Greenhouse gas: reducing emissions by 20 % or more by 2020
The European Union (EU) is committed to reducing its greenhouse gas emissions by 20 % by 2020. However, it estimates that the goal of a 30 % reduction is also viable, providing the international situation allows. This Communication analyses the implementing means and the possible consequences associated with the target of a 20 % and a 30 % reduction in greenhouse gas emissions.
Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 26 May 2010 - Analysis of options to move beyond 20 % greenhouse gas emission reductions and assessing the risk of carbon leakage [COM(2010) 265 final – Not published in the Official Journal].
This Communication presents the results of the analysis on the possible consequences of reducing greenhouse gas emissions by 20 % and by 30 %, and of carbon leakage.
The 20 % target
This Communication analyses three types of actual and possible consequences of the 20 % reduction target:
- Actual consequences of the financial crisis: the financial crisis which began in 2008 brought a 14 % reduction in emissions compared to 1990 levels. However, as production recovers, these figures cannot be completely relied upon as they represent an exceptional situation. The European Commission recently carried out an analysis of the estimated cost of achieving the 20 % targets, taking the recession into account. It emerged that the cost of implementing these objectives decreased by 30 % in comparison to the 2008 estimates. Nevertheless, the crisis had negative consequences for undertakings’ competitiveness, which means that investment is still required in order to achieve the 20 % reduction target.
- Actual consequences of the ‘green revolution’: as a result of the crisis, certain investors decided to turn to less energy-greedy infrastructures. For example, in 2009 renewable energies accounted for 61 % of new electricity generating capacity in the European Union (EU). However, competition is fierce in this field and the EU must maintain its competitiveness in relation to countries such as China and the United States.
- Possible consequences of staying under a 2°C global temperature increase: to achieve the goal of staying under a 2°C global temperature increase, the EU must reduce emissions on its territory by 70 % compared to 1990 levels. The International Energy Agency has estimated that at the global level, every year of delayed investment on more low-carbon energy sources adds EUR 300-400 billion to the price tag.
The 30 % target
This Communication analyses the different options for achieving the 30 % reduction target:
- Emissions Trading System: first, it is necessary to recalibrate the Emissions Trading System by ‘setting aside’ a share of the allowances planned for auction. For example, a reduction of auctioning rights by 15 % for the period 2013-2020 could have positive consequences on environmental achievement. Second, those who invest in more efficient technologies should be rewarded, in particular by being granted extra free allowances.
- Technological options: the EU should have the option to adopt product standards, for example under the ‘Ecodesign’ Directive 2005/32/EC, the Regulation on CO2 emissions and the Digital Agenda for Europe.
- Carbon taxes: one of the options envisaged is the introduction of taxes that target CO2 emissions in sectors not covered by the Emissions Trading System. Furthermore, the EU could also calibrate the tax system for fuels or products to reflect the CO2 component.
- EU policies: the Cohesion Fund could be used to invest in low-carbon technologies at the level of Member States, regions and cities. Furthermore, better use of land and forestry resources (excluded from the Climate and Energy package in 2008) could also contribute to the emissions reduction target.
A reduction of 30 % in emissions (including the costs related to the 20 % target) will cost EUR 81 billion, representing 0.54 % of GDP.
Target for limiting carbon leakage
In the absence of sufficient effort at a global level, the setting of targets for reducing greenhouse gas emissions in the EU could lead to the relocation of certain energy-intensive industries to outside the EU and could cause an increase in emissions levels elsewhere in the world.
There are three options for limiting carbon leakage:
- supporting energy-intensive industries with the help of free allowances;
- adding to the costs of imports to compensate for the advantage held by countries without binding targets for reducing CO2 emissions;
- encouraging third countries to take similar measures.
The most obvious way to provide further help to level the playing field by action inside the EU is to maintain the free allocation of allowances.