Commission focuses on impact of move to -30% on Member States

The European Commission is currently evaluating the potential consequence at Member State level of moving towards a 30% reduction in greenhouse gas emissions. This follows on from the European Commissions Communication “Analysis of options to move beyond 20% GHG emission reductions and assessing the risk of carbon leakage”, published in May 2010. According to the Staff Working Paper entitled “Analysis of options beyond 20% GHG emission reductions: Member State results”, the 30% target is less expensive than previously expected across all Member States. It also predicts 2.4 billion surplus emission permits over 2008-2020 in the Emission Trading Scheme (ETSⁱ) because of lower CO2 output as a result of the economic and financial crisis. In turn, this surplus causes a fall in prices and reduced incentives for investing in low-carbon technologies. There is also less auctioning revenue to be distributed between Member States. Moreover, revenues from potential transfers of national emissions allowances between Member States in the Effort Sharing Decision will also be reduced. In this respect, the Commission describes three potential mechanisms to ensure an equitable distribution of costs and benefits between EU Member States:

• Moving to a 30% target through reducing the number of allowances to auction in the ETS, which can result overall in higher auctioning revenue. This would require a decision on how much each Member State contributes to the reduction of allowances for auctioning.
• Greater emission reduction efforts in the non-ETS sectors. The existing flexibility measures in the Effort Sharing Decision would assume a much more important role: demand for transfers of national emissions allocations would increase considerably – as would their value.
• Using the opportunities provided by the EU’s Multi-Annual Financial Framework and increasing the share of the EU budget spent on furthering Europe's transition to a low carbon and climate-resilient society to at least 20%.

On the issue of carbon leakage, the paper states that the impact “on the output of the EU’s energy intensive industry, even with increasing carbon prices due to the step up, would be limited as long as the existing special measures for energy intensive industry stay in place”.

More information: European Commission Staff Working Paper