EU: CLIMATE AND RENEWABLE ENERGY REGULATION

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1 Oslo March 2013 EU: CLIMATE AND RENEWABLE ENERGY REGULATION Justin Wolst, THEMA Consulting Group

2 The European Union: facts and figures 7% of the world s population GDP ( 12,268,387 million 2010) Responsible for 16,67% of worldwide GHG emissions Depends on imports for more than 50% of its energy needs Taking the initiative in Climate Change

3 THE EU: LEGAL FOUNDATION Treaties: Treaty establishing the European Coal and Steel Community (entered into force 1952) Treaty on the European Union Maastricht Treaty (entered into force in 1993) European Economic Area (1994 EFTA) Treaty on the Functioning of the European Union Lisbon Treaty (entered into force in 2009) Article 191 TFEU 1. Union policy on the environment shall contribute to pursuit of the following objectives: preserving, protecting and improving the quality of the environment, protecting human health, prudent and rational utilisation of natural resources, promoting measures at international level to deal with regional or worldwide environmental problems, and in particular combating climate change. (emphasis added)

4 THE EU: MANDATE - IS THE EU COMPETENT? Position Member States and EU Commission - Exclusive competence - Shared competence - No competence Energy Environment - Art. 4 Treaty on the Functioning of the EU: Shared competence Principles of proportionality and subsidiarity Art. 5(3) Treaty on European Union Protocol (No 2) on the application of the principles of subsidiarity and proportionality proportionality the involvement of the institutions must be limited to what is necessary to achieve the objectives of the Treaties a necessity check to exercise legislation the EU level for every legislative action. subsidiarity decisions are taken as closely as possible to the citizen and that constant checks are made to verify that action at Union level is justified in light of the possibilities available at national, regional or local level lowest possible level of government Bodies of the EU: Commission EU Parliament Council of the EU Council of Minsters European Court of Justice

5 THE EU IN THE UNFCCC 27 countries, one position: The 27 members of the European Union meet in private to agree on common negotiating positions. The country that holds the EU Presidency - a position that rotates every six months - then speaks for the European Union and its 27 member states. As a regional economic integration organization, the European Union itself can be, and is, a Party to the Convention. However, it does not have a separate vote from its members. (UNFCCC website) Council Decision of 25 April 2002 concerning the approval, on behalf of the European Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the joint fulfillment of commitments thereunder (2002/358/CE) Representation of the EU: - EU presidency

6 THE EU IN THE UNFCCC EU mandate for the EU s position in the UNFCCC negotiations Draft of a proposed text of the EU position that is the basis for the mandate EU Presidency Comment on text after continuous agreement at national level Working groups of National Experts Negotiation on the last details of the text Permanent Representati ves Committee Negotiation on the last details of the text and if possible agree on the council conclusions Council of Environment Ministers Agree on the final details (if necessary) and confirm the council conclusions Council of the EU EU Presidency and the Commission 27 National experts 27 Member States internally agree Diplomats agree on the difficult issues EU Presidency and the Commission EU Presidency and the Commission At the negotiations, every morning before normal negotiations, during lunch and after the negotiations, additional negotiations of the heads of delegation (or experts for special things) of the 27 MS.

7 THE EU IN THE UNFCCC: MANDATE UNDERLINES its commitment to agree in Doha a ratifiable amendment to the Kyoto Protocol that enables a second commitment period to the Kyoto Protocol, in the context of balanced progress on all elements of the package agreed upon in Durban; UNDERLINES that the second commitment period starts in 2013 and should end in 2020, emphasising that the new global legally-binding agreement should enter into effect no later than 1 January 2020; in this context, CALLS upon all Annex B Parties that have not yet done so to submit their quantified emission limitation or reduction objective (QELRO) well before the start of the Doha Conference; UNDERLINES the need for wide participation and sufficiently ambitious targets in the second commitment period and CALLS upon all Annex B Parties to ensure a high level of ambition of their QELRO during the second commitment period; URGES all Annex B Parties to put forward QELROs that are more ambitious than their own QELRO for the first commitment period and lead to a significant deviation from business as usual; RECALLS the EU and its Member States submission of 19 April 2012 relating to the information on the QELROs for the second commitment period under the Kyoto Protocol; in this context and subject to the applicable rules being agreed, AGREES with the inclusion of the EU in a revised Annex B of the Kyoto Protocol with a QELRO of 80 and NOTES that Member States propose to be included in a revised Annex B of the Kyoto Protocol with each a QELRO of 80 (percentage of base year or period); AGREES that the written consent for an amendment to Annex B concerning the European Union will be given by the European Commission and NOTES that the written consent concerning the Member States will be given by each Member State individually. Source: Council Conclusions Oct just before Doha

8 THE EU IN THE UNFCCC: MANDATE UNDERLINES its commitment to agree in Doha a ratifiable amendment to the Kyoto Protocol that enables a second commitment period to the Kyoto Protocol, in the context of balanced progress on all elements of the package agreed upon in Durban; UNDERLINES that the second commitment period starts in 2013 and should end in 2020, emphasising that the new global legally-binding agreement should enter into effect no later than 1 January 2020; in this context, CALLS upon all Annex B Parties that have not yet done so to submit their quantified emission limitation or reduction objective (QELRO) well before the start of the Doha Conference; UNDERLINES the need for wide participation and sufficiently ambitious targets in the second commitment period and CALLS upon all Annex B Parties to ensure a high level of ambition of their QELRO during the second commitment period; URGES all Annex B Parties to put forward QELROs that are more ambitious than their own QELRO for the first commitment period and lead to a significant deviation from business as usual; RECALLS the EU and its Member States submission of 19 April 2012 relating to the information on the QELROs for the second commitment period under the Kyoto Protocol; in this context and subject to the applicable rules being agreed, AGREES with the inclusion of the EU in a revised Annex B of the Kyoto Protocol with a QELRO of 80 and NOTES that Member States propose to be included in a revised Annex B of the Kyoto Protocol with each a QELRO of 80 (percentage of base year or period); AGREES that the written consent for an amendment to Annex B concerning the European Union will be given by the European Commission and NOTES that the written consent concerning the Member States will be given by each Member State individually. Source: Council Conclusions Oct just before Doha

9 THE EU: LEGISLATIVE ACTS/INSTRUMENTS EU Policy Strategy Flagship Initiatives Roadmap White Paper Directive Regulation Initiative Impact Assessment Communication Visionary/ Strategic Legislative Strategy (in EU perspective) Long-term plan of action: Europe 2020 strategy for smart sustainable and inclusive growth Flagship Initiatives (7) Areas that have been identified as new engines to boost growth and jobs (as part of the Europe 2020 strategy) Roadmap A (policy) strategy in more detail including a way or path to achieve the set goal White Paper A document containing proposals for Community action in a specific area Directive Legislative Act, that sets legally binding goals, without dictating the way to achieve the goals to the member states Regulation Legally binding legislative act for all member states Decision Legally binding legislative act for a special case or member state. Initiative Non-binding policy paper that pursues a certain objective by stimulating policy Impact Assessment A document that evaluates the possible impacts of a Commission proposal and is mandatory before every proposal Communication Position paper from the Commission that often signals the start of a proposal

10 EU CLIMATE AND ENERGY PACKAGE Climate and Energy Package: targets. March 2007 A 20% reduction in EU greenhouse gas emissions from 1990 levels; Raising the share of EU energy consumption produced from renewable resources to 20%; A 20% improvement in the EU's energy efficiency The Climate and Energy Package is a set of legislative acts aiming in achieving of the targets. It addresses: The EU emissions trading scheme Target for non-ets sectors Renewable energy targets Carbon capture and storage Energy efficiency addressed in 2011

11 EU CLIMATE CHANGE LAW Decision No 280/2004/EC (revised) of the European Parliament and of the Council of 11 February 2004 concerning a mechanism for monitoring Community greenhouse gas emissions and for implementing the Kyoto Protocol Annual reporting on GHG emissions Annual report by the European Environment Agency on Member States Progress Current revision (status: public consultation) Assist in keeping track towards 2020 Quality of data Comply with new international standards (Cancun Agreements) Facilitate policy development for land use change and forestry (LULUCF), aviation, maritime transport and adaption to climate change Rules for reporting on use of revenues of auctioning under EU ETS

12 EU CLIMATE CHANGE LAW: ETS Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community Based on art 17 UNFCCC EU Emission Trading Scheme: 1st phase: Approx 40% of emissions covered Free allocation Energy generation Setting-up of national registries 2nd phase: Linking directive: UNFCCC market mechanisms CDM JI Including Norway, Iceland and Liechtenstein 3rd phase: : full activation of the ETS 50% of emissions covered A single EU wide cap on emissions Auctioning, not free allocation, is now the default method for allocating allowances Some more sectors and gases are included limiting banking of allowances between Phases II and III

13 EU CLIMATE CHANGE LAW: ETS Carbon leakage Aviation 2011 US airlines case at the European Court of Justice 2011 climate summit of the BASIC nations issued an official objection 2011 joint declaration of 29 countries including China, the United States, India and Russia Indicated a round of counter-measures to the EU s legislation non-eu flights have been exempted 2013 (last week) Shipping - IMO International linking Australia from 2016? New Zealand Switzerland, ongoing negotiations California, China, in the future?

14 EU CLIMATE CHANGE LAW: ETS Low carbon price (currently 4,66 Source: Point Carbon) Financial downfall last years financial crisis Over production of cheap alternative market allowances Temporary solution back-load allowances (currently being discussed in EP) Possible solutions: 1. Increasing the EU s greenhouse gas emissions reduction target for 2020 from 20% to 30% below 1990 levels; 2. Retiring a certain number of phase three allowances permanently; 3. Revising the 1.74% annual reduction in the number of allowances to make it steeper; 4. Bringing more sectors into the EU ETS; 5. Limiting access to international credits; 6. Introducing discretionary price management mechanisms such as a price management reserve.

15 EU CLIMATE CHANGE LAW: ESD Decision No 406/2009/EC of the European Parliament and of the Council of 23 April 2009 on the effort of Member States to reduce their greenhouse gas emissions to meet the Community s greenhouse gas emission reduction commitments up to 2020 Effort-Sharing Decision: 10% mandatory emission reduction targets for all non-ets emissions: - transport (except aviation) - buildings - agriculture - waste Targets have been set by Gross Domestic Product per capita (GDP) Responsibility of the Member States to achieve its target national measures

16 EU CLIMATE CHANGE LAW: ESD In case of non-compliance: Any shortfall in emission reductions will have to be achieved in the next year, multiplied by a factor of 1.08 as a penalty. Member States will have to submit a corrective action plan to the Commission detailing, among other things, how and when they intend to get back on track towards meeting their 2020 targets. The EU is making good progress towards achieving this target. 15% and on track.

17 EU CLIMATE CHANGE LAW: CCC The Climate Change Committee is a body within the legislative process that advices on climate change legislation and decides on details in the so called: Comitology-process: implementing powers attributed to the Commission that is assisted by Member States at national experts level (less inclusion of EU Parliament) Implementing powers on legislation at a technical level comment and give recommendations on the Member States plans suspension of the Member State's eligibility to transfer any annual emission allocations and JI/CDM rights to another Member State. Decision on allocation of surplus allowances (Denmark, Cyprus and Croatia on their ascension)

18 EU ENERGY LAW Three main area s: Renewable energy Energy efficiency Internal energy market

19 EU ENERGY LAW: RES Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources 3 types of Renewable energy sources (RES): Electricity (RES-E) Heating and Cooling (RES-H&C) Transport (RES-T) National support schemes: e.g. Subsidies, Loans, Feed-in tariffs, Premiums, Quota System, Tax regulation, Net-metering, Tendering etc. Measures of international cooperation between Member States: Statistical transfer between Member States (all types of RES) Joint Projects between Member States (only for RES-E and RES C&H) Joint projects between Member States and third countries (only for RES-E) Joint Support Schemes (only for RES-E and RES C&H)

20 EU ENERGY LAW: RES PROGRESS 2009 Forecast 2010 National Renewable Energy Action Plan 2011 (for period ) Annual Reports Member State Share in 2005 Target for 2020 Reported progress in Indicated surplus/deficit in Austria 23,3 34,0 30,8 + Belgium 2,2 13,0 5,1 + Bulgaria 9,4 16,0 12,6 + Cyprus 2,9 13,0 5,8 - Czech Republic 6,1 13,0 8,3 + Denmark 17,0 30,0 21,8 + Estonia 18,0 25,0 24,0 + Finland 28,5 38,0 33,1 + France 10,3 23,0 12,8 + Germany 5,8 18,0 11,3 + Greece 6,9 18,0 9,7 + Hungary 4,3 13,0 8,8 + Ireland 3,1 16,0 5,5 = Italy 5,2 17,0 10,1 + Latvia 32,6 40,0 32,5 + Lithuania 15,0 23,0 19,7 + Luxembourg 0,9 11,0 3,0 = Malta 0,0 10,0 0,9 + the Netherlands 2,4 14,0 3,7 - Poland 7,2 15,0 9,5 + Portugal 20,5 31,0 24,6 + Romania 17,8 24,0 22,4 + Slovak Republic 6,7 14,0 10,2 + Slovenia 16,0 25,0 19,9 + Spain 8,7 20,0 13,5 + Sweden 39,8 49,0 47,8 + United Kingdom 1,3 15,0 3,3 =

21 EU ENERGY LAW: RES CHALLENGES Indirect land-use change (ILUC) - Amendment to 5% Measures of cooperation: - Elsertifikater - New research in promotion of cooperation mechanisms (national reports) - Based on the surplus, all countries want to export statistical transfer Other impacts: - Nuclear phase out Germany - Financial crisis

22 EU ENERGY LAW: ENERGY EFFICIENCY DIRECTIVE 2012/27/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 25 October 2012 on energy efficiency Art. 3: Energy Efficiency targets: Each Member State shall set an indicative national energy efficiency target, based on either primary or final energy consumption, primary or final energy savings, or energy intensity. Member States shall notify those targets to the Commission The EE Directive introduces: Energy savings obligations scheme annual final energy reduction of 1,5% Public building efficiency (potential of 30% EE) Promotion of energy services market smart-grids, information on actual usage of electricity Minimum performance requirements for energy generation and mandatory and priority access of high-efficiency cogeneration to the electricity grid Light form of annual reporting and monitoring for Member States

23 EU ENERGY LAW: ENERGY EFFICIENCY In case of non-compliance: Art. 13: penalties: Member States shall lay down the rules on penalties applicable in case of non-compliance with the national provisions adopted pursuant to Articles 7 to 11 and Article 18(3) and shall take the necessary measures to ensure that they are implemented.... Member States shall notify those provisions to the Commission by 5 June 2014 and shall notify it without delay of any subsequent amendment affecting them.

24 EU third energy package Directives/Regulations On the internal electricity and gas markets What does it say? Relevance Milestones Provide a new framework for competition in the energy sector Electricity Regulation on conditions for access to the network for cross-border exchanges in electricity Gas Regulation on conditions for access to the natural gas transmission networks ACER Regulation Electricity Directive concerning common rules for the internal market in electricity Gas Directive concerning common rules for the internal market in natural gas «Unbundling» Structural separation between transmission activities and production/supply activities of vertically integrated companies Stronger powers and independence of national energy regulators harmonize market and network operation rules at pan-european level -new tools A new institutional framework: ACER and the ENTSOs Regulations took direct effect on 3 rd of March 2011 ACER and ENTSOs are up and running and have started working on developing technical rules at EU Member States are progressing well on transposition of Directives No full notification of complete transposition measures yet But several Member States are in final phase of their legislative process Source: EU

25 EU Roadmap 2050 (Vision) Roadmap for moving to a competitive low carbon economy in 2050 What does it say? Relevance Milestones Longterm strategies to form EU s climate policy and to make the EU a competitive low carbon economy To keep the rise in temperature below 2 degrees, GHG emissions in 2050 must be reduced with 80-95% compared to 1990 EU member countries must have longterm strategies for a low carbon development Is base for more specific (legislative) EU-regulation with a focus on: more efficient use of resources and electricity electric and hybrid cars and cleaner cities with less air pollution and better public transport. reduce use of key resources like oil and gas, raw materials, land and water, therefore a focus on renewable energy. If implemented, would lead to an almost complete decarbonsation of power sector by 2050 First initiative: white paper on transport 80% domestic emission reductions required by 2050 Milestones on the way: 25 % in 2020, 40 % in 2030, 60 % in 2040, All compared to 1990-levels

26 EU Roadmap 2050 (Vision) Decarbonizing the power, transport and residential sector Power sector: -93 to -99% Toolbox Sufficient CO 2 price signal and long-term predictibility (revisiting reduction of CO 2 cap) Energy taxation Technology support Source: EC communication to European Parliament: A Roadmap for moving to a competitive low-carbon economy in 2050

27 Thank you for your attention