8 Towards a low carbon economy in
2050
(32592)
7505/11
+ ADDs 1-3
COM(11) 112
| Commission Communication: A Roadmap for moving to a competitive low carbon economy in 2050
|
| Legal base | —
|
| Document originated | 8 March 2011
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| Deposited in Parliament | 16 March 2011
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| Department | Energy & Climate Change
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| Basis of consideration | EM of 28 March 2011
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| Previous Committee Report | None, but see footnotes
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| To be discussed in Council | June 2011
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
|
Background
8.1 According to the Commission, one of the five headline
targets in the Europe 2020 Strategy relates to climate and energy,
where Member States have committed themselves to reducing greenhouse
gas emissions by 20%, increasing the share of renewable in the
EU's energy mix to 20%, and achieving a 20% energy efficiency
target. It notes that the EU is currently on track to meet the
first two of these targets, but that the Energy Efficiency Plan[24]
put forward by the Commission recently has pointed out that the
target in that area will not be met unless further efforts are
made. The Commission also notes that, in order to keep the global
temperature increase below 2°C, the European Council has
endorsed the objective of reducing greenhouse gas emissions in
2050 by 80-95% compared with 1990, and it says that, together
with the Energy Efficiency Plan and the proposed White Paper on
Transport, this Communication sets out a means whereby such an
objective could be met, outlining milestones which would show
whether the EU is on course to reach the target, as well as the
policy challenges, investment needs, and opportunities in different
sectors.
The current document
8.2 The Commission says that the transition to a competitive
low carbon economy requires the EU to prepare for reductions of
80% in its domestic[25]
emissions by 2050, and that the cost-effective pathway would be
to achieve reductions of 25% by 2020, and of about 40% and 60%
by 2030 and 2040 respectively. It adds that this implies annual
reductions of roughly 1% in the first decade to 2020, 1.5% in
the second decade until 2030, and 2% in the two decades to 2050,
with the effort becoming greater over time as a wider set of cost-effective
technologies becomes available. However, it points out that, on
the basis of current policies, the EU would only secure reductions
of 20% in 2020 and 30% in 2030, and that it will therefore be
necessary to implement both the Energy Efficiency Plan and the
measures set out in the current Communication. It also observes
that a less ambitious pathway would lock in carbon intensive investments,
resulting in higher carbon prices later on, and significantly
higher overall costs over the entire period, and that research
and development, the early deployment of technologies such as
carbon capture and storage, smart grids, and hybrid and electric
vehicle technology, are of paramount importance, as is full implementation
of the Strategic Energy Technology Plan,[26]
involving additional investment of €50 billion over the next
10 years. In addition, it points out that auctioning revenue and
the cohesion policy are financing options which Member States
should exploit, together with increased resource efficiency through
waste recycling, better waste management and behavioural change.
LOW CARBON INNOVATION BY SECTOR
8.3 The Commission says that it has explored pathways for
key sectors, assuming different rates of technological innovation
and fossil fuel prices with the following results:
| Emission reductions compared with 1990
| 2005
| 2030
| 2050
|
| Power | -7%
| -54 to -68%
| -93 to -99%
|
| Industry | -20%
| -34 to -40%
| -83 to -87%
|
| Transport | +30%
| +20 to -9%
| -54 to -67%
|
| Residential and services
| -12% |
-37 to -53%
| -88 to -91%
|
| Agriculture | -20%
| -36 to -37%
| -42 to -49%
|
| Other non-carbon dioxide emissions
| -30% |
-72 to -73%
| -70 to -78%
|
| Total | -7%
| -40 to -44%
| -79 to -82%
|
It then looks in greater depth at the various sectoral
options.
Power
8.4 The Commission suggests that electricity
will play a central role in the low carbon economy, and that it
would be possible by 2050 to almost completely eliminate carbon
dioxide emissions, and partially replace fossil fuels in transport
and heating. It says that a wide range of existing technologies
will need to be deployed, including some (such as photovoltaics)
which will continue to become cheaper, and thus more competitive,
over time. It also says that energy specific scenarios and the
means of achieving decarbonisation, will be examined further in
the Energy 2050 Roadmap, building on established EU energy policy
and the EU 2020 Strategy.
8.5 The Commission suggests that the role of
the Emissions Trading Scheme will be critical in driving a wide
range of low carbon technologies onto the market, provided there
is both a sufficient carbon price signal and long-term predictability.
It also believes that the agreed linear reduction in the emissions
cap under the Scheme may need to be revisited, and that other
measures, such as energy taxation and technological support, could
have a part to play. However, it points out that, as the central
role of electricity in the low carbon economy requires significant
use of renewable energy, considerable investments in networks
are required to ensure continuity of supply, but that, as the
benefits do not always accrue to the grid operator, as opposed
to society at large, consideration has to be given to how the
policy framework can foster these investments.
Sustainable mobility through fuel efficiency
8.6 The Commission says that a more efficient
and sustainable European transport system can be achieved by technological
innovation in three areas — namely vehicle efficiency, new
fuels and propulsion systems, and information and communication
systems — and that the White Paper on Transport will provide
a comprehensive set of measures to increase sustainability. It
suggests that, up to 2025, the main driver will be improved fuel
efficiency, and that emissions from road, rail and inland waterways
could by 2030 be brought back to below 1990 levels, in combination
with pricing schemes to tackle congestion and air pollution, infrastructure
charging, intelligent city planning and improved public transport.
It also believes that improved efficiency and better demand-side
management, fostered through carbon dioxide standards and smart
taxation systems, should advance the development of hybrid engine
technologies.
8.7 The Commission goes on to suggest that synergies
with other sustainability objectives, such as a reduction of oil
dependence, the competitiveness of European's car industry, as
well as health benefits, make a compelling case for accelerating
the early development of electrification and of alternative fuels
and propulsion systems, noting also the increased investment in
battery technology, electric vehicles and fuel cells in countries
such as the US, Japan, Korea and China. In addition, the Commission
observes that sustainable biofuels could be used in aviation and
heavy duty trucks, but would in any case need to play a greater
part if electrification were not deployed on a large scale (which
would then decrease their net greenhouse gas benefits, and increase
pressure on biodiversity, water management and the environment
in general).
The built environment
8.8 The Commission says that the built environment
provides low-cost and short-term opportunities to reduce emissions,
principally though improved energy performance of buildings, where
it suggests that emissions by 2050 could be reduced by around
90%. It therefore highlights the importance of achieving the objective
in Directive 2010/31/EU that new buildings from 2021 should be
nearly zero-energy, and the European Council's decision that from
2012 all Member States should include energy efficiency procurement
standards for relevant public buildings and services. It adds
that it will present by the end of 2011 a Communication on sustainable
construction.
8.9 The Commission says that, while the extra
cost of designing new low- or zero-energy buildings can be recovered
though fuel savings, the refurbishment of the existing building
stock presents a greater challenge, particularly as regards the
financing of the necessary investments. It notes that some Member
States are already using structural funds, and that, as an investment
of up to €200 billion will be needed over the next decade
in building components and equipment, Member States are implementing
financing schemes, such as preferential interest rates for leveraging
private sector investments. It also believes that, as in the transport
sector, shifting energy consumption towards low carbon electricity
and renewable energy, provided through district heating systems,
would help to protect consumers against rising fossil fuel prices
and bring significant health benefits.
Industrial sectors (including energy intensive
industries)
8.10 The Commission suggests that greenhouse
gas emissions from the industrial sector could be reduced by 83
to 87% in 2050 through the application of more advanced resource
and energy efficient processes, increased recycling, as well as
abatement technologies for non-carbon dioxide emissions, but adds
that, as solutions are sector-specific, it will develop specific
Roadmaps in cooperation with those concerned. It also points out
that carbon capture and storage would need to deployed on a broad
scale after 2035, entailing an investment of more than €10
billion, adding that, if the EU's main competitors did not pursue
a similar course, it would be necessary to address the risks of
carbon leakage.[27] The
Commission observes that, as the EU develops its climate policy
framework, it will be necessary to continue to monitor the impacts
of measures on the competitiveness of the industries affected
in relation to third countries, though it believes that current
measures provide adequate safeguards for the time being.
Sustainable land use productivity
8.11 The Commission suggests that, although the
agricultural sector has already achieved a significant reduction
in non-carbon dioxide emissions, it can by 2050 reduce these further
by between 42 and 49% compared with 1990. It says that agricultural
policy should focus on sustainable efficiency gains, efficient
fertiliser use, bio-gasification of organic manure, better fodder,
local diversification and commercialisation of production, as
well as maximising the benefits of extensive farming. It also
notes that improved practices can increase the sector's capacity
to preserve and sequester carbon in soils and forests, through
targeted measures to maintain grasslands, restore wetlands and
peat lands, low- or zero-tillage, and reduce erosion, and that
it can also increasingly provide resources for bio-energy and
industrial feedstocks. It says that these issues will be addressed
further in its legislative proposals for the Common Agricultural
Policy for 2013.
8.12 The Commission goes on to suggest that the
rate of emissions reductions in the sector could slow down after
2030, in part because of increased production in response to the
growing global population, and it points out that by 2050 agriculture
is projected to represent a third of total EU emissions, tripling
its share compared with today, thereby increasing its importance
in terms of climate policy. At the same time, the Commission highlights
the challenges arising from increased global population, alongside
the need to preserve tropical forests, and increased demand for
bio-energy, animal feed, timber, and bio-industries. It says that
this will require sustainable productivity increases on a global
scale, whilst cautioning that the impact on water, soil and biodiversity
will need careful management.
INVESTING IN A LOW CARBON FUTURE
Capital investment
8.13 The Commission says that the various sources
of low carbon energy are key components which will require a major
and sustained increase in public and private investment over the
next 40 years of around €270 billion a year, equivalent to
about 1.5% of EU GDP (on top of current investment of about 19%
of GDP). It notes that this would restore investment levels to
those before the economic crisis, and will determine the future
competitiveness of economies, pointing out (for example) that
investment in China accounts for 48% of GDP. The Commission regards
the unlocking of the investment potential of the private sector
as a major challenge, adding that, whilst most of the additional
investment would be paid back over time through lower energy bills
and increased productivity, markets tend to discount future benefits
and disregard long-term risks, the key question therefore being
to create a policy framework for such investments. It adds that
additional public private financing mechanisms are key in order
to overcome initial risks and cash flow barriers, suggesting that
public finance through instruments such as revolving funds, preferential
interest rates, guarantee schemes, risk-sharing facilities can
mobilise and steer the required private finance. It also believes
that the European Investment Bank, the European Bank for Reconstruction
and Development, as well as dedicated funding in the next Multi-Annual
Financial Framework, should play a role, and it points out that
increased domestic investment helps to increase productivity and
the creation of future growth and jobs.
Reducing energy costs and dependence of fossil
fuel imports
8.14 The Commission suggests that, over the whole
40 year period, energy efficiency and a switch to domestically
produced low carbon energy sources will reduce the EU's average
fuel costs by between €175 billion and €320 billion
a year, depending upon the extent and nature of the global action
undertaken on climate change. It also observes that the EU's primary
energy consumption in 2050 could be about 30% below 2005 levels,
with more domestic energy, particularly renewables, being used,
and a halving of imports of oil and gas: on the other hand, it
thinks that, without action, the oil and gas import bill could
instead double — a difference of about €400 billion
a year, equivalent to 3% of today's GDP.
Employment
8.15 The Commission believes that investing early
in the low carbon economy would stimulate structural change and
create in net terms new jobs in both the short and medium term,
pointing out that renewable energy has a strong record in this
respect, and that the construction sector offers large short-term
opportunities, having been particularly hard hit by the economic
crisis. It says that, as industry takes advantage of the economic
opportunities provided by the low carbon economy, the need for
a skilled work force will become more pressing, and that it is
currently assessing the employment effects of greening the economy.
Improved air quality and health
8.16 The Commission says that action to reduce
greenhouse gas emissions would complement existing and planned
air quality measures, with the electrification of transport and
an expansion of public transport capable of making a striking
contribution in European cities. It suggests that the combined
effect of greenhouse gas reductions and air quality measures would
lower air pollution levels in 2030 by 65% as compared with 2005,
and that the annual costs of controlling traditional air pollution
could be more than €10 billion lower (rising to €50
billion in 2050). It adds that mortality would be reduced and
public health improved, and that there would be less damage to
ecosystems, crops, materials and buildings.
THE INTERNATIONAL DIMENSION
8.17 The Commission points out that the EU accounts
for little more than 10% of global emissions, and thus will not
be able to tackle climate change on its own. It says that it must
therefore continue to engage its partners, and that by formulating
and implementing ambitious domestic climate change policies, it
has brought many other countries on board. In particular, it notes
that, whilst the EU unilaterally adopted its climate and energy
package at the end of 2008, countries representing more than 80%
of global emissions have pledged domestic targets under the Copenhagen
Accord and the Cancun agreement (though it cautions that, for
some of these, delivering those pledges will require stronger
action than currently envisaged). It adds that implementing these
pledges in the coming years will be key step in globalising climate
change policies, and that the EU should use this opportunity to
strengthen its international cooperation, including the gradual
development of global carbon markets. However, the Commission
warns that swift implementation of the pledges made since Copenhagen
would achieve only part of the reductions needed, in that their
full implementation would reach 60% of the emission reductions
required until 2020.
The Government's view
8.18 In his Explanatory Memorandum of 28 March
2011, the Minister of State at the Department for Energy &
Climate Change (Gregory Barker) says that the UK agrees with the
main conclusion of the Roadmap that the EU should increase its
domestic reduction target to at least 25% by 2020, and that the
Roadmap provides further evidence that a 20% target is not a cost
effective overall target. He adds that policies will need to be
put into place to deliver the cost effective trajectory set out
in the Roadmap, with Member States doing more to meet their efficiency
commitments, and to set aside (and then cancel) a quantity of
auction allowances in the next phase of the Emissions Trading
Scheme. The UK also believes it is important for the Scheme's
cap to be tightened, and is examining how this can be achieved.
8.19 The Minister believes that the Roadmap supports
the Government's commitment to push for an agreed increase in
the EU emissions reduction target to 30% by 2020, noting that,
once existing rights within the EU to purchase offset credits
are taken into account, there would then need to be a target of
around 30% in order to deliver the 2020 milestone of 25% domestic
reductions required to put the EU on track for a cost-effective
trajectory to 2050. He also welcomes the Commission's explicit
statement that a move to an EU 30% target remains on the table
in the right conditions.
8.20 The Minister says that the response from
other Member States, industry and non-governmental organisations
to the Roadmap has been broadly positive, with no Member State
having spoken out against its findings of Roadmap, and six Environment
Ministers[28] having
joined the UK in signing a letter in support of the Roadmap endorsing
a move to a 30% target. He concludes by saying that the UK will
now be pressing for an informed debate on the practical steps
needed to take forward the findings of the Roadmap.
Conclusion
8.21 Insofar as this Communication deals with
a topic of obvious environmental, economic and political interest,
it is clearly right to draw it to the attention of the House,
given also the breadth of the issues it addresses, the very long
timescale considered, and the level of ambition behind the various
measures identified.
8.22 In view of this, we have considered carefully
whether to recommend the document for debate, but, notwithstanding
the importance of the issues involved, we have on balance decided
against doing so, for two reasons. First, as with many comparable
Communications put forward by the Commission recently, the wide
scope of the document means that is it likely to give rise to
a very general and somewhat unfocussed debate, and we think it
would be preferable if individual aspects were to be considered
as and when the Commission puts forward more specific thoughts.
Secondly, there is inevitably a substantial overlap between this
document and that on the Energy 2020 Strategy,[29]
which was debated in European Committee A as recently as 2 February
2011, and we are doubtful as to the value of another energy-related
debate at this stage.
8.23 We are therefore clearing the document.
24 (32584) 7363/11: see chapter 7 of this Report. Back
25
In other words, real internal reductions, with no offsetting through
the carbon market. Back
26
(30998) 14230/09 + ADDs 1-4: see HC 19-xxx (2008-09), chapter
3 (4 November 2009). Back
27
This occurs when there is an increase in carbon emissions in one
country or region as an indirect and unintended consequence of
emission reduction measures in another country or region - for
example, as a result of the relocation of greenhouse gas emitting
installations away from countries/regions where emissions are
penalised. Back
28
Denmark, Germany, Greece, Portugal, Spain, Sweden. Back
29
(32170) 16096/10: see HC 428-xi (2010-11), chapter 2 (15 December
2010). Back
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