“Let’s get real: We won’t be able to do everything by 2014 like we did on the climate and energy package in 2009,” Jos Delbeke, the European Commission’s director general for climate told a conference in Brussels on 5 October.
“The time is not there,” he added. “We will have to be clear on 2030 early in the next Commission period, and that means 2015 or 2016.”
The announcement, which runs counter to soundings from Brussels insiders, could flag climate and energy battle lines for the next parliament, after a bruising round of squabbles over carbon prices in the Emissions Trading System (ETS).
The Commission’s attempts to insert a short legal amendment to the ETS clarifying how it would “backload” or stagger the numbers of allowances issued at auction provoked a reaction from “some business quarters” that was “out of proportion”, Delbeke said.
“When I see what a limited proposal of a one-lime amendment provokes in terms of emotions, then I’m losing hope that by 2014 we could come forward with a comprehensive climate and energy package,” he explained.
The amendment is scheduled to be debated in the European Parliament’s environment committee on 19 February 2013, a timetable Delbeke said he was “not thrilled about”.
Meanwhile, the Commission’s proposal setting out how many allowances it wants to withhold from auction is due to be published by November.
Surprise call
Delbeke’s 2030 announcement came in response to a surprise call from Eurelectric, the electricity industry association, for a coherent EU package linking a 2030 emissions target with post-2020 renewables policy, and an interim ‘backload’ proposal.
“This process should be substantially completed during the current EU mandate, before summer 2014,” Hans ten Berge, Eurelectric’s secretary-general had said.
Long-term targets and investor certainty were the Eurelectric chief's priority but, significantly, he also called for a “meaningful” backload proposal.
On 1 October, Europe’s employers association, BusinessEurope, sent a letter to all MEP’s asking them to reject the EU’s backloading plan.
BusinessEurope Director Philippe de Buck said that staggering the numbers of allowances auctioned over several years would cause “greater uncertainty, and could have major repercussions for European business, which is already under strain from the economic crisis.”
Clash of the titans
While Europe’s electricity sector is committed to the EU’s decarbonisation instruments, its energy intensive industries fear the cost implications, so pitting two economic titans against each other.
The European Commission’s attempts to balance between differing interests - of industries, member states, NGOs, and its own climate goals for 2020 - have sometimes seen its departments apparently lining up with opposing stakeholders.
A week before EU Climate Commissioner Connie Hedegaard announced her planned carbon market fix, the energy commissioner, Günther Oettinger, called for a risk-taking new industrial policy that embraced offshore oil and gas.
Despite the ETS, the US economy is currently moving away from coal much faster than Europe’s because of low gas prices that the 'shale gas revolution' has brought in its wake.
Europe, though, is actually experiencing a “golden age of coal” because the US oversupply has been exported at bargain basement prices, according to experts at the International Energy Agency.
"In Europe no golden age of gas will come," Anne-Sophie Corbeau, a senior gas analyst at the IEA, told a conference in London. “Europe is an exception to the revolution.”
Carbon allowances
ETS allowances were supposed to incentivise low carbon investments and emissions reductions in Europe but recession has cut emissions, and this - together with an over-allocation of allowances - has reduced demand.
At around €6 a tonne, carbon prices are well below the expected €25-40.
Eurelectric argues that the price of carbon allowances has also been “undermined” by uncoordinated and overlapping member state and EU emissions reductions instruments.
Delbeke had some sympathy for that view. “We hate seeing that - with the weak [carbon] price signal - member states come up with different policies, and complimentary policies,” he said.
The UK, for example, currently has a carbon price floor, while the Netherlands imposes a coal tax.
“If we don’t address the ETS price level we will see exactly the same debate inside the EU,” Delbeke said.
