Why a non-binding renewable energy target could mean more power to the EU

This post is by Clive Bates, director of Counterfactual Consulting and Advocacy.

On 27 January, the European Commission published its 2030 Framework for Climate and Energy Policies.  There were two attention grabbers: a target to reduce EU greenhouse gas emissions to 40 per cent below the 1990 level, en route to 80 per cent by 2050; and a target to secure 27 per cent of energy consumption from renewables at EU-level.

The announcement however contained an enigma:  there would be no targets for renewables at member state level.  We know several member states, including the UK, did not want to renew the 2020 renewables target regime agreed in 2007 and now coded in the Renewables Directive.

Not an ‘investment grade’ commitment
Veteran Europe watchers sniffed freshly baked fudge. Commission President José Manuel Barroso, went into overdrive (at 57 secs) to explain how the mandatory renewables target was what would happen anyway, if the 40 per cent greenhouse gas emissions target was met.  Furthermore, it would work like a ‘pledge and review’ system, in which commitments are pledged, the aggregate pledges are reviewed and then something opaquely political happens to ensure the pledges eventually add up to the target.

The problem is that this does not amount to an ‘investment grade’ commitment.   It doesn’t answer the question “what if the member states decide to meet the 40 per cent target in a different way?” For example, what happens if they cut greenhouse emissions by 40 per cent through more energy efficiency, nuclear or coal to gas substitution and less renewable energy? What happens if the EU-wide 27 per cent target is not met?  Legal experts have wondered whether an EU-wide target is enforceable at all, without member state obligations.

An EU-wide policy instrument is inevitable
Actually, it is straightforward, but it requires a fundamentally different policy approach.  To meet an EU-wide mandatory target, it is necessary to have an EU-wide policy instrument that transcends national boundaries. If the target is to be mandatory and have investment grade credibility, then this is inevitable and unavoidable.  The instrument could take several different forms: a feed-in tariff; supplier obligation; or a contract auction available to any developer in Europe.  But the costs of subsidising renewables would be spread evenly across all European consumers.

On a small scale, this is very much what happens across the three nations of Britain now: English and Welsh consumers pay Scottish renewables developers to produce a disproportionate quantity of renewables to meet a UK target.  Nor is it unprecedented to have a European-wide energy policy that transcends national borders: in fact the third phase of the EU Emissions Trading System does exactly this, through an EU-wide cap, with eligible emitters participating on an EU-wide basis.

Efficient, cost effective and sustainable
There are several positive arguments for having a European level instrument. It should be a more efficient way to meet an EU-wide target: renewables would be developed where it was most cost effective and politically or environmentally sustainable to do so, but the costs would be shared by all consumers, perhaps as flat rate levy per KWh or as the cost of meeting an EU-imposed supplier obligation (analogous to the renewables obligation). Any protection of energy intensive industries would be to a common design and, therefore, would be positive for state aid or internal market reasons.   If this was too much in one go, it could be formulated as a ‘balancing instrument’, effectively a supplementary measure that bridged the gap between member state ambition and the EU target, though this introduces complexity.  There would be certainty about the EU target, but no certainty in which member states development would take place.

Overall, this would be a heroic grab of competency by the Commission and it is quite possible that member states have yet to wake up to what it would mean. They may have wriggled off the hook of national renewables targets only to be impaled on a transfer of policy sovereignty to the EU. The proposal, taken to its logical conclusion, inevitably asserts jurisdiction over renewables policy in the member states, and that is not something we might all welcome.

But is a target the best policy?
None of this is to argue that an EU renewables target is a good policy. In fact, I don’t think it is. As part of the implicit contract with citizens, I think pragmatic greens should support the most cost effective and least painful pathway to meeting major environmental goals.

Technology specific targets, especially for expensive technologies, risk diverting from that pathway. The UK’s reluctance to renew the renewables target is probably not just because of difficult politics, but because it has proved expensive (in 2011-12 the renewables obligation cost £96.61 per tonne of CO2compared to less than £10 in the EU ETS); it has led to huge biomass burn of questionable environmental value; and it has perverse interactions with the EU ETS.  And it may have been based on a misunderstanding in the first place.

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