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Brussels, 9 February 2005
1. Why is the EU developing a future strategy on climate change now?
Climate change is a long-term threat that calls for a long-term, global response. A significant milestone in international efforts to curb climate change under the 1992 UN Framework Convention on Climate Change (UNFCCC) is the Kyoto Protocol, which enters into force on 16 February 2005. It legally obliges industrialised countries to meet targets with regard to their emissions of greenhouse gases during a first commitment period from 2008 to 2012. The Kyoto Protocol is, however vital, a first step only. The Kyoto Protocol requires its Parties to start considering commitments for a new commitment period “at least seven years before the end of the first commitment period”, which is in 2005.
Last year, EU heads of state and government decided to discuss “medium and longer-term emission reduction strategies including targets” during their Spring Council 2005 (22-23 March). They requested the Commission to produce “a cost-benefit analysis which takes account both of environmental and competitiveness considerations.” The Commission responded to this call with its 9 February 2005 Communication, accompanied by a background paper, titled “Winning the Battle Against Global Climate Change.”
2. What is the current scientific knowledge about climate change?
Climate change is happening. Over the past century, global average temperature has risen by about 0.6°C, and mean temperature in Europe has increased by more than 0.9°C. Globally, the 10 warmest years on record all occurred after 1991. Current greenhouse gas emissions will lead to further temperature increases during the 21st century.
The overwhelming scientific consensus is that the cause is emissions of greenhouse gases from human activities. These gases trap heat within the Earth's atmosphere by preventing thermal radiation from the Earth to escape to space. A major anthropogenic source of greenhouse gases is the burning of fossil fuels (oil, natural gas and coal). This emits carbon dioxide (CO2), which accounts for around 75% of global greenhouse gas emissions. Deforestation is also a major source of CO2 emissions. Other greenhouse gas-generating activities include land-fill waste, rice cultivation, cattle and fertilisation of agricultural soil, and the production and use of fluorinated industrial greenhouse gases.
As a result of human actions, greenhouse gas concentrations in the atmosphere are now higher than at anytime in the past 450,000 years. Since the industrial revolution, the concentrations of long-lived greenhouse gases have risen from 278 parts per million volume CO2 equivalent to around 425 ppmv CO2 eq. today. Concentrations of CO2 alone have risen from 280 ppm to around 380 ppm.
Due to slow reactions by the climate system, past and current greenhouse gas emissions will lead to a further rise in temperature during the 21st century. In addition, emissions are expected to keep increasing over the coming decades. If no action is taken to reduce them, global temperatures are expected to increase by 1.4 to 5.8°C above 1990 temperatures by the year 2100, and by 2 to 6.3°C in Europe. These increases may seem little, but are significant if compared to the average global temperature during the last Ice Age (from about 70,000 to 11,500 years ago): it was only 5-6°C colder than today.
3. What impacts can be expected from rising temperatures?
We are already witnessing some impacts. The heat wave that engulfed Europe during the summer of 2003 is typical of what experts consider to be the likely effects of climate change. During that summer, more than 20,000 people in the EU died from a combination of heat stress and increased air pollution from ozone (another greenhouse gas) and particulates. Southern Europe suffered large-scale forest fires. European farmers lost over € 10 billion in income.
There has also been an increase in weather-related natural catastrophes, such as floods and windstorms. A survey of the years 1950 to 2003 conducted by the world's largest re-insurer Munich Re shows that between 1994 and 2003 there were almost three times as many weather-related natural catastrophes as in the 1960s. Even disregarding the tsunami in South Asia, 2004 was the costliest year for natural catastrophes so far in insurance history, with global insured losses of over €30 billion. Sea levels have risen by 10-20 cm over the last 100 years. Over the last 30 years, the extent of Arctic sea ice has decreased by circa 7% and the ice has thinned by about 40%.
It is projected that ecosystems will suffer from climate change, with some species and habitats disappearing. Global food production is likely to decline; infectious diseases, e.g. malaria, dengue and schistosomiasis, may spread, and water scarcity and quality is likely to be an issue in many regions. By 2100, sea levels are expected to rise by 9-88 cm if global greenhouse gas emissions are not reduced. This would drown some low-lying islands (e.g. the Maldives) and many coastal regions (e.g. the Bangladesh delta), and cause widespread salt water intrusion. Weather impacts are likely to include higher maximum temperatures, more heat waves, increased summer drying with the risk of drought and fires, or, in other regions, increases in precipitation, storms and floods.
Such impacts might trigger so-called secondary effects, such as regional conflicts, poverty, famine and migration. Although Europe may be less vulnerable to this than some other world regions, these impacts would inevitably affect the EU.
4. How much will climate change cost?
Climate change is projected to be very expensive, and the cost will rise as greenhouse gas concentrations in the atmosphere, and the resulting temperatures, increase. However, all estimates operate with ranges because scientists have to make assumptions on future emission levels, their exact effects, the speed of technological progress, the monetary value of damage and many other factors. Most scientists believe that their models cover only part of the full costs of climate change since a lot of the damage cannot be readily expressed in monetary terms (e.g. biodiversity loss, loss of human life).
Allowing for scientific and economic uncertainties, the UN’s Intergovernmental Panel on Climate Change concluded in its Second Assessment Report that a rise in global temperature of only 2.5°C could cost as much as 1.5 - 2 % of global GDP in terms of future damage, with significant regional variations .
One recent study has examined the costs up to 2200 at different levels of greenhouse gas concentrations. It found that if no action is taken climate change will cost €74 trillion in current prices. If greenhouse gas concentrations are stabilised at 650 ppm CO2 equivalent, it will cost €43 trillion (40% less). If they are stabilised at 550 ppm CO2 equivalent, it will cost €32 trillion (55% less).
5. How did the EU arrive at its goal to limit global temperature increases to a maximum of 2° Celsius?
The Council first agreed on this goal in 1996 on the basis of the evidence available at the time, mostly the impact studies assessed in the Second Assessment Report of the Intergovernmental Panel on Climate Change (IPCC). The evidence suggested that the risk of severe climate change impacts would increase markedly beyond a temperature rise of 2° C.
Recent studies have underpinned the EU’s 2°C target. Significant impacts on ecosystems and water resources are likely even with a temperature increase between 1-2°C. But once the global temperature increase exceeds 2°C, climate impacts on ecosystems, food production and water supply are projected to increase significantly and unexpected response of the climate becomes more likely and irreversible catastrophic events may occur.
6. What level of global greenhouse gas emissions will enable the 2° Celsius target to be reached?
Uncertainties remain about how sensitive the climate is to rising greenhouse gas concentrations and of the relationship between greenhouse gas concentrations in the atmosphere and temperature increases.
The chart below shows the differing results of recent studies that examine how likely it is that the 2°C target will be reached at different levels of atmospheric global greenhouse gas concentrations. Assuming that the mean values are the most likely ones, mankind has almost a two in three chance of staying within the target at current levels of concentrations (around 425 ppmv CO2 eq.). At a level of 550 ppmv CO2 eq., the chance is at most one in six. If the concentrations were to rise to 650 ppmv CO2 eq., there is only a one in sixteen chance of meeting the target.
The probability of reaching the 2°C target
Figures and graphics available in PDF and WORD PROCESSED
Consequently, limiting the temperature rise to 2º C will very probably require greenhouse gas concentrations to be stabilised at a level even lower than 550 ppm CO2 eq. (Currently, the concentration is at around 425 ppm and rising at an average rate of 0.5 % per year.)
7. Why does the Commission's report does not mention a concrete emission reduction target?
The Commission considers this too early – there is not even an international mandate to start post-2012 negotiations. The first priority should be to build broad international support for further action. Depending on the outcome of discussions with other countries, the Commission will make further proposals before the next round of global climate change negotiations at the end of this year.
8. Will the reductions required under the Kyoto Protocol be enough to stay within the 2º Celsius target?
No. The Protocol was designed as a first step to reduce global emissions. It legally obliges only industrialised countries to reduce their emissions - because they are responsible for most of the past and current emissions and should demonstrate to the developing world that they are ready to take action. When the Protocol was negotiated in 1997, they agreed to cut their collective emissions by 5.2% below 1990 levels until 2012, which is not going to be enough to stay within the 2° target.
9. Will the EU be able to honour its Kyoto commitments?
The EU is working hard to live up to its Kyoto commitments and targets. Apart from reducing their greenhouse gas emissions domestically, a number of Member States will need the flexible mechanisms built into the Kyoto Protocol to achieve their individual targets.
In 2002, the greenhouse gas emissions of the EU-25 were 9% below the base year. Emissions of the EU-15 were 2.9% below the base year. Still, Member States will have to swiftly implement their national climate policies as originally foreseen.
Which countries have to reduce their greenhouse emissions so that the necessary overall reduction is achieved?
The necessary reductions will require contributions from all major emitting countries, including rapidly developing countries. Their share in global emission is projected to increase significantly over the next 50 years.
Figures and graphics available in PDF and WORD PROCESSED
Even significant reductions in greenhouse gas emissions in the industrialised world would, on their own, not be sufficient to achieve the level of reductions necessary to attain the 2o C target. And the EU alone has little chance to significantly influence global emissions since its contribution to global emissions in 2050 is estimated to drop to around 8%.
10. How can all major emitters be convinced to reduce their emissions?
Developing countries are concerned that reducing emissions will harm their economic development and point out that industrialised countries did not have to carry the burden of having to reduce emissions when they were developing.
However, if climate change policies are designed to contribute to economic growth in the developing countries, they are more likely to embrace them. For instance, the policies could have a focus on improving energy efficiency, introducing new energy sources that are simultaneously low-carbon and improve air quality, reducing health costs. The recent EU Action Plan on Climate Change and Development, adopted by the Council on 22 November 2004, will be instrumental in supporting this agenda.
Developing countries could also be encouraged to join in international efforts to reduce emissions if they are offered incentives. For instance, if companies located in developing countries could participate in emissions trading, it would open the possibility for them to financially benefit from effective emission reductions.
Wider participation by developing countries in reducing emissions might in turn encourage the US to come on board, which has cited their non-participation as one of the main reasons for its rejection of the Kyoto Protocol.
Since a relatively small group - EU, US, Canada, Russia, Japan, China and India - accounts for about 75% of world greenhouse gas emissions, trying to accelerate progress at the global level by discussing reductions among this smaller group of major emitters, in parallel with the UN forum, may yield significant climate benefits.
11. What is the EU position on the participation of developing countries?
The United Nations Framework Convention on Climate Change (UNFCCC) emphasizes common but differentiated responsibilities and capabilities. The Intergovernmental Panel on Climate Change reports and other long-term projections indicate (and this was known when Kyoto was negotiated) that the industrialised countries would not be able to solve the problem of reducing emissions alone, in the long run. However, the need for the developing countries to develop their economies and thereby to increase their emissions led to the agreement that the industrialised countries would do the first step.
Huge differences in the per capita emissions and income levels within many countries call for a better differentiation between countries and their possible contributions in a future global scheme. This does not mean that all countries would need to have Kyoto-type reduction targets. A staged approach for participation allows differentiation to be made, reflecting the state of development a country has reached and allowing enough flexibility for many more countries to contribute to the reduction effort.
12.What are the Commission’s recommendations regarding the EU’s position in international negotiations?
The Commission recommends that the EU explore options for a post-2012 strategy with key partners during 2005 before deciding on the position it will take in the upcoming negotiations. In bilateral contacts with interested countries, including the large emitters, concrete actions should be identified that they are ready to take within specified time horizons and under specified conditions. The EU should underline its willingness to take on deeper and longer-term reductions in the context of an international post-2012 agreement that would deliver global reductions commensurate with the 2°C target and would therefore have to include the major emitters.
In this way, the EU could use its international leadership role on climate change to pursue an action-oriented approach at the international level. The outcomes of bilateral discussions could then feed into the UNFCCC negotiations.
13.Will adaptation measures be necessary if temperature increases remain below 2° Celsius?
Yes, they will. Even small temperature increases, which have already occurred and will grow further, will have an impact. Particularly vulnerable to climatic changes are low-lying coastal areas and river catchments, mountainous areas, areas with high risks of increasing numbers of storms and hurricanes, and climate-sensitive economic sectors such as agriculture, forestry and tourism.
As yet, few Member States have examined the need to reduce vulnerability and to increase their resilience to climate change effects. Adaptation to climate change will require further research to predict the impacts to enable the public and private sector to develop adaptation options. These impacts differ from region to region and include flood protection measures, appropriate land use methods, adjusted building codes and urban plans, insurance coverage.
Developing countries are the most vulnerable given their high dependence on climate-sensitive economic sectors and their low capacity to adapt. Strengthening their adaptive capacity would contribute to their development.
Adaptation will also entail the early prediction of more frequent and more damaging natural disasters. The Commission is already involved in a EU-wide early warning system for floods and forest fires. In addition, Earth observation can provide reliable tools for both adaptation and prevention.
14.How much will it cost to reach the 2° Celsius target?
There is increasing scientific evidence that the benefits of limiting global average temperature increase to 2° Celsius outweigh the cost of the emission cuts necessary to stay within this increase.
The IPCC considered the costs of meeting various targets for atmospheric concentrations under various assumptions about GDP and emissions growth, based on conservative assumptions as regards technological progress, and excluding adaptation cost. It found that, on average, over the period 1990 to 2100, world GDP growth would be slowed by 0.003% per year; the maximum reduction (to reach a very ambitious target in a high growth scenario) was 0.06% per year.
However, many factors influence the costs, such as the degree of international participation, the availability of flexible market-based mechanisms (e.g. emissions trading) and the speed of technological progress. The Commission has also studied the possible costs of cutting world emissions consistent with stabilising greenhouse gas concentrations in the atmosphere at 550 ppmv CO2 eq. in the long-term. Assuming gradual participation of all countries in an international effort to address climate change and full international emissions trading, the study shows that reducing EU-25 emissions annually by about 1.5 percentage points after 2012 would reduce GDP in 2025 by about 0.5% below the level it would reach in the absence of such a pro-active climate policy. Broad international participation is crucial. If the EU were to unilaterally reduce its emissions by a similar amount while the rest of the world did nothing (consequently there would be no international emissions trading and no other market-based instruments), the costs could rise by a factor of three or more and the environmental effect would be negligible.
15.How can the costs of global emission reductions be minimised?
The Commission concluded that the following factors are crucial in keeping the costs of reducing emissions low:
In addition, a gradual and predictable implementation of policy can reduce the compliance cost because there is time to take the necessary measures and exploit the medium and long-term investment cycles of long-lasting infrastructure (energy, transport, buildings).
16.Do we have to wait for science to develop new, breakthrough technologies before we can do something against climate change?
No, there are many technologies available that can already be deployed today with the right mix of cost-effective policies. The Communication lists 15 technologies that have been tested at a significant scale in one or the other part of the world and that have proven their commercial viability. Each of these technologies can contribute significantly to the reduction of greenhouse gas emissions.
These technologies improve efficiency and conserve energy (i.e. improved fuel economy of vehicles, reduced reliance on cars, more efficient buildings, improved power plant efficiency), decarbonise electricity production and fuels (i.e. substituting natural gas for coal, storage of carbon captured in power plants, storage of carbon captured in hydrogen plants, storage of carbon captured in synthetic fuel plants, nuclear fission, wind electricity, photovoltaic electricity, renewable hydrogen, biofuels), or enhance natural carbon sinks (i.e. forest management, agricultural soils management).
17. How can the EU continue to reduce its emissions in the most cost-effective way?
Compliance costs will be lower if new climate-friendly technologies are developed and mainstreamed quickly. This would also increase the EU’s global competitiveness - European companies would be able to sell the technologies on the global market as demand grows. Thanks to early support schemes, for example, European companies dominate the global market for wind power equipment, which is worth some €8 billion per year and has been growing at 30% annually.
Many climate-friendly technologies exist already or are at an advanced pilot stage (see 17). Their further development and uptake requires a conducive policy framework. The EU Emissions Trading Scheme has already created economic incentives for emission cuts and thereby the use of climate-friendly technologies. But more efforts are needed, for example prices that reflect environmental costs, and the abolition of environmentally harmful subsidies and tax-cuts (i.e. for solid fuels or aviation).
In 2004, the European Environment Agency estimated annual energy subsides in the EU-15 for solid fuels, oil and gas amounted to add up to more than €23.9 billion and for renewable energy to €5.3 billion. Aviation and maritime transport are currently almost entirely excluded from taxation.
Market-based instruments can be complemented with policies that promote the deployment of climate-friendly technologies at an early stage of their commercialisation. In Europe, active support policies have helped to radically reduce unit costs of producing electricity from renewable energy sources in the years 1980 - 1995 (- 65 % for photovoltaics, - 82 % for wind power, - 85 % for electricity from biomass). It is also important to continue to increase energy efficiency. Estimates show that in the EU-15 it would be economically feasible to realise energy savings of up to 15% over the coming decade, while a technical potential of up to 40% exists. Carbon capture and storage is another important area.
Furthermore, a long-term policy framework is needed in order to guide normal capital replacement cycles, e.g. investments in the power, industry, transport and buildings infrastructure. In Europe, around 700 GW of electricity generation, equivalent to the currently installed capacity, needs to be installed by 2030 (investment cost: €1.2 trillion).
More research will be needed for future technologies, for use in the second half of this century. Budgets for climate, energy, transport and production and consumption research need to be increased significantly in Member States and the EU’s upcoming 7th Framework Programme for Research and Development.
18. What are the co-benefits of climate change policies?
The early development and commercialisation of climate-friendly technologies would endow the EU with the “first-mover advantage” and allow it to capture new markets when global demand for such technologies grows. Increases in energy efficiency bring economic savings. Moving away from fossil fuels would make the EU less vulnerable to oil price volatility and help increase our security of supply. Climate change policies also improve air quality since the burning of fossil fuels not only generates CO2, but also the pollutants sulphur dioxide, nitrous oxides and particulate matter. A scenario with 15% CO2 reduction in the EU power sector compared to “business-as-usual” found a reduction of sulphur dioxide emissions by 6% (equivalent to the total SO2 emissions of Italy), a decline in nitrous oxide emissions (NOx) emissions by around 1.2 %.
19.What elements should the EU’s future climate strategy be based upon?
The Commission's report recommends the following elements:
It also report recommends the following actions:
20. Did the Commission consult stakeholders in preparation for this report?
The Commission conducted an Internet-based stakeholder consultation between September and October 2004 where more than 160 contributions were submitted. It then organised a stakeholder conference on 22 November 2004, which was attended by more than 450 representatives from business, science, NGOs and Member states. Their contributions and comments fed into the Communication “Winning the Global Battle Against Climate Change.”
21.What are the prospects of winning the fight against climate change considering the Lisbon agenda?
The EU will retain its strong commitment to the global fight against climate change. Improving competitiveness and mitigating climate change can complement each other. Europe can gain first mover advantages by focusing research and development on resource-efficient technologies that other countries will eventually need to adopt. This makes it important for policy makers on all levels to set a clear long-term policy framework in order to direct investments into the direction of a low-carbon economy. Business needs a long-term stable framework for investment decisions.