Highlights huge investment and structural changes
On 8 March 2011 the European Commission (the "Commission") published a number of documents relating to the EU’s transition to a low carbon economy and energy efficiency. These represent the Commission’s plan for the future upon which it will consult with other EU institutions. These are important indicators of the direction of future law and policy. Two documents in particular, a roadmap for moving to a competitive low carbon economy in 2050 (COM(2011) 112/4) (the “Roadmap”) and an Energy Efficiency Plan 2011 (the “Plan”) are key reading for commercial leaders in all sectors. They should be of particular interest to investors, fund and asset managers, real estate developers, transport, energy and other infrastructure providers, those who are involved in public procurement and, of course, clean technology providers.
The content of these documents is intended to make clear the EU’s path to emissions reduction, promotion of growth and jobs in the clean economy, reduce vulnerability to potential future oil volatility and other energy security concerns, substantially reduce the energy import bill, air pollution and associated costs. It is also intended to stimulate international discussion.
The Commission states that if current policies are fully implemented, the EU is on track to achieve its 2020 targets of reducing emissions to 20% below 1990 levels and raising, to 20%, the share of clean energy in its energy mix. However, further work is required in order to reduce domestic emissions by between 80% and 95% by 2050. This target would require a 40% domestic reduction of greenhouse gas emissions by 2030 and 80% by 2050.
The Commission identifies energy efficiency as a key vehicle for the transition.
The Roadmap sets out the Commission's views on key challenges, milestones, a sectoral perspective on low carbon innovation, investment, the international dimension and draws together conclusions.
The Roadmap outlines how the transition can be achieved in the most cost-effective way, the type of technologies and actions requiring implementation and the types of policies the EU will need to develop. It proposes that the reductions targeted are technically feasible if sufficient incentives (such as a strong carbon price) are applied across all sectors. Research and development, early demonstration and deployment of technologies are identified as crucial. The Roadmap also emphasises the importance of the EU's Strategic Energy Technology Plan as a key component. Additional public/private mechanisms are seen as key to fuelling behavioural change. Sector specific policy initiatives and roadmaps are planned
Domestic v international
The Roadmap raises the need to act domestically, raising concerns over the viability of international credits being able to offset enough emissions in Europe. The concern is that large-scale use of international credits will not be possible by 2050 as the global climate action needed to keep average warming below 2ºC will reduce the supply of international credits and their availability at low cost. As a result the decision has been taken within the Roadmap to reduce emissions almost entirely through domestic measures in the longer term. This has major policy and future legislative implications for decarbonised power, fuel efficiency, the built environment, industry and land use. A stream of new policy and legal developments should be expected.
The scale of investment
The Roadmap states that achieving an 80% emissions reduction by 2050 will require additional annual investment averaging 1.5% of EU GDP (€270 billion) for the next 40 years in addition to current overall investment.
Sectors identified for additional investment include:
- built environment (buildings and other infrastructure),
- power generation and
The Plan identifies that the greatest energy saving potential lies in buildings followed by transport. The largest investment in absolute terms would be in demand-side technologies in these sectors e.g. energy-efficient building materials and components, technologies such as heat pumps and appliances.
The Commission proposes a 2 tier approach to target setting. Firstly, Member States are presently setting national efficiency targets which shall be reviewed in 2013. Secondly, if at that stage the overall EU target is unlikely to be achieved, the Commission will propose legally binding targets for 2020.
Significant emphasis is placed on energy efficiency in the public sector. In addition to existing measures in this area it is proposed that high standards of energy efficiency should be applied in the purchase of goods, services and works.
This will no doubt surprise (if not shock) many but a proposal is that public authorities should be required to refurbish at least 3% of their building stock each year.
When considering the efficient generation of heat and electricity, the Commission proposes that where there is sufficient potential demand authorisation for new thermal power generation should be conditional on its being combined with systems allowing the heat to be used (combined heat and power) and district heating systems should be combined with electricity generation wherever possible. Other proposed measures include national energy saving obligation schemes for all Member States, mandatory regular energy audits for large companies, voluntary agreements with industry, a revision of the Energy Services and Combined Heat and Power Directives, the adoption of new ecodesign and energy labelling measures and proposals on financing tools.
The Roadmap is a Communication addressed to the Council, European Parliament, European Economic and Social Committee and Committee of the Regions. The EU institutions and bodies are expected to give their responses, in the coming months. The Commission has invited all of the above to take the Roadmap into account in the further development of EU and national policies for achieving a low carbon economy by 2050. At sectoral level the Commission perceives a need to develop specific roadmaps in cooperation with the sector. The leveraging of finance for low carbon technologies will form part of discussions on the EU's next budget framework for 2014-2020 and incentives to reduce emissions from agriculture and forestry will be part of the further development of the Common Agricultural Policy.
The Roadmap and the Plan will be followed by a White Paper on Transport (anticipated this month). All three are cited as key components of the resource-efficient Europe initiative under the Europe 2020 strategy. The Commission is also preparing a Communication on resource efficiency and a 2050 Energy Roadmap for adoption later this year.
Please click here for the Roadmap
Please click here for the Plan