EU Commission Releases Suite of Energy Proposals, Calls for Stronger Efficiency Target

1 December 2016

The European Commission released a suite of climate and energy-focused proposals on Wednesday 30 November, targeting these towards supporting a swifter move to a cleaner-energy economy.

The highly anticipated legislative package – dubbed “Clean Energy for All Europeans” – consists of proposals spanning topics ranging from energy efficiency to improving the regulatory framework for renewables. Other aspects include governance of the EU Energy Union and rules for the bloc’s electricity market.

Commission officials unveiling the package touted its value for increasing consumer choice within the 28-nation bloc, along with its potential for spurring greater investment in lower-carbon technologies and supporting the EU’s efforts in meeting its commitments under the UN’s Paris Agreement on climate change, which is now in force. (See Bridges Weekly, 20 November 2016)

The bloc has already set an overall target of slashing emissions by 40 percent from 1990 levels by the year 2030.

“These measures will equip all European citizens and businesses with the means to make the most of the clean energy transition,” said Maroš Šefčovič, the European Commission Vice-President for Energy Union, during a press conference on Wednesday.

Speaking at the proposals’ launch, EU Climate Action and Energy Commissioner Miguel Arias Cañete credited these plans as having the potential to incentivise the development and use of newer, climate-friendly technologies.

“Europe is on the brink of a clean energy revolution,” said the EU climate and energy chief. “Our proposals provide a strong market pull for new technologies, set the right conditions for investors, empower consumers, make energy markets work better and help us meet our climate targets.”

Energy efficiency target, renewables

Among the notable developments announced on Wednesday was the proposal by the EU’s executive arm to have a binding 30 percent energy efficiency target across the bloc under a new “Energy Efficiency Directive,” among various other efficiency-related measures.

Experts say that energy efficiency is a valuable component in meeting climate targets and lowering the need for energy imports.

Commission officials explained that the push for a binding target was meant to help ensure that the investment climate becomes more predictable. The bloc-wide target does not include national-level commitments, with the Commission to coordinate and discuss with member states their ongoing efforts to meeting these. According to a technical memo from the Commission, it could still set out additional measures and recommendations should individual member state efforts fall short.

“I’m particularly proud of the binding 30 percent energy efficiency target, as it will reduce our dependency on energy imports, create jobs, and cut more emissions,” said Cañete.

The European Commission had previously backed a 30 percent energy efficiency target for 2030. However, this was subsequently revised downwards after negotiations with the other EU legislative bodies to an indicative 27 percent goal across the bloc. (See Bridges Weekly, 23 January 2014, 31 July 2014 and 30 October 2014)

Along with putting forward the 30 percent energy efficiency target, the Commission is also advocating for more energy-efficient building design; more efficient appliances with clearer labelling; and facilitating more public and private support for so-called “smart buildings” that automatically adjust cooling, heating, lighting, and other systems.

The proposals released on Wednesday also aim to create a better investment climate for renewables. Steps towards that end would include recommending principles for individual EU nations to use when setting up “support schemes” and establishing an easier-to-use regulatory framework, such as by facilitating the process of granting permits for renewable energy projects.

The EU’s current renewables goal sets their share at 27 percent of the energy mix by 2030.

Other planned changes would include facilitating efforts at the national level to transition towards renewable energy sources in heating and cooling. The Commission is also pushing for a requirement that suppliers of transport fuels draw more from “advanced biofuels” and other renewable sources, while limiting the level of the more controversial, food-based “first generation” biofuels that can be used to meet the bloc’s overall renewable energy target.

Furthermore, the EU would use the 2020 national-level targets on renewables – which range between 10 to 49 percent under a bloc-wide target of 20 percent – as the minimum national benchmarks for the years 2021-2030.

Energy Union governance

Included in the proposals package on Wednesday was a regulation that would help support “Energy Union Governance” – in other words, administering the planned Energy Union through steps taken at both the EU-wide and national levels.

This would involve having the bloc’s member states set out individual 10-year plans on climate and energy geared towards serving the overall Energy Union’s needs. The process envisions a series of steps in the coming years, starting with draft plans in 2018 for review and feedback, with updates on progress expected every two years from 2021 onward.

Brussels had released an earlier “blueprint” for this energy union in February 2015, concurrent with its intended climate commitments under the new Paris Agreement. (See Bridges Weekly, 26 February 2015)

Capacity mechanisms

Another section of the proposals deals with electricity market design, including making adaptations for increased renewables use, along with how to address the current use by some EU member states of so-called “capacity mechanisms.” These mechanisms are used to help support electricity producers so they can provide reserve power when needed, thus limiting the risk of potential black-outs and ensuring a secure supply of energy.

Examples include tenders aimed at spurring investment in electricity generation capacity; payments to keep plants online so they can be called on in emergencies; or setting prices administratively so plants will provide capacity in situations where demand has spiked.

Commission officials reviewed such mechanisms ahead of Wednesday’s announcement, citing questions over how these may affect the bloc’s single market or negatively impact trade flows via limitations on cross-border trade. Their findings include recommendations aimed at making these mechanisms effectively obsolete through instituting market reforms; preventing their use by the most polluting plants; and calling for these to be open to providers from all EU member states.

“Capacity mechanisms need to match a problem in the market and be open to all technologies and to operators from other EU countries. They must not be backdoor subsidies for a specific technology, such as fossil fuels, or come at too high a price for electricity consumers,” said EU Competition Commissioner Margrethe Vestager.

“We will not support fossil fuels either directly or indirectly,” said Cañete during Wednesday’s press conference, referring to the debate over “capacity mechanisms.” Šefčovič similarly affirmed that the Commission was aiming to “substantially [restrict] the use of capacity mechanisms by member states, e.g. applying high environmental standards.”

Reactions

The legislative package drew reactions from a series of environmental groups, many of whom welcomed the move while also calling for additional steps to be taken to ensure policy coherence and pursue greater energy efficiency gains.

For example, one question raised by some groups was how these planned changes would affect the bloc’s flagship Emissions Trading System (ETS), now in its “third phase” covering the 2013-2020 period. Efforts are currently underway to revise the carbon trading scheme for its fourth phase, which starts in 2020.

These ETS reform proposals are aimed particularly at dealing with challenges such as a surplus of carbon permits, along with the related problem of these allowances being priced at levels that experts claim are far below what is needed to spur investment in lower-carbon technologies and move away from more polluting ones.

“While we are pleased that the Commission has introduced these proposals to update existing regulations for the next decade, we believe great attention should be paid to ensuring that the new proposals work well in coordination with each other and with the EU ETS,” said the International Emissions Trading Association (IETA).

Other organisations such as WWF Europe have called for tougher energy efficiency targets – suggesting 40 percent might yield significant consumer health benefits. Others, such as the NGOs Transport & Environment and Oxfam, have argued that the EU should take more action on reducing the use of food-based biofuels, citing environmental and other concerns.

Coming up

The proposals will need to go through the other steps of the EU legislative system for approval. The Commission has said that these proposals – along with earlier ones released over the past two years – should be “addressed as a priority” by the Council and Parliament.

How long this process will take – and what changes may be incurred in doing so – is not yet clear. For instance, the European Parliament has previously called for setting an energy efficiency target of 40 percent, compared to the 30 percent tabled on Wednesday.

ICTSD reporting; “EU to release latest raft of climate, energy legislation,” CLIMATE HOME, 28 November 2016; “Exclusive: EU to attach CO2 limits to power reserve subsidies – source,” REUTERS, 28 November 2016; “EU unveils power market reform to boost renewables,” REUTERS, 30 November 2016; “EU unveils power market reform, energy efficiency target,” REUTERS, 30 November 2016.

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