Weekly Update

The EU’s decision to focus on emissions limits rather than renewables mandates

The deal the European Commission reached last Wednesday on carbon emissions reductions and renewable energy targets will be remembered as an acknowledgment of the difficult economic times facing Europe as well as the policy challenges of reaching agreements that satisfy so many countries with such divergent agendas.

The deal calls for a 20 percent emissions reduction by 2020 and 40 percent by 2030 versus 1990 levels. It also calls for 27 percent renewable energy generation by 2030 though it does not make this a country by country mandate, which should allow renewable energy leaders like Germany to bear the brunt of the goal even as it sets up future conflict among EU nations over how to reach that union wide mandate.

The decision not to enforce renewables mandates by country was seen by many in the renewables sector as a major blow. Many EU nations are battling rising power prices and England specifically was very opposed to renewables mandates.

The European Union’s decision to shift from renewable energy mandates towards carbon emissions limits highlights a core argument at the heart of the fight against climate change: Should we allow efficiency and carbon reduction as the primary solution to climate change?

Stephen Castle reports in The New York Times:

European nations would still agree to formulate national plans for individual targets for CO2 emission cuts, but they would not be required to hit specific objectives for renewable energy production. Instead they would have the flexibility to decide on their own path toward a lower carbon economy.

One of the core underlying issues here is the fact that some nations like France are big nuclear power investors and would like to cut their carbon emissions that way. Other nations are very concerned that their struggling industrial sector is left competing against Asian and North American competitors that are paying significantly less for their power.

Power rates in Europe are high. In 2007, the EU had even considered targeting a 30 percent reduction by 2020. But those were very different times economically. All major European governments have rolled back renewable energy subsidies as they face debt crises. The one exception here has been Germany, which has spent over 100 billion Euros to move its energy economy to solar and wind as it completely does away with nuclear.

There’s a lot of disappointment among renewable energy lobbies in Europe and a lot of finger pointing at any outside criticism, as EU regulators make the argument that if other economies (China, India, US) would cut their CO2 emissions by 40 percent by 2030, we’d all be in better shape.

The reality is that estimates are that the EU has already reduced carbon emissions by about 18 percent from 1990 so has basically already met the 20 percent reduction by 2020 target. It’s currently on pace to cut carbon emissions by 32 percent by 2030 so it’ll need some acceleration of reduction in carbon emissions to reach the 40 percent by 2030 target.

It remains tempting to invest in efficiency measures as well as nuclear power as the quickest and least difficult means to reduce carbon emissions, the measures most likely not to affect retail electricity rates. Harvard’s director of its Environmental Economics Program noted to Bloomberg that the scrapping of renewables targets was “good news” for the economy and the environment because it lower the cost of achieving the EU’s pollutions caps.

And that’s the economic argument. That the means don’t matter, as long as emissions come down. Which incidentally how the UN is looking like it’s going to approach the issue as it seeks a global treaty limiting emissions when it meets in 2015.

None of this will satisfy those who felt that we needed a 60 percent reduction target and a 45 percent renewables target to make a real dent in climate change. Nor will renewable energy producers be happy. In the end we will eventually need a robust and price competitive renewables sector to bring down the cost of clean power. Until then, we’ll have to leave it up to European countries as to how they’ll reduce their carbon footprint.