EU
Page last updated: 11th May 2017
Rating
Assessment
The European Union has established a well-deserved reputation as a global leader on climate policy. However, in the wake of the Paris Agreement’s entry into force, the EU’s climate policy effort appears to be slowing and it has not effectively responded to the 1.5° limit in the Paris agreement, which goes beyond the former 2°C goal.
The EU’s 2030 target represents a slight slowdown in the rate of climate action compared to the preceding quarter-century at exactly the time when there needs to be an acceleration—to at least three times the historical rate of reduction—for decarbonisation by mid-century to be achieved. The EU is not on a trajectory to meet its 2030 target, as implemented policies are projected to reduce the EU’s domestic emissions by between 30–39% below 1990 levels, when its target is “at least” 40%.
The EU is discussing a large package of measures aimed at achieving the target. It is crucial that it uses this opportunity to increase the effectiveness of the EU Emissions Trading Scheme (EU ETS), and to step up meaningful action in the area of transport and buildings, as well as take action to reverse the recent slowdown in the development of renewable sources of energy.
The EU’s target of “at least 40% domestic reduction in GHG emissions by 2030 compared to 1990” - to which the EU and its member states committed themselves in their NDC - is not consistent with limiting warming to below 2°C, let alone with the Paris Agreement’s stronger 1.5°C limit. There are also concerns over the accounting of land-use, land-use change and forestry activities which could be used to limit action on reducing emissions from the consumption of fossil fuels and other industrial greenhouse gas emissions, in a similar way that both Australia and New Zealand have essentially avoided substantial action.
On 6 March 2015, the EU submitted its Intended Nationally Determined Contribution (INDC) to the UNFCCC (UNFCCC 2015a, 2015b) formally putting forward a binding, economy-wide target of at least 40% domestic greenhouse gas emissions reduction below 1990 levels by 2030. The EU ratified the Paris Agreement on 5 October following the completion of its fast-track procedure. As a result, its INDC became the EU’s NDC with the same emissions reduction target. We rate this target “medium.” Individual EU countries are also in the process of completing their ratification (as of 3 April 2017, all member states, except Belgium, Croatia, Czech Republic, the Netherlands and Romania, have ratified the Agreement).
A positive element of the EU’s NDC is the specification that it includes economy-wide emission reduction goals and is defined as a domestic target. Less positive is the statement that the target includes emissions/removals from land use, land-use change and forestry (LULUCF), which were not included in the 2020 target. The accounting rules for the LULUCF calculation are yet to be agreed. The European Commission presented a proposal for a regulation in July 2016 (European Commission, 2016a).
The 40% emissions reduction target is significantly behind what is achievable and necessary by the EU. Between 1990 and 2015 the EU’s emissions decreased by 24%, or approximately 1.1% per year. As a result, from now until 2030, emissions only need to decrease by about 1.2% annually to achieve the 2030 emissions reduction goal. A continuation of this trend would lead to emissions reduction by around 64% below 1990 levels. A significant acceleration of climate action is therefore essential to meet the EU’s long-term 2050 emissions reduction goal of 80–95% below 1990 by 2050. The long term goal also needs to be revised to reflect the Paris Agreement temperature goal. Slowing down now will require much faster - and therefore more costly - action than would otherwise be necessary. Failure to increase the effectiveness of the EU Emissions Trading Scheme (EU ETS) and the slowdown in the development of renewable sources of energy may threaten the achievement of even the unambitious 2030 target. The additional RES-E capacity installed in the years 2014-2016 was over 40% below the capacity installed in the period 2010-2012 (WindEurope, 2017)
In relation to 2020, the EU has signed up to the second commitment period of the Kyoto Protocol (2013–2020) with a QELRO equivalent to a 20% reduction from 1990, averaged over the second commitment period. Domestically, this target has been divided into 21% emissions reduction in the EU ETS sector, and 10% emissions reduction in the non-EU ETS sector, with 2005 as the base year for both sectors. Currently implemented policies are estimated to lead to a 28-30% reduction below 1990 levels by 2020, meaning that the EU is on track to meet its second commitment period target.
Pledges and targets
Paris Agreement targets
In October 2014 EU leaders agreed on a 2030 climate and energy policy framework, putting forward a legally binding EU target of at least 40% reduction in domestic emissions by 2030 in comparison to 1990 (European Council, 2014). In contrast to the period before 2020 it will also make no use of international credits, as it refers to domestic emissions reductions only. However, the 2030 target is different from 2020 in that includes LULUCF, for which the details of the accounting rules have yet to be decided.
On 6 March 2015, the EU submitted its INDC to the UNFCCC committing to a target of “at least 40%” domestic emissions reductions below 1990 by 2030 (UNFCCC, 2015). With the ratification of the Paris Agreement by the EU and its entry into force in November 2016, the INDC became the EU’s first NDC.
The uncertainty around LULUCF accounting
Although the NDC confirms the inclusion of LULUCF accounting in the 2030 GHG mitigation target, it doesn’t clarify to what degree, and which emissions from land use, land use change and forestry (LULUCF) will be included in its emissions accounting in the base and target years. It also remains unclear whether this target is set with a fossil fuel and industrial greenhouse gas emissions baseline in 1990, as under the Kyoto protocol, or whether LULUCF emissions and/or removals are to be included in the base year, and if so, how. The choices here have substantial implications for the environmental integrity of greenhouse gas reduction targets, due to the significant uncertainties associated with monitoring of LULUCF emissions and sinks, and the risk of asymmetric accounting when the base year includes LULUCF, but the target year does not.
In July 2016, the European Commission published a proposal for a regulation that was designed to clarify the inclusion of emissions or removals from the LULUCF sector in the 2030 emissions targets (European Commission, 2016a). While the proposed regulation does spell out which categories are included in the LULUCF sector, it does not specify whether potential emissions sinks would be included in the 40% emissions reduction target. Based on estimates for the pre-2020 period and projections for the whole LULUCF sector in 2030 (EC, 2014b), we could envisage an impact of including LULUCF accounting on reductions of industrial greenhouse gas emissions in the range of 1–4% of 1990 emissions, depending on the exact accounting rules applied (see Pledge Data sources and assumptions).
2020 pledge and Kyoto target
Under the Copenhagen Accord, the EU proposed decreasing emissions by 20% below 1990. Should other developed countries commit to comparable efforts, and developing countries contribute according to their capabilities, the EU offered to increase its 2020 emissions reduction target to 30%. By 2050 the EU wants to achieve a reduction of 80%–95% below 1990 levels.
In May 2012, the EU submitted a provisional QELRO[1] (Quantified Emission Limitation or Reduction Objective) level equivalent to 20% reduction from base year over the second commitment period. This target is to be fulfilled jointly by the EU and its member states.[2] In 2015 the EU and Iceland signed an agreement to jointly fulfil the second phase of the Kyoto Protocol (European Commission, 2015b). In 2008 the EU member states agreed on the 2020 Energy and Climate Package that included a number of measures that would make the achievement of the 20% emissions reduction target possible. These measures included the Effort Sharing Directive specifying national emissions targets for the EU member states, amendment of the EU’s Emissions Trading Scheme and Renewable Energy Directive aiming to increase the share of renewables to 20% by 2020.
In February 2011 EU leaders endorsed the objective of reducing Europe's GHG emissions by 80–95% below 1990 levels by 2050 (European Council, 2011) conditional on necessary reductions to be collectively achieved by developed countries in line with the Intergovernmental Panel on Climate Change (IPCC).
Footnotes
[1] The QELRO, expressed as a percentage in relation to a base year, denotes the average level of emissions that an Annex B Party could emit on an annual basis during a given commitment period.
[2] This QELRO is inscribed in the amendments agreed in Doha in December 2012. The EU has yet to ratify these amendments.
Fair share
We rate the European Union’s NDC “medium.” This means that the EU is within the upper and least ambitious end of the range of what would be a fair contribution. It is not consistent with limiting warming to below 2°C, let alone with the Paris Agreement’s stronger 1.5°C limit, unless other countries make much deeper reductions and comparably greater effort. For the EU, proposals based on equality and capability/cost allow for higher emissions in comparison to approaches that focus on capability only and equal cumulative/equal per capita emissions. But in all those cases more stringent reductions are required to be assessed as fair. The rating for the 2020 pledge is “inadequate”, as it is in line only with the very least stringent of categories (capability/costs).
Current policy projections
Emissions in the EU28 have been decreasing since 1990. In 2015, emissions (excl. LULUCF) were 24% below 1990 levels. After a steep decline in 2009 due to the recession, and an upward spike following the recovery in 2010, they dropped continuously until 2014. Preliminary (“proxy”) numbers for 2015 show a slight increase in emissions, despite the rising role of renewables (European Environmental Agency, 2016c), which allowed saving 436 MtCO2. Initial projections for 2016 indicate a significant decrease in emissions from the power sector of 4.5% - primarily driven by a continuing move from coal to gas and a small increase in the share of renewables (Agora Energiewende 2017)..
According to our analysis, the future emissions projections under the EU’s currently implemented policies continue the past downward trend with similar - or slightly decreasing - reduction rates each year, depending on the policies adopted. While emissions decreased by an average of 1.3% per year between 1990 and 2014, they are projected to decrease between 0.8% according to the EEA’s estimates and 1.3% according to the PRIMES projections per year up to 2020. For the period until 2030 the projected decrease is 0.5% and 1.3% per year respectively. According to the two scenarios emissions are estimated to be between 3.9 and 4 GtCO2e (a 28–30% reduction below 1990) in 2020 and between 3.4 GtCO2e and 3.9 GtCO2e (30–39% below 1990) in 2030. The PRIMES projections are lower than its previous estimates mainly due to lower energy consumption (decrease by almost 4% in comparison to earlier projections). At the same time the share of renewables (slightly over 24% in 2030) is consistent with earlier projections, but below the EU target of 27%.
Current policy projections include the EU ETS, the Effort Sharing Directive, the Energy Efficiency Directive and a wide range of other EU wide regulations influencing GHG emissions such as the Renewable Energy Directive. It also includes the most important national policies. However, these scenarios do not include the expected effects of policy proposals currently on the table, such as the reform of the EU ETS after 2020 or the new proposal of the renewable energy directive.
For the 2020 timeframe, the most important policies are those resulting from the implementation of the “2020 climate and energy package” which contains the “20-20-20” targets. These refer to increasing the share of renewable sources of energy to 20%, improvement of energy efficiency (EE) by 20% and the aforementioned reduction of GHG emissions by 20% compared to 1990.
While the EU is well on track to meet its (too weak) 2020 target, it is not on track to meet its 2030 target. It is even further away from achieving the necessary emission reductions consistent with the long-term target, let alone any potential revision after the Paris Agreement. The EU is focussing on discussing the implementation of the 2030 framework through a number of legislative proposals put forward by the European Commission in the course of 2016: the Commission’s proposal for the Effort Sharing Regulation for the period 2021–2030 (European Commission, 2016b) and the package of proposals operationalising the implementation of the 2030 energy framework and Energy Union, the so-called Winter Package4.
The Proposal for the Effort Sharing Regulation proposes emissions reduction targets for each member state in the non-EU ETS sectors. These sectors, such as transport and buildings, cover around 60% of the overall emissions. Each member will be given a binding emissions reduction target between 0 and 40% below 2005 levels. Combined, these targets add up to the EU-wide goal of 30% emissions reduction (excl. LULUCF) below 2005. The Winter Package presented by the Commission on 30 November 2016 included proposals of four directives dealing with energy efficiency, energy performance in the building sector, renewable energy and the functioning of the power market. The Commission proposes to increase the energy efficiency target for 2030 from 27% to 30% (European Commission 2016d). It is unclear, however, whether this strengthening of the energy efficiency target would yield additional emissions reductions beyond the overall 40% goal - but it will likely make it easier to achieve this goal .
In parallel with the discussion over the Winter Package, the European Parliament and the Council have adopted, each separately, slightly diverging positions concerning the functioning of the EU ETS after 2020. The reform of the EU ETS is necessary to achieve emissions reductions in the energy and industry sectors in 2030 by 43% below 2005 levels. This target, combined with the 30% target for the non-EU ETS sectors (which also excludes LULUCF emissions)—both taking 2005 as the base year—combine to form the EU’s target of 40% below 1990 levels.
The EU ETS is the flagship climate policy tool, but it is currently ineffective in helping decarbonise the power and industry sectors, due to the significant and growing oversupply of emissions allowances, leading to low certificate prices. An attempt has been made to increase its efficiency. One of the main topics during the debate about the ETS reform, was the speed of the emissions cap’s annual decrease, which is .determined by the annual linear reduction factor, and which is due to increase from 1.74% annually until 2020 to 2.2% afterwards (European Parliament 2017).
A point of disagreement between the Council and the Parliament was the amount of allowances that will be transferred to the Market Stability Reserve (MSR). This instrument, which should become operational in 2019, will be used to deal with the oversupply or shortage of allowances. So far it has been agreed that in case of allowances oversupply exceeding 400 million, 12% of the allowances in circulation will be transferred to the MSR. However, to speed up the reduction of the oversupply of allowances, until 2023 the amount of allowances being transferred to the reserve should be increased from 12% to 24% of the oversupply. This decrease is urgently needed as the oversupply of allowances exceeded 3 billion by the end of 2016 (Sandbag, 2017)
Keeping in mind these differences, the European Commission, Parliament and Council are conducting interinstitutional (“trilogue”) negotiations aimed at finding a final decision. It remains unclear, however, whether the reform will increase the price of emissions’ allowances to a level that will facilitate the process of decarbonisation of the power sector and energy intensive industries. Releasing the allowances from the MSR could decrease their price, but cancelling them instead of transferring them to the MSR would send a stronger message to investors and strengthen climate action.
Another significant challenge for the EU are the emissions from the transport sector which increased by over 13% between 1990 and 2014. In July 2016, the Commission presented the “European Strategy for low-emission mobility” (European Commission, 2016c). It suggested a number of measures aimed at reducing emissions from the transport sector by 60% below 1990 by 2050, announced in 2011 (European Commission, 2011). These measures include increasing the utilisation of digital technologies, fairer taxation that would improve the competitiveness of railways and development of infrastructure that would speed up the market take up of alternative modes of transport, such as electric recharging points, natural gas filling stations and hydrogen filling stations. It has also proposed new and more stringent tests for emissions from cars and vans. The impact of such measures on emissions reduction cannot be quantified and therefore it is not clear if they will allow the EU to meet its “at least 60%” emissions reduction target for the transport sector.
The climate mitigation policies adopted at the EU level are complemented by the measures adopted by some member states. An important measure with significant impact on emissions in the short term is the decision of some governments to phase out coal from the power sector: the United Kingdom and Austria by 2025, Denmark and France by 2023, Finland and Portugal in the 2020s. Some governments have also adopted effective measures leading to development of e-mobility, e.g. the Netherlands, which is also planning to ban the sale of gas-powered cars by 2025.
Data Sources and Assumptions
Pledge
Targets for 2020 and 2030 were calculated from the most recent national inventory submissions (CRF, 2016), which do not include emissions from aviation and shipping. We calculated EU's LULUCF accounting quantities for the period 2014-2020 for afforestation, reforestation and deforestation using the current Kyoto rules, and for forest management using a net-net approach with a projected reference level for 2014-2020. Some EU countries have included a background level for natural disturbances in their submitted Forest Management Reference Level. LULUCF quantities for the period of 2020-2030 have not been calculated because data projections are not detailed enough to allow their accounting. Furthermore reference levels for forest management have not been set and some additional activities (e.g. wetlands management) may be elected by individual member states thus making the calculation insecure.
The EU provided historical data on forest management and afforestation, reforestation and deforestation for many of its member states. Where members did not submit data it was - wherever available - compiled using the time series data from national inventories (CRF, 2016).
The impact of including LULUCF accounting on reductions of industrial greenhouse gas emissions could be in the range of 1–4%, of 1990 emissions, depending on the exact accounting rules applied. If the rules for the first commitment period of the Kyoto Protocol were used, EU’s emission in 1990 would increase by 75 MtCO2 thus effectively weakening the 2030 target by 1.4%, or by 1.3% when expressed as a reduction of industrial greenhouse gas emissions against 1990 levels. Another reference could be the likely second commitment period credits, which the CAT has estimated will be roughly 145 MtCO2/a (see assumptions below); effectively weakening the EU’s target by 3.0% (compare “Kyoto targets” with “Kyoto emission allowances” in the figure), or 2.6% of 1990 Annex A emissions. The whole LULUCF sector is expected to be a net emissions sink of ~210 MtCO2/a in 2030 (EC, 2014b), or as much as 4% of 1990 emissions of all sectors.
Current policy projections
The current policy projections are based on the EU reference scenario 2016 (European Commission 2016d) and the latest projections provided by the EEA (European Environmental Agency 2016a). The two scenarios were chosen because they represent a ‘bottom-up’ and a ‘top-down’ manner of evaluating the impact of policies in the EU. While the EEA data reflect the implementation of existing measures as put forward by member states, the PRIMES model performs a separate modelling exercise to estimate the effects of policies.
For the upper end of current policy projection for 2020 and 2030 we used the EEA data “with existing measures” scenario which ”reflects the effects of all adopted and implemented measures at the time the projections were prepared.” The figures were then harmonised to the latest inventory historical data (CRF, 2016). This harmonisation was necessary due to the differences between the CRF historic data and the data provided by the EEA.
For the lower end of the current policy projections for 2020 and 2030 we used the EU reference scenario 2016, which includes policies and measures adopted at EU level and in the member states by December 2014 and three additional amendments to three Directives agreed in the beginning of 2015 (ILUC amendment to the RES and FQD Directives and the Market Stability Reserve Decision amending the ETS Directive). The figures were also harmonized to the latest inventory historical data (CRF, 2016).
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