40/27/27/15 by 2030 : the European Council agrees on a flexible "at least" climate and energy deal

Late in the night came the news of an agreement between the EU heads of state and government on a new climate and energy framework for 2030.

A need for mid-term commitments

An agreement on post-2020 EU climate and energy strategy was deemed necessary in order to ensure predictability for energy technology investors, developers and industrial operators as regards mid-term commitments.

Indeed, the Renewable Energy Directive 2009/28/EC may foresee a post-2020 roadmap in 2018, stakeholders have been repeatedly asking for clarification as to the situation after 2020 as soon as possible. 

"Uncertainty of future policy framework" was also identified by the Commission as a major challenge for energy and climate policy, not least because a clear framework would help increasing the share of renewable energy in the EU energy mix. In its 2012 Communication on renewable energy (COM(2012)271 final), the Commission wrote that: "As currently framed, the EU renewable energy policy framework effectively ends in 2020, a mere eight years away. Post-2020, there are no renewable energy objectives and no decarbonisation targets than those under the ETS and a political, rather than legal, EU Council objective to achieve 80-95% greenhouse gase reductions by 2050 if other developed countries take similar action." In other words, nothing certain enough to foster investments and technology development.

The agreement reached by the European Council is also meant to reposition the European Union as a front runner on climate change issues ahead of the 2015 Paris climate negotiations.

The part of the European Council conclusions of 23 October 2014 dedicated to the 2030 climate and energy framework is available here.

"Deal!"

The first to reveal the deal was the president of the European Council, Herman Van Rompuy, on Twitter and then in an official press release detailing the deal. In his "remarks" on the agreement reached, Van Rompuy confessed that "It was not easy, not at all, but we managed to reach a fair decision." 

He also stressed that three principles had guided the work of the European Council:

• fairness: every country contributes to their prosperity and capacity;
• solidarity: with extra support for lower-income countries, both through adequate targets and through additional funds to help them catch up their clean-energy transition;
• thriftiness: the money should be spent in the most cost-effectice way, from a Europea-wide perspective.

Much of the agreement focuses on the nature of the new targets, i.e. "flexible" because minimum targets and subject to a kind of "review clause" after the results of the next COP/MOP of the UNFCCC in Paris in December 2015.

The new 2030 climate and energy targets

The new targets can be summarised under the label at least 40/27/27/15 by 2030, although much less easy to remember than the well known 20/20/20 by 2020. So, the European Council agreed on:

AT LEAST

• 40% domestic reduction in greenhouse gas emissions by 2030 compared to the 1990 baseline. The EU target will be broken down in national targets per Member State based on GDP. Binding target.
• 27% renewable energy in the total energy consumption at EU-level in 2030. Binding target.
• 27% improvement of energy efficiency in 2030 compared to projections of future energy consumption based on the current criteria. Indicative target, i.e. non-binding.
• 15% electricity interconnections between Member States, with an intermediary target of 10% by 2020 "at least for Member States which have not yet attained a minimum level of integration in the internal energy market, which are the Baltic States, Portugal and Spain, and for Member States which constitute their main point of access to the internal energy market". As exemplified by President Van Rompuy, "This means that for each 100 MW it produces, a Member State should have the infrastructure to be able to import or export 15 MW to neighbouring countries". Supposedly binding target too.

The winners: the EU ETS and physical internal energy market

The conclusions give the central role back to the EU ETS. Reductions in GHG emissions should take primarily place domestically, where about half of the effort must take place within the EU ETS (43%), and the other part in non-ETS sectors (30%). The system of free allocation and the mechanism of compensation for risk of carbon leakage will continue to exist "as long as no comparable efforts are undertaken in other major economies". The NER300 facility, a financial instrument created under the EU ETS Directive 2003/87/EC as amended in 2009, will be reinforced and change name to NER400. Under NER 400, 400 million allowances from new entrants' reserve will be used to support the construction and operation of commercial demonstration projects based on renewable energy technologies and carbon capture and storage (CCS) as before, but also to low carbon innovation in industrial sectors including small-scall projects, which represent an extension of the scope of eligibility. The European institutions will continue working on the methodology to set the national reduction targets for the non-ETS sectors. 

The fact that the European Union is re-taking the lead of the international climate change agenda ahead of the 2015 Paris COP/MOP has been heavily stressed by both the current Commissioner in charge of Climate Action, Connie Hedegaard, in a public statement, and the presidents of the European Council and the European Commission in a joint letter to UN Secretary General Ban Ki-moon.

Another winner is the physical internal energy market with the reinforcement of interconnections. The European institutions and bodies (including the European regulatory agency ACER, European TSOs and energy regulators) have been prolific in terms of new initiatives on physical markets and cross-border exchanges during the last few years. The latter are seen as crucial milestones in achieving a fully integrated internal energy market, which ultimately reinforces security of energy supply as defined in the European Energy Security Strategy. It is consequently not surprising - while not expected in these terms - to read that the European Council believes that there is a sense of "urgency" in reinforcing electricity interconnections. The European Commission is asked to report on "all possible sources of financing", including EU financing, that would allow reaching the 10% target by 2020 ahead of the 15% by 2030. Among the sources of financing to be envisaged are the Projects of Common Interest (PCIs) which can access financing from the Connecting Europe Facility (CEF), and the EU's Multiannual Financial Framework (MFF) (2014-2020). The European Commission should come back with concrete proposals on the topic as early as March 2015 European Council.

The left-behinds: energy efficiency, and partly renewables

The less glorious part of the conclusions relate to energy efficiency, with a lack of high ambition and therefore binding commitments. The 27% target is only indicative, while the Commission called upon a 30% target in its proposal. The conclusions make clear that the "targets will not be translated into nationally binding targets". Meanwhile, "the Member States are free to set their own higher national targets".

The 27% indicative targets should be reviewed by 2020, "having in mind an EU level of 30%". The European Council asks the Commission to propose a list of priority sectors in which "significant energy-efficiency gains can be reaped" as well as "ways to address them at EU level". The building sector should again be among the first in line.

Should renewable energy sources be considered as a left-behind in the final deal? Not necessarily if we look at the level of the EU-wide target, which indeed indicates an increase (from 14% now to 27% in 2030). The target is also a minimum one, and Member States like Germany or Denmark, can continue planning more ambitious national policies. However, the lack of national binding target may slow down the efforts in less ambitious countries with cheaper access to convention sources or sufficient renewable energy generation capacity.

"EU level targets": the untold effects

Most of the targets are expected at the level of the EU. However, it remains to be seen what would be the sanctions that the EU will impose to its Member States for non-compliance with an EU-wide target. Under national targets defined in binding secondary EU law, the European Commission had clear sanction powers in case of non-compliance at the end of the compliance period.

Then, there is a whole new dynamic which will need to be installed when for example the renewables target will be defined at EU level, and not anymore at national level. There are some far-reaching implications here, which may not appear clearly in the conclusions of the European Council but which the Member States have now agreed on.

The vision of a "resilient Energy Union" is taking form

The newly appointed Commission has labelled its vision for the Union energy policy "a resilient Energy Union". We find some echoes to this new vision in the last point of the European Council conclusions (point 5) on energy security, finally giving some substance to the concept. 

Resilience is here related to the ability of the Union to absorb and recover from a situation of energy compression and adversity created by periods of shortage (my wording), if we follow the analogy with the language of mechanics. Efforts must be made to "increase the EU's resilience to a possible major disruption in the upcoming winter" pursuant to the European Council. The recently conducted energy security stress tests which analyse the manner European gas systems would react to a gas crisis, forms integral part of this new efforts to reinforce Europe's independency towards external providers like Russia (see Communication on the short term resilience of the European gas system, COM(2014)654 final, 16.10.2014).

In its conclusions, the European Council defines a series of priority actions aimed to reinforce Union's energy security: 

• implement critical projects of common interests (PCIs) in the gas sector including the North-South corridor, the Sourthern Gas Corridor, the promotion of a new gas hub in Sourthern Europe, and key infrastructure projects enhancing Finland's and the Baltic States' energy security; 
• improve arrangements for a better use of regasification and storage capacity in the gas system
• intensify Commission's supervision in efforts to speed up critical projects of interconnection
• streamline national administrative procedures in accordance with Commission's guidance
• make full use of the Decision establishing an information exchange mechanism with regard to intergovernmental agreements between Member STates and third countries in the field of energy
• increase information sharing with the Commission, including as regards the content of intergovernmental agreements and their compatibility with EU legislation and EU energy security priorities
• further strengthen the Energy Community
• use EU and Member States foregin policy instruments to convey consistent messages on energy security

Next steps

The binding targets now agreed upon by the European Council must need to be translated into legislative proposals. This will be the task of the newly appointed European Commission in 2015.

Photo credit: (C) The Council of the European Union