THE STATE OF THE EUROPEAN UNION

THE STATE OF THE EUROPEAN UNION

Reducing emissions: easier than expected?

The EU’s goal of unilaterally reducing its green-

house gas emissions to 20% below 1990 levels

by the year 2020 has always served two pur-

poses: First, it was intended to accelerate the

process of transforming the European economy

into a low-carbon economy. And second, with

an eye towards the upcoming international cli-

mate negotiations it was to send a strong signal

to the outside world that Europe was willing to

unilaterally take the first step on climate change.

The crucial step towards implementing the

unilateral climate target was taken in the con-

text of the negotiations on the climate-energy

package in 2008 (cf. Fischer, 2009). By reform-

ing the EU emissions trading scheme (EU-ETS)

and agreeing to reduce greenhouse gas emis-

sions in the sectors not covered by the EU-ETS

(transport, agriculture, and buildings), the 20%

target was turned into legally binding legislation

(European Community, 2009a and 2009c).

Since then, roughly half of the greenhouse gas

emissions fall under the emissions trading

scheme, and the rest are covered by individual

country-specific measures. The emissions reduc-

tion in non-ETS sectors to be achieved by each

Member State has been determined on the basis

of their individual economic performance and

capacities. The reform also introduced complete

harmonization of the system on the EU level

from 2013 onward, which means that national

allocation plans will be abolished, and with them

the possibility for individual Member States to

influence the process of free allocation of trad-

able certificates within the system. Only the rev-

enues from auctioning the allowances are to be

given back to the Member States, partly via a

solidarity and burden-sharing mechanism.

Since the formal adoption of the climate-en-

ergy package in the spring of 2009, the climate

policy discussions in the EU have mainly been

shaped by the following two developments.

First, the lack of success of international climate

protection efforts. Particularly the failed 2009

UN Climate Change Conference in Copenhagen,

which clearly illustrated the ineffectiveness of

the EU’s conditional emissions reduction goals.

Second, the EU was hit by the recession in 2008.

The global financial and economic crisis caused

a drop in industrial production rates in almost all

EU Member States, which led to a noticeable

reduction in carbon emissions. In 2011, emis-

sions were already 17.6% lower than in 1990.

Therefore, the 20% emissions reduction target

by 2020 has come within reach earlier than ex-

pected and will be much easier to achieve com-

pared to expectations in 2007. On the other

hand, this development means that the number

of available allowances that are determined by

the emissions trading system for the period be-

fore 2020 will no longer exercise a strong steer-

ing effect. Demand for these allowances and

thus the allowance price itself has dropped sig-

nificantly. The price for one ton of CO

has long

been well under 10 Euros. It is thus a long way

away from a price range of 30-40 Euros initially

forecast by the European Commission. It is to be

expected that the over-supply of allowances will

remain in place until the end of the current trad-

ing period in 2020.

Renewable energy: diverging trends

In addition to the legislation on climate policy,

the climate and energy package of 2009 also

included a directive on the promotion of the use

of energy from renewable sources, which

turned the target of a 20% share of renewables

in final energy consumption into legislation

(European Community, 2009b). While the EU