Towards an ambitious EU climate change policy

The European Parliament's Environment Committee voted yesterday to support the EU's ambitious climate change policy calling for CO2 reductions from buildings and transport, and other sectors covered by the EU Emissions Trading Scheme (ETS).

Transport & Buildings emissions

On 7 October the Environment Committee voted on a report on reducing emissions from sectors not covered by the ETS such as road and sea transport, buildings, smaller industrial installations, agriculture and waste.

The new decision will set binding national targets for each Member State to reduce greenhouse gas emissions from non-ETS sources between 2013 and 2020, which currently account for about 60% of all EU greenhouse gas emissions. The target is to reduce these emissions overall by 10% between 2013 and 2020, so as to contribute towards the EU's overall aim of a 20% reduction in total greenhouse gas emissions by 2020.

Main elements of the proposal backed by the Environment Committee include:

• Emissions reductions up to 80% by 2050: the Environment Committee set new EU long-term (post-2020) reduction targets of at least 50% by 2035 and of 60% to 80% percent by 2050 compared to 1990 levels. Member States will then have specific reduction targets to contribute to the overall target.

• Fines for missing targets: the Committee stipulated that any Member State that fails to meet its target must pay an "excess emissions penalty" equivalent to the fines paid under the ETS. On the other hand, a Member State that overachieves its target may sell or lend part of its emissions entitlements to another Member State. The transfer revenues should then be invested in energy efficiency, renewable energy or climate-friendly modes of transport.

• Credits for clean development projects in third countries: Member States will still be able to "offset" emissions by investing in greenhouse gas reduction projects in third countries under the UN's Clean Development Mechanism (CDM), accounting for up to 8 percent of their 2005 emissions over the whole period from 2013 to 2020.

• Target adjustment to international agreement: The Committee supported an automatic increase of the EU's target for reducing greenhouse gas emissions by 2020 from 20% to 30% from all sectors in the event that an international climate change deal is reached in Copenhagen in December 2009. In that case, stricter reduction commitments will be implemented automatically also for the sectors not covered by the EU ETS.

Sectors covered by the EU ETS

On the other hand, in a separate vote concerning the revision of the EU ETS the Environment Committee supported a number of changes which will apply from 2013 to make the carbon trading mechanism more effective. The EU ETS currently covers power stations, oil refineries and factories making cement, glass, lime, bricks, ceramics, and pulp. Proposals adopted include:

• A single EU wide cap of emissions from those sectors.

• Increased auctoning of allowances.

• Use of auction revenues to adapt to climate change in the EU and reduce emissions in developing countries.

• Carbon capture and storage demonstration projects to be financed through ETS allowances.

• Extension of the scope of the ETS, to cover additional industries, such as aluminium and ammonia producers and petrochemicals and two further gases (nitrous oxide and perfluorocarbons).

Background & next steps

On 23 January 2008, the European Commission presented a series of proposals to reduce the EU's greenhouse gas (GHGs) emissions by 20% by 2020, while increasing the bloc's share of renewable energy use to 20% over the same period. The three proposals voted upon by the Environment Committee yesterday on 1) the revision of the EU ETS, 2) CO2 reductions in sectors not covered by the ETS and 3) the legal framework to regulate the geological storage of CO2 form part of the package.

The proposals will be set before the European Parliament plenary for a first reading in December 2008. Following this, the European Council, European Parliament and European Commission will then negotiate and reach a deal on the package.