Over the past two decades, the European Union has gained vital experience putting in place a coherent policy mix to address climate change. With more and more countries making policy pledges ahead of December’s COP21 United Nations Climate Change Conference in Paris, Europe is in a position to share that experience with countries just beginning to put climate policies in place.
Around 150 countries, covering almost 90% of the world’s greenhouse gas emissions, have made policy pledges – or Intended Nationally Determined Contributions – in the run-up to Paris. That represents an enormous step up from the just 12% of the global emissions covered by the Kyoto Protocol’s second commitment period running from 2013-2020. All these nations, many of them developing countries, will be committing themselves to putting in place policy instruments designed to limit their emissions of climate-harming gases for the first time.
The extensive experience of the EU over the last 25 years can be enormously useful in helping them implement their policy pledges. For example, the EU has developed, and continues to develop, a robust system of monitoring, reporting and verifying greenhouse gas emissions in different sectors. That monitoring enables policies to be appropriately designed, measured for effectiveness and enforced. This is why the EU is so insistent on robust transparency and accountability in international climate change negotiations. Without them, pledges made by countries might never be followed up in a meaningful way.
The EU has employed a wide range of instruments, such as the emissions trading system, CO2 standards for cars and regulations on fluorinated gases under the Montreal Protocol. Europe also has experience in sharing burdens equitably among a varied group of countries and regions. Not everything the EU has done has worked as foreseen; voluntary agreements signed in the late 1990s with car manufacturers did not live up to expectations, but mandatory CO2 standards for new cars did. The emissions trading system has been gradually strengthened by the harmonisation of allowance allocation across the EU, after it was initially handled differently by member states.
One key message is that climate policies do not end economic growth. Since 1990, gross domestic product in the EU has increased by 45% while its emissions of greenhouse gases have fallen by 19%. As Europe has taken a lead in tackling climate change over the past decade, EU exports of non-agricultural products increased by over 70%, reaching more than €1.5 trillion in 2014. Europe is the world’s largest exporter of manufactured goods and services – the EU accounts for around one-sixth of the world’s trade in goods. It ranks first in both inbound and outbound international investments. These facts disprove the fallacy that climate policies constrain growth or are “hollowing out” European manufacturing capabilities. On the contrary, our industrialised economy is proving that, with the right policy-mix, environmental sustainability is both affordable and a factor in stimulating innovation.
When the EU set out its 2020 climate and energy package, critics argued the existence of legally-binding renewable energy targets amounted to a de facto imposition of certain technologies in the energy mix, irrespective of their costs: subsidies for renewables would add to the cost of energy. Concerns about competitiveness and the price of energy rose to the fore. So in October 2014, the European Council decided that for 2030 there would be greenhouse gas targets fixed for each member state, but nationally differentiated renewable energy targets would be dropped. Instead, there would be an EU-wide renewable energy goal of “at least 27%” – the level which it is estimated the EU will reach while meeting its climate objectives in an economically cost-efficient way.
Fortunately, recent research shows that starting with multiple targets, then reducing their number over time, is the right approach. A research project called ENTRACTE (Economic instruments to achieve climate targets in Europe) suggests that although multiple goals might look like a danger to cost effectiveness, this is not always the case especially if they can serve to remove market barriers and if longer time frames are taken into account. It concluded that adopting “complementary measures” to address issues such as innovation and technology adoption “can reduce costs by as much as one-third” compared to a pure carbon price approach.
However, the research emphasises that the need for support diminishes as renewable technology costs fall thanks notably to spillover effects, lessons learned, economies of scale and the breaking of informational barriers. Far from simply cutting-and-pasting its 2020 climate-energy policy framework for 2030, the European Council has demonstrated that EU policy is dynamic and adaptable.
As the cost of electricity from on-shore wind and other renewable energy technologies approaches that of power from conventional fuels – as is expected by 2020 – policies have to be adapted to remain coherent. State aid rules for energy and the environment now reflect this evolving situation. The integration into the emissions trading system of a “market stability reserve” is another example. The EU’s experience shows that an effective climate policy can be built without compromising economic growth. Europe’s experience can be usefully shared with the widening circle of states preparing to adopt climate goals in Paris.
Jos Delbeke and Peter Vis are co-editors of the newly-published book EU Climate Policy Explained (Routledge, October 2015)
The information and views set out in this article are those of the authors and do not necessarily reflect the positions of the European Commission
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