Utility Week

Uberflip 17 01 14

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Policy & Regulation Analysis Climate policy may fall short A European policy package rumoured to propose a 35-40 per cent reduction of greenhouse gases and 24-27 per cent of EU energy from renewables by 2030 will disappoint many, says Vic Wyman. A new policy package to tackle climate change and boost renewables in the European Union looks certain to disappoint many when unveiled on 22 January by the bloc's executive, the European Commission. This is because a 10 January Commission meeting to iron out disagreements among commissioners over 2030 climate and energy targets and a reform of Europe's carbon market seems to have resulted in little ambition compared with a trio of existing 2020 targets. As Utility Week went to press, the hints emerging from the meeting, involving the Commission president Jose Manuel Barroso and nine commissioners, were of a proposed mandatory 35-40 per cent reduction on the 1990 level of greenhouse gas emissions by 2030, and renewables to provide a non- binding 24-27 per cent of EU energy by that date. Those compare with the binding 2020 targets of a 20 per cent cut in emissions and a 20 per cent renewables share. The renewables share today is 13 per cent. The Commission is believed to have deferred a decision on an updated energy efficiency target for 2030 until after it reports to the European Parliament and the European Council by the end of June on progress towards the mandatory 2020 target of a 20 per cent improvement on the 2010 level. The energy and climate package is also expected to address shale gas, the Fuel Quality Directive and industrial competitiveness. The policies are intended to help the EU become a competitive, low-carbon economy by 2050. That means an emissions reduction of 85-90 per cent, including 93-99 per cent for the power sector, to limit global warming to below 2°C above the pre-industrial temperature. "We were expecting at least 30 per cent for renewables," says Susanna Williams, the energy and climate policy officer in the European Environmental Bureau (EEB) grouping of more than 140 environmental organisations. The Commission's own roadmap calls for a 40 per cent cut, she adds: "We need at least 60 per cent by 2030." "Forty per cent is on the low end of what we were looking for," says Jesse Scott, head 14 | 17th - 23rd January 2014 | UTILITY WEEK of environment and sustainable development policy at the European electricity industry association Eurelectric. Jacopo Moccia, head of political affairs at the European Wind Energy Association (EWEA), says a 24 per cent renewables target reflects "inertia" and that 30 per cent is a minimum requirement. It is hard to assess the commissioners' proposal for the EU's Emissions Trading System (EU ETS) for greenhouse gas emissions allowances, because everyone is remaining silent due to concerns about insider trading. Critics want urgent reform of the EU ETS – or its replacement. The EU ETS is seen widely as failing to stimulate low-carbon investment, thanks in part to an allowance surplus that has resulted in a carbon price of under €5/tonne. The Commission is likely to propose measures to deal with the surplus, plus a price-smoothing mechanism to deal with a fixed supply of allowances for a flexible demand. One long-touted idea is backloading, or delaying the auctioning of new allowances, to reduce the surplus. "A backloading deal is the minimum that needs to be done," says Moccia. "[The EU ETS] needs to be reformed more fundamentally." "You have to do something with the EU ETS to get a 40 per cent [emissions cut]," says Scott. A 20-21 March European Council meeting of heads of states and governments is scheduled to discuss the climate policy package. Scott expects the Commission to complete an impact assessment and most other parts of the climate policy package, but not a study, of pricing measures such as taxation, support for renewables and electricity network tariffs. Such measures are the responsibilities of EU member states rather than Brussels. Many in the energy sector would like firm and challenging targets beyond 2030, to justify the large investments needed to decarbonise Europe. "Business is not asking for policy certainty," says Scott. "It is asking for clarity and stability." Moccia says Barroso and others in the Commission know that its own studies show industry would be better off with a higher renewables target, but that commissioners may have bowed to business dogma, particularly in energy-intensive industries, against such targets. Although Moccia expects a revival this year in investment in wind energy after a tough few years, a policy change could boost that further. The problem for all generators, he says, is the low wholesale price of electricity. The European Renewable Energy Council industry association has called for a 45 per cent renewables target. According to its president, Rainer Hinrichs-Rahlwes, policy uncertainties and a lack of long-term targets are deterring investment and leaving the energy market open to less attractive technologies. However, there is clear European Parliament support for firm action. On 9 January, the parliament's Industry, Research and Energy committee and the Environment, Public Health and Food Safety committee jointly voted to tell the European Council and the Commission to adopt binding energy and climate targets for 2030, including a 40  per cent improvement in energy efficiency. The EEB's Williams says the Commission has failed, but that the European Parliament vote could put some backbone into policymakers, especially as the industry committee is often not keen on environmental measures. However, the commissioners will be replaced after October and there will be European Parliament elections in May. Also, national concerns could scupper any policy package – Poland last year was the only EU state to veto a Commission energy roadmap, because it would undermine its extensive use of coal and gas. The Commission has also taken Poland to court over regulated gas prices and has objected to a plan for "illegal" coal-fired generating units. Yet some other EU states want three 2030 targets. The UK suggested a 50 per cent emissions cut (including 10 per cent of international offsets). Scott is sure that discussion will be lively: "There's going to be a humdinger on this." Vic Wyman is a freelance journalist

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