The European Commission (the Commission) recently published its package of proposals designed to achieve the emissions reduction target of 20 per cent of 1990 levels by 2020 adopted at last year’s spring Council meeting.

The package comprises the following.

  • A draft directive setting out a regulatory framework for carbon capture and storage (CCS) projects. The proposal includes provisions for CCS projects to be regulated under existing EU legislation, including the EU emission trading scheme (ETS) directive and the environmental liability directive and requires that exploration for suitable sites and storage itself will be subject to a permit, with storage permits being subject to prior approval by the Commission. Monitoring of the storage site, including injection facilities, will be required during the operational phase. After closure the operator will remain liable for maintenance, monitoring and control, reporting and corrective measures until responsibility is transferred to the competent authority. This will occur when there is evidence that stored carbon dioxide will be completely contained for the indefinite future.
  • The revision of state aid guidelines to significantly increase the level of state aid that can be provided for environmental protection projects, including investment in cleaner energy or energy efficiency, with up to 100 per cent of aid being allowed for some projects that are selected through a competitive bidding process.
  • A draft directive to revise the EU ETS from the start of the third phase in 2013. As expected, the proposal extends the scheme’s coverage to the aluminium, non-ferrous metals and chemicals sectors and to CCS projects and other GHGs, not just carbon dioxide, in certain instances. A single EU-wide emissions cap is set at 1.72bn allowances for 2020, 21 per cent below 2005 levels, corresponding to a linear reduction of 1.74 per cent per year. The same factor will be used to set the cap for the fourth trading period. In terms of allocation, 90 per cent of allowances will be allocated to member states by the Commission, based on 2005 emissions, with the remaining 10 per cent being split between low-income, high-growth states and a new entrants reserve. Power generators will be subject to 100 per cent auctioning with other sectors initially receiving 80 per cent of their allowances for free but with free allocation being phased out entirely by 2020. The Commission will investigate those industries most at risk of carbon leakage, ie relocation outside the EU due to competitive pressure, and will propose measures to prevent this occurring by mid-2011, if appropriate in light of the contents of any post-2012 international agreement. Limited use of Kyoto project credits in terms of banking between the second and third phase and within the third phase is provided for, pending conclusion of a post-2012 international agreement.
  • A proposal for a legislative framework to achieve the EU’s overall target of a 20 per cent share of energy from renewable sources in total energy consumption by 2020. The target is to be achieved via differentiated binding national targets to increase renewables from a 2005 baseline to 2020. The proposal foresees the ability for member states who meet interim targets, specified in the proposal, to allow domestic producers of renewable energy to sell renewable certificates to member states unable to meet their targets. It also includes a target requiring biofuels to make up 10 per cent of transport fuel by 2020.
  • Individual GHG reduction targets for 2020 for each member state. The targets cover only non-EU ETS sectors, are calibrated from 2005 and have been shared out using a GDP per capita calculation. Kyoto project credits can be used by member states to meet the target up to a limit of 3 per cent of their 2005 emissions. Adoption of the legislative instruments is as much as two years away and the proposals are likely to be heavily debated before the European Parliament and the Council.