1. EAI Board The EU 2030 Climate and Energy Framework 11 th March 2014

2. A Sustainable Future Powered by Electricity Commission 2030 Framework Headlines Emphasis on markets, investor confidence, and affordability – EE State Aid Guidelines implementation for RES and CRM 40% economy-wide greenhouse gas target (domestic, unilateral) 27% EU-level RES in energy consumption target – Should be driven by the 40% GHG target, implies 45%+ RES in electricity Deferred decisions on energy efficiency, transport proposals, CCS, innovation funding – Await 2014 assessments of current policies and new Commission ETS reforms with effect from 2021 – Maintain carbon leakage regime until 2020 Security of Supply – Shale exploration, more diversity, improved energy intensity “New governance” – COM to propose streamlined National Energy Plans

3. The road to a 2030 framework It’s not over until it’s over… Step 1:22 Jan 2014: Commission proposals on goals These are only preliminary recommendations Step 2: March 2014: European Council political decision on goals (or June 2014) Politicians can ignore recommendations Step 3: Commission review of energy efficiency progress/policies (summer 2014) Outcomes are far from clear Step 4: 2015: Commission drafts legislation to implement goals, spread burdens The devil is in the details And new Commissioners might have new ideas Step 5:2016-17: Parliament and Council Co-Decision on legislation The EP definitely has its own ideas Elections in Member States can mean changes of government Step 6: 2018-19: National transposition where necessary More details

4. What does a 40% GHG target mean? 40% across the whole economy ETS sectors = power and energy intensive industry power sector decarbonisation signal Effort-sharing sectors = transport, buildings… agriculture etc. electrification signal 43% compared to 2005 30% compared to 2005 ?% Linear factor Energy efficiency Energy labelling CO2 cars Transport in ETS?c Eco-designEPBD Stability reserve

5. 1. The ETS cap is not coherent with the EU 2050 goal Solution: Revise the linear factor 2. Surplus of 2bn - 2.5bn EUAs Solution: Permanent set-aside 3. Fixed supply and demand shocks result in price volatility Solution: Supply adjustment mechanism ETS problems and reforms 3 different problems, 3 different solutions

6. ETS reforms Step by step through 5 policy processes (so far) ProcessImpactStatusIn forceGoals 1.Back-loadingCosmetic fix, helps market confidence Done2014-18// 2.Market stability reserve Useful re price volatility, slow impact on surplus In Co-Decision2021?Stronger, % from 2019 3.Set-asideCould solve surplus, no impact on linear factor Political debate n/aDE-FR-UK-IT consensus and COM proposal 4.Linear factor revision Crucial, but only slow impact on surplus White paper2021?Stronger % 5.Extension to more sectors Would hep secure the ETS system, could solve surplus and linear factor Under consideration After 2021 COM White Paper

7. Step 1: The 40% GHG target will in itself deliver at least 27% RES, so this can be a binding target Step 2: The Treaty does not allow the Commission to prevent Member States from having national RES policies Step 3: But the Commission can use EU market, competition, and state aids law to limit what sort of policies the Member State can use Step 4: If, during 2014-15, Member States decide that neither the 40% GHG target, nor the EU market-compatible national policy options, is sufficient to deliver 27% (or higher) RES growth, then… Step 5: The Commission would consider additional measures at EU level Step 6: Likely the Commission’s preferred measures would be a stronger ETS plus more RES innovation support Binding RES target at EU level The Commission’s strategy (reading between the lines)

8. National energy policies / EU competition law A different picture by autumn 2014? Brussels / DG COMP New State Aid Guidelines for 2015 Hinkley Point state aid application EEG (German RES law) exemptions state aid case State aid definitions Consultation Luxembourg / ECJ Alands Vindkraft case Essent case Berlin / Federal Govt EEG (German RES law) revision Developing news during spring-autumn 2014

9. Support the Commission’s proposals towards the European Council Lobby for the ETS MSR to start in 2017 (in line with the back-loading) Lobby for a stronger solution to the ETS surplus as the 2.2% linear factor will probably not be sufficient (WG Climate Change will prepare an analysis of policy options and numbers) Strong effort needed in analysis and lobbying on the policy opportunities and obstacles electrification arising in the Commission’s energy efficiency review and related processes Wait and see on the RES target / national instruments EAI conclusions