The EU's Renewable Energy Target and the Revision of the Emissions Trading System: Follow-up report - European Union Committee Contents


The EU's Renewable Energy Target and the Revision of the Emissions Trading System: Follow-up report


Background

1.  On 24 October 2008, we published a report on the European Commission's proposed renewable energy target for the EU[1] following an inquiry conducted by Sub-Committee B (Internal Market) (see Appendix 1). On 10 December 2008, we published a report on the proposals to revise the EU's Emissions Trading System[2] following an inquiry conducted by Sub-Committee D (Environment and Agriculture) (see Appendix 2). These two proposals are part of the Commission's Energy and Climate Change Package, the overall aim of which is to reduce the EU's carbon emissions by 20 per cent by 2020. In December 2008, the Council of Ministers and the European Parliament reached an agreement on the Package and Directives concerning renewable energy and the emissions trading scheme were adopted.

2.  On 27 April 2009, Lord Hunt of Kings Heath, Minister of State at the Department for Energy and Climate Change (DECC), gave evidence to members of Sub-Committees B and D to provide an update on the adopted Directives. A transcript of the hearing is printed with this report.

3.  We make this report to the House for information.

Renewable energy

4.  The agreed Directive on the promotion of the use of energy from renewable sources[3] not only sets the EU a target of 20 per cent of energy consumed to come from renewable sources by 2020, but also sets binding targets for Member States. Lord Hunt confirmed that the Commission's proposal for the UK's target to be 15 per cent was adopted. There is also a binding target for 10 per cent of the UK's transport fuel to come from renewable sources (Q 1). The Minister said that achieving the UK's target would be "a considerable challenge, but one we are up for" (Q 2). When asked whether he believed the target was achievable in the current economic circumstances he replied, "I do" (Q 20). He said that, "We are confident that, notwithstanding the current economic climate, we can achieve the 15 per cent" (Q 22).

5.  The Government's plan for meeting the target will be contained in the UK Renewable Energy Strategy due to be published soon (Q 1). However, the Minister touched on a number of elements of the Government's policies:

  • Renewable Heat Incentive (Q 4);
  • Feed-in tariffs (Q 4);
  • the revision of Renewable Obligation Certificates (Q 12);
  • the mix of renewable generation technologies needed to meet the UK's target (QQ 6-11);
  • the creation of the Office for Renewable Energy Deployment (QQ 9-23);
  • demonstration projects for Carbon Capture and Storage (Q 16); and
  • the flexibility mechanisms available to Member States to meet their targets (Q 24).

CONCLUSION

6.  We agree with the Minister that the UK's target will be a challenge. In our previous report we emphasised the importance of removing barriers to renewable energy deployment, such as grid access and planning permission. We also concluded that the Government's renewable energy policy must support energy efficiency measures, developing generation technologies and the supply chain to the renewables industry. We therefore await the UK Renewable Energy Strategy with great interest: the longer the delay to the publication of the strategy, the more challenging meeting the target will be.

Revision of the EU's Emissions Trading System (ETS)

7.  The agreement reached for Phase III of the EU ETS[4] (from 2013 to 2020) means, in the Minister's words, that it is now "more environmentally ambitious" (Q 1). The central EU cap has been made more demanding, and the cap is linked to an annually declining trajectory to 2020 and later years. Access to international carbon credits is limited in the EU ETS to ensure that at least half of the required emissions reductions take place within the EU; finance is also to be provided to developing countries to invest in low carbon projects. At least 60 per cent of EU ETS allowances will be auctioned by 2020 compared to around 3 per cent of allowances in Phase II (which ends in 2012). Lord Hunt said that these revisions were "consistent with keeping the EU on track to deliver a 60 to 80 per cent cut in emissions by 2050" while stressing that they would also bring "more predictable market conditions, with a more stable price and improved certainty for industry" (Q 1).

8.  In setting out the Government's intentions in relation to the commitments contained in the revisions to the EU ETS, the Minister also dealt with the following issues:

  • co-ordination of the Government's effort through carbon budgets for individual Departments (Q 29);
  • interaction with the devolved administrations (Q 30);
  • the risk of "carbon leakage", and how that issue might be affected by a new international climate change agreement in Copenhagen later this year (Q 31);
  • the prospects for linking the EU ETS to trading systems in other parts of the world (QQ 32-34);
  • monitoring the effectiveness of the revised requirements (Q 44); and
  • the possibility of a fiscal audit of existing subsidies for fossil-fuel intensive businesses and carbon-based taxes (QQ 46-48).

CONCLUSION

9.  In our previous report, we called on the Government to press for ambitious revisions to the EU ETS, and we accept the Minister's use of the term "ambitious" to describe what was agreed in December 2008. While we welcome the revisions that have been agreed, we make the point that the real promise of the EU ETS lies in its potential. We re-emphasise our previous comments about the need for robust auditing and enforcement mechanisms, and for effective linkage between the EU ETS and other trading schemes, if that potential is to be delivered. Finally, we reiterate our call for a credible and robust international agreement in Copenhagen later this year, allowing the revised ETS and the broader Energy and Climate Change Package to deliver substantial reductions in greenhouse gas emissions.


1   European Union Committee, 27th Report (2007-08): The EU's Target for Renewable Energy: 20% by 2020 (HL 175) Back

2   European Union Committee, 33rd Report (2007-08): The Revision of the EU's Emission Trading System (HL 197) Back

3   OJ L140 (5 June 2009) pp16-62. Renewable sources do not include nuclear power. Back

4   OJ 140 (5 June 2009) pp 63-87 Back


 
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