EU Commission Unveils Energy Union Plans, Contribution for Paris Climate Deal

26 February 2015

In a highly-anticipated announcement, the EU’s executive branch on Wednesday unveiled a blueprint to establish a single market in energy supplies, purchases, and consumption within the 28-nation bloc.

A 15-point action plan would move the EU towards a so-called energy union including, among other things, new legislation to overhaul the bloc’s electricity market; efforts to ensure more transparency in member states’ international energy agreements; and the use of external policy instruments such as trade policy to further integrate into global energy markets.

The Commission also intends to step up reporting on energy prices in the union, including analysis on the role of taxes and subsidies, which will help it to identify measures that distort the EU’s internal market. 

In a move geared towards energy consumers, plans for a redesigned electricity market would boost the power of Brussels against national energy regulators, and allow for more choice when buying electricity services. Measures will also be taken to bolster energy efficiency.

Wednesday’s strategy adds that a reformed EU Emissions Trading System (ETS) would help send the right carbon price signals for investment in low-carbon technology. EU lawmakers on Tuesday backed an end-2018 start for a market stability reserve to act as a bolster for tumbling emissions permit prices. (See related story, this edition)

An accompanying roadmap released on Wednesday outlines initiatives to be developed in each of the 15 action areas, with a timetable for adoption and implementation, as well as corresponding institutional responsibilities between the Commission, member states, national regulatory authorities, and transmission operators.

Wednesday’s strategy also includes a communication geared towards achieving a target of 10 percent electricity interconnection between member states by 2020, building on previous commitments made by member states in this area. The document shows which member states currently meet that target and where projects – including pipelines and grid infrastructure – will be necessary to fill identified gaps.

Brussels argues that ramping up intra-EU trade will boost security of supply, ensure affordable prices in the internal market, and help decarbonise the economy by plugging in renewable sources of energy from different regions. An interconnected grid could save consumers €40 billion a year, according to a Commission press release.

Energy security concerns

The EU is the world’s largest energy importer, relying on foreign sources for around 53 percent of its power needs, running to the tune of around €400 billion annually.

“Today, we launch the most ambitious European energy project since the Coal and Steel Community,” said Maroš Šefčovič, the European Commission Vice-President leading Brussels’ energy union work, citing the post-World War II origins of the EU project.

“A project that will integrate our 28 European energy markets into one Energy Union, make Europe less energy dependent and give the predictability that investors so badly need to create jobs and growth,” he continued.

Energy security has been a major concern for some member states over the last year as relations with key gas supplier Russia have deteriorated over the situation in Ukraine. Last June, the European Council endorsed the Commission’s European Energy Security Strategy and called for a diversification of sources given that a third of the EU’s gas is imported from Russia, with almost half of this passing through Ukraine.  

On Wednesday the Commission said it would explore new supply regions for fuels, as well as new technologies, and further develop indigenous sources. According to the strategy, this will involve preparing a plan for boosting liquefied natural gas (LNG) trade, looking at the required transportation infrastructure.

EU climate contribution

The EU executive on Wednesday also outlined its contribution to the global climate deal negotiators from just under 200 nations are hoping to hammer out by a December meet being held in Paris, France.

The decision to outline new energy and climate commitments together follows the current Commission President Jean-Claude Juncker’s plan to address the two policy areas in tandem, according to Commission officials.

Wednesday’s communication translates decisions taken at an October European Council summit to cut the bloc’s emissions by at least 40 percent by 2030 relative to 1990 levels into the EU’s “Intended Nationally Determined Contribution” (INDC). Countries have said these should form the basis of the Paris deal. (See Bridges Weekly, 30 October 2014)

The EU’s proposed INDC would be an absolute, economy-wide reduction across a number of greenhouse gases (GHGs), with agriculture, forestry, and other land uses included. The reductions would not include efforts made by purchasing emissions reductions from international markets.

The document released on Wednesday outlines the planning process for achieving the EU’s INDC and subsequent legislative action, while providing information on the fairness and relative ambition of its contribution as well as the metrics and methodologies applied. A list of sectors that would be covered is also detailed.

The Commission said that the EU’s INDC, outlined in a table format that could be followed by other countries, was articulated according to decisions taken at the latest UN climate meet held last December in Lima, Peru.

Parties to the UN Framework Convention on Climate Change (UNFCCC) agreed on that occasion that their INDCs should be transparent and clear, with other potential information including reference points, scope, and coverage, among others. (See Bridges Weekly, 18 December 2014)

Wednesday’s climate communication also supports the introduction of a global sectoral abatement target for aviation and shipping industries.

Paris protocol?

The Commission document also calls for all countries to submit their INDCs and proposed emissions reduction targets well in advance of the Paris conference, and by the end of March for countries such as China, the US, and other G-20 economies.

Overall commitments should add up to a global emissions reduction of around 60 percent below 2010 by 2050, the EU communication says, and the deal should be underpinned by a review process every five years.

In the title of the communication – Paris Protocol – the EU affirms a stance held at recent climate talks that the agreement should take a legally binding form. Some parties, such as the US, have resisted this move given the expected difficulty of passing an international treaty through their domestic legislatures.

The EU suggests that the Protocol could come into force under the UNFCCC as soon as it is ratified by countries totalling 40 gigatonnes of carbon dioxide equivalent emissions – in other words, around 80 percent of 2010 global emissions.

While some environmental groups welcomed the EU’s effort to make the deal more legally binding, some said that the 60 percent global abatement target would not keep the world below a two degree Celsius warming compared with pre-industrial levels, following figures released by UN climate scientists last year.

“The communication is absolutely not in line with the two degrees target and is a missed opportunity after the latest [Intergovernmental Panel on Climate Change] report clearly stated that there is a cumulative carbon budget,” Bas Eickhout, member of the European Parliament for the Green Party, told The Guardian.

Some observers have also pointed out the absence of commitments on climate financing in the EU’s INDC. However, Wednesday’s communication says that implementing the new deal will require large scale shifts in investment patterns and a mobilising of climate finance, and that a full picture of the volumes required after 2020 will only become clearer once more INDCs and national adaptation plans are published.

The communication also underlines the importance of achieving climate resilience through adaptation, scaling up international cooperative action, supporting the development of climate technologies, capacity-building, and mobilising a variety of policy measures, although none of these are included in the EU INDC table.  

Mobilising trade

Among the other policy measures that could complement climate action, the Commission on Wednesday cited the importance of liberalising trade in environmental goods and services, in both its energy union and climate communications.

In the proposed energy union strategy, the Commission says that it will pursue an active trade and investment agenda, including securing access to foreign markets for European technology and services.

Meanwhile, in the Paris Protocol document, the Commission highlights the role of trade policy to promote climate goals, through bilateral trade agreements, preferential treatment, and an ongoing effort between the EU and 14 other WTO members to secure a tariff-cutting deal on select environmental goods. (See Bridges Weekly, 5 February 2015)

These negotiations, known formally as the Environmental Goods Agreement (EGA) talks, were launched last July.

The Commission said on Wednesday that it hoped to conclude the deal before the end of 2015 in order to increase the dissemination and up-take of climate-friendly technologies.

Next steps

The Energy Union strategy will be presented to both the European Parliament and Council for endorsement.

The Paris Protocol communication will be put before EU environment ministers at their next meeting on 6 March. The EU will then finalise and submit its INDC to the UNFCCC secretariat by the end of the first quarter.

The Commission also said on Wednesday that it was considering convening an international conference in November to help build mutual understanding across the various national contributions. The event will bring together stakeholders from government, academic, think tanks, and international organisations.

The UNFCCC secretariat has been mandated by parties to prepare a synthesis report, also by November, on the aggregate effect of the INDCs towards keeping under the two degree Celsius warming limit.

ICTSD reporting; “EU wants Paris climate deal to cut carbon emissions 60% by 2050,” THE GUARDIAN, 23 February 2015.

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