At a landmark summit in December 2008, EU leaders reached agreement over an energy and climate change 'package' to deliver the bloc's ambitious objectives of slashing greenhouse-gas emissions and boosting renewable energies by 20% by 2020. The package is designed to reduce the Union's dependency on imported fuels and set the pace of "a new global industrial revolution".

Overview

The Commission opened a wide-ranging debate on a future European energy policy with the publication of a Green Paper in March 2006. The paper was published upon EU leaders' suggestion at the Hampton Court summit during the UK Presidency in autumn 2005 (EurActiv Links Dossier on Green Paper).

The need to act at EU level was prompted by mounting concerns regarding high oil and gas prices and worries about Europe's increasing dependency on a few external suppliers, as well as the global-warming crisis.

As a follow up to the Green Paper, the Commission unveiled a 'package' of energy and climate change proposals on 10 January 2007 in a move which, it said, would "set the pace for a new global industrial revolution" and increase EU resilience to future oil-price shocks.

The European Parliament endorsed a compromise agreement on the package on 17 December 2008, which will be adopted by the Council this year.

Issues

EU heads of state and government broadly endorsed the Commission's proposals at a landmark summit in March 2007, agreeing on a two-year action plan to launch a common European energy policy (EurActiv 13/03/07). 

EU heads of state and government broadly endorsed the Commission's proposals at a landmark summit in March 2007, agreeing on a two-year action plan to launch a common European energy policy (EurActiv 13/03/07). 

Central to the summit agreement is a recognition that energy and climate-change policies should go hand in hand. It stressed the need for "decisive and immediate action" on climate-change and underlined "the vital importance of achieving the strategic objective of limiting the global average temperature increase to not more than 2°C above pre-industrial levels". To achieve this aim, EU leaders agreed to:

  • A binding target to slash the EU's greenhouse gas emissions by 20% in 2020 compared with 1990 levels. EU leaders agreed that the objective should be pursued "unilaterally" even if there is no international agreement on reducing greenhouse-gas emissions after 2012 when the Kyoto targets expire, and;
  • a commitment to reduce emissions by 30% provided that other industrialised nations, including the US, commit themselves to comparable emission reductions and that "advanced developing countries" (i.e. China and India) contribute as well in the framework of a post-2012 agreement.

To achieve these objectives, the summit endorsed an action plan to be implemented between 2007 and 2009. The plan's main elements include:

  • Completing the internal market for electricity and gas (see EurActiv's LinksDossier);
  • a binding target to raise the EU's share of renewables to 20% by 2020 (see EurActiv's LinksDossier);
  • an obligation for each member state to have 10% biofuels in their transport fuel mix by 2020 (EurActiv 10/01/07);
  • boosting energy efficiency  with a target to save 20% of the EU's total primary energy consumption by 2020 (see EurActiv's LinksDossier). New initiatives here include proposals for an international agreement on energy-efficiency standards for consumer appliances;
  • aiming towards "a low CO2 fossil fuel future" with support for 'clean coal' technology, using carbon capture and storage deep underground (see EurActiv's LinksDossiers on clean coal and CCS)
  • developing a common external energy policy to "actively pursue Europe's interests" on the international scene with major supplier, consumer and transit countries, including Russia;
  • developing a European Strategic Energy Technology Plan to focus R&D efforts on low carbon technologies, and;
  • on nuclear, the Commission chose to take an "agnostic" stance, leaving it up to member states to decide.

Since the 2007 EU summit, the Commission has put forward two major legislative packages in respect of the action plan:

  1. 19 Sept. 2007: The third 'package' of proposals to liberalise the EU's energy market (see EurActiv's coverage of the package and stakeholder reactions);
  2. 23 Jan. 2008: The 'climate and energy package', which features legislative proposals on CO2 'burden sharing' and on the post 2013 period of carbon trading under the EU-ETS, revised EU state aid rules, a communication on carbon capture and storage (CCS), and a prosposed directive on renewable energies, including biofuels (see EurActiv's coverage on CO2 and EU ETSrenewables and stakeholder reactions).

Liberalising the EU energy market

On 10 October 2008, European energy ministers struck a compromise deal on the Commission's proposal to open up the EU's gas and electricity markets. The EU executive's original plans had sought to ease the stranglehold of national energy majors by forcing large integrated firms to sell off their transmission assets so as to keep such activities fully separate from energy production (so-called 'ownership unbundling').

Member states, however, decided to grant former state monopolies the right to retain ownership of their gas and electricity grids on the condition that there is outside supervision. Nevertheless, a clause was inserted to prevent energy producers from buying up the transmission businesses of energy companies in European countries where full unbundling has been introduced (EurActiv 13/10/08).

The energy liberalisation package now has to be approved by MEPs.

Climate and energy package

The Parliament signed off on the climate and energy package on 17 December 2008. It had been endorsed by EU heads of state and government the week before, after informal negotiations between the Parliament, the Commission and the French Presidency (EurActiv 15/12/08). 

Agreement was reached on all the major components of the original proposal, but important derogations were inserted during the course of the negotiations, most notably to the revised ETS. Under the deal, full auctioning of carbon allowances may take place as late as 2027, instead of 2020 as initially proposed by the Commission. 

Moreover, industry sectors threatened by third-country competition were promised a continuation of free allowances (see EurActiv's LinksDossier on 'Carbon Leakage'). In a move considered crucial for the deployment of 'clean coal' technology, 300 million ETS allowances were secured to fund carbon capture and storage (CCS) projects in the EU (EurActiv 12/12/08). 

Greenhouse gas emissions from sources outside the scope of the ETS were addressed under the "effort sharing" decision, which set binding targets for each member state in sectors such as transport and buildings.

The deal also included a new directive on renewable energies, including a mandatory 10% target of green fuels in transport (EurActiv 09/12/08) and a revised Fuel Quality Directive. Furthermore, it introduced a new Regulation setting performance standards for new passenger cars.

Positions

Several EU business organisations (BusinessEurope, Eurochambres), and the European chemicals industry (CEFIC), criticised the Commission's unilateral CO2 reduction targets for 2020. "Further strong CO2 reduction targets that have not been adopted by other major emitting nations will weaken the European industry's competitiveness within the global business environment without achieving effective environmental benefits," said a CEFIC press statement. 

CEFIC said an auctioning-based emissions trading regime is unsustainable, but welcomed the allocation of free allowances according to performance benchmarks, which it said would provide investment security.

Employers' organisation BusinessEurope also warned of serious price hikes as a result of the Commission's proposals, and said the compromise agreement was an improvement in comparison. "But I am still concerned about the cost effect on European companies which have already done a great deal to reduce emissions and to increase energy efficiency," said the organisation's director-general, Philippe de Buck.

The Commission's intention to continue its energy-market liberalisation, on the other hand, was welcomed by most industry groups such as the Union of the Electricity Industry (Eurelectric) as well as SME lobby UEAPME and the European Federation of Energy Traders (EFET). However the European Federation of Public Service Unions (EPSU) called the package a "PR exercise to justify higher energy bills and disguise failure of liberalisation", saying forced ownership unbundling would not bring benefits for citizens. ETUC, the European Trade Union Confederation, also considered the "pursuit of electricity and gas market liberalisation to be 'reckless'.

Foratom, the nuclear industry lobby, expressed its satisfaction with the Commission's evaluation that "nuclear energy is one of the largest sources of carbon-dioxide free energy in Europe". It did not comment on the fact that the Commission leaves the decision on the future of nuclear in the hands of member states.

Lobby groups for the renewable energy industry gave their support to the new legislation. 

EREC, the European Renewable Energy Council, hailed the directive as "the most important piece of legislation on renewable energy in the world," providing investor confidence for the sector. 

ESTIF, the European Solar Thermal Industry Federation, reacted in similar fashion. "With this directive, the European Union demonstrates its leadership in renewable energies," said ESTIF Secretary-General Uwe Trenkner. 

The European Wind Energy Association (EWEA) hailed the agreement as confirmation that Europe is "the leader of the energy revolution the world needs".

CEPI, the European paper industry association, said it supported the Commission's integrated view on climate change, energy and industrial competitiveness, describing it as "a big step in the right direction". However, it added that "by focusing solely on setting targets, the current debate on renewables is heading in the wrong direction". 

COGEN Europe regretted that the Commission does not give enough weight to co-generation, "the most immediate single source of both energy saving and CO2 reduction available in Europe today". 

The European electricity industry association Eurelectric was much more critical of the Commission's renewables targets. "The EU should avoid command-and-control measures such as binding energy targets or requirements to use only certain technologies," and questioned the "wisdom and the realism of the proposed dramatic compulsory increase in the share of RES (renewables) in the energy mix by 2020". Nevertheless, it said finalisation of the energy and climate package would bring greater clarity for European electricity investors, despite failing to ensure a "fully level playing field".

Environmental NGOs described the Commission's climate change goals as too weak, criticising the compromised agreement for further diluting the original ambitions. 

The European Environmental Bureau (EEB) said the package "lacks teeth". EEB chief John Hontelez labelled the EU greenhouse-gas reduction target "unacceptably weak" and the energy policy proposals "unconvincing and potentially even damaging, particularly regarding biofuels and nuclear power". 

WWF made similar comments, describing the EU energy revolution as "still a distant dream". It said the final agreement was "poisoned by the large amount of carbon credits allowed from non-European countries," focusing actions away from Europe and giving a bad example to the rest of the world. 

Friends of the Earth Europe called the package "good news for the dirty energy industry, bad news for people and the planet". It said the agreed package reflected "almost no genuine effort by European countries to achieve ambitious targets for reducing harmful emissions by 2020".

Greenpeace warned that the climate package cannot be taken as a basis for the EU's negotiating position in Copenhagen in 2009, because it does not even guarantee the achievement of the EU's emissions reduction target of 20%, let alone 30%, which it said is generally recognised as the bare minimum to combat global warming.

"The Parliament has marginalised itself by lacking the courage to make even small changes to the compromises negotiated by the EU summit last Friday. Europe promised leadership on climate, but so far it has led us up the garden path," said Joris den Blanken, Greenpeace EU's climate and energy policy director.

Timeline

  • 10 Jan. 2007: Commission presents 'energy and climate change package' including a Strategic Energy Review focusing on both external and internal aspects of EU energy policy. The package contains proposals for specific targets on:
    • Renewable energy (20% by 2020)
    • Biofuels (10% in transport by 2020)
    • Greenhouse gas emissions reduction (20% by 2020)
  • 9 March 2007: EU summit endorses package, agreeing on a two-year action plan to launch a common energy policy.
  • 19 Sept. 2007: Commission tables third legislative package to complete the liberalisation of EU electricity and gas markets.
  • 22 Nov. 2007: Commission Communication on a Strategic Energy Technology Plan (SET-Plan).
  • 23 Jan. 2008: Commission proposals on EU emissions trading scheme (EU ETS) for the period after 2013; revised environmental state aid rules and Communication on carbon capture and storage (CCS).
  • March 2008: EU Summit agrees to adopt energy/climate package by end 2008.
  • 11 Sept. 2008: Parliament's industry committee votes almost unanimously in favour of a report based on boosting the share of renewables in final energy consumption to 20% by 2020 (EurActiv 12/09/08).
  • 7 Oct. 2008: Parliament's environment committee votes largely in favour of three separate reports on emissions trading, greenhouse gas reduction effort-sharing and CO2 capture and storage (EurActiv 08/10/08).
  • 10 Oct. 2008: European energy ministers agree to open EU gas and electricity markets further (EurActiv 13/10/08).
  • Nov. 2008: Commission presents Second Strategic European Energy Review, focusing on supply security and fossil fuels (EurActiv 14/11/08).
  • 11-12 Dec. 2008: EU summit agrees final version of energy and climate change package.
  • 17 Dec. 2008: Parliament endorses energy and climate change package (EurActiv 18/12/08). 
  • March 2009: EU summit endorses second Strategic European Energy Review.
  • 6 Apr. 2009: Council of Ministers adopts final legal texts of the energy and climate change package (EurActiv 07/04/09).
  • Nov. 2009: Commission to present Energy Saving Action Plan for 2010 onwards. 
  • Dec. 2009: EU summit to endorse Energy Saving Action Plan.
  • 2020: Target date to achieve the objectives.