The Low Carbon ambition in a difficult context Brussels. June 2013

Green Paper “A 2030 framework for climate and energy policies” Aim: to consult stakeholders to obtain evidence and views to support the development of the 2030 framework objectives clearly set: 20% less GHG, 20% Energy from Renewables, 20% less energy consumed 2050 long term objectives: GHG reduction of between 80-95% compared to 1990 level 2030: GHG reduction 40%? REN 30% share?

Numerous hurdles Economic recession Budgetary difficulties of Member States, lack of finances for long-term investments Household concerns about rising energy prices Many countries round the world lukewarm about GHG reduction Evolution of global energy markets, including in relation to renewables, unconventional gas and oil, and nuclear

A brief assessment Emission Trading System: Apparently on track... but CO2 price decrease due to recession. System collapse ? Effort Sharing Decision (ESD): EU on track of 10% GHG goal, but half of MS still need to take additional measures. Energy Efficiency: Not binding. Not on track. No proper assessment tools. Insufficient funding. Late or incomplete national implementation measures. Renewable Energy: Binding target. On track of 20% target, but decreasing level of public funds support, and financing difficulties. Energy networks: necessity for developing single market, energy security and integration of energy from variable renewable sources. Huge costs and needs for funding. European Strategic Energy Technology plan “in place to encourage a technological shift”

EU Energy & Climate ambitions not matched by funding Considerable funding required for TEN-E or Energy efficiency (e.g: EE investment needs valued at €60 Bio / year - €420 Bio over a 7 year period). Many MS in recession and/or with massive public deficits. EU budget reduced... Under pressure of most North Sea Member States!

20% of EU spending “related to Climate action.” Low Carbon economy a priority in ERDF thematic concentration (12% of ERDF funding for Less Developed Regions, 15% for Transition Regions and 20% for More Developed Regions)...But EU Cohesion Policy budget reduced from €339 billion down to €325 billion. Funding for Transition Regions reduced by -14%, and for More developed Regions by 11% [case of most Regions around the North Sea]. Budget for Trans-European Energy Network down from expected € 9 Billion (Commission’s proposals) to € 5, 1 billion.

THE EU’s ETS: will it be a major funding source ? The EU’s ETS delivers a uniform carbon price for large industrial installations, the power sector and in the aviation sector. It covers more than installations and nearly 50% of all EU GHG emissions. As from 2013, a large share of carbon certificates is to be auctioneered by MS, which have pledged to allocate 50% of proceeds to 20/20/20 objectives But because of various factors and in particular the recession, carbon price have plummeted from 25 to below 4€ ( a 90% fall in five years) when €25-40/tonne would be needed to encourage companies to change their behaviour. (Guardian)

Earmarking auction revenues to fund low-carbon technologies ? The European Commission tried to defer the auction of 900 mio allowances to keep prices up [backloading], but this was at first rejected by the EP. However, the ENVI Cttee has recently taken a more positive line, suggesting that capping of credits should be frozen at a maximum of 900 million. Of these, 600 million must be made available to set up a fund to support the development of innovative low-carbon technologies, demonstration projects and measures intended to reduce the costs and carbon emissions of energy-intensive industries, as well as for the ‘social and skill-related aspects of the low-carbon transition’. The amended text is to be put to a plenary vote on 3 July in Strasbourg.

It remains to be seen if the auctioneering of Carbon Certificates Expected will prove a major source of funding for Low Carbon initiatives. Meanwhile, Carbon price is so low that it is cheaper to use coal. No incentive. Moreover, private companies which have been over-allocated with free carbon certificates, have made substantial windfall at the expense of consumers. Question: Would not a “carbon tax” (e.g.: Australia) prove more efficient?

The reduced funding in the EU budget contradicts the EU C&E ambitions. Regions are willing to strive towards a low carbon economy, but will they get the support they need? The EU’s belief in the market may be doubted considering the failure of the ETS. Would not a carbon tax be preferable? Is not the regulatory approach, which has succeeded with renewable energy, more efficient than non-binding objectives, which have failed with Energy Efficiency? Is the EU really interested in the regional dimension, bearing in mind that the Green Paper makes hardly any reference to it, nor to to how the Energy and Climate policies may help to meet territorial cohesion objectives? Questions

The Energy & Climate issue highlights the EU’s contradictions: - “Free market” or Regulation? -How to conciliate Long term goals (Climate change) with short or medium terms ones (competitiveness on the world scene, consumers’ needs, security of supply)? -Should one favour the “sectoral approach” (addressing the issues by industrial sectors – e.g.: car industry) or impose targets to Member States / Regions, which have different capacities ? Thank you very much!