1. EU Climate and Energy Policy Package and Climate Policy developments until 2050 Mr Zsolt Lengyel, Team Leader & Key Expert 1 9 April 2014, Moscow

2. 2 A competitive low carbon roadmap until 2050 2

3. Policy context: European Council 2011 – Science (IPCC) : global emissions to be reduced by - 50% by 2050 compared to 1990 – EU objective of reducing greenhouse gas emissions by 80-95% by 2050 compared to 1990, in the context of necessary reductions by developed countries as a group – Need for a low carbon 2050 strategy providing certainty: predictability for longer term action – Need to fix intermediary milestones (2030, 2040) towards reaching the 2050 objective 3

4. 4 The 2050 Low carbon economy roadmap in a nutshell: process Coordinated analytical framework (Europe 2020 Resource efficient Europe flagship initiative) Framework also used for sectoral initiatives, e.g. – Transport 2050 White Paper – Energy Roadmap 2050 Based on extensive economy-wide global and EU level model-based scenario analysis 4

5. 5 Global climate action EU objective: 80 to 95% reductions largely through domestic measures:  around -80% internal reductions in 2050 compared to 1990 Developed Countries:  similar effort Developing Countries:  -5% compared to 1990  Equivalent to - 80% compared to business as usual  no cheap offsets by 2050 5

6. 6 The 2050 Low carbon economy roadmap in a nutshell: contents strategy responds to interlinked policy objectives: – avoiding dangerous climate change, – improving energy security – overcoming barriers to the development of low carbon technologies which are at the heart of sustainable growth identifies cost-effective pathway, with intermediate milestones identifies key technologies guiding R&D identifies investments needs and benefits identifies opportunities and trade-offs guides EU, national and regional policies gives direction to private sector and private households for long term investments 6

7. 7 Efficient pathway: -25% in 2020 -40% in 2030 -60% in 2040 Cost-efficient EU pathway towards 2050 80% domestic GHG reduction in 2050 is feasible  with currently available technologies,  with behavioural change only induced through prices  If all economic sectors contribute (energy: 85%) 7

8. 8 Energy Efficiency will be key Energy efficiency is the single most important contribution, especially until 2020 – Current policies only result in 10% energy efficiency improvement – roadmap confirms key role of efficiency up to 2020 and beyond – efforts towards 20% efficiency target would deliver 25% GHG reduction – ETS is one instrument to deliver additional efficiency 8

9. 9 Roadmap 2050: Investing in the EU economy Additional domestic investment: € 270 billion annually during 2010- 2050, equivalent to 1.5% of GDP, of which – built environment (buildings and appliances):€ 75 bn – transport (vehicles and infrastructure):€ 150 bn – power (electricity generation, grid):€ 30 bn Note: Investment in the EU economy and EU jobs, not cost delaying action increases overall investment requirements R&D and early demonstration/deployment crucial 9

10. 10 Roadmap 2050: Benefits for EU economic growth Significant increase in domestic investment – Shift from fuel costs to investment expenditure  money stays in the EU  Innovation in key growth sectors crucial for future competitiveness  GDP growth decoupled from GHG emissions also after 2020  GDP more secure from energy price shocks 10

11. 11 Roadmap 2050: Benefits for EU energy security and air quality Fuel savings: € 175 to 320 billion on average annually during 2010-2050 (compared to € 270 billion investments) Primary energy consumption about 30% below 2005 without negatively affecting energy services Making EU economy more energy secure: – Halves imports of oil and gas compared to today – Saving € 400 billion of EU oil and gas import bill in 2050, equivalent to > 3% of today’s GDP – Safeguard against macro-economic impacts of future energy price hikes Air quality and health benefits: € 27 billion in 2030 and € 88 billion in 2050 11

12. 12 Sources of new jobs – Short term: e.g. in renovation of buildings, production of insulation materials, renewables industry – Potential net job creation up to 1.5 million by 2020 if revenues from auctioning of ETS allowances and CO2 taxation are used to reduce labour costs and increase in investments and R&D – Getting on track to achieve the 20% energy efficiency improvement in 2020 has the potential to boost net employment by 400,000 jobs. – Long term job prospects depend on favourable economic framework conditions, e.g. expenditure on research & technology development, innovation, entrepreneurship, new skills, investment Roadmap 2050:Benefits for EU jobs 12

13. 13 Roadmaps of international competitors Several emerging economies (e.g. Korea, China, Brasil, India) develop low emission and green growth strategies Main drivers: innovation, leading in new growth sectors, energy security & resource efficiency, clean air For example: China’s 12 th 5-Year Plan (2011-2015): – increase carbon and energy intensity targets – pilot emission trading systems – develop low carbon zones – invest 5 trillion yuan (€ 570 billion) in new energy – increase renewable energy by 65% by 2015 – invest 100 billion yuan (€11.5 billion) in alternative vehicles 13

14. Roadmap 2050: the way forward Presidency conclusions and European Parliament responses on the Low carbon roadmap 2050 Member States, Candidate Countries and Potential Candidates to develop long-term national and regional low emission development strategies 14

15. 15 2030 Framework 15

16. Investments today need long term horizon to avoid carbon lock in Focus R&D and innovation activities in new growth sectors Prepare for EU position in the international negotiations 16 Why consider 2030 Framework?

17. Main elements of 2030 package A Communication on a policy framework for climate and energy in the period from 2020 to 2030 A Communication and a report on Energy Prices and Costs for the European Council A Recommendation on the safe and environmentally friendly exploitation of shale gas A Communication on industrial policy "For a European industrial renaissance" http://ec.europa.eu/clima/policies/2030/index_en.htm

19. 2050 Roadmaps 2030 Green Paper Proposal for the 2030 framework for climate and energy policies 2011March 2013January 2014 The 2030 framework builds on the 2050 Roadmap On-going discussions with Member States, EU institutions and stakeholders

20. "No Regrets" options from the Energy Roadmap 2050 More Energy Efficiency Higher shares of Renewables Better and smarter Infrastructure

21. Increased certainty for Member States and reduced regulatory risks for investors Growth and jobs through demand for efficient and low- carbon technologies Definition of EU ambitions in view of a new international climate change agreement (Early) agreement on the 2030 framework is essential

22. The 2030 policy framework takes into account lesson learnt from the 2020 framework and the economic and political context The 2030 framework must ensure progress towards three objectives

23. EU emissions reduced by 15.5% 1990 -2010 EU GDP grew >40% EU as a whole on track towards 20% target For half of the MS, existing policies and measures are sufficient to reach their Effort Sharing target domestically GHG emissions are decreasing in the EU compared to other countries Source: European Commission

24. The EU is making good progress towards meeting the 2020 RES target - But most Member States are still some distance away Renewable sources accounted for 12.7% of the EU's energy consumption in 2010 Source: Eurostat

25. EU energy consumption is going down, but 2020 target likely to be missed with current policies projections Source: European Commission

26. Increasing concern about energy import dependency and rising energy prices Stability and costs of renewables support schemes, impacts on the internal energy market, on grid stability and on capital allocation Need for massive investments in energy transmission and distribution infrastructure, e.g. due to renewables expansion Current large surplus of ETS allowances, resulting in a low carbon price and low investment incentives Challenges in meeting 2020 targets - to be considered in the 2030 framework

27. Which targets for 2030 would be most effective in driving the objectives of climate and energy policy? At what level should they apply (EU, MS, sectors?), and should they be legally binding? Targets Which are the most appropriate policy instruments to meet potential new targets for the period up to 2030? How can Research and Innovation best support the 2030 framework? Instruments How can EU policies take account of international developments? E.g. Climate negotiations How can internationally competitive and affordable energy prices be ensured? Competitiveness & Security of Supply How can an equitable distribution of efforts be ensured among Member States? How to best consider the different investment capacities of industry sectors and consumer groups? Effort Sharing Main issues considered in the 2030 framework

28. Electricity prices – the US is increasing its advantage… Source: IEA, Energy Prices and Taxes, 4th quarter 2012 Evolution of end-user electricity prices for industry (2005 = Index 100)

29. 29 …in part due to the shale gas boom - US wholesale prices for gas are 3-4 times lower than in the EU Source: European Commission

30. Retail electricity prices paid by households and industry in 2012 Note: Euro/kWh, first half of 2012, consumption bands DC and IC, all taxes included Source of data: Eurostat

31. 2006200720082009201020112012201320142015 01/2007 Commission proposal for 2020 climate and energy package 12/ 2008 Heads of State and Government reached agreement on the package 10/2012 Adoption of the Energy Efficiency Directive 11/2010 Commission Communication "Energy 2020 Strategy" 12/2011 Commission Communication "Energy Roadmap 2050" 04/2009 Adoption of the Renewables Directive 03/2013 2030 Green Paper 2015 Global Climate Change Agreement More concrete proposals for the 2030 framework Window of opportunity Towards the 2015 Agreement 07/2009 Adoption of the 3 rd package on the Liberalization of electricity and gas market 11/2012 Commission Communication "Internal Energy Market" 03/ 2013 Adoption of the Energy Infrastructure Regulation = EU legislation = Commission Communications= Council Counclusions

32. How to contact us The project team can be contacted at personal e-mail addresses and : info@climaeast.eu Clima East Office c/o Milieu Ltd Rue Blanche n 15 1050 Brussels, Belgium The full project website is available in English and Russian: www.climaeast.eu