Event Summary: Getting back on track - Why EU climate targets need a drastic course correction

Event Summary: Challenging the EU Climate Targets

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Event Summary

Getting back on track

Why Europe's climate targets need a drastic course correction

January 29th, Offices of the European Climate Foundation, Brussels

On January 22nd, the European Commission set out its proposals both for an EU Climate and Energy package for 2030, and for structural reform of the Emissions Trading Scheme (ETS). Chaired by Baroness Bryony Worthington, Labour Lord and Director of Sandbag, this lunchtime meeting discussed the challenge to Europe's climate targets revealed in recent research by Greenpeace and Sandbag.

Joris den Blanken, Director of EU Climate Policy at Greenpeace, highlighted the build-up of carbon allowances in the ETS, and presented research by Ecofys showing how a target to reduce emissions by 40% would only trigger a real reduction in EU emissions of 33%. Without cancellation of allowances or a significantly higher 2030 target (Greenpeace suggests -55%), the EU will not be pulling its weight in the global shift toward a low-carbon economy by 2050.

Damien Morris, Senior Policy Analyst at Sandbag, told the audience how the EU's decision to set 2020 the emissions reduction target as a carbon budget, rather than a point-in-time target, meant emissions could grow 2.2% each year out until 2020, and yet the EU could still technically reach its target. Again, this highlighted the space for extra pollution afforded by the enormous surplus of allowances in the ETS.

Jon Gorvett, Environment Attaché at the Permanent Representation of the UK to the EU, set out the UK's position. Notably the UK agree with allowance cancellation pre-2020, and are equally pushing for the 2030 target to be -50%,

in the context of an ambitious deal in Paris in 2015, estimating the extra cost to the EU to be just 0.04% of GDP, even before co-benefit analysis is included (an initiative launched by the Swedish, UK and other governments analysing these co-benefits will be published in the summer). Jon pointed out that whilst the targets are important internally, the EU needs to recognise it's not going to tackle climate change alone, and they must be thinking about the context of the international negotiations.

Bas Eickhout, Greens/EFA MEP set out how the Commission should have been leading, not pre-diluting targets in the hope that they wouldn't dilute further in Council: they will. Bas wanted confirmation that the UK would fight for 50% in March Council.

The EU needs to deal with the ETS allowances problem now, not after 2020. If the 2050 Low-carbon Roadmap is going to be referenced, we need to remember that the 2020 plan is for a -25% domestic target, so we're already off the cost-effective pathway.
We need permanent cancellation, but if we're going to get that, we need to discuss where the ETS revenues are going, to bring on some allies in industry.
Bas said we can't rely entirely on the markets, because the cost-effective pathway assumes the low-hanging fruit of Energy Efficiency first, but markets aren't delivering, and only a binding energy savings target will do that.

Questions & Answers

Emily Waterfield, MLex: Will Parliament improve on the Commission's 2030 target proposal?
Bas suggested a joint Green - S&D amendment for a -50% domestic target would have the best chance, but without enough government interest for more than -40%, it was unlikely. Of course, the situation could change dramatically; at the end of May, the Greens may have a majority!

Emily Waterfield, MLex: What can the EU do about energy poverty?
Bas said a focus on Energy Efficiency is important. The subsidies for fossil fuels need to be cut, and the EU needs to stop importing fuel (including uranium) and focus on homegrown renewables. The EU market is too dispersed; the Greens want specific, non-market policies on energy.

Jade Lindgaard, Mediapart: Would an emissions spike not result in a price spike, and how would that change the research assumptions?
Damien agreed that there were, indeed, dynamic effects between the cap and emissions and that as the supply of allowances started to run out the rising price would make it unlikely that emissions would reach the ceiling set by the cap. It is widely acknowledged that, in the 2020 context at least, the ETS has stopped functioning as the 'backbone' of European climate policy, and only acts as a 'backstop' to ensure our climate targets are met. This research aims to show just how feeble a backstop the ETS has become.

Jade Lindgaard, Mediapart: Why carbon markets? What are the alternatives?
Joris said how this was an increasingly pertinent question. Greenpeace is campaigning in Germany for a law to phase out coal, and in other countries for national carbon and coal taxation schemes, but a move towards different regulations across the EU may be difficult for business.
Bryony said how she doesn't want civil servants trying to choose winners; the market is best at finding the cheapest abatement. The freeze to the Carbon Price Floor in the UK shows how politicians will put the brakes on taxation too.
Bas pointed out that emissions trading was not a Green invention, but the grass is not always greener on the other side: the forces which have added loopholes to the ETS will try to do the same to a carbon tax. A tax doesn't guarantee a specific emissions reduction; and ETS does. What's more, the ETS does not need council unanimity: a tax does, and that just won't happen. Add-ons to the ETS are desperately needed; the Greens want an Emissions Performance Standard.

John Settle, Optikon: Do we expect new additional overallocation to happen in Phase 3?

Damien confirmed that we did. That the projections recently given by the Commission show the surplus rising from around 2 billion at the end of 2012 to around 2.5 billion by 2020. We can expect a lot of that new surplus to consist of offsets. There are around 500 million offsets left in the 2008-2020 offset budget.

Mark Johnston, European Policy Centre: When President Obama visits later this year what message should the European Commission give him?
Bryony pointed out that the most basic fuel-switch, from lignite coal to bituminous, is not yet being triggered by the low carbon price in the EU, nor will it in the near future. US Environmental Protection Agency regulations should begin the shift away from the worst polluting coal, but what is the US plan after that?
Joris said that the European Commission should ask President Obama what he is doing to ensure that the United States will announce its post-2020 emissions goal in time. The EU, China and United States should contribute positively to the Ban-Ki Moon Leader’s Summit in New York in September 2014.