Low-carbon economy

Low-carbon economy

The transition to a low-carbon economy is important in order to transform the European industrial base, including the energy, manufacturing, transport and construction sectors. European energy intensive industry sectors that face international competition could be substantially disadvantaged by unilaterally imposed carbon constraints on EU industries. The European Commission has developed carbon leakage provisions and promotes low-carbon technologies through the Sustainable Industry Low Carbon programmes.

The 2030 climate and energy policy framework proposed by the Commission in January 2014 recognises industrial competitiveness as a key aspect of EU climate and energy policies. This principle was endorsed by the European Council in October 2014 with a clear reference to the need to eliminate the risk of carbon leakage, as well as the importance of ensuring a stable regulatory framework for long-term industrial investments. The Council also stressed the importance of access to secure and affordable energy.

The Communication, ‘A policy framework for climate and energy in the period from 2020 to 2030

Commission actions

Developing 'carbon leakage' provisions

The concept of carbon leakage was introduced in the reference Emissions Trading System (ETS) legislation and specific provisions established in Directive 2009/29/EC to guarantee the environmental integrity and benefit of actions undertaken by the EU, and to preserve the international competitiveness of its industrial base.

Carbon leakage is defined as the increase in greenhouse gas emissions in third countries, where industry is not subject to carbon constraints comparable to the ones applied to EU energy-intensive sectors and subsectors. When the latter are exposed to international competition, they are put at an economic disadvantage.

Sectors and subsectors deemed to be exposed to the risk of carbon leakage are included in a specific list and receive enhanced free allocation in ETS Phase 3 based on ambitious benchmarks.

The 2030 climate and energy framework indicates that as long as there are no comparable efforts undertaken in other major economies, policies similar to the current carbon leakage provisions (including an improved and more focused system of free allocation of allowances) will be required after 2020 in order to ensure the competitiveness of Europe’s energy-intensive industries.

Promoting low-carbon technologies

Low-carbon technologies in industry are essential to achieve the EU's climate and energy targets (2020 package, 2030 framework, 2050 roadmaps) and contribute to implementing the industrial roadmaps that various sectors are developing in a low-carbon economy perspective.

The Sustainable Industry Low Carbon (SILC) programmes support industry by providing grants for the development, demonstration and dissemination of low-carbon technologies and for the adoption of such technologies within and across sectors.

In addition to SILC, industries can also get financial support for low-carbon technologies from: Horizon 2020, the NER programme and the European Structural and Investment Funds.

Low carbon business action with Brazil and Mexico

This action is implemented under the Partnership Instrument 2014-2020. It will foster cooperation partnerships between EU, and Mexican and Brazilian businesses. It will provide technical assistance for the elaboration of joint low-carbon business proposals that can be financially profitable.

Monitoring energy prices

In 2014, the Commission adopted the Communication on Energy Costs and Prices in Europe and published an accompanying report. The main objective was to assess trends in energy prices and costs, assess the root causes, and use the resulting conclusions to inform decisions on further policy action.

With regard to electricity and gas, price differentials with the rest of the world were confirmed. EU industry gas prices were found to be three to four times more expensive than comparable US, Indian and Russian prices, while EU industrial retail electricity prices were more than twice those in the US and Russia. This situation can jeopardise the competitiveness of EU companies, in particular energy-intensive industries.

In addition, significant disparities were found between Member States and industry sectors. This was due to highly differentiated energy policies adopted at national level and the distortive impact of regulated energy prices, which prevent fair competition in the Internal Market.

Consequently, the Communication proposes a number of possible measures to help Europe manage its energy prices, thereby maintaining the EU's commitment to complete the internal energy market and further develop its energy infrastructure. The Commission acknowledges the need to ensure a level playing field in terms of energy prices at international level for EU industry, and recommends that, where appropriate, ad-hoc measures in the form of fiscal transfers, exemptions and reductions are adopted.