Emissions Trading System (ETS): The UK needs to deliver its share of the total EU ETS emissions reduction of 21% by 2020, compared to 2005;

Size: px
Start display at page:

Download "Emissions Trading System (ETS): The UK needs to deliver its share of the total EU ETS emissions reduction of 21% by 2020, compared to 2005;"


1 Emissions Trading System (ETS): The UK needs to deliver its share of the total EU ETS emissions reduction of 21% by 2020, compared to 2005; Non-ETS emissions: The Effort Sharing Decision sets a target for reducing greenhouse gas emissions, not covered by the ETS, by 16% by 2020 from 2005 levels; The Renewable Energy Directive: This sets a target for the UK to achieve 15% of its final energy consumption from renewable sources by The Directive also includes a binding target for 10% of the UK s transport fuel to come from renewable sources, such as biofuels. 1

2 Effort sharing of reductions in non-ets emissions 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% Source: European Commission 2

3 EU 2020 renewables targets per country Sweden Latvia Finland Austria Portugal Denmark Slovenia Estonia Romania Lithuania France Spain EU (27 countries) Greece Germany Italy Ireland Bulgaria Poland United Kingdom Hungary Netherlands Slovakia Belgium Cyprus Czech Republic Luxembourg Malta Target Source: Eurostat 3

4 1. Greenhouse gas emissions reductions 2. Energy sustainability 3. Climate change policy as an example of the EU s soft power diplomacy 4

5 Study Open Europe (2008) Element of EU climate and renewable energy package under consideration Entire CAREP Cost/benefit to the UK 9bn a year cost ( 11.5bn including grid connection costs). Notable assumptions Pöyry (2008) Renewables target 5bn- 6.7bn cost a year. Department for Energy and Climate Change (2009) 3bn a year cost. Department for Business, Innovation and Skills (2009) Renewable Energy Foundation (2011) Cost of carbon reduction in the ETS and non-ets sectors through UK carbon budgets Renewables target Net cost-benefit range of 11.4bn cost to 221.5bn benefit over 8 years (net present value). 4.8bn a year cost. Net cost of 66bn over 20 years (net present value). High end of benefit range reflects world where EU action is pivotal in achieving a global deal. Distribution of renewables: 32% large scale electricity; 8.5% heat; 10% transport; 3.5% small scale electricity. Renewables target 15bn a year cost. 8bn in subsidy, 5bn in grid integration, and a further 2bn in VAT charged on these extra costs. 5

6 Study Open Europe (2008) Committee on Climate Change (2011) Additional cost to household in a year on energy bills 110 a year on energy bills due to low-carbon policies. Notes Due to support for investments in low-carbon power generation (including renewables) and with a small increase (around 10) required to support energy efficiency measures (including smart meters). Policy Exchange (2012) 400 a year paid through a combination of energy bills, general taxation, and higher prices for goods and services 6

7 Coal Nuclear Gas Oil Renewables Source: Eurostat 7

8 Denmark United Kingdom Romania Estonia Hungary EU (27 countries) Finland Austria Slovakia Italy Netherlands Latvia Sweden Germany Czech Republic Poland Ireland France Belgium Portugal Greece Lithuania Luxembourg Switzerland Spain Slovenia Malta Bulgaria Cyprus Oil imports Gas imports Denmark Netherlands Romania United Kingdom Latvia EU (27 countries) Poland Austria Hungary Germany Czech Republic Italy France Ireland Bulgaria Belgium Spain Slovenia Lithuania Greece Slovakia Sweden Finland Luxembourg Estonia Portugal Source: Eurostat 8

9 Source: Credit Suisse 9

10 OECD other Non OECD India China United Sta tes Europe (OECD) Source: US Energy Information Commission 10

11 An EU-level emissions reduction target could, potentially, help to maximise member states individual efforts and ensure a common position. This is a benefit insofar as it leads to global agreements on emissions reductions. However, the EU s current climate change policies suffer from a confused mix of objectives, which has resulted in large costs. Emissions reductions can be achieved in a number of ways and renewables are likely to play some part. However, the EU renewables target necessitates a specific technological approach over a short time frame, which is not consistent with either achieving emissions reductions at the lowest cost or moving to (economically) sustainable low carbon energy sources. This is because investment is being driven to technologies that may prove to be more expensive than future alternatives. The EU s modest and declining share of global emissions would suggest that this is an area where the EU is always likely to have limited leverage in global negotiations. 11

12 1. Renegotiate current renewable target and assess the viability of the ETS 2. Refuse to agree new renewables target post-2020 and assess the viability of the ETS 3. A more cost-effective implementation of existing targets? 4. Unilaterally pull out of renewables targets and/or the ETS 12