August 7 2017 brussels

August 7, 2017

Most experts agree that energy efficiency should be the number one priority in the fight against climate change. Yet EU Member States in June lowered their energy efficiency ambitions drastically – even by as much as 90% by some calculations. What explains this debacle? And what does it mean for EU climate policy? David Thorpe,  independent consultant and author of several books on energy efficiency, discusses the ramifications. (Our EU correspondent Sonja van Renssen is on maternity leave.)

At an Energy Council meeting on 26 June, the energy ministers of the EU member states agreed on a non-binding 30% energy savings target for 2030 (compared to 2005) as part of their negotiations on a new  Energy Efficiency Directive (EED). The Energy Efficiency Directive forms part of the EU’s Energy Union Strategy, the general aim of which is to move towards decarbonisation of the EU economy by 2030 and beyond, whilst “strengthening economic growth, consumer protection, innovation and competitiveness”. The Commission earlier issued a proposal on a new Energy Efficiency Directive which updates the current Energy Efficiency Directive 2012/27/EU and was presented in November 2016.

Virtually all observers agree that the outcome of the Energy Council meeting was very disappointing. First of all there is the fact that the target is non-binding, unlike the current 20% reductions target for 2020. This means it cannot be enforced.

Then there is the target itself. This is less ambitious than the target of the current Energy Efficiency Directive of 1.5% energy savings per year. The new 30% target by 2030 means an energy savings obligation of 1.5 % from 2021-2025 but decreasing to 1.0% for the period 2026-2030 (unless the Commission mid-term review in 2024 concludes that the EU is not on track to meet its targets).

Note that earlier, in October 2014, the European Council had proposed “at least” a 27% binding target. The European Commission had separately proposed a binding target of 30% in the “Clean Energy Package”, while the European Parliament has been calling for a binding 40% target.

What is more, at the meeting on 26 June a number of “loopholes” were agreed to. Analysis of the European Commission proposals, which were adopted at the meeting, shows that these loopholes will reduce the actual energy savings mandate in the EED from an effective level of 443 Mtoe per year to just 52 Mtoe—a reduction of almost 90%.

The loopholes, identified by by Jan Rosenow and Richard Cowart of the Regulatory Assistance Project (RAP), an independent, non-partisan, non-governmental organization. specifically permit:

• the double-counting of energy savings from new buildings standards/codes – even though those are covered by the Energy Performance in Buildings Directive already;
• double-counting in the period 2021-2030 savings from energy efficiency measures installed before 2021 with lifetimes longer than 23 years – as if they were new savings;
• 15% of on-site renewable energy generation to be treated as energy savings; and
• excess savings from the current Article 7 (Energy Efficiency Obligation) period 2014-2020 towards the minimum savings 2021-2030.

They note that depending on the amount of excess savings reported by Member States in 2014 and 2015 the total savings target is currently on track to be less than 0 Mtoe!

For and against

Why did the European Council come to such meagre results? The reason is that a number of Eastern European member states, led by Poland do not want Brussels to dictate energy efficiency policy to them. They argue that they are not in a position to afford the upfront investments efficiency measures often need.

The countries – Poland, Bulgaria, Hungary, Slovenia, Slovakia and Romania – were backed by the UK. Where other countries sent their secretaries of state for energy, Britain sent an under-secretary from the Business, Energy and Industrial Strategy Department, Conservative MP Richard Harrington. who had only been appointed a week earlier from a role in the Work and Pensions Department following the election.

According to Cenk Olgun at Berlin’s Institute for International Political Economy, Poland absorbed the 2020 EU climate directives without experiencing substantial structural changes, but it applied a much more aggressive approach in the negotiations over Europe’s 2030 climate goals. “The most vehement opposition to ambitious climate policies have historically come from the post-Soviet eastern Member States,” he says, in particular the Visegrad Group (founded in 1991 by Poland, the Czech Republic, Hungary and Slovakia) because the bloc “still struggles with a post-communist economic legacy and conventional power sectors”.

Energy prices and domestic fossil fuel consumption are especially important issues in these countries. They are highly dependent on imported gas and oil.

According to Olgun, “binding targets on energy efficiency and renewable energy were heavily opposed by the Visegrad Group. Especially Poland had been opposing the idea of binding targets, sending clear signals and thereby significantly contributing to the lowered ambitiousness of EU policies.”

Hungary currently holds the Presidency of this group and its declared objectives for the coming year are to promote energy infrastructure, security (meaning more gas and LNG) and competitiveness, striking its own idea of a “balance between economic growth and meeting climate policy goals”, and expressing anxiety about ‘carbon leakage’ and ‘investment leakage’.

This graph shows that Hungary is the one European country in 2016 that had not implemented any energy efficiency policy. Its Visegard friends also had only implemented one or two policies while other countries use a greater array of legislative means to achieve energy savings.]

These countries’ greenhouse gas emissions 2020 permitted percentage increase/decrease limits since 2005 are also all at the bottom end:

These Effort Sharing Decision limits were released on 20 July by the European Commission in its Summer Package and distribute climate targets to each Member States in order to decarbonise the non-Emission Trading Scheme sectors – transport (except aviation and maritime shipping), buildings, agriculture and waste.

As to why the UK allied itself with the Eastern European countries, it was experiencing an election campaign at the time in which arguments about high energy prices and Brexit featured significantly. A perception on the British right is that high energy prices are due to the cost of climate change legislation. Since the election, though, progress on decarbonising the economy has not stalled.

On the other side were in particular France, Germany, Luxembourg, Sweden and Ireland, who were congratulated by Green MEP Claude Turmes for fighting hard for a strong deal. EU Energy and Climate Commissioner Miguel Arias Cañete commented that finding agreement on the Energy Efficiency Directive was “not easy” and that as a result it fell “below the ambition of the Commission”.

Others were equally disappointed. Clémence Hutin, climate justice and energy campaigner at Friends of the Earth Europe, said: “These negotiations should have been about ramping up the EU’s climate efforts for 2030, instead we are risking a decade of inaction.”

Benedek Jávor, an MEP from the Greens/EFA (European Free Alliance) said: “There is an engaged energy efficiency community that stands ready to raise ambition levels and invest massively in the energy transition. Where some countries lag behind, there is a real risk of higher energy costs and serious competition gaps.”

Implications

What are the implications if this proposal were to become law?

Even before the Energy Council meeting, the EU was not on a trajectory to meet its self-assigned 2030 greenhouse gas emissions reduction target of “at least” 40% by 2030 below 1990 levels under the Paris Agreement.

The Paris Agreement commits to staying “well” below 2°C, while pursuing efforts to limit temperature rise to 1.5°C. Taken with other countries’ pledges the EU’s would lead to global emissions of at least 55 GtCO2-e by 2030. But the absolute maximum level of emissions for staying below 2°C would be 40 GtCO2-e. To close this gap, the United Nations Environment Programme (UNEP) has asked all countries to reduce their 2030 emissions by at least another 25%.

Factoring in the new, seriously unambitious targets under the Energy Efficiency Directive would make achieving Europe’s goal under the Paris Agreement much harder and more expensive to achieve.

But what makes the new proposal particularly disappointing according to most observers is that it is in the end in no one’s interest, not even from an economic perspective.

The European Parliament’s own  Impact Assessment has shown that higher levels of ambition would deliver significantly greater benefits, as shown in the table below:

These figures are consistent with those from the De-Risking Energy Efficiency Platform (DEEP) database, which contains close to 6,000 individual energy efficiency projects across the Member States of the EU.

They imply, for example, that energy efficiency measures are an effective measure to combat fuel poverty, an issue in most member states. It affects tens of millions of Europeans (between 50 million and 125 million depending on how you measure it). Of the main causes – low income, high energy costs and poor insulation of European dwellings – the directive could do much to affect the latter two.

What’s next?

The ball is now in the European Parliament’s court. The Parliament’s Industry, Research and Energy Committee will vote on the issue in October.  In June this committee’s rapporteur Adam Gierek proposed an energy efficiency target of 35% for 2030, so it will be interesting to see what the outcome is.

Estonia now has the Presidency of the Union. Energy efficiency and climate are not high on its agenda. However, the topic may be discussed at the next informal meeting of the Transport, Telecommunications and Energy Council (TTE) on October 19-21 and the full meeting on 24 October.

In December, proposals for a new Energy Market Design, a revision of the Renewable Energy Directive and a Sustainable Bioenergy Strategy for 2020-2030 are expected. The review of the Renewable Energy Directive will aim to cost-effectively achieve the ‘at least’ 27% renewables target, binding at EU level.

France’s new climate action plan, published last week states that France will push the EU to increase ambition of its emission reduction targets. Wendel Trio, Director of Climate Action Network (CAN) Europe said that France’s plan “sends a clear message to the whole EU that the full implementation of the Paris Agreement means much deeper emission cuts.”

So the fight over the Energy Efficiency Directive is not over yet. And of course nothing prevents individual EU countries, such as France, from pursuing their own ambitious energy efficiency policies. Or cooperating with other “willing” member states.