EU Climate Law tabled to achieve 2050 target

06 March 2020 | Trading

The European Commission has published proposals for a new climate law that includes wide-ranging changes in areas that include energy policy.

The European Climate Law sets the 2050 target and the "direction of travel" for all EU policy, and gives predictability for public authorities, businesses and citizens.

The Commission recognises that modernising and decarbonising the EU's economy will require increased investment in the bloc’s energy system and related infrastructure.

The proposed law tasks the Commission with reviewing existing policies and legislation in view of their consistency with the climate-neutrality objective and the trajectory identified.

Every five years, the Commission will consider the latest international and scientific developments as well as existing EU policies, legislation and progress made towards the 2050 objectives, to assess whether the trajectory is still adequate or needs to be updated.

As part of a two-step approach, the Commission will first assess and make proposals for increasing the EU's greenhouse gas emission reduction target for 2030 to ensure its consistency with the 2050 objective.

By September 2020, the Commission will present an impact assessed plan to increase the 2030 target to at least 50% and towards 55% compared to 1990 levels in a responsible way, and will propose to amend the climate law accordingly.

To achieve the revised, more ambitious 2030 target, by June 2021 the Commission will then propose reviews of the Renewable Energy Directive, the Energy Efficiency Directive, European Emissions Trading System (EU-ETS) Directive, the Effort Sharing Regulation, the Land use, land use change and forestry (LULUCF) Regulation as well as carbon dioxide emissions performance standards for cars and vans.

Other initiatives in preparation under the European Green Deal will also help achieve the objectives of the Climate Law, including making a proposal for a “carbon border adjustment mechanism” for selected sectors, launching a new EU Adaptation Strategy and the European Climate Pact.

This transition will require “significant investments”.

To this end, the Commission put forward in January 2020 a European Green Deal Investment Plan to mobilise at least €1tn of sustainable investments over the next decade, as well as a Just Transition Mechanism to ensure that the transition towards a climate-neutral economy happens in a fair way, with targeted support for the most affected regions.

Modernising and decarbonising the EU's economy will stimulate significant additional investment. Today around 2% of GDP is invested in the bloc’s energy system and related infrastructure. The EU said this would have to increase to 2.8% in order to achieve a net-zero greenhouse gas economy.

This means considerable additional investments compared to the baseline, in the range of €175-290bn a year.

European Commission President Ursula von der Leyen said: “We are acting today to make the EU the world's first climate neutral continent by 2050.

“The Climate Law is the legal translation of our political commitment, and sets us irreversibly on the path to a more sustainable future. It is the heart of the European Green Deal. It offers predictability and transparency for European industry and investors. And it gives direction to our green growth strategy and guarantees that the transition will be gradual and fair.”

Executive vice-president for the European Green Deal Frans Timmermans added: “We are turning words into action today, to show our European citizens that we are serious about reaching net-zero greenhouse gas emissions by 2050.

“The European Climate Law is also a message to our international partners that this is the year to raise global ambition together, in the pursuit of our shared Paris Agreement goals. The Climate Law will ensure we stay focused and disciplined, remain on the right track and are accountable for delivery.”

In response to the proposed law European energy companies Iberdrola, EDP, Enel, Orsted, SSE, Statkraft and Verbund issued a letter addressed to Timmermans.

In it they “welcomed” the insights provided by the European Commission’s 2050 long term climate strategy and the European Green Deal, which underline that an energy system based on renewables is the most efficient and cost competitive path to achieve decarbonisation across the economy.

To make the 2050 ambition reality, the signatories believe an “ambitious European Climate Law” should enshrine several key stated principles to steer development of all policy areas in the EU.
These include a way of ensuring the cost of energy supplied and used in the EU reflects the true costs to the climate. Costs of green-house gas emissions should be priced and internalised to incentivise the change to climate-friendly alternatives across all sectors

Tax and tariff regimes at both European and national level need to reflect the climate impact of the energy delivered to consumers and a discontinuation of subsidies to infrastructure projects that will not be compatible with climate neutrality by 2050.

The signatories stated: ”A just and fair transition leaving no-one behind should be a guiding principle and include focused strategies aimed at maintaining the EU’s competitiveness and minimizing distributional impacts. This requires promoting jobs, requalification, minimizing the negative impacts of changes in local industries and addressing energy poverty.”

The letter advocates for all Europeans having the right to choose a green energy product, when supplying their homes with electricity and heating.

The energy companies also called for a “well-functioning integrated and digitalised” internal energy market to allow for a cost-efficient transition to a climate neutral society.

The letter also stated: “To inform policy makers it is essential that cost assumptions in energy system modelling should be based on latest available market data – both at European and national level.

“Circular economy and resource efficiency should minimise deprivation of resources and enhance the development of renewable energy and renewables-based electrification.”