The EU could cut emissions by 30% by 2020 without incurring any additional costs, according to Niklas Höhne, director of energy and climate policy at renewable energy consultancy Ecofys. But the switch to a higher target needs to be balanced across sectors, he told EURACTIV in an interview.
According to a recent Ecofys study, the EU could also up its target to 45% by 2030 at no cost. Although the findings were originally made before the economic crisis took hold, they are still accurate because two effects cancel each other out, Höhne said. While the emissions reductions did not happen as quickly as expected, the recession has in fact delivered significant CO2 cuts, he explained.
The European Commission last month published a report arguing that the recession has brought down the cost of increasing the EU's current 20% emissions reduction target, calculating that 30% emissions reductions would now cost only €81 billion.
"With cost it's always a big question – €81 billion of which baseline? We would argue that it's probably a bit less if you use a different way of calculating those costs," Höhne said.
He pointed out that were the EU to move to 30%, it would have to balance the shift carefully across sectors that trade carbon allowances under the EU emissions trading scheme (EU ETS) and those outside of it.
"If you want to do a lot on energy efficiency in the non-trading sectors, for instance energy-efficient appliances, it has a big effect on electricity demand in the EU ETS and therefore also on emissions in the ETS. So increasing one without thinking about the other is dangerous because it could result in a system that is not consistent," he said.
Höhne recommended that the EU provide more incentives in the non-trading sectors and then take these into account when looking at what further incentives should be put in place in the trading sectors.
The researcher pointed out that businesses will often not make energy-efficiency investments that come at a negative cost due to the long pay-back time. "From a societal perspective, payback times of 10 years are OK, but from the business point of view it's far too long," he said.
However, Höhne argued that there are several ways to offer businesses and households incentives to invest.
"One is to provide regulation so that they just have to do it. Another is to take away the risk on upfront investment," he said. Low-interest loans, for instance, are a good way to push home owners into renovating their houses with energy-efficiency improvements in mind, he said.
Asked whether a carbon tax could provide such an incentive, he said an improved cap-and-trade scheme would do the trick in the carbon trading sectors. He urged the EU to urgently strengthen the cap in the EU ETS by looking into setting aside allowances, for instance, stressing that now is "the last chance to save" the scheme.
"In the non-trading sectors there are policy tools at hand that could be more effective because all sectors are different," he added. A tax on already heavily taxed transport fuels would not make the consumer change their car, he said, arguing that standards have a great track record of reducing air pollutants from cars and trucks.
"The same will happen in buildings," he said, pointing to the fact that renovating a building already pays off in the current system. The question is whether a tax would remove the barriers preventing people from actually doing so, he argued.
"Again, the instrument of choice is low-interest loans to [create incentives for] renovations and high energy-efficiency standards for buildings," Höhne concluded.