June 20, 2017
BRUSSELS INSIDER #1 by Sonja van Renssen
EU defends Paris but can’t deliver its own climate policy
June 20, 2017
It turns out to be much easier to defend a global climate agreement than work out the details of how to actually deliver emission reductions in 28 different countries over the next decade. EU-28 environment ministers meeting in Luxembourg on Monday universally lined up behind the Paris Climate Agreement – it is “irreversible” – but hopelessly failed to reach agreement on their own plans.
“The Paris Agreement should be implemented, not renegotiated,” EU Climate and Energy Commissioner Miguel Arias Cañete told EU environment ministers in Luxembourg on Monday 19 June. “We have spent 20 years negotiating,” he added. This was the EU environment ministers’ last meeting under the Maltese EU presidency, which ends on 30 June. On 1 July, it will hand the baton over to Estonia for the second half of this year. In two public debates on Monday, ministers vigorously defended the Paris Climate Agreement, but showed themselves split over the EU’s own climate policy for 2030.
The EU’s biggest climate instrument: the Effort Sharing Regulation
The EU’s biggest climate instrument is not actually the EU Emission Trading Scheme (ETS), as is often claimed, but something called the “Effort Sharing Regulation (ESR)”, as we reported back in October 2016. Just as the EU ETS sets caps for energy and industrial plants, the ESR sets emission caps for non-ETS emissions. These come mainly from transport, agriculture, buildings and waste, and add up to a massive 60% of the EU’s total emissions. And just as the European Commission kicked off a reform of the EU ETS for 2021-30 back in July 2015, it issued a new ESR for the same period a year later, in July 2016. Fast forward another year and experts today hope that both files may be concluded by the end of the year.
It became clear in the Maltese Presidency’s last progress report on the ESR, issued on 2 June in the run-up to the environment council, that ministers would not be able to agree a united position on the new ESR on 19 June. Nevertheless, several ministers on the day, notably from Germany and Italy, said they “regretted” this. The new deadline is October, when ministers next meet under the Estonian EU Presidency. Estonia’s environment minister Siim Kiisler said on Monday that he aimed “to keep the momentum, also before the summer break” with a view to a “general approach” in October and trialogue negotiations with the European Parliament and Commission after that.
Several ministers and Cañete emphasised the need for member states to reach a position ahead of the next UN climate conference (COP23) in Bonn, Germany, in November. The Council is really the brake on the ESR, after the European Parliament voted through its final position on the file last week on 14 June.
So what’s the problem? Already at a first debate on the new ESR back in October last year, quite a few ministers said that their proposed reduction targets for 2030 were too high to meet cost-effectively. This group included typically progressive member states like Denmark and Finland as well as traditionally climate-sceptical Central and Eastern Europe. Rather than opening up an impossible debate about the targets themselves however, countries have focused on how they are calculated and what flexibilities are available to meet them.
Three issues dominated Monday’s debate in Luxembourg and will be pivotal to the Council finding a united position on national emission reduction targets for 2030. The first two pertain directly to the ESR proposal. The third is a separate legislative proposal on Land Use, Land-use Change and Forestry (LULUCF), which sets out accounting rules to capture this sector’s emissions and removals in climate and energy policy. The Commission has proposed a limited two-way flow of emission permits between the ESR and LULUCF as one source of flexibility for member states to comply with emission limits under both.
Issue one: the “safety reserve”
The first – and dominant – ESR issue to be discussed on Monday was a new “safety reserve” of emission permits proposed by the Maltese EU Presidency, which would be available to lower income Member States that overachieve their 2020 targets but struggle with 2030. This was welcomed as a necessary tool for compromise by most EU environment ministers – even if many of them did not especially like it. The Parliament backed a similar reserve last week. Commissioner Cañete emphasised in his opening remarks to ministers that “to preserve environmental integrity” the reserve must be conditional on the EU reaching its 2030 emission reduction target and only accessible to member states after 2030. Several ministers were equally cautious.
Sweden’s State Secretary to the Minister for International Development Cooperation and Climate, Eva Svedling, said “it must not remove incentives for more ambition than set out in the ESR”. She reminded ministers that the Swedish Parliament last week voted to go carbon neutral by 2045 and added that it was “not ready to use [its] overachievement to fill up the [new] reserve”. “We want to help [meet the goals of the] Paris [climate agreement] instead.” The UK, Germany and Austria echoed these sentiments. Dutch environment minister Sharon Dijksma said the reserve would only be acceptable “if quite limited and compensated by a more ambitious start point [for calculating national emission reduction targets for 2030]”. Luxembourg and Belgium said the same.
Femke de Jong, EU Policy Director at Brussels-based NGO Carbon Market Watch told Energy Post that the new reserve “would allow countries to delay their climate action”. She explained: “The problem is that it will add additional pollution permits to the carbon budget for 2021-30.” And this, while “there is still a lot of cost-effective emission reduction potential in lower income countries”, she added.
Other countries, notably Spain, Hungary and the Czech Republic, suggested quite the opposite on Monday however: that the safety reserve as proposed is “insufficient” to reward “early over-achievers”. Lithuania suggested that even with the new reserve, it would still be difficult to reach its 2030 target.
Issue two: the starting point for calculations
The second ESR issue that attracted attention on Monday is not new: this is the starting point for calculating national emission reductions for 2030. It was already raised by most of the EU-12 back in October 2016 and remains highly contentious. If Dijksma of the Netherlands wants to make national trajectories more ambitious – as the Parliament has done – many member states want no such thing. Primarily, the EU-12 (the EU’s newest 12 member states) want their 2021-30 trajectories based on their 2020 targets not 2016-18 emissions, which are likely to be lower. Most of the EU-15 disagrees.
Issue three: forest reference levels
It was LULUCF which emerged as the biggest source of contention on Monday however. This is crucial to the EU’s post-2020 climate debate from both a political and actual emissions perspective. Energy Post understands that it is disagreements about forest reference levels which ultimately held up agreement on the ESR too in Council on Monday. “Many delegations are concerned with the overall balance of the proposal, in particular regarding the contribution of forests and sustainable forest management practices towards incentivising climate action,” noted the Maltese EU Presidency in its 2 June progress report. Many ministers on Monday made clear that for them, the LULUCF and ESR files are inextricably linked.
In a nutshell, forestry-rich member states want to make the most this resource to meet their climate goals for 2030. They want sustainable forest management to be recognised as a potential source of net negative emissions. Countries like France want to be able to increase harvest rates without being penalised for it. They argue that forest reference levels should not be based purely on historical practice.
Campaigners like De Jong warn that “then some emissions from bioenergy would be completely unaccounted for, since it is considered carbon neutral at point of use.” She points out, as several ministers did, that the EU is setting a global precedent with its LULUCF rules.
Many forest-rich member states also want member states, not the EU, to set the reference levels. Other countries warn against “creative accounting” and insist on using a historical baseline.
The Parliament is still due to adopt its LULUCF position before the summer break. In its ESR vote last week however, it rejected an attempt by its environment committee to reduce the amount of CO2 removals by forests that can be used to meet national emission reduction targets for 2030.
Little progress on EU ETS as well
The ESR and LULUCF proposals are only half of the EU’s post-2020 climate policy of course. The other half is the EU ETS. Suffice to say that little political progress has been made on this front since the Council adopted its position in February. The first real trialogue negotiation between Council, Parliament and Commission will take place next week on 27 June. The last two planned trialogues were reportedly cancelled after the MEP leading the EU ETS debate in the Parliament, British conservative Ian Duncan, could not make them.
Whilst he was busy campaigning for the UK elections on 8 June, Duncan actually handed the EU ETS file over to his colleague, Julie Girling. Despite very narrowly missing out on a seat in the House of Commons in the end – and requesting the EU ETS file back – it looks like Girling is here to stay and will lead next week’s trialogue. The three big issues to resolve on the EU ETS are how to increase ambition (read: carbon price), how to protect energy-intensive industries from carbon leakage (leaving Europe) and how to manage a series of funds fed by carbon market revenues.
Later this week, European leaders are expected to discuss the fall-out of Trump’s withdrawal from the Paris Climate Agreement at a summit in Brussels. They will no doubt express profound regret, much as EU environment ministers did on Monday. But beyond the rhetoric, the real test of European leadership on climate change will be “swift agreement on 2030”, as Sweden put it. Many ministers on Monday said they did not think agreement on either the ESR or LULUCF was that far off. On the EU ETS, Council and Parliament do not seem miles apart. Realistically, the EU will not revisit its overarching 40% emission reduction target for 2030 until a new Commission and Parliament take charge in 2019-20. But as De Jong says: “What’s important now is that the ambition on the table is delivered.”