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Abstract
This article seeks to provide an overview of the potential ability of the current EU climate policy suite to deliver a cost-effective, low-carbon transition, based on the sectoral characteristics of such a transition projected by four modelling studies for 2030 and 2050. Assessments are made on a sectoral level, based on theoretical considerations and the empirical literature. In the power generation and industry sectors, reforms to the EU ETS (EU Emission Trading System) are unlikely to achieve their stated objectives; however they are likely to induce abatement commensurate with minimum requirements. A more pressing issue in the power sector is electricity market design, currently incompatible with increasing penetration of renewables. In the industry sector, the continuation of free permit allocation into Phase 4 of the EU ETS is likely to prevent substantial change in the short to medium term. In the residential building and passenger car sectors, practical underachievement despite reported compliance against the targets set by their primary instruments, along with a lack of instrument credibility, long-term clarity and requirements, may prove substantial barriers to achieving required milestones. The presence of non-climate policy instruments that act to dull the effect of the climate policy landscape, or induce perverse financial incentives, is also a significant obstacle.
Policy relevance
This article synthesizes the results of key modelling studies that seek to project pathways for a cost-effective, low-carbon transition, and highlights whether the existing suite of EU-level policy instruments are likely to be suitable for driving the changes required to achieve key milestones in 2030 and 2050, as projected by the modelling results. We summarize the key elements of the policy landscape on a sectoral basis (power generation, heavy industry, passenger car transport and residential buildings), and examine potential effectiveness based on a priori considerations and the empirical literature. As a result, priority elements for policy attention may be distilled.
Disclosure statement
No potential conflict of interest was reported by the authors.
ORCID
Paul Drummond http://orcid.org/0000-0002-6921-0474
Paul Ekins http://orcid.org/0000-0003-1975-434X
Notes
1. The agriculture, upstream and waste sectors are excluded, due to their relatively minor contribution to CO2 emissions in the EU (∼2%).
2. Data from European Environment Agency's GHG Data Viewer. Excluding land use, land use change and forestry.
3. EUROSTAT Statistics.
4. Including hydroelectricity and Biomass with CCS (present in the ETM-UCL results).
5. CCS is not included in the GINFORS study (in power or industry) as an exogenous constraint.
6. Along with commercial (domestic) aviation, N2O from the production of nitric, adipic, glyoxal and glyoxic acids, and PFCs from aluminum production. Non-Member States Iceland, Lichtenstein and Norway are also covered.
7. Except some derogations in certain Member States.
8. Against the average total quantity of allowances issued annually in Phase 2 (2008–2012).
9. This assessment was based on Option 2d in European Commission (Citation2014b), which although slightly different in form to the MSR design adopted (e.g. the upper threshold modelled was 1 billion permits, rather than 833 million), the same conclusion may be reasonably applied.
10. GBP is converted to EUR at a rate of 1.3. All values have a 10% discount rate applied by the source.
11. For CCS options technological availability is a further issue, although policy instruments to address this concern are beyond the scope of this article.
12. Along with issues such as grid capacity, and cost of connection.
13. Twenty-seven per cent of gross final energy consumption by 2030.
14. Growth in demand for industrial products is driven primarily in all studies discussed by GDP growth, but with different results on the structure, scope and assumptions applied to each model.
15. ‘Industrial’ emissions in GINFORS also consider emissions from industry-related buildings and transport, rather than direct energy consumption and emissions associated with industrial processes alone.
16. 2030 data are not readily available for this study.
17. Member States that provide such compensation are the Netherlands, Germany, Greece, the UK, Spain, Belgium (Flanders) (plus Norway) (Carbon Market Watch, Citation2015).
18. Enterprises which employ more than 250 people, or more than €50 million annual turnover and an annual balance sheet of over €43 million.
19. Data for 10-year average value are not readily available.
20. 1990 and 2014 comparisons for GINFORS are not presented, as energy consumption in residential buildings cannot be readily disaggregated.
21. IEA (Citation2012) projects an increase in residential floor space from 19.5 billion m2 in 2010 to 24.7 billion m2 to 2050, driven primarily by increasing household income. Assumed to be a linear increase between 2010 and 2050 for the calculations in this paper.
22. In contrast with the 2020 targets, as with renewables, the 2030 Climate and Energy Framework target for energy efficiency is to be binding at the EU level only.
23. As reported by the ETM-UCL.
24. However, in GINFORS, the ‘transport’ sector is defined as a service sector delivering transport services to commercial activities and private households. Private individual car use is considered separately, under ‘household’ emissions.
25. Current value calculated using 2014 CO2 emissions from passenger cars, and assuming static transport demand of 1816 bvkm as reported by the ETM-UCL for 2010. 2030 value assumes 25% increase in vehicle-kilometres, and 50% by 2050.
26. Data sourced from the European Commission's Weekly Oil Bulletin.