'Governance' & the 2030 Framework

Transcription

1 'Governance' & the 2030 Framework 1 Summary The purpose of this paper is to: 1. Assist in clarifying the meaning of the term governance and associated concepts 2. Clarify the meaning of governance in the EU context 3. Provide a general evaluation of the significance of the Commission s 2030 governance proposals 4. Set out ClientEarth s proposals for responding to the issue of governance in the 2030 context. In essence ClientEarth believes that the issue of governance will play a central role in winning and losing a strong 2030 package. We believe that a successful outcome requires civil society to adopt a separate approach to EU climate and energy governance for the post 2020 period. Our analysis proposes that focus should be on: 1. Winning a robust, technology neutral and genuinely long-term EU GHG governance regime; AND 2. Explore the value of the Commission s proposal to apply what is in effect, the Open Method of Co-ordination model of EU governance as a means to foster policy and political convergence around the EU s energy objectives and targets. In essence, we believe that separating out GHG governance from energy governance as outlined above would steer the 2030 debate away from the highly polarised and deadlocked energy debate and towards the landscape of consensus. In effect, making a strong demand on better GHG governance would concentrate on the context in which the EU has a very strong mandate to act (climate), in relation to which QMV measures can be adopted and for which there is more likely to be support for more binding EU governance in exchange for greater flexibility on the national energy mix. Our proposed approach also involved a rebalancing of the governance burden between MS and the Commission, which is presently not the case.

2 If a technology neutral GHG governance regime were adopted, but one with nationally binding GHG targets, supported by strong embedding of transparency, accountability and legitimacy provisions for meeting GHG targets, the trade-off might enable greater space for higher GHG ambition and thereby a powerful driver for expedited EE and RES and more action on agriculture and waste emission reductions. This approach could also provide the political space for a positive campaign on what Europe is for (collective action to mitigate climate change and share the cost of doing so) and also a message that European action is appropriate and proportionate. 2 What does the term 'governance' mean? Defining the term governance requires a focus on 3 key issues: 1. The broad definition of governance: The first point to emphasise is that while the term governance is very widely used, defining this concept is less straightforward. There is consensus that the concept refers to the shift during the past 20 years in most western democracies from centralised, hierarchical top down government to more flexible, horizontal decision making processes. There is an enormous literature explaining the drivers for this shift charting (for example) from the rolling back of the state that attended the privatisation and deregulation agendas, to the rise of civil society and the importance of public participation in decision making and the impact of complexity on policy making and the need for greater participation by expert agencies. 1 In effect, governance is a concept that seeks to capture the reality that while traditional top down government still exists (classically in areas like taxation), policy and decision making power in many other spheres is much more widely distributed (eg: upwards to the EU, sideways to civil society and downwards to regional tiers of government). However, while there is consensus that the term governance seeks to explain how we are governed today, it is less easy to define the concept precisely. That said, the concept is widely defined as the structural (institutional) and procedural arrangements for the allocation of power and responsibility between key stakeholders/players. 2. The tools of governance in essence how governance is delivered: The shift from government to governance has also been attended by the emergence of a wide range of new more flexible modes or tools of governance i.e., the mechanisms or instruments through which decisions are made and outcomes delivered. 1 For example: J Jordana and D Levi-Faur (eds), The Politics of Regulation Institutional and Regulatory Reforms for the Age of Governance (Elgar 2004); R Rhodes, Understanding Governance (Open University Press 1997). 2

3 In very broad terms, traditional top down styles of governing are associated with command and control instruments. In essence, this form of instrument involves the setting of detailed and binding instructions by central government. The shift to governance is associated with the development of a much wider range of more flexible and experimental mechanisms, including the use of market mechanisms (taxes and levies), risk based regulatory frameworks, 2 selfregulation and voluntary codes of conduct. 3. The principles of good governance : In essence the core principles of good governance reflect the origins of this concept in the dispersal or sharing of power beyond the state and the rise of more active participation by a wider range of stakeholders. To that extent the principles focus on the need to ensure that the arrangements for governance ensure that power is shared in a meaningful way between the various vested interests/stakeholders (transparency and participation) and also the need to ensure outcomes are achieved (accountability). However, because the decline of hierarchical governing is now so well established, the principles of good governance are today viewed as synonymous with principles of good governing. In other words, even failure by top down styles of governing to comply with these principles would call into question the legitimacy and efficacy of the regime. It is also important to note that in addition to the core or foundational principles, the wider constellation of governance principles varies depending on the context. Classically, good governance is generally viewed as a process that adheres to the core principles of transparency (openness), accountability and legitimacy through participation. However, other key principles include: effectiveness, equity, and coherence (integration). In the EU context, principles of subsidiarity and proportionality play a key role (discussed in more detail below). In addition, the more subject specific literature on good climate governance tends strongly to emphasise the importance of the rule of law and binding and enforceable frameworks as critical features of governance because of the importance of ensuring outcomes although this also blends into the issue of tool design. 3 What does the term 'governance' mean within the EU context? Although the governance debate originated from the experiences of many western democracies, it is also a concept that applies equally, albeit distinctively, to the EU level. 3 2 As used in the UK whereby only those industries at greatest risk of causing environmental harm or breaching environmental licenses (as opposed to all polluting industries) are subject to close regulation. 3 See for example analysis by; E Wurzel, A Zito and A Jordan, Environmental Governance in Europe: A Comparative Analysis of New Environmental Policy Instruments (2013) Edward Elgar; I Bache and M Flinders, Multi-Level Governance (2004) Oxford University Press; I Maher, 'Regulation and Modes of Governance in EC Competition Law: What's New in Enforcement?' (2008) 31 Fordham ILJ 1713; S Deakin, 'Reflexive Governance and European Company Law' (2009) 15 ELJ 224.; N Walker and G deburca, 'Reconceiving Law and New Governance' (2007) 13 CJEL 519; C Sabel and J Zeitlin, 'Learning from Difference; The New Architecture of Experimentalist Governance in the European Union' (2008) 14 ELJ

4 During the early decades of the EEC and EC (as the EU was previously known), policy design was strongly characterised by a top down approach with Europe governing through the adoption of detailed, legally binding and readily enforceable measures. However, by the 1990s Europe was also facing pressure from several quarters to depart from this highly centralised command and control approach to government. In summary this pressure was: 1. Led by Margaret Thatcher but continued by successive UK leaders who strongly disagreed with this highly prescriptive, centralised approach to governing arguing that it placed too great a burden on business; 2. Intensified by growing unease about Europe s democratic deficit and various scandals concerning fraud and weak financial management which further called into question the legitimacy of highly centralised governing by Europe; 3. Advanced by widespread concerns about competence creep by the EU as the range of competences being transferred to the EU institutions increased with successive Treaty amendments; 4. Heightened by enlargement and the impact of even greater diversity in national circumstances. The EU has responded to these pressures in 3 key ways; namely: 1. The principles of subsidiarity and proportionality have been progressively embedded into the EU Treaties. 4 The subsidiarity principle controls when Europe should act, while the proportionality principle tells Europe how to act. Both principles are now firmly embedded in the EU s constitution and both provide the legal basis for legal challenge to any measure deviating from their requirements. Their net governance effect has been far greater national scrutiny of the boundaries of power sharing between the MS and EU and, when the EU takes action, a marked shift by the Commission towards using flexible instruments that leave greater discretion at national level. The rise of framework Directives is a classic example of this shift. These measures depart from traditional detailed Directives adopted in the s and instead set binding but very broad harmonisation objectives leaving considerably more discretion with MS concerning the means of implementation. They also come with a greater emphasis on public participation in decision making at national level but are far less easily enforced by the Commission. 4 Post Lisbon, they are enshrined in Article 5(3)-(4) of the Treaty on European Union and Protocol No.2 on the Application of the Principles of Subsidiarity and Proportionality. See generally; P Craig and G deburca, EU Law, Text Cases and Materials (6th ed) (Oxford University Press), Chapter 3, pp 94 et seq and pp

5 2. Launch of the EU s Better Regulation & Commission s European Governance Norms or Principles The Better Regulation agenda 5 was essentially an extension of the subsidiarity and proportionality debates but focused more on the need for simplification and rationalisation of EU legislation and also the need for greater use of alternatives methods of regulation in particular, co-regulation and self-regulation, market mechanisms and more latterly smart regulation. This agenda has contributed significantly to the wider shift towards less hierarchical styles of EU governing. While these new styles of regulation generally involve the adoption of legal frameworks, the attainment of objectives is entrusted to the relevant stakeholders in the field (radically so for self-regulation) or the market. As far as enforcement is concerned, the framework legislation will often make provision for follow up in the event of noncompliance. The follow up can involve enforcement action and legislative action but both remain the default option. The European Governance agenda was launched in 2001 with the Commission s White Paper on the subject. 6 The White Paper defined European Governance as the rules, processes and behaviours that affect the way in which powers are exercised at European level The White Paper set out the new norms of European governance; namely: i. Systematic consultation with MS and all key stakeholders ii. Greater flexibility in how EU legislation can be implemented at national level (reemphasising the need for Framework Directives, self/co-regulation, market mechanisms etc ) and avoiding overly complex, uniform legal standards. iii. Adherence by EU institutions to certain core principles: openness, participation, accountability, effectiveness, coherence all of which are deemed to reinforce systematic EU compliance with subsidiarity and proportionality. 3. EU 2000 Lisbon Agenda on Competitiveness and Economic performance formally launched an entirely new style of EU governance called the Open Method of Co-Ordination (OMC) 7 The OMC represents the most significant step towards governance within the EU context in that it is a process designed to facilitate an EU supervised, but strongly decentralised approach to steering (rather than instructing) national delivery of agreed objectives. Since its launch in 2000, this much more open textured and informal approach to governing has come to dominate many areas of economic and social policy making in the EU (including pensions, social exclusion, health care, research, education, enterprise and information 5 Simplifying and Improving the Regulatory Environment, COM(2002) 278; Action programme for Reducing Regulatory Burdens in the EU, COM(2007)23; Impact Assessment, SEC(2007)84. 6 COM(2001) 'Lisbon Strategy: Working together for growth and jobs and the 2005 re-launch: 'A New Start for the Lisbon Strategy', COM(2005)24. 5

6 society). The European Semester System is a form of OMC although applying only to the economic and fiscal domain. The 4 key features of OMC are: The setting of EU guidelines and timetables for achieving goals Establishing quantitative and qualitative indicators and benchmarks, tailored to the needs of MS, but against which national progress could be measured Translating EU guidelines into national policies by setting specific targets and adopting specific measures Periodic monitoring, evaluation and peer review organised as a mutual learning process. The OMC was described by its author as being a concrete way of developing modern (EU) governance using the principle of subsidiarity. 8 In essence, OMC is viewed as an inclusive method for fostering co-operation and policy/political convergence with the EU institutions, MS and all other relevant actors and governance levels (local and region) engaged in the benchmarking and evaluation/peer review/policy learning process. OMC represents a movement away from the traditional Community (EU) Method of adopting complete prescriptive policies and instead placing an emphasis on guidelines and goals translated into national plans by state and regional actors. OMC is designed to promote flexibility and openness and interaction between EU and national levels of governance in framing and developing policies. However, the extent to which either objective is realised depends significantly on how detailed objectives, targets, indicators and benchmarks are and the arrangements for participation. A further element of OMC is the absence or significantly reduced role for binding instruments and compulsory legal enforcement. While some of the co-ordination processes used in the economic policy context (i.e., European Semester System) do contain a legally enforceable or binding element, most of the OMC or OMC-like processes do not. However, it is important to emphasise that there is no one single OMC it is instead described as a cookbook of recipes 9 with variations on a theme rather than a single recipe. In effect, the precise nature of the OMC arrangements (and in particular the extent to which they are binding and enforceable) varies according to the context. 10 It is also important to emphasise that the OMC is often combined with other governance tools depending on the context. Those methods vary in design from broad harmonisation to intensified integration measures. 8 OMC is widely viewed as the brainchild of the adviser to the Portuguese Presidency of the EU in the lead up to the Lisbon Council João Rodrigues. See M Telo (ed), L'evoluzione della governance europea', 'Special Issue of Europa/Europe', Rome, No 2-3, 2001, P. Craig and G. de Burca, EU Law (5 th edition), Oxford University Press, p There is an excellent collection and classification of the extensive OMC literature up to 2010 at the OMC Forum at the EU Centre of the University of Wisconsin, 6

7 4 Applying a Governance Analysis to the EU Climate & Energy Framework There is significant academic debate about the impact of the broad EU governance agenda and in particular the implications of OMC style governance instruments. There is little doubt that since the 1990s, the EU has been making far greater use of alternatives to traditional hierarchical governing evidenced by the proliferation of framework Directives as measures that repatriate discretion to the national level and are consequently more difficult for the Commission to enforce. In addition the EU has demonstrated a commitment to experiment with market mechanisms (classically the ETS) as an alternative to top down traditional EU governing. That said, although EU governing of the environment has also reflected the shift towards governance, measures adopted in this sphere continue to reflect a strong emphasis on traditional rule of law based approaches to EU governing. In contrast to the economic and social policy spheres where OMC style governance has been used frequently, it is not a significant feature of EU intervention on the environment - most likely because this is a sector in which the EU has a strong mandate to act. However, the Commission s 2030 proposals suggest that this may be about to change. The models of governing used in the 2020 Framework: Before addressing the 2030 proposals it is worth understanding the architecture of the 2020 framework. The core mechanisms (IEM, State aid, RES, EED, ETS, ESD) reflect a mixture of governing styles ranging from traditional top down measures to measures more strongly associated with governance. However, even where governance approaches have been used, there is a consistent embedding of the framework in the rule of law, albeit with varying degrees of legal traction and enforceability. That said it is clear that: Measures based on the EU's competition and internal market competence (State aid and IEM) in which it has exclusive powers (competition) or a strong mandate to act, reflect traditional 'top down' governing. EU controls on GHG emissions, based on the environment competence but pioneering in a global context, reflect a governance approach (ETS and ESD). Energy measures based on the environment competence (RES Directive) reflect a more traditional almost top down approach with prescriptive and enforceable measures, while energy measures based on the EU's energy competence (EED) tend towards a more steering, governance based approach. Notably, informal OMC styles of governance do not feature within the 2020 regime although the ESD is arguably OMC with rules. 7

8 In terms of compliance with 'principles' of good governance, the 2020 regime places the responsibility on MS and industry to comply with EU rules on transparency, accountability and participation but strikingly less so for the EU institutions themselves. There is a huge concentration of power within the Commission, whose action/inaction is essentially immune from legal challenge, and whose compliance with transparency standards is much weaker than those applying to MS. The shift towards even more 'governance' proposed for the 2030 Package There is little doubt that the 2030 proposals reflect a much more significant shift towards governance as the central model for governing the post 2020 period. 1. Despite failure of the ETS there is a determination to persist with this market mechanism and strong resistance to an EPS which would involve top down governing. 2. In the context of the ESD there is no debate about strengthening its very loose controls; instead MS are in dispute as to the principle rather than the mode of governance ensuring greater equity in the burden sharing arrangement. 3. Despite the perceived success of the RES Directive there is a proposed shift away from top down governing - the replacement of enforceable national targets with unenforceable, symbolic EU targets. 4. Unwillingness (and probable lack of competence) to ban shale exploitation and a cautious approach to intensified or tailored application of top down EU controls on environmental impacts. 5. Most significantly there is the emergence of a Commission proposal for a new governance regime as part of the 2030 framework. Although not referred to by name, and despite very limited articulation of the process, the Commission s proposal reflects all the hallmarks of OMC style governance. There is therefore little doubt that the Commission is inviting MS to consider the deployment of this much more informal, facilitative approach to governing in post 2020 period. 6. To the extent to which an emphasis on top down governing remains, it is concentrated in the emphasis on better compliance with the IEM Directives and the adoption of new State aid and energy guidelines signalling the Commission s intention to use an entirely top down instrument to shape and drive the energy decarbonisation process. 8

9 5 Clarifying the Drivers of the Proposed Introduction of OMC Style Governance to the 2030 Context Despite sharp disagreement concerning the effectiveness of OMC style approaches, there is broad academic consensus that OMC style governance tends to be proposed either: To unblock or overcome a political impasse where agreement on a more convention approach cannot be reached; Where the EU lacks formal, legal competence to act; Because it is considered to be the most suitable instrument for achieving the policy goals in question. There is little doubt that the dynamics of the 2030 debate resonate strongly with all 3 drivers thus giving the Commission a strong incentive to reach for OMC style governance. 1. The 2030 policy debate is defined by political deadlock principally concerning GHG ambition and EU intervention in prescribing the national energy mix. 2. Although the EU cannot be said to lack formal legal competence to act in the context of energy policy, the scope of its powers as articulated under Article 194 TFEU reflect an uneasy constitutional bargain between MSs and the EU concerning the sharing of power in this sensitive sector. In contrast to the EU s much stronger Treaty mandate to act on the environment, the scope for triggering unanimous voting for energy measures adopted under Article 194, and the explicit Treaty caveat reserving national control over the energy mix, create at best an uncertain legal mandate for prescriptive EU action on energy and at worst, one highly susceptible to legal challenge where action is taken. ClientEarth s separate analysis of the voting rules likely to govern the adoption of energy measures makes clear that the extension of nationally binding RES targets (and any proposal for an equivalent under the EED) are at greatest risk of triggering a veto. 11 At a political level, despite the EU s formal energy powers, key MS have already made clear their strong resistance to centralised prescription of the national energy mix and insistence on national flexibility. 3. To compound the problem of political disagreement, the experiences of the 2020 package make clear that the existing regime is far from perfect. The rapid deployment of RES has led to a range of unintended outcomes (market distortion, unsustainable RES); the regime is significantly fragmented with numerous reporting lines; targets are not necessarily the optimum mechanism for governing; and there is poor alignment between the EU s energy liberalisation, security and sustainability objectives. It is clear meeting the EU s energy objectives and targets will require much greater co-ordination and integration across several 11 climate-a-energy-process

10 complex spheres of energy market activity and also a degree of governance innovation particularly EU supervised regionalism within the IEM. There is also a perceived need for simplification and rationalisation of reporting. Consequently, it is possible that the more facilitative and policy learning approach offered by OMC style governance may offer a more suitable mechanism for steering political convergence around the complex and highly sensitive policy goals operating in this sphere. 6 Unpacking the Implications of Using OMC Style Governance in the 2030 Context ClientEarth takes the view that the issue of governance provides a lever for winning and losing a strong 2030 outcome. We believe a strong 2030 outcome will not be achieved if we fail to acknowledge the factors that have led the Commission to propose the introduction of OMC style governance to the climate and energy framework. We furthermore believe that by advocating different approaches to EU climate and energy governance, it might be possible to: Win greater GHG ambition by breaking the deadlock over energy governance. Develop a positive campaign for robust GHG governance that resonates powerfully with what Europe is for and counters the negative perception of excessive Europe in the energy context. Prevent the embedding of OMC style governance into the architecture of climate governance specifically GHG emission reduction controls; and Consolidate the EU s mandate to steer energy policy convergence in the longer term. Acknowledging the factors that led the Commission to OMC for 2030 In essence, the Commission s proposals for new OMC style energy governance can be understood as: (a) an attempt to find a solution to political deadlock, (b) limited or contested power and (c) a more suitable approach to delivering convergence around the EU s highly sensitive and enormously complex energy security, competitiveness and sustainability objectives. However, the question is to what extent does this approach add value in terms of achieving the desired outcomes of the 2030 debate? A substantial literature exists on the EU experience of the OMC. For present purposes suffice it to say that opinions vary sharply as to the value and effectiveness of OMC styles of governance. 10

11 On the one hand some commentators welcome it as an appropriate and necessary response to the powerful critiques that have emerged concerning more traditional styles of European governing. 12 However, many others have questioned, for example, whether it has succeeded in delivering its policy steering effect, lived up to its promise of participation and stakeholder inclusion, and enabled the domination of economic and competitiveness concerns over social (and in this case environmental) considerations. 13 Some commentators have launched full-frontal attacks on the OMC, questioning its empirical effectiveness and cautioning about its impact on the EU institutional balance, on democracy, rights and the rule of law in general. 14 However, there is also consensus that despite its undoubted limits, OMC style governing is unlikely to be replaced by a return to traditional hierarchical EU governing given the intractable governance dilemmas facing the EU. In effect, OMC is here to stay as a feature of EU governance the only question is the nature and impact of its deployment. It is unclear from the 2030 Communication how the new governance regime is intended to relate to or interact with existing GHG and energy measures. On the one hand the Commission clearly envisages the ETS, IEM and State aid rules to continue as key instruments within the 2030 package. However, the precise fate of the RES Directive, the EED and ESD are less clear and indeed the emergence of a potentially new instrument on LULUCF/AFLOU. The framing of the Commission s governance proposals is ambiguous. On the one hand it is introduced in the 2030 Communication as European Governance of the 2030 Framework suggesting it applies to all aspect of climate and energy governance. However, the immediate focus on national plans to meet the EU s energy objectives suggests that it is envisaged primarily as a tool of energy governance. However, the Commission s proposal for a simplification of existing reporting lines and consolidated governance spanning EU climate and energy objectives and targets, suggests it is inviting Member States to consider potentially substantial changes to the present arrangements under the RES, EED and ESD elements of the 2020 framework and potentially a retreat from reporting and planning obligations based in the rule of law. ClientEarth takes the view that informal OMC style governance would be a retrograde step for EU climate governance in that it would embed a very soft instrument as the mechanism for ensuring delivery of the EU and MS GHG target. We would advise that there is considerable merit in, and political space for launching a strong positive campaign for far more robust EU GHG governance. 12 For example; J Zeitlin and P Pochet with L Magnusson (eds), The Open Method of Co-ordination in Action: The European Employment and Social Inclusion Strategies (PIE-Peter Lang, 2005); C Joerges, 'Integration Through De-Legislation?' (2008) 33 EL Rev 291; 13 For example: M Dawson, 'Transforming into What? New Governance in the EU and the "Managerial Sensibility" in Modern Law' (2010) 2 Wis L Rev 389; C Scott, 'Governing Without Law or Governing Without Government? New-ish Governance and the Legitimacy of the EU' (2009) 15 ELJ. 14 V Hatzopoulos, 'Why the Open Method of Coordination is Bad for You: A Letter to the EU' (2007) 13 ELJ

12 However, we also take the view that if properly designed (genuinely transparent, inclusive of all institutions and stakeholders and accountable), the use of OMC style governance could conceivably play a valuable role in promoting cooperation and convergence around the energy policy, consolidate the EU s mandate to steer in this sensitive context and facilitate governance innovation around regionalism. However, such an approach would only be acceptable if it is also reinforced by stable, long-term and enforceable governance of MS and EU GHG targets, strong Commission/third party enforcement of the GHG and IEM frameworks and appropriate deployment of the Commission s State aid jurisdiction. In this regard the model represented by the European Semester System, which is reinforced by the 6-pack and 2-pack legislative measures, offers much by way of learning concerning how an OMC style process might be effectively constructed to support convergence around the EU s energy objectives and targets. Winning an appropriate design will also be important if the Commission s threat of bargaining in the shadow of hierarchy is to have a real impact. The Commission s 2030 Communication attempts to send a message to MS that bargaining concerning national energy plans would occur against the background of the potential for a deeper iterative process or the threat of a legislative approach. Given how deadlocked political negotiations are at present, the sensitivities concerning EU intervention in the national energy mix, and the potential for legal challenge to such intervention, it is unlikely the Commission will be able to achieve support for legislation without a major change of political will. However, the OMC is a non-legislative approach so arguably creates a forum for facilitating strong steering by the Commission but without a binding framework. It goes without saying this process could also bring with it an even greater loss of transparency in energy governance, the exclusion of the European Parliament and civil society and weak accountability. The Nature & Value of a New (Good) Governance Framework Meeting the EU s 2050 GHG emission reduction target is the central objective of the climate campaign. The 2030 Impact Assessment also indicates that a main target for GHG emission reduction represents the least cost pathway to a low carbon economy, which of itself, should drive an increased share of RES and EE in the EU. Delivery of the GHG target is thus critical to both the climate and energy agendas. However, while there has been considerable debate as to the ambition of the GHG target, there has been comparatively little debate concerning the mechanism for its delivery. Instead the debate has focused on the need for 3 targets and the extension of nationally binding targets for RES and potentially for EE. The intense focus on the mechanisms of energy governance and the need for a top down prescription of the national energy mix has forced the 2030 debate into constitutional terrain that promotes political polarisation and deadlock through the scope for unilateral vetos and legal contestation of the EU s competence to intervene. 12

13 The focus of the debate has also led to neglect of the core pathway for climate mitigation (GHG emission reduction), constitutional (Treaty) terrain that gives the EU a strong mandate to act (environment and in particular on climate), and a basis for EU action by QMV which lessens the scope for unilateralism and legal challenge to a measure that would inevitably require changes to the national energy mix. 15 It has also led to neglect of a pathway where MS appear to be willing to extend nationally binding GHG targets out to The intense focus on extending the 2020 regime out to 2030 across both climate and energy measures has also neglected the value of a trade off between two styles of governance within the 2030 framework and exposed the policy debate to the risk that the loss of confidence by the EU and political stalemate amongst the MS, will ultimately lead to a substantial embedding of OMC and thus a significant retreat from climate governance based on the rule of law in the post 2020 period. A rule of law based approach to climate governance is universally considered to be a fundamental pre-requisite of effective decarbonisation and it was its clear support for this approach that fundamentally demonstrated the EU s willingness to provide leadership in global climate negotiations. This core achievement must not be lost in the 2030 process. Most fundamentally a good governance campaign involves an attempt to defend and intensify that achievement. Such a campaign would consider the following: 1. Although a central message in the Commission s 2030 Communication is the need for a more predictable regulatory context for investment, little attention has been devoted to the value of creating a genuinely long-term GHG trajectory linking (as a minimum) the EU to the 2050 objective. At present the EU is not obliged to deliver the 2050 GHG objective. The ETS creates an implicit long-term pathway for energy intensives but the EU and Member States are only committed to the 2020 GHG target under ESD. 2. The creation of an instrument with a singular focus on the creation of a binding, long-term but flexible (technology neutral) regulatory pathway to meet the EU s 2050 GHG target. However, flexibility is exchanged for compliance by both the EU and MS with the core principles of good governance (as a minimum: data and decision making transparency, accountability for outcomes, and legitimacy through participation of key stakeholders and the requirement to use independent, expert advice, and integrated decision making through shared obligations for relevant DGs). The potential political value of such an instrumnet as a means to remedy the poor quality of climate governance provided by the Commission should not be underestimated. The Commission would be required to report at specific junctures to the EP and Council and to bring forward proposals for reform (potentially specific measures such as EPS) where progress towards the GHG target was insufficient and/or the retreat from coal was not being expedited. The Act would also make provision for the creation of an independent, expert EU climate commission or agency. The Commission would be required to base policy on the advice of this entity and the advice would have to be disseminated publicly. In addition, the 15 The legal analysis underpinning this argument will be explained in a subsequent paper. 13

14 new body would play an important role in advising MS on compliance, supporting best practice and potentially independent evaluation of progress. The integration of environmental (climate) considerations into policy making, which is required by the Treaty, would be supported by the imposition of shared obligations for relevant DGs. 3. Together with the ETS, the ESD contains the foundations of this much more powerful decarbonisation regime. In essence the ESD should be replaced by a much higher profile measure which in technical terms could be called something like the EU Climate Action/Mitigation Framework Directive. The new Climate Framework Directive could either be positioned as the twin pillar to the ETS or a chapeau measure above the ETS and potentially a new AFLOU pillar. 4. The new Framework Directive would mobilise near term tools of governance principally 5- yearly carbon budgets as opposed to longer term targets that cannot be enforced until they expire and encourage MS to behave as free-riders knowing the Commission is unlikely to enforce in any event. A long-term and binding system of budgets linked to explicit and enforceable reporting and pathway adjustment obligations would give the economy and more direct and clear indication of the stability of commitment to the decarbonisation objective. 5. The Directive would retain the ETS and would involve consideration of the value of interaction between ETS allowances and AEA s under the ESD. However, the ETS should not remain a 'holy cow' of the EU climate acquis with proposals only relating to the management of scarcity rather than early reform of the equally problematic issues relating to excessively generous offsets. 6. The essence of the design of a Mitigation Directive is already inherent in the ESD and ETS. However, in this regard the importance and potential represented in the design of the ESD is hugely neglected. Despite accounting for over half of the EU s GHG emission, the ESD remains a scarcely understood and rarely discussed measure. Although MS are focused on the principle of governance operating in this context (ie equity of the burden sharing model) there is little focus on the need to substantially strengthen this measure. There is also little emphasis on the fact that the most cost effective GHG reductions in the non-traded sectors come from RES and EE, which would be substantially intensified if the model contained in this instrument were developed. 7. In addition, there is little attention being devoted to the threat to the GHG target and its governance represented by the proposed introduction of LULUCF into the EU 2030 acquis. ClientEarth has completed an analysis of the issues concerning the fungibility of fossil fuel emissions and those from the AFLOU sectors. However, our view is that the two decarbonisation pathways cannot be credibly merged and thus separate accounting regimes are required. This does not necessarily mean the creation of two separate GHG instruments but certainly separate arrangements for the accounting of emissions and sink effects. 14

15 Sharon Turner Climate and Energy Programme Leader Visiting Professor, University College London and University of Sussex ClientEarth The Hothouse 274 Richmond Road Martello St Entrance London E8 3QW t e sturner@clientearth.org Contact: Aoife O'Leary Lawyer, Climate & Energy ClientEarth The Hothouse 274 Richmond Road Martello St Entrance London E8 3QW t e aoleary@clientearth.org Brussels 4ème Etage 36 Avenue de Tervueren 1040 Bruxelles 1 Belgium London 274 Richmond Road London E8 3QW UK Warsaw Aleje Ujazdowskie 39/ Warszawa Poland ClientEarth is a company limited by guarantee, registered in England and Wales, company number , registered charity number , registered office 2-6 Cannon Street, London EC4M 6YH, with a registered branch in Belgium, N d entreprise , and with a registered foundation in Poland, Fundacja ClientEarth Poland, KRS , NIP