New Numbers Behind the EU Climate Target

Keskiviikkona, 26. toukokuuta 2010     0 kommentti(a)
Thomas Spencer
Kansainvälinen ympäristö- ja luonnonvarapolitiikka -tutkimusohjelma

New Numbers Behind the EU Climate Target

Despite the jitters of the global economy and apparent pressure from some Member States’ Ministries of Economy and other Commission DGs, today the EU Commission published a new Communication, outlining the costs and co-benefits of a potential increase in the EU’s 2020 emissions reduction target. This has been framed as an invitation to a fact-based discussion on the EU’s 2020 target; it was not expected that the Commission would recommend raising the target immediately or unilaterally.

The basic driver behind this reassessment is the economic downturn of 2008-2009, and the resultant lasting downward shift in the EU’s emission trajectory. As a result, the current EU emissions cap is significantly “looser” than it was intended to be, with some 500-800 million surplus emissions permits expected to be carried over into the 3rd phase 2012-2020. According to the analysis, the current target will thus be significantly easier to achieve, while also no longer leveraging lasting, structural change in the European economy.

Cyclical cut-backs in economic activity are not equivalent to structural economic change toward a low-carbon economy. With the price of carbon now modelled at just €16 in 2020 under the current cap, the incentive for fundamental shifts in investment patterns is likely too weak to put the EU on a cost-efficient, long-term decarbonisation pathway.

Climate concerns aside, the EU’s emissions policy has also always been seen as a lever for other agendas – energy security, green economic growth and job creation. Weaker carbon price incentives could undermine the achievement of these collateral goals, which are increasingly motivating climate policy worldwide. In the context of a looming “space race” for clean sources of energy and employment, the EU has seen its principle motor for innovation and green growth stall.

The issue of “carbon leakage”, i.e. the off-shoring of production and/or investment, is likely to be the key question in the debate around a possible increase in the EU’s target. According to the Commission’s analysis, the current risk of carbon leakage is less than originally modelled, given the large surplus of emissions permits and the commitments to action made by all major emitters in the run-up to Copenhagen. In the case of a 30% target, the Commission argues that impacts on output in a handful of maximally affected industries would be between 1 and 3 %, and can be ameliorated by the existing mechanism of free allowance allocation. A range of recent studies (see e.g. de Bruyn et al, Keppler and Cruciani, Grubb et al, and Martin et al) have supported this argument that, firstly, impacts on international competitiveness are limited to a very small number of sectors, and that over- or unwarranted allocation of free emissions permits “is simply a transfer of taxpayers' money to industry without any additional social benefit”.

The Commission’s analysis will also likely meet with reticence from the Central and Eastern European Member States, which have traditionally formed an important part of a more moderate block in EU climate policy. The Commission has offered, on the basis of guidance provided by the June Council, to conduct an impact assessment at Member State level, in order to develop a proposal on how a higher target could be fairly and cost effectively shared among Member States. This process could be crucial to getting CEE Member States on board, as well as looking for ways to address their interests in other, related, policy spheres (see this UPI briefing paper).

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