The regulation of GHG emissions in the EU
(updated 27 November 2020)
The EU’s climate objectives
The EU’s climate objectives have been framed in 10-year programs, which define policy objectives for a certain target date, and packaged with a number of legislative measures to achieve them. We will first look at the EU’s climate objectives, and then discuss the most important legislative measures.
The “2020 climate and energy package” defines the targets that shall be reached by 2020. The targets were set in 2007, and the necessary legislative measures were enacted in 2009. The objectives are set as follows:
— 20% cut in greenhouse gas emissions (from 1990 levels)
— 20% of EU energy from renewables
— 20% improvement in energy efficiency
The “2030 climate and energy framework” defines the following targets:
— At least 40% cuts in greenhouse gas emissions (from 1990 levels)
— At least 32% share for renewable energy
— At least 32.5% improvement in energy efficiency
The GHG emission cuts correspond to the NDC the EU pledged under the Paris Agreement. The 40% target was submitted in 2015.
European Green Deal: new, more ambitious climate objectives to come?
The legislative measures to implement the 2030 targets that we just discussed were adopted in 2018. Only one year later, in winter 2019, the EU Commission proposed an ambitious new program, the “European Green Deal” (EGD). The objective of the EGD is described as “making Europe climate neutral by 2050, boosting the economy through green technology, creating sustainable industry and transport, cutting pollution.” The scope of policies covered by the European Green Deal is quite breath-taking.
From a climate perspective, the most important proposals are:
— making the EU “climate neutral” by 2050.
— set a new 2030 target of 50 to 55% emission reductions.
These are laid down in a proposed “European Climate Law” that the Commission issued in Spring 2020. The European Parliament recently demanded even bolder action, calling for a new emission reduction target for 2030 of 60%.
The regulation of emissionsin the EU
The EU is a quasi-federal entity, comparable to the US, Mexico or Australia. This means that regulatory competences are shared between the federal level and the state level. This is also the case for climate mitigation and adaptation: regulation exists on both the European and the national level.
In the EU, GHG emission targets are laid down under two separate legislative instruments: the EU ETS Directive and the so-called Effort-sharing Regulation.
EU Emissions Trading System (EU ETS)
The EU ETS is laid down in Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading (or short: “EU ETS Directive”; it dates from 2003, but is continually amended).
→ An EU Directive is a “typically federal” type of legislation: the Directive defines the regulatory objectives to be achieved, usually in general terms; it is for the member states to implement the Directive, by enacting appropriate national legislation. A Directive could be termed an “EU framework law”, because it only defines a legislative framework, which has to be filled in by the legislation of the Member States.
The EU ETS covers about 40% of total GHG emissions in the EU. The economic sectors it covers are electricity production, heavy industry and aviation. GHG emitters have to acquire emission certificates (European Emission Allowances = EUAs). For each ton of CO2 emitted, the emitter must “pay” one EUA. The overall number of EUAs issued per year is capped, and the cap is falling: every year a smaller number of EUAs is issued. From 2021 onwards, the annual reduction is 2.2%. Because each EUA represents one ton of CO2, the overall amount of GHG emissions in the sectors covered by the EU ETS must fall by the same percentage. The EU ETS system is discussed in more detail in a separate blogpost. If the improved emission objectives proposed in the EGD are adopted, the annual reduction number must be increased as well. This will be done by means of an amendment to the EU ETS Directive.
The Effort-sharing Regulation
GHG emissions not covered by the EU ETS system fall under the “Effort-sharing Decision” (until 2020) and the “Effort-sharing Regulation” (2021–2030). This currently includes economic sectors such as (non-aviation) transport, agriculture, waste and housing.
→ An EU “Regulation” could be described as an “EU law”: it creates directly binding obligations.
The Effort-sharing instruments lay down emission reduction targets for each Member State. The targets are different for each country (in fact, not all member states have to cut their emissions). It is up to the member states to enact suitable national legislative measures to achieve sufficient emission cuts in time.
→ check the graphics below: which countries are required to cut the most, and which are allowed continued emission growth? — what is the likely reason for the difference?
Renewable energy
The core legislative measure to achieve the Union’s renewable energy goal is Directive 2018/2001 on the promotion of the use of energy from renewable sources (or “Renewable Energy Directive”). The central instruments for the member states to achieve this objective is via financial support schemes, i.e., subsidies for the production of renewable energy. The problem with subsidies is that they can distort the market. The Directive seeks to ensure that renewable energy support systems are designed in an efficient, non-discriminatory and non-distorting manner.
Energy efficiency
Energy Efficiency Directive
Energy production is a main source of GHG emissions. Increasing energy efficiency means doing the same thing using less energy. Consequently, increasing energy efficiency can contribute to the reduction of GHG emissions. The central EU measure regarding the energy efficiency objective is Directive 2012/27/EU on energy efficiency (or “Energy Efficiency Directive”). The core objective that the Directive seeks to achieve is laid down in its Article 3 (paragraphs 1+5):
— “that the Union’s 2020 energy consumption has to be no more than 1 483 Mtoe of primary energy or no more than 1 086 Mtoe of final energy;”
— “the Union’s 2030 energy consumption has to be no more than 1 273 Mtoe of primary energy and/or no more than 956 Mtoe of final energy.” (“Mtoe” stands for “million tonnes of oil equivalent.”)
If you read the provision attentively, you can see that the overall objective is not actually defined in terms of energy efficiency, but seeks to reduce the total amount of energy consumption. It is essentially up to the Member States how they implement the objective. However, they need to submit annual progress reports. Among the measures prescribed by the Directive is the renovation of public buildings by the central government to make them energy-efficient. When the central governments make purchases, they need to purchase energy-efficient goods and services.
How the EU “banned my lightbulb”: internal market law and the Ecodesign Directive
According to EU internal market law, goods must be allowed to circulate freely within the EU (Article 34 TFEU); this means that member states are prohibited from adopting measures that undermine the free movement of goods. At the same time, member states retain, of course, the right to regulate the production, sale and use of products if that is necessary in the public interest. This includes measures necessary to protect, for example, the consumer’s health and safety, as well as the environment. In order to avoid a situation where environmental product regulation differs from member state to member state, product requirements are, if necessary, harmonized on the European level. This means that the requirements that a product must meet in order to be sold legally are laid down in a European measure; a product that conforms to the European requirements can be sold in all EU member states.
There are many EU measures that harmonize product requirements; among them is the “Directive 2009/125/EC establishing a framework for the setting of ecodesign requirements for energy-related products” (= Ecodesign Directive”). The directive authorizes the EU Commission to issue environmental product requirements for “energy-related products”; typically, these measures
- set minimum energy efficiency standards that new products have to comply with;
- they require products to be marketed with a label indicating their energy efficiency class (see below for more on this)
- set other requirements related to energy efficiency. For example, “networked devices” (such as connected televisions) must switch into standby/off-mode if not used.
The Commission has issued harmonized ecodesign requirements for products such as air conditioners, lamps, computers, TVs and household appliances such as ovens, washing machines and dryers. A full list of ecodesign legislation can be found here.
A decade ago the EU Commission inadvertently caused some major hooplah with an ecodesign measure that laid down minimum energy efficiency standards for light bulbs. The measure phased out the sale of traditional light bulbs: compared to all other types of light bulbs (such as halogen and LED bulbs) these were highly inefficient in their energy-to-light conversion, as well as extremely short-lived. Populist politicians and newspapers were delighted, as this allowed them to play a round of EU-bashing. The EU Commission had to defend the measure against accusations that it would be an “intrusion of Brussels into citizens’ private lives”. Two years ago, the ecodesign measure on light bulbs was again updated: halogen bulbs are phased out, to be replaced by the more efficient LED bulbs.
During the long Brexit debates of the previous years, similar accusations were also launched in relation to other household products subject to an EU ecodesign measure.
The Energy Labeling Regulation
A related measure is the “Regulation 2017/1369 setting a framework for energy labeling” (or Energy Labeling Regulation).
The regulation requires energy-using products to display a label with their energy efficiency class. Similar to the Ecodesign Directive, a two-tier form of legislation is employed. The Energy Labeling Regulation lays down the labeling obligation in general terms, while the concrete efficiency classes for each type of product (e.g. fridges, ovens, TVs) are defined in an implementing measure by the EU Commission (a full list of implementing measures can be found here).
Ecodesign and energy labeling requirements also exist for buildings (the “Energy performance of buildings directive”).
Planning → reporting → monitoring
The EU has pledged a common emission reduction goal under the Paris Agreement for all its Member States . However, as we have seen, the EU is not exclusively competent to act on climate issues; instead, the competence is shared between the EU and the Member States. This means that the EU depends on all Member States to “do their fair share.” The main instrument to achieve this is the Regulation on the Governance of the Energy Union and Climate Action (“Governance Regulation”), which was enacted in 2018. It lays down a system of planning, reporting and monitoring that comparable to the system under the Paris Agreement (“MRV”: monitoring, reporting and verification).
- Planning + Reporting: the Governance Regulation requires Member States to regularly submit “national energy and climate plans” (NECPs) and “long-term strategies” (LTSs). The latter should have a time horizon of at least 30 years (i.e., at least till 2050). Both plans must be updated regularly, every 5 years, and submitted to the European Commission. Moreover, Member States need to submit biennial progress reports, and annual GHG inventories.
- Monitoring: the European Commission reviews the draft NECPs, especially regarding the question whether the plans are sufficiently ambitious (“ex ante” monitoring). It also reviews the progress reports (“ex post” monitoring). If a Member States makes insufficient progress, the Commission may issue a recommendation how to improve the situation.
