EUROPEAN ECONOMIC AREA
FORUM OF LOCAL AND REGIONAL AUTHORITIES
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NINTH MEETING OF THE EEA EFTA FORUM
Grímsnes- og Grafningshreppur
26-27 June 2014
Background paper I for discussion under Agenda Item 4: Climate and energy policy and local
authorities
FRAMEWORK FOR CLIMATE AND ENERGY POLICIES 2020-2030
In January 2014, the European Commission proposed a new policy framework for climate and
energy for the period 2020–2030. The new framework sets targets that will take the EU towards
a more competitive, secure and sustainable economy and energy system. The targets are: 40%
greenhouse gas emissions reduction and 27% renewable energy share by 2030.
CURRENT POLICY
The EU is making good progress towards meeting its climate and energy targets for 2020. The
targets are a greenhouse gas emissions reduction of 20% compared to 1990 levels, a renewable
energy share of 20% and an increase in energy efficiency by 20%. The latest official statistics
show that in 2012 greenhouse gas emissions were reduced by 18%, the renewable share was at
14,1% and energy efficiency at 12,1%. In order reach these targets, three central instruments
have been put in place; the Emission Trading System (ETS), the Renewable energy directive
and the Energy efficiency directive. All three have been incorporated into the EEA agreement.
In addition to the 2020 targets, the EU also adopted a “Roadmap for moving to a competitive
low carbon economy in 2050” in 2011. The Roadmap is one of the long-term policy plans put
forward under the Resource Efficient Europe flagship initiative. The transition towards a
competitive low carbon economy means that the EU should prepare for reductions in its
domestic emissions by 80% by 2050 compared to 1990 levels. The roadmap suggests a
reduction in greenhouse gas emission by 40-44% in 2030. Mention should also be made of the
7th Environmental Action Plan which sets out measures to meet the targets.
THE NEW PROPOSAL
The European Commission’s main reason for proposing an integrated policy framework for
the period up to 2030 is to ensure regulatory certainty for investors and a coordinated approach
among Member States. Another reason is that the ETS faces a challenge in the form of a
growing surplus of allowances, largely because of the economic crisis which has depressed
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emissions more than anticipated. In the short term this surplus risks undermining the proper
functioning of the carbon market; in the longer term it could affect the ability of the EU ETS
to meet more demanding emission reduction targets cost-effectively. The Commission has
therefore presented a legislative proposal to establish a market stability reserve at the beginning
of the next trading period in 2021.
KEY ELEMENTS OF THE FRAMEWORK
The Commission’s projections show that with the current policy the EU will have reduced the
greenhouse gas (GHG) emissions by 32% in 2030. Thus, to achieve a reduction of 40%, urgent
action is needed. The proposal doesn’t provide all the details, some are to be sorted out when
the Council and Parliament have agreed on new targets. Some key elements of the framework
are explained below.
GREENHOUSE GAS EMISSIONS TARGET
The Commission proposes a new reduction target for domestic greenhouse gas emissions of
40% compared to 1990 as the centrepiece of the EU's energy and climate policy for 2030. The
reduction is to be shared between the ETS and non-ETS sectors. The ETS sector covers 11,000
fixed installations which are significant users of energy, typically involved in power generation
and manufacturing. The remaining sectors are considered non-ETS.
The ETS sector would have to deliver a reduction of 43% in GHG emissions in 2030 and the
non-ETS sector a reduction of 30% both compared to 2005. In order to bring about the required
emissions reduction in the ETS sector, the Commission proposes an ETS reform (see below
for more details).
The collective effort for the non-ETS sector must also be allocated among the individual
Member States in an appropriate and timely way. Currently, the attribution is made on the basis
of relative wealth using GDP per capita which results in a wide spread of obligations ranging
from a 20% reduction to a 20% increase in emissions.
A RENEWABLE ENERGY TARGET AT EU LEVEL
According to the Commission, renewable energy must continue to play a fundamental role in
the transition towards a more competitive, secure and sustainable energy system. This
transition will not be possible without significantly higher shares of renewable energy. To the
extent that renewables are generated within the EU, they can also reduce the EU's trade deficit
in energy commodities and reduce its exposure to supply disruption and to volatile prices of
fossil fuels. Renewables also have the potential to drive growth in innovative technologies,
create jobs in emerging sectors and reduce air pollution.
The functioning of the ETS and the contribution to GHG reductions from renewables are
closely interlinked and complementary. A greenhouse gas reduction target of 40% should by
itself encourage a greater share of renewable energy in the EU - at least 27%. Therefore, the
Commission proposes this target for the share of renewable energy consumed in the EU. Unlike
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in the current framework, the EU target would not be translated into national targets via EU
legislation, thus leaving greater flexibility for Member States to meet their greenhouse gas
reduction targets in the most cost-effective manner in accordance with their specific
circumstances, energy mixes and capacities to produce renewable energy.
To give the EU the means to ensure that the 2030 target is met a substantial revision of the
Directive on renewable energy sources for the period after 2020 is needed.
ENERGY EFFICIENCY
Improved energy efficiency makes an essential contribution to all of the major objectives of
EU climate and energy policy: improved competitiveness; security of supply; sustainability;
and the transition to a low carbon economy. The Commission's analysis shows that a
greenhouse gas emissions reduction target of 40% would require an increased level of energy
savings of approximately 25% in 2030.
The question of how best to deliver the optimal energy savings in 2030 will be analysed in
greater detail in a review of the Energy Efficiency Directive to be concluded later this year.
REFORM OF THE EMISSION TRADING SYSTEM
To achieve a GHG reduction of 43% in the ETS sector, substantial reform is needed. There are
mainly two proposals being put forward that combined will help do this.
Firstly, the annual factor by which the cap on the maximum permitted emissions within the
ETS decreases will have to be increased from 1.74% currently to 2.2% after 2020. This will
help reduce the surplus of allowances.
Secondly, the Commission proposes to establish a market stability reserve at the start of phase
4 trading in 2021. The market stability reserve would provide an automatic adjustment of the
supply of auctioned allowances downwards or upwards based on a pre-defined set of rules and
would improve resilience to market shocks and enhance market stability.
VIEWS OF LOCAL AND REGIONAL AUTHORITIES
The Committee of the Regions (CoR) is currently discussing its opinion on the proposed new
framework. It is expected to be aligned with its opinion on the green paper from last year which
states that the Commission has failed to mention the climate protection and energy saving
measures local and regional authorities have already implemented. They ask for a 50% GHG
reduction target and believe that the 27% target for renewable energy should be binding for the
Member States and not just EU-wide. Also the CoR states that it is “deeply concerned about
the lack of funding opportunities at local and regional level and about the ongoing economic
crisis, which hinder the central task of local and regional authorities in mitigating climate
change and developing opportunities to adapt to it”.
As a response to the Commission’s proposal for a climate and energy framework for 20202030, several organisations representing local and regional authorities in Brussels sent a joint
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letter to the EU Member States and permanent representations. Their main concern is the lack
of local and regional focus. More specifically they feel that the Commission’s proposal:
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does not address the potential of local action to contribute to EU climate and energy
goals;
 does not sufficiently include local and regional stakeholders and political leaders that
are committed to mitigating climate change through different initiatives;
 fails to seize the potential of decentralized low-carbon production and lower energy
use.
Urban areas are responsible for 80% of energy consumption and CO2 emissions. Because they
have significant legal powers and responsibilities and are closest to citizens, they drive societal
and technological innovation within their constituencies. Cities, towns and regions thus hold
an important and often untapped potential for the delivery of the EU climate and energy
objectives. Thousands of local authorities have already committed to taking action at their
level, by joining the Covenant of Mayors or other initiatives. They present a win-win situation:
while the EU needs a strong involvement of local and regional authorities to attain its climate
and energy objectives, local and regional authorities need an ambitious EU policy environment
to scale up their actions.
The Covenant of Mayors initiative accounts for almost 5,500 signatories, voluntarily
committed to go beyond the EU climate and energy targets by 2020. With some 3,430
Sustainable Energy Action Plans under implementation, the Covenant signatories aim at
reducing their CO₂ emissions on average by 28% by 2020, thus showing the potential emission
reduction target in Europe for 2020. Municipalities are supported in their actions by regions,
which establish energy transition programmes, set ambitious targets for the use of renewable
energy and act as coordinators on their territory.
STATUS IN ICELAND
The latest Climate Change Strategy for Icelandic was adopted in 2007, unfortunately it does
not specifically address municipalities. The strategy sets forth a long-term target of 50-75%
reduction of greenhouse gas emissions by 2050. In 2010 a Climate Change Action Plan was
adopted by the Government. The Action Plan is the main instrument for defining and
implementing actions to reduce greenhouse gas emission and enhance carbon sequestration.
The Action Plan defines ten main tasks to curb and reduce greenhouse emissions in six sectors,
as well as provisions to increase carbon sequestration resulting from afforestation and
revegetation. The main tasks include:
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Implementing the EU Emission Trading Scheme;
Implementing carbon emission charge on fuel for domestic use;
Changing of tax systems and fees on cars and fuel;
Promoting alternative transport methods like walking, cycling, and public transport;
Use of biofuel by the fishing fleet;
Increasing afforestation, revegetation and restoring wetlands.
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In 2012, the first yearly progress report was published, where the emissions and removals are
compared with the goals put forward in the Action Alan. Iceland‘s total emissions of
greenhouse gases were 4.4 Mt of CO2-equivalent in 2011. Industrial processes were the largest
source of emissions followed by the energy sector, agriculture and waste. Greenhouse gas
emission in 2011 were 25.8% above the emissions in 1990. The emissions peaked in 2008 and
have declined since, a clear result of the economic recession in Iceland. The main drivers
behind increased emissions before the recession were the development of primary production
of non-ferrous metal. Other drivers were population increase and growth in GDP.
Iceland’s interests when it comes to climate related policies are aligned with the EU in two
fundamental ways. First, through a joint fulfilment agreement between EU and Iceland for
emission reduction commitments that the EU and Iceland may undertake in the framework of
a future international climate agreement. This was initiated by the Icelandic government and
endorsed by the EU Council in 2009. This means that Iceland will be included in the so called
«EU bubble» when future emission targets will be negotiated within the UN Framework
Convention on Climate Change. Iceland‘s climate policy thus needs to be in line with the
principles and criteria set out in EU's Climate and Energy Package. Second, through the EU
Emissions Trading Scheme (EU-ETS) which was transposed into Icelandic law in 2011.
Aviation became part of the emission trading system in 2012 and primary production of nonferrous metals in 2013. The emission trading system covers approximately 40% of greenhouse
gas emissions in Iceland.
Iceland has abundant renewable energy resources. Its energy policy is to make the fullest use
of these resources in a sustainable manner. Nearly all of Iceland’s electricity and space heating
is provided by renewable sources, i.e. hydropower and geothermal energy. This constitutes
over 70% of all local energy consumption. The remaining 30% are provided by imported fossil
fuels which are used for vehicles, vessels and some industrial processes. Iceland is actively
studying means to decrease its reliance on imported fossil fuels by utilizing its sustainable
energy resources, e.g. for production of hydrogen as an energy carrier to power on-land
transportation and fishing vessels. A public hydrogen fuelling station has been built in
Reykjavik with three hydrogen fuel cell buses operating as a part of the Ecological City
Transport System Project (ECTOS), supported by the European Commission. Iceland is also
working on new technologies, e.g. mapping its considerable wind energy potential and testing
windmills for electricity.
Icelandic municipalities have an important role to play in climate strategy but local work
addressing climate change is in its infancy. A Nordic council study from 2012 demonstrated
that climate change is not seen as a threat by many local politicians or citizens, rather as a
benefit. The state has not directed any support actions for Icelandic municipalities to start their
work with climate change issues, and most municipalities need guidance on how to prepare a
climate strategy. One exception is the City of Reykjavík which adopted a climate and air quality
policy in 2009 under the title: The future is in the air. A decision was made to include issues
of air quality in the city, as many contributory factors are common to both climate and air
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quality, and require the same mitigating measures. The City’s policy stipulates the overall
emission of greenhouse gases to be reduced by 35% by 2020 and by 73% by 2050, compared
to 2007 emission levels. The policy covers six fields concerned with climate issues:
• Carbon sequestration;
• green operations;
• transport,
• industry and agriculture;
• waste;
• urban planning.
The policy is implemented via the Green Steps for Reykjavík, a yearly, updated plan of
implementation for the city‘s environmental issues, which are worked on in connection with
the work schedule and budget of the city. The City has taken several measures to reduce GDG
emissions and bases decisions on meticulous environmental indicators. In 2010 a special focus
was placed on climate issues. This focus has been highlighted even further with the decision
of the executive committee of the city council of Reykjavík to join the Covenant of Mayors
which entails the commitment to reduce GHG emissions by more than 20% by 2020.
STATUS IN NORWAY
The white paper on Norway’s relations to the EU points out that Norway’s interests in the
climate policy area are aligned with EU’s. Still there are some underlying tensions. In the EU,
the climate and energy policy areas are integrated, while in Norway the two are often kept
separate due to the fact that Norway exports large amounts of fossil fuels to Europe (mainly oil
and gas and some coal). A shift towards more renewable energy production in the EU is not
necessary in Norway’s interests as EU then would import less fossil fuel. However, one could
argue that the Norwegian fossil fuels are cleaner than the brown coal currently being used for
electricity in many EU Member states.
In the Climate policy area, the Norwegian Parliament, Stortinget, adopted the “Climate
agreement” in 2012. The agreement sets the GHG reduction target for Norway at 30% by 2020
compared to 1990 levels. Half of this reduction is estimated to be done domestically. The
agreement also states that Norway shall be carbon neutral by 2050.
The most recent development in the energy policy area in Norway, is the Parliament’s decision
to electrify the planned offshore gas and oil rigs on Utsirahøyden (an area 200 km west of
Rogaland). This will help Norway meet its obligations set out in the Renewable Energy
Directive, but at a too high cost according to Statoil.
Another important measure to increase the national renewable energy share is the introduction
of electricity certificates. Electricity certificates provide financial support to producers of
renewable electricity in Sweden and Norway. The electricity certificate system is market-based
and aims to increase the production of electricity from renewable sources in a cost effective
way.
In its response to the Commission’s green book on EU’s climate and energy framework for
2030, the Norwegian Government emphasised the need for a strong and ambitious framework
in Europe. The Government supports a framework based on a single target for CO2 emissions
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reductions and a reform of the ETS. Further the Government signals that it will intensify
Norway’s development of renewable energy and further strengthen its climate policy. Also,
Norway will invest in research and development of new technologies that can help achieve a
low emission society.
The Norwegian Association of Local and Regional Authorities, KS, has also given its response
to the framework in the preparatory phase (December 2013). KS supports a GHG reduction
target of 40% and emphasises that a consequence of such a target should be that more emission
cuts needs to be done in the non-ETS sector. The local and regional authorities can help do this
in areas such as spatial planning, transport, housing and waste.