EU 2030 climate & energy package: Deal or no deal

The package of legislation is due to be agreed by EU heads of state at a European Council meeting on 23-24 October. But analysts Sandbag show that existing and proposed policies will lead to only about 23% of European coal-fired units closing down between now and 2030.

Without major reform to the EU Emission Trading Scheme (EU ETS), the carbon price is unlikely to rise beyond €10 per tonne of CO₂, it calculates. As a result, renewables will continue replacing gas generation rather than coal, and there will be no sign of coal-to-gas switching. Other regulations (for example on pollutants such as sulphur dioxide) are not being used to shut coal stations. Coal generation accounts for 20 percent of all European greenhouse gas emissions.

Dave Jones, policy analyst at Sandbag, said there is no policy within the 2030 package that specifically targets coal generation.

“Without Emissions Trading Scheme reform, the EU carbon price is likely to continue its slide towards zero, so it will not act as a brake for coal generation which is what most policy-makers are assuming.

“The situation is being worsened in some countries such as the UK by capacity mechanisms, which are giving additional revenue streams to keep old power stations alive.”

Nick Mabey, chief executive of environmental group E3G, said that the European Council meeting this month is currently set to be a ‘showdown’ between Poland and other nations. This implies a risk that Poland will be granted concessions enabling it to build new coal-fired power stations that could operate until 2070. This, he indicated, would have serious implications for international negotiations on climate change, with a new agreement due to be reached in Paris at the end of 2015,

“In a situation where we’re running up to the Paris negotiations, where China is looking at peak coal before 2020 and where Obama is closing down existing coal, the idea that Europe would subsidise new coal on its system is pretty impossible for Merkel and Hollande and even Cameron, as it would require the UK taxpayer to illegally subsidise new Polish power stations.”

Mabey also said that on the proposed target for increasing energy efficiency, the UK was “looking increasingly isolated - and for no good reason”. Most governments are backing a target of increasing energy efficiency by 30% by 2030, but the UK is opposed – mainly over fears that it would be portrayed as ‘another target from Brussels’.

“Energy efficiency is framed as a cost rather than an investment in infrastructure, and this dislocation in the way governments look at the issue is causing problems - it sits in a different part of the political mindset,” he said.

“In real economy terms it’s a win-win-win; the question is can the UK deal with another ‘target from Brussels’? If they present it as a deal to make Europe more productive, then yes; if they decide not to present it like that, no.”

Ingrid Holmes, associate director of E3G, said that the proposed 30% target is too low. Economic analysis shows, she said, that a 40% target is more cost effective and boosts employment.

“By not hoovering up cost effective potential, we’re losing out on energy security; for every 1 percent of energy saving in Europe we get a 2.6 percent reduction in gas imports,” she said.

“The difference between the GDP gains, because you’re investing in jobs in Europe instead of buying in foreign fossil fuels, is 1 percent GDP gains in 2030 with a 30 percent target versus 4.5 percent with a 40 percent target. You’re also missing out on just cost savings in the energy bill for the European economy of over €150bn a year.”

On the 2030 package overall and the international context around it, Nick Mabey added: “It really matters that we can tell this story that Europe is on a structural path to a zero-carbon energy economy.

“That’s what Europe is gong to be arguing for as a goal in Paris, and the irony is that trajectory would be a more efficient and productive trajectory than the one we’re going on at the moment.”

An in-depth analysis of the EU 2030 package is available here: http://eciu.net/assets/EU2030-briefing.pdf