Historic agreement on EU climate package
18-Dec-08
Four EU Directives, an EU Regulation and an EU Decision – all relating to energy and greenhouse gas emissions policy – will be formally adopted before the European Parliament elections in
June, following their adoption by large majorities in a series of votes in the Parliament's plenary session yesterday. In an unprecedented show of urgency, all six texts have been fast tracked to achieve first reading agreements and will not have to return to the Parliament for second reading.
The legislation is designed to enable the EU to meet three key targets by the year 2020: to increase the share of energy generated by renewables to 20%, to cut total greenhouse gas emissions by 20% - rising to 30% if countries outside the EU sign up to challenging targets under a global climate agreement – and to improve energy efficiency by 20%.
Ahead of Parliament's first reading vote, MEPs had reached informal agreements with the French EU presidency on the six texts. And EU heads of state last week reached agreement on three of the measures; a Directive on the revision of the EU emissions trading scheme (EUETS), a new Directive on carbon capture and storage (CCS), and a Decision on effort-sharing between Member States regarding emission cuts from sectors outside the EUETS (Environment Analyst 12 Dec 08). But under the co-decision procedure, all six measures still needed - and got - the formal backing of the full European Parliament.
Revised EUETS Directive
The Directive will set the rules for the third phase of the scheme, which runs from 2013 to 2020 and is designed to cut GHG emissions by 21% compared to 2005 levels. It covers over 10,000 installations in the energy and industrial sectors, which collectively emit close to half of the EU's carbon dioxide emissions and 40% of its total GHG emissions.
The final text establishes auctioning from 2013 in principle but power stations in the new Member States such as Poland, which is heavily reliant on coal, can be given 70% of their allowances for free in 2013, falling to 0% by 2020. Manufacturing installations such as petrochemical and steel plants won an even bigger exemption and will have a free allocation of 80% in 2013, falling to 30% in 2020 and 0% in 2027. In addition, until an international agreement is finalised, sectors at serious risk of “carbon leakage” – the relocation of production to countries with less strict climate policies – might receive all of their allowances for free until 2020 under certain conditions. According to the European Commission, more than 90% of emissions from manufacturing industry would be covered by the exemption.
At least 50% of auction revenues will be used by Member States for climate adaptation and mitigation measures in the EU and developing countries. CCS projects may also receive funding from the scheme.
Member States may offset their emissions by buying credits related to projects in developing countries under the UN clean development mechanism. Up to 50% of the EU-wide reductions over the period 2008-2020 may stem from such credits.
Effort-sharing between Member States
The Decision sets binding national targets for each Member States to reduce GHG emissions from non-EUETS sources such as transport, services and agriculture between 2013 and 2020. These sources account for 60% of all EU emissions. The Decision aims to cut these emissions by 10% overall over the period. The UK's target is a 16% cut. Limited trading and transferring of over achievement of national targets will be allowed among Member States.
CCS Directive
Last year EU heads of state said at least 12 large-scale demonstration facilities should be built by 2015 but the necessary funding had yet to be secured. The European Parliament Environment Committee had proposed awarding up to 500 million EUETS allowances in the new entrants reserve to such projects in the EU or other countries, but the Council proposed to reserve only 100 to 200 million. The compromise accepted by the full Parliament will allow up to 300 million allowances to be set aside for CCS plants and “demonstration projects of innovative renewable energy technologies” in the EU only.
The Environment Committee had also wanted to set a mandatory emission standard for new fossil-fuel power plants from 2015 onwards that would have forced them to use CCS. But instead Parliament accepted provisions that will require operators of new plants to assess whether storage sites are available and if it is technically and economically viable to retrofit the plant with CCS. If it is, Member States would have to guarantee that suitable space on the site is set aside for CCS equipment.
Renewables Directive
MEPs largely approved the political agreement on the Directive that was reached between MEPs and the Council of Ministers on 9 December (Environment Analyst, 9 Dec 08). The Directive sets mandatory national targets for each Member State that are designed to ensure the EU meets its 20% target. The UK will have to increase renewables' share of its total energy consumption to 15%. Member States will be allowed to achieve their targets jointly, including joint running of generation projects. Member States will also be required to develop transmission and distribution grid infrastructure, electricity systems and storage facilities that can accommodate renewables. Green electricity should either be given priority or guaranteed grid access. The Commission will have to produce a renewable energy roadmap in 2018 that will propose any necessary new proposals for the post-2020 period.
Parliament also approved a proposed Regulation that requires new passenger cars to meet an emissions standard of an average of 120g of CO2/km for the whole car industry by 2012, compared to the current average of 160g/km. Within this target, improvements in vehicle motor technology must be responsible for reaching 130g/km. The Regulation also sets a target to cut average emissions to 95g/km by 2020.
The final part of the climate package is a revised fuel quality Directive that sets a target of reducing GHG emissions produced throughout the life cycle of transport fuels by 6% from 2010 levels by 2020. The Commission must submit a review by 2012, when the Directive might be amended, requiring an extra cut of 2% from 2010 levels by 2017 obtained through the use of electric vehicles except trains. The review would also assess whether a further 2% cut by 2017 should be required through credits bought under the clean development mechanism.
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