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Joint EFC-EPC Working Group on the International Financial Aspects of Climate Change

Working Group on Energy and Climate Change

Introduction

 

The EPC Working Group on Energy and Climate Change was created in June 2011 after the merging of the Joint EFC - EPC working group on the international financial aspects of climate change with the EPC working group on the economic aspects of EU energy and climate policy. The mandate of the Working Group covers both workstreams.

The working group should focus on issues related to:

1. the economic and financial aspects of international climate policy, and

2. the economic and financial aspects of internal EU energy, climate change policy and related issues, including in the context of the integrated economic surveillance and the European Semester.

The working group will focus on priority issues within its area of expertise, namely the macro-economic and fiscal implications of climate policy, energy and related issues, cost-effective mitigation and adaptation instruments for delivering climate change objectives and international climate finance issues.

The working group will also provide inputs on specific issues at the request of the EPC or the presidency of the EU.

Main tasks

Climate finance will be one of the main issues for the 2015 Agreement. Analysis and reflection on what could be the key asks and deliverables by the EU and its Member States on climate finance pre and post 2020 will be important. To this end, the working group should provide timely input, via EPC and EFC, to ECOFIN Ministers in order for them to consider and define the EU’s position on climate finance. The timing of meetings and reports should have regard to the timing of external events and milestones.

 

1. Regarding the economic and financial aspects of international climate policy, the working group should focus on the following main areas:

 

Long term financing commitment, including potential sources of climate finance: Reflection on and contribution to how climate finance could be reflected in the 2015 Agreement and accompanying decisions.  This includes reflecting on and outlining potential international and national public, private and alternative finance instruments for scaling up financial flows globally and at EU level, reflecting on types of financing to be mobilised pre and post-2020 as part of future international decisions, reflecting on how to scale up climate financing to 2020 in line with current international commitments.

 

  • Reflecting on building enabling environments and the necessary accompanying policy frameworks in both developed and developing countries to facilitate the mobilisation and deployment of both public and private climate finance in developed and developing countries in the most cost-effective way.

 

  • Financial framework: exchange of views on a framework for ensuring the efficient and effective use of public and private financial flows to developing countries; the delivery channels, and operating principles; reflection on the possible rationalization of international climate finance architecture; the Green Climate Fund and the Standing Committee on finance, including its work ahead of COP21. 

 

  • Share experiences and discuss current developments in climate finance reporting with a view to improve and streamline reporting of climate finance by the EU and its Member States and other developed countries (including reflections on possible internationally agreed methodologies for measuring, reporting and verifying public and private climate finance flows); reflect on lessons learned concerning transparency of EU and Member States regarding climate finance reporting under the Monitoring Mechanism Regulation (MMR). The Commission and Member States reported for the first time climate finance under the MMR in September 2014 based on agreed guidelines. The results of reporting will be discussed and the need for further improvement of reporting guidelines will be assessed.

 

Contributions are expected from the group to prepare draft ECOFIN Council Conclusions on the climate finance aspects of the EU position for the UNFCCC negotiations. In addition, the group should maintain flexibility and within its area of expertise address other issues of relevance to finance ministers as needed due to possible developments in the international negotiations, in particular with regard to negotiations related to climate finance in the Ad-hoc Working Group on the Durban Platform for Enhanced Action.

 

2. EU policies on energy and climate change and their impact on Member States are also important for the work of the group. The working group will support the EPC in providing economic analysis in the context of the implementation and further development of the EU energy and climate framework and in examining the macroeconomic and financial implications of policy options to meet EU energy and climate objectives beyond 2020 and upcoming proposals on an EU Energy Union. The working group will focus on the 2 main areas:

 

  • Economic analysis of energy and climate policies and market development in  network industries(in particular the energy sector): analysis of energy prices and costs, their drivers and economic consequences of variations; the interaction of different policy instruments and the uncertainties inherent to the long time horizon; possible obstacles to financing improvements in energy efficiency and low-carbon infrastructure investment;  R&D and innovation strategies; the internal energy market and reforms in network industries in Member States;  energy dependence and energy security in the context of energy prices, changes in the energy mix and diversity of supply considerations, including decentralised energy supply,  increasing share of renewable energy sources  and the implications for different types of energy infrastructures;  the macroeconomic aspects of EU energy policy, including the effects of a move to more integrated and liberalised energy markets, the economic impact of energy developments in EU Member States, including the analysis of bottlenecks to growth and investment and the role of state-owned enterprises.

 

  • Building on the first bullet, analysis of the broader impacts of transition to a low carbon economy, with a focus on the 2030 climate and energy framework, including the 2030 greenhouse gas reduction targets;  further analysis of the interaction of European climate and energy objectives and of the most cost-effective policies also reflecting the longer-term perspective, including instruments and structural policies for achieving a low-carbon and resource efficient economy;  analysis of estimated aggregate and country-level macroeconomic and public finance implications of the 2030 climate and energy framework, including possible competitiveness impacts and  analysis of proposed amendments to the EU Emission Trading Scheme Directive.

Participation

Membership will consist of two reimbursed experts per Member State.

Working Practices

The Working Group will follow the working practices set out in the 5 November 2009 report by the Chairman of the EPC on “Streamlining of  EPC work – Restructuring of EPC Working Groups”, in particular with regard to reporting back regularly to the EPC and the development of projects plans to be approved by the EPC. The working group will work closely with other Council formations and their sub-groups, in particular the Environment and Energy Councils to ensure communication, coordination, consistency of work, while fully respecting the responsibilities of the relevant Council formations and their respective areas of expertise. In particular, on international climate finance issues, the Working Group will work closely together with WPIEI and EGI. It is agreed that the ECCWG remains a time-limited working group.

http://europa.eu/epc/working_groups/eccwg_en.htm

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