20-20 targets for 2020 will not get a proud sequel for 2030. This despite the European Parliament’s vote on 9 January in favour of three binding targets for greenhouse gas emissions (40%), renewables (30%) and energy efficiency (40%). Despite the fact that on 23 December, Ministers from Germany, France, Italy, Austria, Belgium, Denmark, Ireland and Portugal sent the two Commissioners a letter urging them to retain a renewable energy target in addition to a reduction target. Despite the letter by Germany, the UK, France and Italy last week urging a 40% climate target. Despite also pressure from the renewable energy sector and parts of industry to maintain an ambitious climate and renewable policy.
The truth is that at this moment many member states and industry fear that a strong climate and energy policy will be bad for their economies.
If in an interview with Energy Post last December, Hedegaard still insisted three binding targets were needed, today she is fighting to defend her 40% emission reduction target. The Commission’s 2050 low-carbon roadmap says this equates to the most cost-effective path to an 80-95% emission reduction in 2050. In contrast, 35% is only just above business-as-usual – a 32% decrease in emissions in 2030 – according to the Commission’s new 2013 reference scenario. The debate within the Commission is over an un-ambitious vs. very un-ambitious climate and package that ignores the findings of its own impact assessment, critics say.
D-Day for climate policy
The critics have a point. The truth is that at this moment many member states and industry fear that a strong climate and energy policy will be bad for their economies. Relatively high energy prices in Europe compared to the US which benefits from its shale gas boom plus the economic recession have forced their way into the heart of the 2030 climate and energy debate. Consider that EU leaders were due to meet twice early this year: in February, to discuss energy prices and competitiveness, and in March, to discuss climate policy. The two have now been merged into a single summit on 20-21 March in line with EU policymakers’ wish “to be coherent”, according to a Commission source. In addition, it now appears that on 22 January – long pencilled into energy journalists’ diaries as D-Day for the 2030 climate and energy package – the European Commission will also launch a new industrial policy for Europe. Indeed, it may launch the two with a single press conference!
Although policymakers recognise that competitiveness is not determined by climate policy alone, the fear is that EU climate and energy policy may be the straw that breaks the camel’s back. European industries have been claiming this for some time. Several of them were prioritised by the Commission for a “fitness check” or “cumulative cost assessment” to work out how much EU climate policy is actually costing them. The results are gloomy: EU climate and energy policies have raised the cost of producing a tonne of aluminum by as much as 11% (€228), reported the Centre for European Policy Studies (CEPS) last autumn. Just before Christmas, it announced that European steel companies pay twice as much for electricity and four times as much for gas as their US counterparts.
Energy prices report
These sector-specific conclusions appear to be borne out by a leaked draft of a report on energy prices seen by Energy Post. This paper is also due from the Commission on 22 January. Bearing in mind that the draft appears an early version, it nonetheless suggests that the findings for steel are on average true for all industrial and retail consumers in Europe. From 2005-12, European industrial consumers faced real price rises of 40% for electricity and 30-35% for gas, even as prices went down in the US and grew more slowly in other parts of the world.
EU climate policy has been an easy scapegoat.
But the report also points out that these are average figures that hide an extremely diverse picture across Europe. According to the report, prices in different European countries can vary by a factor of 3-4. In 2012, industrial electricity prices were below the weighted EU average in 18 member states, comparable to prices in Turkey, Mexico, Brazil and China. In Romania, electricity prices have actually decreased since 2007. In Germany, energy-intensive industries are exempted from carbon and renewable levies plus grid access fees; similar exemptions exist for industries in other countries.
Felix Matthes the Öko-Institut recently argued that German industry pays about the same for electricity as in the US. In the aluminum sector, about a third of all plants still buy electricity through long-term contracts, which mean they have seen just one-tenth of the cost increase of plants exposed to market prices. (Though many of these are due to terminate soon and may not be renewable under EU competition law.) Finally, despite the clear price difference with the US, there is no sign of EU industry doing less well on EU and US markets, concludes the prices report.
Yet energy is getting more expensive in Europe compared to the rest of the world and this threatens at least some industries. The question is what to do about it? EU climate policy has been an easy scapegoat, with much mudslinging at the EU Emission Trading Scheme (ETS), which makes industry pay for its carbon emissions. But the Commission has so far found no evidence of “carbon leakage”, i.e. industry leaving Europe for regions with looser carbon constraints. Yes, some industries are looking elsewhere, but this is “driven mainly by global demand developments, and input price differences”, according to yet another report from the Commission. And yes, says this report, energy prices are going up, but carbon costs are not a major factor. (This may also be because of the leakage protection measure – extra free allowances – in place so far).
The Institutional Investors Group on Climate Change (IIGCC), which manages €7.5 trillion in assets, wrote to European Commission president Jose Manuel Barroso on 9 January: “As shareowners in energy intensive companies, we have discussed with them the competitiveness risks of the EU ETS for their European operations and they have reported that this is not an issue.”
Instead, the biggest problem is the commodity price of fuel. The draft energy prices report shows that this typically makes up the bulk of energy prices, followed by taxes and network charges. The gas price is something policymakers can partly do something about, for example by working to complete the single European energy market. What they can do much more about however, is taxes. The share of tax in the total energy price for industrial consumers can be high in Europe, while in the US, China, and India there is no taxation on natural gas and electricity for industry. Moreover, the tax component increased by more than any other in recent years, says the Commission in its prices report. But taxes are primarily a national, not European, competence.
Untangling the causes of high energy prices does not answer the question of how to deal with them, however. Interestingly, in its draft prices report, the Commission suggests that European energy-intensive industry has been able to hold its own so far in part because it has decreased its energy intensity (defined by the Commission as the amount of energy consumed to produce a unit of value-added of one million Euros). In contrast, US industry has started consuming more with the arrival of cheap shale gas. It also says Europe has been helped by restructuring away from energy-intensive sectors, although it maintains an overall share of manufacturing in value added above that of the US.
It is alarming that industries that depend on energy efficiency legislation are apparently leaving Europe.
“In many cases decreasing energy intensity could mitigate the impact of increasing energy prices,” the Commission suggests. This suggests that a strong policy push for efficiency makes competitive sense. Greater efficiency and technological innovation are essential to a healthy European industry. The European paper industry, represented by CEPI, has become one of the first to embrace this with an innovation competition last year.
Viewed in this light, it is alarming that industries that depend on energy efficiency legislation are apparently leaving Europe. “If words were action in the field of energy efficiency, then I would be opening new factories in Europe but as they are not we have just closed a factory in Italy and are planning to open three new plants in the US, Asia and Turkey,” wrote the CEO of Knauf Insulation, Tony Robson, to Barroso on 9 January.
Competitiveness is also about preventing low-carbon leakage. It is also about maintaining an expanding cleantech industry. Policymakers cannot ignore high energy prices and the risk of carbon leakage of course, but a failure to maintain a strong climate, renewable energy and energy efficiency policy may not be the right remedy. It may hurt Europe’s growing green sector while doing little to reduce energy prices for industry.