Cost of meeting targets
Since 2008 the absolute costs of meeting the 20% target have decreased from
£60 billion to £41 billion (0.32% of GDP) per year by 2020. This is due to
several factors: lower economic growth has reduced emissions; higher energy
prices have spurred energy efficiency and reduced energy demand; and the carbon
price has fell below the level projected in 2008 as EU ETS allowances not used
in the recession are carried forward. However, at the same time, this reduction
in absolute costs comes in the context of a crisis which has left businesses
with much less capacity to find the investment needed to modernise in the short
the EU is committed to move to a 30% emissions cut by 2020 if other major
economies take on their fair share of the effort under a global climate change
agreement.The cost of reaching the 30% targetis now estimated at £69 billion
per year by 2020, £9.4 billion higher that the price tag for the 20% target two
years ago. The 30% target would cost £28.2 billion (0.2% of GDP) more than the
20% target is estimated to cost today.
Countries worldwide are recognising the potential of green, low-carbon
growth to create new sustainable jobs and strengthen energy security. Europe's
lead in this revolution cannot be taken for granted as global competition
becomes fiercer. The 20% target was seen as a critical driver for modernising
the EU economy, but now, with carbon prices lower than expected, its potential
as an incentive for change and innovation has decreased. Moreover Europe has
also to prepare its long term objectives, as part of the developed countries
group, of achieving 80-95% reduction by 2050 at an optimal cost
Options for moving to 30%
The Communication sets out options for meeting the 30% target within the EU
ETS and in the other sectors. These include: reducing the number of auctioned
allowances under the EU ETS; regulation to promote greater energy efficiency;
smart use of fiscal instruments; directing EU cohesion policy funding towards
green investments; and improving the environmental integrity of the
international carbon credits recognised in the EU ETS.
A measure that is attractive even ahead of a possible move to 30% would be
to use some unallocated free EU ETS industry allowances to accelerate
innovation in low-carbon technologies, in a similar way to the existing
demonstration programme for innovative renewable energy and carbon capture and
storage technologies funded with 300 million allowances.
The Commission has examined the situation of energy-intensive industries
with regard to the risk of "carbon leakage" (relocation of production
from the EU to countries with laxer carbon constraints).
The key conclusion is that the existing measures to prevent carbon leakage
from these industries - free allowances and access to international credits -
remain justified. The analysis also shows that raising the target to 30% while
other countries implement their reduction pledges under the Copenhagen Accord
would have a limited impact in terms of carbon leakage, provided the existing
measures stay in place.
The Commission will continue closely to monitor the risk of carbon leakage,
particularly in relation to third countries which have not yet taken action to
limit emissions. Among the potential measures that merit continued examination
is the inclusion of imports in the EU ETS.
The Communication is addressed to the EU institutions for consideration.
Maria Kokkonen – Tel. +32.2/295.42.03 – mob. +32.498/95.42.03 – firstname.lastname@example.org
Lena De Visscher– Tel. +32.2/296.36.94 – mob. +32.498/96.36.94 – email@example.com
conclusions on 8/9th March 2007
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Please note: all amounts expressed in sterling are for information purposes