August 2016 - As part of the EU 2030 Climate and Energy Framework agreed in October 2014 and the Commission’s strategy for a resilient Energy Union announced in February 2015, the European Commission (“Commission”) has published a package of measures to accelerate the transition of the European Union (“EU”) to a low carbon economy (“Emission Reduction Package”). In addition to its contribution to the policies of the EU, the Emission Reduction Package, together with the Commission’s last year’s proposal for the revision of the EU Emission Trading System, is also an important milestone to implement the commitments of the EU under the Paris Agreement on climate change and the 2030 Agenda on Sustainable Development.

The Commission has put forward the following legislative proposals and communications as part of the Emission Reduction Package:

  1. Commission Proposal for Regulation on binding annual GHG reductions from 2021-30 for sectors not covered by the EU Emission Trading System (“Proposal for Effort Sharing Regulation”);
  2. Commission Proposal for Regulation on the inclusion of GHG emissions and removals from land use, land use change and forestry into the 2030 Framework (“Proposal for LULUCF Regulation”); and
  3. Communication from the Commission on a European Strategy for Low-Emission Mobility (“Low-Emission Mobility Strategy”).

In addition to the documents listed above the Commission also published a communication on accelerating Europe’s transition to a low carbon economy, which document explains the context of the entire package.

Whilst the Emission Reduction Package consists of legislative proposals and communications which at this stage do not create legally binding obligations for the Member States, the package shows the direction to which the Commission intends to develop the European climate change policy, subject to the support and approval of the Members States.

The purpose of this newsletter is to give a brief overview of the proposals put forward by the Commission in the Emission Reduction Package.

Proposal for Effort Sharing Regulation

National emission targets in the non-ETS sectors were introduced by the Effort Sharing Decision (Decision No. 406/2009/EC). Since the current targets apply for the period between 2013 and 2020, the proposal puts forward targets for GHG reductions in the non-ETS sectors for the period between 2021-2030.

According to the proposal, each Member State would be assigned with an individual target for GHG reductions representing a percentage compared to the Member State’s level of emissions in 2005. Individual targets would be distributed equitably between Member States based on their relative wealth resulting in higher impact on the more economically advanced Member States. The targets range between 0% and -40%, e.g., 0% for Bulgaria, -2% for Romania, -7% for Hungary, -12% for Slovakia and -14% for the Czech Republic. The United Kingdom has a target of  -37% and it is currently unclear how Brexit might affect this target.

Member States may use a variety of measures to achieve their targets, including traffic management, shifts away from carbon-based transport, taxation regimes, biofuels, urban and transport planning and improved energy performance standards for buildings.

Proposal for LULUCF Regulation

At present, the emissions and removals of GHG in land use, land use change and forestry are covered by international obligations under the Kyoto Protocol, which will expire in 2020. The proposed regulation follows-up and consolidates the applicable rules that will apply post-2020 and sets the way in which the above sectors will be included in the 2030 Climate and Energy Framework.

The proposal would require each Member State to ensure compliance with the “no debit rule”. This rule means that accounted land use carbon dioxide emissions have to be entirely compensated by an equivalent removal of such emissions from the atmosphere. For example, if a Member State cuts down its forests (deforestation), it must compensate by planting new trees (afforestation) or by improving the sustainable management of forests, croplands and grasslands.

The proposal creates a general framework for Member States to incentivise more climate-friendly land use through for example the adoption of forest management, better nutrient management in agriculture, mitigation of emissions from fertilisers and performance of carbon audits to identify relevant actions at the private-farm level.

Low-Emission Mobility Strategy

The main objective of the strategy is to set a course for the development of EU-wide measures on low and zero-emission vehicles and alternative low-emission fuels. The strategy is built around the following three objectives:

  • higher efficiency for transport system;
  • low emission alternative for energy transport; and
  • low and zero emission vehicles.

Given that road transportation is responsible for over 70% of GHG in the transport sector and for much of the air pollution in the EU, the strategy focuses mainly on the road transport, acknowledging however that the other sectors of transportation (e.g. aviation, shipping) could also contribute to the overall reduction goal.

To encourage the optimisation of the transport system and to improve its efficiency, the strategy emphasises the importance of digital mobility solutions, fair and efficient pricing in transport, and multi-modality, in particular for the railway sector.

Transport in the EU still largely depends on oil (about 94% of its energy needs). Therefore, the strategy also aims at promoting the establishment of an effective framework for low-emission alternative energy and creating a new infrastructure for alternative fuels, including advanced biofuels. Interoperability and standardisation for the electro-mobility industry will play a crucial role in this respect.

The strategy argues for fundamental changes in respect of how vehicle emissions are measured and verified. The introduction of new “real driving” emission tests has been raised by the Commission in order to regain consumer trust.

The strategy acknowledges that further horizontal initiatives and actions are needed to support the transition at all levels, including the introduction of tax incentives and other financial support schemes to bring research, innovation and competitiveness to this area.