More than 20 years ago, the EU vowed to fight the newly identified danger of climate change. Over time, it has developed a policy which is two-fold: on one hand, it looks at ways to reduce greenhouse gas emissions inside EU borders and now has 2050 as horizon; on the other hand, it tends to lead by example and to push other big emitters to gather around similar emission reduction objectives. Pursuing the idea of giving a price to carbon, the EU has put in place an instrument that would lead it towards decarbonisation: the Emissions Trading Scheme (ETS). Launched in 2005, it has today become a complex system which is being reproduced in other parts of the world. The ultimate vision is one of a global carbon market leading to a significant reduction of greenhouse gas emissions and thus mitigating the impact of climate change.

1. INTRODUCTION TO EU CLIMATE POLICY
EUROPEAN SUSTAINABLE ENERGY & CLIMATE POLICY 1.3
10th April 2015

2. Session contents:
• EU climate policy vade mecum
• Short history
• EU internal climate policy
• EU vision of climate policy at global level
• Perspectives for development

3. EU CLIMATE POLICY VADE MECUM
• Foreword: decision-making structure
• Objective of EU climate policy
• Coverage
• Corollary: give impulse at global level

4. FOREWORD: DECISION-MAKING STRUCTURE
Source: Plan Intl
• The European Commission has the central role
• Role of science: relative…
• Lobbies are part of the game
 For climate-related issues: green NGOs, power sector,
manufacturing industries

5. OBJECTIVE OF EU CLIMATE POLICY
TWO-FOLD OBJECTIVE:
1. ”Preventing dangerous climate change” as a strategic priority for the EU
 Cut EU greenhouse (GHG) gas emissions
 Encourage other nations/regions to do likewise
2. Adapting to climate change
• “Dangerous”: endorsement by the EU of the international position to limit the
temperature increase to 2°C compared to pre-industrial times (i.e. 1.2°C above
today’s level)
 Stop growth in global GHG emissions by 2020 at the latest
 Reduce them by half of 1990 levels by 2050
 Continue reduction thereafter
• GHG emissions: EU policy covers CO2, N2O, PFCs

6. COVERAGE OF EU CLIMATE POLICY
• Energy production
• Industrial production
• Transport
• Buildings
• Agriculture
• Forestry (land use, land
use change and forestry
– LULUCF)
• Waste
• Role of innovation
policy
• Low carbon
technologies – e.g. CCS
N.B. Link to environment & energy policies but separate

7. COROLLARY: GIVE IMPULSE AT GLOBAL LEVEL
INTERACTION BETWEEN EU INSTITUTIONS AND INTERNATIONAL BODIES
• UNFCCC: the EU is endorsing its works
• IEA: influence, e.g. on energy efficiency policy
• OECD, e.g. Global Forum on Sustainable Development works on
emissions trading, innovation
• World Bank, e.g. studies on carbon market, price evolutions; advocacy
aiming at “putting a price on carbon”
POSITION OF THE EU AT GLOBAL LEVEL
• Ardent fighter against climate change: we cannot afford waiting
• But also: we can afford the fight… financially speaking
• EU’s ambition: be a world leader in the fight against climate change
• Has managed speaking with one voice at the latest international
conferences on climate

8. SHORT HISTORY
OF EU CLIMATE POLICY
• Origins
• Chosen direction

9. ORIGINS OF EU CLIMATE POLICY
INSPIRATION FROM INTERNATIONAL LEVEL +
PROGRESSIVE EUROPEANISATION OF ENVIRONMENT POLICY
• 1986: first official EU document on climate change (parliamentary
resolution)
• Mid-1980s: EU funding targets research on climate change
• 1988: establishment of the IPCC (Intergovernmental Panel on Climate Change)
• 1988: Communication “The Greenhouse Effect and the Community”
• 1990: discussion on the possibility of a carbon/energy tax at EU level;
political agreement to stabilise emissions by 2000 compared to 1990
• 1991: starting point for climate-related initiatives, with first Community
strategy to limit CO2 emissions and improve energy efficiency
• 1996: the EU proposed 2°C as the policy target
• 2000: European Climate Change Programme (ECCP) launched;
vehicle for the implementation of Kyoto Protocol at EU level

10. CHOICE OF INSTRUMENTS
• Principle: give a price to carbon
• Cap-and-trade or carbon tax?
• The EU chose to put in place a cap-and-trade scheme
 Micro-economic computer simulation studies on cap-and-trade in
the late 1960s in the US
 Prototype as part of the US Acid Rain Program in Title IV of the 1990
Clean Air Act
 Designed as the means of achieving the "least cost solution" for a
given level of abatement: decision-makers set the cap and the
market sets the carbon price
 The European Emissions Trading Scheme (EU ETS) emerged in 2003

11. EU INTERNAL CLIMATE POLICY
• GHG emission sources
• Drivers of EU climate policy

12. SHARE OF EU GHG EMISSIONS PER SECTOR (2012)
Source: EEA, EU greenhouse gas inventory, 2014 submission
33%
27%
20%
10%
7%
3%
0%
Energy supply
Energy use
Transport
Agriculture
Industrial processes
Waste
Solvents and other

13. EU CLIMATE POLICY TODAY
• EU climate policy is set until 2020 (adopted legislation goes until then)
 3x20% targets: for emissions reduction, for renewable energies, for energy
efficiency
 For GHG emissions reduction: compared to 1990 level; 30% conditional
target
• The EU vision until 2050 is also (politically) set
Source: Roadmap for a low carbon economy by 2050, European Commission

14. MAIN INSTRUMENT: EU ETS (1)
SHORT PRESENTATION
• Objective: reduce GHG emissions (+ incentivise low carbon technologies)
• Design: limit on overall emissions from high-emitting industry sectors, reduced
each year = cap; within this limit, companies can buy and sell emission
allowances as needed = trade (N.B. participation is mandatory)
 Allocation of allowances through auctioning (“polluter pays” principle);
some allowances given for free to industries exposed to carbon leakage risk
 Monitoring, reporting and verification mechanism
• Coverage: more than 11,000 power stations and manufacturing plants in the 28
EU Member States + Iceland, Liechtenstein and Norway; aviation operators flying
within and between most of these countries
 In total, around 45% of total EU emissions are capped by the EU ETS
• Trading periods:
• 2005-2007: learning by doing
• 2008-2012: ETS enlarged to the EEA + aviation; economic downturn
• 2013-2020: EU-wide cap on emissions; auctioning is the principle

15. MAIN INSTRUMENT: EU ETS (2)
• According to latest estimates, total EU
GHG emissions in 2013 were around
19% below 1990 levels; projections
show a reduction of 21% by 2020
• Decoupling between economic
activity and GHG emissions achieved
ACHIEVEMENTS
Source: European Commission, report on progress, October 2014 Source: EEA, DG ECFIN (Ameco database), Eurostat
• N.B. Influence of economic/financial crisis: reduction of industrial output (and
energy consumption); to be balanced (e.g. Germany’s Energiewende and
US shale gas revolution increased EU coal consumption)

16. MAIN INSTRUMENT: EU ETS (3)
REDUCTION DRIVERS - ILLUSTRATION
• European Environment Agency: analysis on basis of aggregate decomposition of
the change in total CO2 emissions from fossil fuel combustion in the EU for the
2005-2008 and 2008-2012 periods
Source: EEA

17. MAIN INSTRUMENT: EU ETS (4)
CHALLENGES
• Low flexibility
• Surplus of allowances -> low prices
• Credibility of the system harmed (quick fixes; long term objectives)
Source: European Commission

18. MAIN INSTRUMENT: EU ETS (5)
CARBON PRICE EVOLUTION
Source: EEA, Bloomberg

19. RENEWABLE ENERGIES
EU RENEWABLES POLICY
• Directive 2009/28/EC
• Requires the EU to fulfil at least 20% of its total energy needs with renewables by
2020 (through individual national targets)
• All EU countries to ensure that at least 10% of their transport fuels come from
renewable sources by 2020
WHERE WE STAND TODAY
• Share of energy from renewable sources in the European Union (in % of gross
final energy consumption)
Source: Eurostat

20. ENERGY EFFICIENCY
EU ENERGY EFFICIENCY POLICY
• Directive 2012/27/EU
• Set of binding measures to reach EU’s 20% target by 2020
• Over the period 1990-2010,
energy efficiency increased by 20%
in EU-27 countries at an annual average
rate of 1.1%/year, driven by improvements
in the industrial sector (1.7%/year) and
households (1.6%/year)
SPECIAL IMPORTANCE
• Energy efficiency is a solution to several problems
currently faced by the EU
• But latest developments keep it in the shadow:
European Council and Juncker investment plan
Source: EEA

21. TRANSPORT
IMPORTANT SHARE IN EU GHG EMISSIONS
• Responsible of 25% of EU GHG emissions and 20% of EU CO2 emissions
• N.B. Biofuels included in RES policy
SEVERAL PIECES OF LEGISLATION
• White Paper on Transport (2011)
 Aims a.o. at cutting carbon emissions in transport by 60% by 2050
• CO2 emissions from cars and vans
 Regulation (EC) 443/2009 + Regulation (EC) 510/2011;
implementation completed
• CO2 emissions from heavy duty vehicles fuel consumption
 On-going discussion on basis of strategy adopted in May 2014
• CO2 emissions from maritime transport
 Communication (2013) 479; political agreement in December 2014
 1st step: report emissions

22. INNOVATION
• Innovation’s role has increased over the years
• Necessary to achieve the ambitious EU targets
Source: McKinsey, 2009

23. EU VISION OF CLIMATE POLICY
AT GLOBAL LEVEL
• EU compliance with Kyoto Protocol
• Comparison with other major countries
• Analysis of EU’s position
• EU vision of the 2015 Paris agreement

24. EU COMPLIANCE WITH KYOTO PROTOCOL
Source: European Commission and EEA

25. EVOLUTION OF CO2 EMISSIONS - WORLD
Source: Enerdata
0
5000
10000
15000
20000
25000
30000
35000
CO2 from
fuel
combustion
CO2 from oil
combustion
CO2 from
coal
combustion
CO2 from
gas
combustion
CO2 in
energy
sector
CO2 from
industries
CO2 from
agriculture
CO2 from
transport
1990
2005
2013

26. EVOLUTION OF CO2 EMISSIONS – MAJOR COUNTRIES
CO2 emissions (Mt); source: World Bank
.0
1000.0
2000.0
3000.0
4000.0
5000.0
6000.0
7000.0
8000.0
9000.0
2005 2006 2007 2008 2009 2010
EU
China
US
Russia
India

27. EVOLUTION OF CO2 EMISSIONS/SECTOR – MAJOR COUNTRIES
China
United States
European Union
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1990
2005
2013
0
1000
2000
3000
4000
5000
6000
7000
1990
2005
2013
0
1000
2000
3000
4000
5000
1990
2005
2013

28. ANALYSIS OF EU’S POSITION
WHAT DOES IT IMPLY TO BE A LEADER?
• Balance is difficult to find
 Energy price/cost increase has to be mitigated – e.g. in practice, coal
still plays an important role today
 Some protection of EU-based industry is necessary – e.g. carbon
leakage regime in the policy design
 Investment in innovation is crucial
HAS THE EU BEEN A LEADER SO FAR?
• Yes by its ambition
• No by its influence

29. THE EU ON THE ROAD TO PARIS
EU VISION OF 2015 AGREEMENT
• Communication “The Paris Protocol - A blueprint for tackling global climate
change” (25th February 2015)
 Put the world on track to reduce global emissions by at least 60% below
2010 level by 2050
 Criteria:
 Common legal framework covering all countries
 Clear, fair and ambitious targets for all countries
 Regular review and strengthening of targets by country in view of the
below 2°C target
 Hold all countries accountable
SOME MAJOR ISSUES
• Importance of financing
• EU funding (EU + Member States) to help developing countries fight climate
change: 7.3 bn € in 2010-2012; 9.5 bn € in 2013
• Technology transfer from developed to developing countries

30. PERSPECTIVES FOR DEVELOPMENT
• At EU level
• At global level

31. PERSPECTIVES AT EU LEVEL
CLIMATE POLICY BY 2030
• Communication of 22nd January 2013; legislative proposals in the making
• Politically agreed targets: 40% GHG emissions reduction, 27% share of renewable
energies; 27% improvement of energy efficiency (N.B. indicative and non binding
target)
LOW CARBON ECONOMY BY 2050
• Roadmap for moving to a competitive low-carbon economy in 2050 (2011)
• Reduction of GHG emissions to 80-95% below 1990 levels through domestic
reductions alone (almost full decarbonisation)
THE EU IN THE GLOBAL PICTURE
• 2012: EU responsible of around 10% of GHG emissions worldwide
• Expectations for 2020: EU to be responsible of around 6%

32. PERSPECTIVES AT GLOBAL LEVEL (1)
TOWARDS A GLOBAL CARBON MARKET?
Source: World Bank

33. PERSPECTIVES AT GLOBAL LEVEL (2)
PARIS COP21
• Climate protection is a quite consensual issue BUT do the crisis in “Western”
world and the growth-oriented policies in emerging economies undermine this
objective?
• Milestones on the road to Paris:
 Publication of Intended Nationally Determined Contributions (INDCs)
 UNFCCC synthesis report by 1st November 2015 and analysis with regard to
the below 2°C goal
 Negotiations text agreed in Geneva in February 2015; other UN meetings in
June, September, October 2015 in Bonn
• INDCs published so far: Switzerland, EU, Norway, Mexico, US, Gabon, Russia
 E.g. China: peak around 2030 + increase of renewables (20% in 2030)
 E.g. US: reduction of 26-28% below 2005 levels by 2025… Kyoto targets?
 E.g. Russia: “might” aim at 25-30% reduction by 2030 compared to 1990
(exactly the same target as for 2020…)
• What to expect?

34. CONCLUSIONS

35. CONCLUSIONS
• Ambitious policy at EU level
 Emission reduction targets considered in line with the 2°C limit goal
 The first and one of the most complex cap-and-trade systems
 2020 targets on track to be achieved so far
 But balance is difficult to strike
 The EU ETS suffers from prototype syndrome
 EU’s share of GHG emissions is declining as well as its impact
• The EU wants to be leader at global level
 But it is still isolated
 The strategy used in Copenhagen did not work
 Paris conference is not expected to deliver strong commitments
 What will be the interpretation of its results by the EU institutions?

36. THANK YOU!
Iva Ganev
ganev@euroalliages.be