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Imbalance in Europe's Effort Sharing Decision: Scope for strengthening incentives for energy savings in the non-ETS sectors
Abstract
Europe's 2020 greenhouse gas (GHG) reduction target consists of two sub-targets: one for the Emissions Trading Scheme (ETS) sectors and one for the non-ETS sectors. The non-ETS target covers CO2 emissions in buildings, transport and non-ETS industry and non-CO2 GHG emissions. The non-ETS target is known as Europe's Effort Sharing Decision. This article discusses the GDP per capita method the European Commission has applied in setting Member State specific targets for the non-ETS ("the effort sharing") and shows that it results in an imbalanced reduction effort among the Member States. It turns out that the principal mechanism of the GDP per capita method (low-GDP countries get room to catch up with high-GDP countries by allowing them to increase emissions) is obscured by the non-CO2 GHGs, the baseline projections of which are highly policy-induced and not correlated with the growth of GDP per capita. We propose an alternative method that (1) corrects for the policy-induced decrease of non-CO2 GHG emissions and (2) is based on energy savings potentials. This approach could be used in future target setting for non-ETS sectors - including in the case that the overarching EU-wide target would be strengthened - and would provide a direct support to Europe's energy savings ambitions and policies.
... If comparing ETS sector to the non-ETS sector, the Europe's Effort Sharing Decision is not widely discussed into scientific publications. [1] Only some authors have included into the scientific publications the information on intra-EU flexibility of the non-ETS emission reduction obligations, the use of cleaner production mechanism at the non-ETS sector, and the analysis on top-down approaches for sharing GHG emission reductions in the non-ETS. [2;3;4] Europe's Effort Sharing Decision permits each Member state to define and implement policy and measures for GHG emission reduction in the non-ETS sector. ...
... In the energy sector, measures may be implemented which relate to the use of renewable sources of energy or introduction of highly efficient technologies. [1] The Nordic non-ETS energy sector includes energy production both at small energy sources, the input capacity of which is below 20MW, small industrial companies and individual consumers of energy resources. Link between energy sources and endconsumers of energy is demonstrated into Figure 1. ...
Member states of the European Union have undertaken to reduce GHG emissions and to achieve targets in 2020 and 2030. By using the system dynamic model, it is possible to analyze the possible GHG emission reduction, and the impact of suggested policy instruments on this reduction.
... This includes an increased use of renewable energy and combined heat and power installations; improved energy efficiency in buildings, industry, and household appliances; the reduction of CO 2 emissions from new passenger cars; abatement measures in the manufacturing industry; and measures to reduce emissions from landfills (European Environmental Agency (EEA), 2016). The EU's "own" (B€ ackstrand & Elgstr€ om, 2013, p. 1373) landmark legislation is the Climate and To attain these goals, the EU adopted the Emissions Trading Scheme (ETS) and an Effort Sharing Decision for non-ETS target sectors, which covers CO 2 emissions in buildings, transport and non-ETS industry, and non-CO 2 GHG emissions (Harmsen, Eichhammer & Wesselink, 2011). The EU ETS mostly covers GHG emissions from large-scale facilities in the power and industry sectors, as well as the aviation sector (Dessler & Parson, 2010). ...
In this study we examine the adoption of climate framework laws in 20 member states of the European
Union (EU) from 1990 until 2015. Our analysis is guided by the following research questions:
First, which EU member states have adopted climate change legislation that addresses mitigation,
adaptation, or both? Second, do EU countries act coherently or do we observe differences across
countries regarding the response strategy or point in time of policies directed towards climate
change? Third, comparing mitigation and adaptation frameworks, which approach came first and
did it affect the adoption of the respective other? Our findings show that all countries save one (i.e.,
Hungary) covered in the analysis have adopted framework laws tackling mitigation and/or adaptation
to climate change. While we did not observe a coherent pattern with respect to timing or
sequence of adaptation and mitigation frameworks, we found that the best predictor of a national
government’s behavior is the behavior of the governments of other countries. However, the response
of EU member states to climate change is less homogenous than one would have expected based on
previous literature. In addition, by highlighting that mitigation and adaptation measures are equally
prominent, at least within our sample of EU countries, we complement current climate change literature
that often places mitigation efforts at the forefront in terms of legislation activity. Future
research should examine this issue more closely, as this dynamic is likely to continue since the Paris
Agreement gave prominence to adaptation.
... non-ETS emissions). Despite the policy imperative, achieving reductions in energy-related CO 2 emissions in non-ETS sectors has received very limited attention (Böhringer et al., 2009;Harmsen et al., 2011;Tol, 2009) in academic research and this paper addresses this knowledge gap. This paper models technical energy systems pathways to deliver target emissions reductions in a least cost manner, using partial equilibrium modelling. ...
... non-ETS emissions). Despite the policy imperative, achieving reductions in energy-related CO 2 emissions in non-ETS sectors has received very limited attention (Böhringer et al., 2009;Harmsen et al., 2011;Tol, 2009) (Howley et al., 2010;Howley et al., 2008). This increased energy demand was supplied mainly by fossil fuels, which accounted for 95% of all energy used in Ireland in 2009. ...
Due to growing concerns regarding the anthropogenic interference with the climate system, countries across the world are being challenged to develop effective strategies to mitigate climate change by reducing or preventing greenhouse gas (GHG) emissions. The European Union (EU) is committed to contribute to this challenge by setting a number of climate and energy targets for the years 2020, 2030 and 2050 and then agreeing effort sharing amongst Member States. This thesis focus on one Member State, Ireland, which faces specific challenges and is not on track to meet the targets agreed to date. The methodology is replicable in other Member States.
The purpose of this thesis is to increase the evidence-based underpinning policy decisions in Ireland. Before this work commenced, there were no projections of energy demand or supply for Ireland beyond 2020. This thesis uses techno-economic energy modelling instruments to address this knowledge gap. It builds and compares robust, comprehensive policy scenarios, providing a means of assessing the implications of different future energy and emissions pathways for the Irish economy, Ireland’s energy mix and the environment.
A central focus of this thesis is to explore the dynamics of the energy system moving towards a low carbon economy. This thesis develops an energy systems model to assess the implications of a range of energy and climate policy targets and target years. The thesis also compares the results generated from the least cost scenarios with official projections and target pathways.
Three specific time scale perspectives are examined in this thesis, aligning with key policy target time horizons. The results indicate that Ireland’s short term mandatory emissions reduction target will not be achieved without a significant reassessment of renewable energy policy and that the current dominant policy focus on wind-generated electricity is misplaced. In the medium to long term, the results suggest that energy efficiency is the first cost effective measure to deliver emissions reduction; biomass and biofuels are likely to be the most significant fuel source for Ireland in the context of a low carbon future prompting the need for a detailed assessment of possible implications for sustainability and competition with the agri-food sectors; significant changes are required in infrastructure to deliver deep emissions reductions (to enable the electrification of heat and transport, to accommodate carbon capture and storage facilities (CCS) and for biofuels); competition between energy and agriculture for land-use will become a key issue.
The thesis also extends the functionality of energy system modelling by developing and applying new methodologies to provide additional insights with a focus on particular issues that emerge from the scenario analysis carried out. Firstly, the thesis develops a methodology for soft-linking an energy systems model with a power systems model to improve the interpretation of the electricity sector results in the energy system model. The soft-linking enables higher temporal resolution and improved characterization of power plants and power system operation Secondly, the thesis develops a methodology for the integration of agriculture and energy systems modelling to enable coherent economy wide climate mitigation scenario analysis. This provides a very useful starting point for considering the trade-offs between the energy system and agriculture in the context of a low carbon economy and for enabling analysis of land-use competition.
... Although much scientific research was done to analyse the performance of the sectors covered by the EU ETS (Pruse, 2012), little attention has been paid to studying the dynamic relations between and among the actors involved in the EU non-ETS sectors: agriculture, transport, waste management and the part of energy sector and industry, which is not included in the ETS. The methods, used for setting specific targets for the non-ETS sectors in the EU, are analysed by Harmsen et al. (2011). The models, used for the allocation of cost optimal solutions for non-ETS sectors, are examined by Hast et al. (2013) for Finland and by Chiodi et al. (2013) for Ireland. ...
The European Union (EU) has recently agreed on an ambitious framework for climate and energy policies by 2030. The new commitment foresees greenhouse gas (GHG) emissions reduction by 40 % compared to 1990. The part of these reductions is going to come from the EU Emission trading system (ETS) and other part from the sectors outside the EU ETS or, so called, nonETS sectors: agriculture, transport, waste management and the part of energy sector and industry, which is not included in the ETS. As for now, much research has focused on studies relevant to the ETS; meanwhile, the largest part of GHG emissions in Europe is generated by nonETS sectors. Therefore our study aims to strengthen the decision making capacity by providing the comprehensive modelling tool for policy analysis in nonETS sectors. This tool is based on system dynamics modelling approach and encompasses the mathematical model for nonETS sectors. With this model we analyse the effectiveness of various policy measures aiming to reduce GHG emissions in nonETS sectors. The obtained results are compared with the benchmarks set by the EU climate and energy policy. Latvia is selected as a case study. We perform the analysis of baseline and green scenarios and test the model for sensitivity. The obtained results show that with the existing policy framework, in 2030, GHG emissions would increase by 19 % above the 2005 level. Since the developed model is white-box modelling approach therefore the dynamic relationships of driving forces behind the GHG emissions in nonETS sectors can be transferred to other case studies and extended to the EU.
... Moreover there are substation differences between the participants of the ETS and non-ETS in the terms of financial models and involved parties. Where the ETS participants control financial recourses needed for the improvements of the existing technology and/or introduction of the best available technologies [4], the financial model for the non-ETS participants is not available and needs to be still developed [5]. The availability of financial resources is major precondition for these participants. ...
... According to Labandeira et al. (2011), energy efficiency policy is essential in Spain due to the acute energy dependence and the fact that Spain is not meeting its GHG target. The latter is confirmed in analyses by Harmsen et al. (2011b) pointing at the need of more stringent energy efficiency policies for Spain (and other Member States) to comply with its binding Effort Sharing Decision target for the non-ETS sectors which includes the built environment. ...
Energy efficiency is considered one of the most cost effective ways to enhance security of energy supply and reduce greenhouse gas emissions. According to Europe's Energy Efficiency Plan, the biggest energy savings potential in the EU lies in the built environment. However, the many barriers to energy efficiency have prevented the implementation of the existing potential so far. This paper evaluates the existing policy instruments aimed at energy efficiency in buildings in Spain as laid down in the 2nd National Energy Efficiency Action Plan (NEEAP). The results show that the current policy package is insufficient to yield the existing energy savings potential in this sector. As much of the savings potential can be found in existing buildings and realization of this potential very much relies on voluntary action, the renovation sector is in need of an appropriate financial framework that mobilizes sufficient public and private financial resources, and transparent and efficient mechanisms to ensure the return on investment and payments from those who benefit from the renovation. Such financial framework needs to be supported by a regulatory framework that is tuned to existing buildings and an organizational framework that effectively connects the different policy layers in Spain.
... non-ETS emissions). Despite the policy imperative, achieving reductions in energy-related CO 2 emissions in non-ETS sectors has received very limited attention (Böhringer et al., 2009;Harmsen et al., 2011;Tol, 2009) in academic research and this paper addresses this knowledge gap. This paper models technical energy systems pathways to deliver target emissions reductions in a least cost manner, using partial equilibrium modelling. ...
This paper focuses on Ireland’s ambitious target for 2020 to reduce greenhouse gas (GHG) emissions by 20% below 2005 levels for sectors not covered by ETS (Non-ETS). Ireland is an interesting case study due to the role of agriculture (a particularly challenging sector with regard to GHG emissions reduction), that represents 29% of Ireland’s GHG emissions compared with less than 10% for the EU. The analysis is carried out with the Irish TIMES model, a bottom-up energy systems modelling tool with detailed characterization of Ireland’s energy system. The paper uses scenario analysis to provide pathways that demonstrate how Ireland can meet the non-ETS target at least cost. The paper considers the impacts (in terms of different technology choices and higher marginal abatement costs) arising from higher targets for the energy system to compensate for growth in agriculture activity and low mitigation potential in that sector. The results point to a need to reconsider Ireland’s renewable energy focus, with a need for increased effort in renewable transport and renewable heat in particular. The results also point to significant electrification of residential heating. The results also point to a high marginal abatement cost (€ 213/tCO2), which challenges the analysis carried out at EU level to establish Ireland’s non-ETS target.
... This suggests that the ambition level of both targets is different. Harmsen et al. (2011a and2014) show that the 2020 20% energy savings target is equal to 14% energy savings compared to energy use in 2005. As the 2020 20% GHG reduction target equals 14% reduction compared to 2005 as well, achievement of the 14% energy savings target with an unchanged fuel mix would lead to 14% GHG reduction. ...
Delegation and accountability are central concepts for analysing political processes. This contribution engages in these debates by examining the public’s perception of climate change in the European Union (EU) and analyses the willingness of European citizens to delegate competences for governing climate change. Drawing on Eurobarometer surveys, we find that respondents in some states show below-average support for the EU’s responsibility in tackling climate change, whereas respondents in other states support very strongly the EU’s involvement in climate policymaking. Moreover, European citizens indeed prefer to diffuse policy competences across different levels, which reveals the EU has a domestic legitimacy to address climate change.
The European Union has set a system of climate and energy targets comprising target values for greenhouse gas emissions (GHG), Emission Trading Sectors ETS and non-ETS sectors, energy efficiency and renewable energies until 2020. A new framework up to 2030 is just being developed. We analyse what lessons can be learned from the EU 2020 target system and how a new 2030 framework could be designed coherently. We derive a coherent target system for 2030 from a bottom-up assessment of energy efficiency potentials. Thus we show that ambitious energy efficiency and renewable energy targets also guarantee significant reductions in greenhouse gas emissions of 47-60% compared to 1990. ETS sectors can contribute significantly to the GHG reduction, provided that a stabilisation of the carbon price can be reached. An alternative design with a 40% GHG emission reduction as the only headline target, as currently debated, will not exploit all cost-effective energy saving potentials and so not take advantage of the macroeconomic co-benefits of energy efficiency either.
As Europe is not on track in meeting its 2020 energy savings target, there has been quite some debate to make the energy savings target binding instead of indicative. Although the final draft text of the Energy Efficiency Directive left the option of a binding target explicitly open for the period beyond 2014, this statement has watered down in the adopted Directive: If still not on track mid-2014, the European Commission will propose “further measures.” In this paper, we argue that a binding energy savings target could be the first EU legal initiative to look beyond 2020 serving as a beacon for other policies such as for renewables and greenhouse gases that need redefinition after 2020. We therefore explore four possible design options of a binding savings target and assess their feasibility. We conclude that a binding target at Member State level (opposed to an EU-wide target like for the EU Emission Trading System (ETS)) is the most feasible. A binding target at Member State level would ensure political accountability and commitment to deliver results while providing flexibility to choose and apply the most suitable tools to achieve the target. It could provide a framework to guide ambitious and coherent implementation of EU energy efficiency policies, as well as the strengthening of national policies. Furthermore, binding targets at Member State level will make Member States take an ambitious position in Brussels when new energy or CO2 performance standards for appliances and transport modes are to be set. A Member State binding target applied to end-users (excluding ETS companies) is a design option that covers the vast majority of the cost-effective energy savings potential, maintains the flexibility for ETS companies, and supports the most cost-effective achievement of a greater share of renewables.
The EU proposal on greenhouse gas emission reduction has 28 targets for 2020: an EU-wide one for CO2 emissions covered by the European Trading System (ETS), and one target for non-ETS emissions per Member State. Implementation is more expensive than needed. I consider three alternative proposals to reduce costs. In the Irish proposal, Member States can purchase ETS permits to offset excess non-ETS emissions. In the Polish proposal, Member States can sell excess non-ETS emissions in the ETS. In the Swedish proposal, Member States can trade their non-ETS allocations. I compare these alternatives to the default policy (no flexibility outside the ETS) and the cost-effective solution (full flexibility). I calibrate a simple model to the results of the EU impact assessment, which did not disclose all details and made odd assumptions. The non-ETS allocation exceeds the projected emissions for three Member States. The alternative flexibility mechanisms would be used to only a limited extent, but would cut the costs of meeting the target. The Swedish and Polish proposals come closest to the cost-effective solution because of the hot air. The Irish proposal performs best if there are negative surprises in either abatement costs or emissions. The Swedish proposal will become policy.
To reduce GHG emissions, the 27 European Union Member States committed themselves in 2007 to reduce emissions from 1990 levels by 20% by 2020. In January 2008, the EU Commission gave the first country-specific proposals to reduce emissions in sectors outside the EU emission trading system (non-ETS). In this study, we looked at several ways of sharing emission reductions in the non-ETS sector. We considered population and economic growth as significant drivers of the development of emissions. In particular, we analyzed development in GHG intensity of economies. Reduction requirements vary greatly among countries depending on the principle of effort sharing. The results of our calculations can be perceived as examples of how effort sharing between the EU Member States could look like when certain assumptions are made. Generally they illustrate the sensitivity of the results to data used, assumptions made, and method applied. The main strength of simple top-down approaches is transparency. A major weakness is a very limited ability to consider national circumstances. Political negotiations are ultimately crucial; an analysis like this provides material for negotiations and makes a contribution to solving the effort-sharing problem. As future development is partly unpredictable, implementation of some kind of subsequent adjustment could be considered during the process.
Under European Union proposals for CO2 emission reduction between 2013 and 2020, a Member State can transfer to another Member State the right to use its unused Clean Development Mechanism (CDM) credits. The paper addresses three issues in relation to these CDM Warrants (CDMW). First, how should the Member State treat the CDMW in making decisions concerning emission reduction? The price of the property right is an important signal for a Member State in deciding the level of domestic abatement compared to trading in CDMWs. In other words, a shadow price for CDMWs should be used in formulating the emission strategy in order to determine whether or not a Member State is a buyer or seller of CDMWs. Second, what mechanism should be used to facilitate the exchange of CDMWs? The preferred mechanism depends on the market size, over which there appears to be some ambiguity: market intermediaries such as Over-the-Counter trades and exchanges are preferred if market size is small; auctions if the market size
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