BRUSSELS INSIDER #1 - June 26, 2018
Energy efficiency and climate “are not afterthoughts anymore” in the EU – but neither can they be enforced
by Sonja van Renssen
European negotiators have agreed on a revised energy efficiency directive, with non-binding, moderate targets – leading to mixed reactions. “Energy efficiency is not an afterthought anymore”, is the positive take. In addition, a new governance regulation will require EU member states to come up with national climate and energy plans by the end of next year. But they can’t be held accountable anymore by Brussels if their efforts are inadequate. From now on, ”peer pressure” will have to keep states on the right path.
The EU has succeeded in keeping its Clean Energy Package on track to conclusion before European elections (and Brexit) next spring. A key milestone was getting agreement on a revised renewable energy directive, a revised energy efficiency directive and a new governance regulation before the summer break. EU negotiators have now delivered on all three fronts.
Together with a revised energy performance of buildings directive agreed last December, this means that the Clean Energy Package is halfway to completion. There are four files left to go. Negotiations on these – all four pertain to electricity market design – will start in July under the incoming Austrian EU presidency.
The legal texts of the three agreements of the past fortnight are still pending, meaning that some of the detail remains fuzzy. There are “grey zones”, as one stakeholder put it. Nevertheless, we know enough to understand how Europe’s new climate and energy framework for 2030 is shaping up.
We reported on the revised renewable energy directive last week. This week, we take a look at what happened on energy efficiency and governance. On 19 June, EU negotiators rectified their failure from the week before to conclude a revised energy efficiency directive for 2021-30. They also concluded a new governance regulation the same night, as foreseen.
Energy efficiency: “no longer an afterthought”
Europe has signed up to a non-binding (no surprises there) energy efficiency target of 32.5% in 2030. That’s exactly midway between the Parliament’s 35% and Council’s 30%. It’s a long way from the 40% that campaigners have tirelessly argued is what Europe can and should deliver however.
No wonder then that many NGOs reacted with disappointment to the deal. They reiterated that 40% is Europe’s cost-effective energy efficiency potential and that the Paris Climate Agreement depends on it.
But it wasn’t all doom and gloom. For one, as for renewables, there is an upwards review clause for energy efficiency in 2023. Two, “Energy Efficiency First” is made a core principle of national energy and climate action plans required under the new energy governance regulation.
This is a big achievement, says Marion Santini at the Coalition for Energy Savings. “The narrative has evolved,” she told Energy Post. “Energy efficiency is not an afterthought anymore.” She points out just how far we’ve come: the Commission’s first proposal for a new energy and climate policy for 2030 in January 2014, did not include an energy efficiency target at all!
In the negotiations that went down to the wire on 19 June, two issues divided Member States and Parliament until the very end. One was the headline target. The other was the Commission’s proposal to extend an existing (binding!) 1.5% annual energy end-use savings requirement beyond 2020.
As Member States added loophole after loophole to this infamous “article 7” during the negotiations, the real savings it would deliver were at some point “close to zero”, Santini says. In the end, in what amounts to a significant shift in language, negotiators stopped talking about the 1.5% altogether and focused entirely on “real savings” instead.
This helped unlock the talks. The directive today is estimated to deliver about half of its official 1.5% target. And crucially, most Member States are not struggling to do this. So why slow down? Negotiators finally settled on a slight increase to 0.8% real savings a year from 2021.
How exactly article 7 will deliver this remains to be seen. Its final wording has yet to be decided, Energy Post understands. This means that it’s impossible to say to what extent transport – and the thus far untapped energy efficiency potential there – will be introduced into the baseline for this calculation for example.
Energy efficiency advocates were less impressed with a decision to leave it to Member States to decide whether they target primary or final energy savings. It means that they can “disregard part of the energy system”, as Santini put it.
The European Association for the Promotion of Cogeneration (Cogen Europe) also argued that the decision on a Primary Energy Factor (PEF) of 2.1 – this describes the efficiency of electricity vs. primary energy sources such as coal – “does not reflect the significant energy losses in the electricity systems of many Member States”.
Governance: cracking open the black box
It won’t come as a surprise that Green MEP Claude Turmes did not get a net zero greenhouse gas emissions goal for the EU into the new energy governance regulation. But the Parliament’s rapporteur (lead MEP) got pretty close.
Governance was wrapped up in the early hours of 20 June, after energy efficiency. The regulation stipulates that the Commission has to look into a net zero emissions scenario as part of the new 2050 EU climate and energy strategy it will work on this summer. Moreover, it should look at what that means for Europe’s carbon budget between now and then.
Separately, Member States’ own long-term climate and energy strategies – required by the regulation – should be used to achieve net zero emissions “as soon as possible”. Member States will have to draw up a first draft of these strategies by the end of 2019. A WWF analysis last year concluded that efforts to date have been “patchy” at best.
Governments also have to draw up climate and energy plans for 2030. The first drafts of those need to be ready by the end of this year, with final versions due by the end of 2019. It’s no coincidence that the 2030 and 2050 plans ultimately face the same deadline: the medium-term plans are supposed to take the long-term strategies into account.
As for energy efficiency and renewables, there is a five-year review clause in the governance regulation. In other words, by 2025 the EU will have updated its entire climate and energy policy framework anew, in line with the five-year cycle introduced by Paris Climate Agreement.
Aside from the 2050 net zero emissions goal, the most divisive issue on governance was how to deal with any gaps to the EU’s energy efficiency and renewables targets. Quentin Genard at think tank E3G, says it’s difficult to know how well what’s been agreed will work. What is clear, is that it’s a radical departure from the past.
“We’ve moved away from a top-down approach where the EU held Member States accountable [through legal means i.e. infringements] to more of a political and peer pressure-based approach,” he explains in an interview.
The governance regulation introduces a lot of transparency. It calls for 2030 and 2050 plans and strategies, with templates for what should be in them. It introduces Europe’s first obligation to report on energy poverty. It introduces an almost linear series of interim targets on renewables and energy efficiency leading up to 2030. It requires Member States to set up “permanent” stakeholder dialogues.
If at any point there is a gap to the EU’s renewables target, the Commission will apply an agreed formula to pinpoint laggards and issue (non-binding) recommendations on how they could bridge that gap. If they don’t take these up, Member States have to explain why. There are safeguards against filibustering too.
For energy efficiency, there is no formula but a set of criteria (e.g. remaining cost-effective energy savings potential, GDP forecasts, changes in energy imports/exports or the energy mix) to identify who should be doing more.
In the end, the governance regulation was less controversial than either energy efficiency or renewables because it sets no targets. And unlike for either of the other two, Germany’s ambition on governance never wavered. For Germany, the new governance regulation is the next-best alternative to today’s nationally binding renewable energy targets.