Effort Sharing Decision

The 2009 climate and energy package implements the goal of reducing EU greenhouse gas emissions to 20% below 1990 levels by 2020. The reduction effort is shared out as follows:

• a 21% reduction in emissions from sectors covered by the EU emissions trading system (EU ETS) compared to 2005 levels;
• an around 10% reduction from most other sectors compared to 2005. These sectors are covered by the Effort Sharing Decision (ESD).  

Taken together, these two instruments will deliver an overall reduction of 14% compared with 2005, which is equivalent to a reduction of 20% compared with 1990. A larger reduction is required of the EU ETS sectors because it is cheaper to reduce emissions in the electricity sector than in most other sectors.

Since a single, EU-wide cap on EU ETS emissions will be introduced from 2013, the effort-sharing arrangement between Member States under the ESD has been determined solely for the reduction in emissions from sectors not covered by the EU ETS. These sectors include transport (road and rail, but not aviation), buildings (in particular heating), services, small industrial installations, agriculture and waste. Though many of the emitters are small, collectively these sectors represent some 60% of the EU's total greenhouse gas emissions. Emissions from land use, land use change and forestry (LULUCF) are not included in the ESD.

As a rule, it is up to Member States to define and implement their own policies and measures to reduce emissions from the ESD sectors. However, a number of EU-level measures taken in areas such as energy efficiency standards, limits on CO2 emissions from cars and vans, and waste management will also contribute to emission reductions in these sectors.

All Member States have taken on national emission targets for 2020 which are expressed as a percentage change from 2005 levels. Collectively, these national targets give an overall reduction of 10%.

GDP per capita has been used as the main criterion when setting the national targets. This approach has two advantages. It ensures that the actual efforts and the associated costs are distributed in a fair and equitable manner. It also allows for further, accelerated growth in less wealthy countries where economic development still needs to catch up with other Member States.

Under the ESD countries with a low GDP per capita will be allowed to emit more than they did in 2005 because their relatively higher economic growth will probably be accompanied by increased emissions in sectors such as transport. The emissions reduction required in Member States where GDP per capita is below the EU average is therefore correspondingly lower (i.e. less than 10% below 2005 levels). Less wealthy Member States will be allowed to increase their emissions in the ESD sectors by up to 20% above 2005 levels. These targets do, however, represent a cap on their emissions and will still require a reduction effort.

By contrast, in the wealthier Member States, where GDP per capita exceeds the EU average, emission reductions above the EU average are required. These go up to a maximum target of 20% below 2005 in the Member States with the highest GDP per capita.

The 20% limit on national emission reductions or increases compared with 2005 ensures that the targets for each country remain technically and economically feasible and that there is no unreasonable increase in overall costs.

In sectors such as buildings and road transport, many of the important decisions will be made at Member State level. Policies and measures to lower emissions potentially include traffic management, shifts away from carbon-based transport, taxation regimes, the promotion of public transport, biofuels, urban and transport planning, improved energy performance standards for buildings more efficient heating systems, and renewable energy for heating. Measures to reduce and recycle waste streams, and to reduce landfilling can also have a significant impact on greenhouse gas emissions.

Guidelines for State aid in the area of environment increase the ability of Member States to implement such measures while avoiding distortions of competition in the internal market.

A number of important EU-wide measures will also help Member States to reduce emissions and thus meet their national targets. New efficiency standards for boilers and water heaters, for example, together with adequate labelling systems to inform consumers, could help deliver major emissions reductions in buildings. The full implementation of the directive on the landfilling of waste (in 2016) will deliver a major reduction in emissions of methane, a powerful greenhouse gas.

In addition, Member States can also use a range of flexibilities, including credits from Clean Development Mechanism (CDM) projects (see point 5).

2005 represented the current situation when work began on the economic analysis which underpins the climate and energy package. Calculating emission reductions and renewable energy shares for 2020 against 2005 levels therefore gives a transparent and easily understandable picture of the changes needed.

The annual level of Clean Development Mechanism (CDM) and Joint Implementation (JI) mechanism credits any Member State can use in 2013-2020 is limited to 3% of its 2005 emissions.

However, the Effort Sharing Decision also allows certain Member States that have emission reduction targets, or which are allowed to increase emissions by up to 5% of 2005 levels, to use an additional 1% of credits. These credits can come only from CDM projects in least developed countries and small island developing states, and are not bankable or transferable. The Member States concerned are Austria, Finland, Denmark, Italy, Spain, Belgium, Luxembourg, Portugal, Ireland, Slovenia, Cyprus and Sweden.

Greater use of credits can increase the cost-effectiveness of reducing emissions. However, it  also means that the emission reductions take place outside the EU, reducing the domestic benefits for the EU in terms of technological leadership and pollution reductions. The limits on credits aim to ensure that investments in cleaner technologies and renewable energy are  triggered, thus putting Europe on the way to becoming a low carbon economy. From the same perspective, Member States are encouraged to use fewer credits than the maximum allowed.

To increase the cost-effectiveness of the emissions reduction path, several flexibility measures are provided. These include allowing Member States to bank and borrow emission budgets (5% max.) between years and to transfer (for example, by selling) over-achieved emission reductions to another Member State.

These flexibilities do not increase the total amount of greenhouse gas emissions in the EU; they only change the location of reductions and allow small changes in timing.

In addition, Member States may use Clean Development Mechanism credits and Joint Implementation mechanism credits from countries outside the EU (see point 5 above)

The national targets under the Effort Sharing Decision (ESD) foresee a linear reduction or limitation path in 2013-2020 (as does the EU ETS). In the ESD, Member States take on binding annual emission limits – known as annual emission allocations (AEAs) - in accordance with the reduction path and they must report their emissions to the European Commission each year. This will ensure a gradual move towards the agreed 2020 targets is achieved in sectors where changes take time, such as buildings, infrastructure, and transport.

The annual reports that Member States are required to make under the Effort Sharing Decision will cover not only their emissions but also the policies and measures they are undertaking and projections of their future progress. Together with the various flexibilities at their disposal, this should enable Member States to take timely action to ensure that they comply with their annual emission allocations.

If a Member State's report for a given year shows it is not in line with its annual limits, however, it will have to take corrective action.

Any shortfall in emission reductions will have to be achieved in the next year, multiplied by a factor of 1.08 as a penalty. On top of this, Member States will have to submit a corrective action plan to the Commission detailing, among other things, how and when they intend to get back on track towards meeting their 2020 targets. The Commission and the EU Climate Change Committee (comprising the Member States) can comment and give recommendations on the plans. In addition, there is a temporary suspension of the Member State's eligibility to transfer any AEAs and JI/CDM rights to another Member State.

The Commission can also launch an infringement procedure against the Member State concerned.

The combination of the mechanism for corrective action and the potential use of the infringement procedure strengthens the credibility of the EU's mitigation measures under the Effort Sharing Decision. It also gives greater certainty to Member States which achieve greater emission reductions than required and would like to sell their surplus emission allocations to another Member State.

Yes, there is nothing to prevent Member States from adopting their own overall targets and giving visibility to their own efforts to fight climate change, tracking progress and engaging the public.

However, no such national targets can be set at EU level because it cannot be known by how much emissions from sectors covered by the EU ETS will be reduced in each Member State. This is because from 2013 there will be a single, EU-wide cap on EU ETS emissions in place of the 27 national caps which existed previously.

This is because the 'global warming potential' (GWP) values for certain greenhouse gases that Member States use in their emissions reporting will change from the reporting year 2013 onwards. Greenhouse gas emissions are reported with two years delay, so Member States will report on their emissions for the year 2013 in 2015. To ensure legal certainty and consistency between reported emissions and AEAs throughout the ESD commitment period, the AEAs have been calculated by applying both the current GWP values and the future ones, which are taken from the Fourth Assessment Report of the Intergovernmental Panel on Climate Change.

Under the Effort Sharing Decision, annual emission allocations (AEAs) may be adjusted if there is a change in the scope of the EU ETS. For example, if a Member State includes an activity in the EU ETS during 2013-2020 that was not previously covered by the ETS, the corresponding amount of allowances will have to be subtracted from the AEAs of that country. Therefore, an adjustment of the AEAs for certain Member States will take place in early 2013 to take into account the change of scope of the ETS from the 2008-2012 to the 2013-2020 trading periods. These adjustments will be made pursuant to Article 10 of the Effort Sharing Decision and will be published by the Commission.

The AEAs may also be adjusted in this way if a Member State unilaterally included an activity in the EU ETS during 2013-2020 that was not previously covered by the ETS, or if a Member State excluded any small installations from the ETS from 1 January 2013.