EU 2030 Climate and Energy Framework

and EU Emissions Trading Scheme

Karoliina Anttonen, Senior Legal Officer

Energy Department

13.11.2014

E

EU GHG Reduction Policy

EU Low Carbon Roadmap 2050 (2011)

Asuminen ja palvelut

2030 Framework for Climate and Energy

• European Council agreed on the Framework on 23 October2014:

• Domestic GHG emissions reduction by at least 40 % below 1990 level by 2030

• Binding target

• EU ETS sector to reduce emission by 43 % below 2005 level

• Non-ETS to reduce emissions by 30 % below 2005 level

• All Member States will participate in the effort on grounds of fairness and solidarity

• On EU level a binding at least 27 % renewable energy target

• On EU level an indicative target of at least 27 % energy efficiencyimprovement

• European Council will revert to the issue after Paris Climate Conference

Emissions Trading Scheme

• EU ETS continues to be a key instrument in EU climate policy

…but it needs to be fixed

• 43 % reduction target for ETS sector translates into a cap that is reduced annually by 2,2 % instead of current 1,74 %

• Market stability reserve will be implemented in line with the Commission proposal

• Discussions on timing ongoing

• Treatment of backloaded allowances

Free Allocation

• Free allocation will continue

… as long as no comparable efforts are undertaken in othermajor economies

… with the objective of providing appropriate levels of support for sectors at risk of losing international competitiveness

• Benchmarks will be periodically reviewed

• Direct and indirect carbon costs will be taken into account

• Most efficient installations should not face undue carbon costsleading to carbon leakage

• Better alignment with changing production levels in different sectors

• ”[A]llowances will be distributed among all Member States on the basis of verified emissions, without reducing the share of allowances to be auctioned”

• Reduction of free allocation volumes?

Solidarity Shares

• Member States with a GDP per capita below 60% of the EU average may opt to continue to give free allowances to the energy sector

• The NER300 facility will be renewed

• Scope will be broadened to low-carbon innovation in the industry sector

• Initial endowment will be 400 million allowances (NER400)

• A new ”modernisation” reserve of 2 % EUAs will be set aside for low-income Member States

• 10 % of EUAs to be auctioned will be distributed among MS withGDP less than 90 % of EU average

EUA Price Development

• Multiple targets will have an effect on the functioning of the ETS

• National RE support schemes are likely to continue

• Price forecasting is challenging

• PointCarbon analysis:

• Average price 2021-2030 24 €

• Price 2030 35 €

Other Features of Interest

• Inclusion of traffic to ETS for interested MemberStates

• Promotion of emissions reduction and energy efficiency in transport, for electric transportation and for renewable energy sources in transport also after 2020

• One-off transfer from ETS sector to non-ETS

To Be Continued

• Reassessment of target(s) after Paris climate conferencein December 2015

• Legislation proposals to be expected in 2016

• Emissions trading sector

• Non-trading sector

THANK YOU!