EU's Climate Policy, 2016-2017

CEPS, end of the year address – 14 December 2016Jos DELBEKE

Director General for Climate Action European Commission

Table of contents:

International Climate issues

Progress on 2030 Climate Proposals

Clean Energy for all Europeans package

Commission proposals for next year

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International Climate Issues

Ratification of the Paris Agreement 2016 Timeline

Build-up of political momentum throughout the year

Record speed of ratification

EU triggering entry into force

As of 9 December, 116 Parties have ratified

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COP22 MarrakechMain Deliverables

Sustained momentum and global determination

Steady progress on the Paris rulebook

Strong evidence of solidarity and action

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COP22 MarrakechNon-State Actors Involvement

Marrakech Partnership for Global Climate Action to support work of "Champions"

1200 events on initiatives, alliances, partnerships, platforms

Involvement of businesses, cities, civil society

Global transition seen as unstoppable and irreversible

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Phase-down of HFCs• The Kigali Amendment to the Montreal Protocol introduced a

mandatory phase-down of HFCs for developed and developing countries and created an opportunity for green growth

Developed countries to reduce to 15% of 2011-13 HFC levels by 2036

Most developing countries (including China) to reduce to 20% of 2020-22 HFC levels by 2045; the rest (including India) to 15% of 2024-26 by 2047

Compliance support to be provided by donor countries via the Multilateral Fund

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2016 ICAO Assembly 39th ICAO Assembly: Resolution for a global market-based

measure on international aviation emissions. Positive development, but only a 1st step towards more meaningful action.

Offsetting measure to enable Carbon Neutral Growth from 2020: compensating emissions above 2020 levels with international credits.

Differentiation: phased implementation (2021-2026 voluntary period) and exemptions for routes to/from smaller aviation states 20% gap to achieve Carbon Neutral Growth 2020.

Work in progress: rules on MRV, quality of units, double counting and registries + governance arrangements still to be developed.

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Progress on 2030 Climate Proposals

Timing and Process

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ETS13 Oct2016

ITRE opinion

15 Dec2016

ENVI report

ESR15 Dec2016

ENVI Draftreport

29 May2017

ENVI report

LULUCF30 Jan 2017

Public Hearing

20 March2017

ENVI Draftreport

ENV Council19 Dec

ENV Council28 Feb

European Council

9-10 March

Feb 2017 (TBC)

Plenaryvote

ENVI report

22 June2017

EU ETS: Key issues in Council and EP1. Protect competitiveness of industry :

Carbon leakage Innovation Fund

2. Strengthening the EU ETS

3. Develop successful and transparent low-carbon funds Modernisation Fund 10c derogation for power sector

NB: In the absence of agreement, many provisions relating to free allocation would expire in 2020. 11

Fit-for-purpose carbon leakage regime

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Overarching goal is to avoid/minimise correction factor:key objective across EU institutions; many elements in Commission proposal; (need for) additional assurances debated.

Carbon leakage groups: tiering is an interesting concept; growing convergence to continue for the time being with the binary approach in the Commission's proposal.

Benchmark update: convergence on update of benchmarks that properly incorporates technological progress, with limits to provide predictability, ensure fairness and reward innovation.

Indirect cost compensation: a strive for more harmonisation but limited means to achieve this.

Strengthening the EU ETS

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European leaders want a well-functioning carbon market

Growing concerns in light of sustained weakness of the pricesignal

Context: Paris agreement, 1st publication of the MSR indicator in May 2017, winter package (RES/EE).

Menu of possible measures:• higher LRF• increasing MSR feeding rate• (voluntary) cancellation or expiry for allowances• adjust for overlapping policies

Develop successful and transparent low carbon funds

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Modernisation Fund:

• Need for transparent, simple and coherent governance structure. Debate continues on how / by who decisions are taken, including role of EIB.

• Transparency can be ex-ante (clarity on what can be funded) or ex-post (open/inclusive arrangements for decision-making process)

Article 10c derogation:

• Optional mechanism for certain MS, but considered important tool for energy sector modernisation.

• Need for improved modalities, including transparency (via competitive bidding). Debate continues on how to combine this with sufficient flexibility for MS and companies.

The Effort Sharing proposal

Achieve a 30% reduction in GHG emissions below 2005 that is

fair: taking into account differenteconomic capacities of Member States

cost-efficient: taking into accountdifferences in cost-effective mitigationpotentials between Member States, increasing flexibilities

ensures environmental integrity so that theEU 2030 GHG target is met

Fair

Cost-efficient

Environ-mentalintegrity

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Brings the CO2 commitment for this sector into the EU climate and energy framework for the first time as a stand-alone policy pillar

Ensures that accounted emissions from land use are entirely compensated by an equivalent removal of CO₂ from the atmosphere (no debit rule)

Ensures that emissions of biomass will be recorded and counted; promoting bio-energy feed-stocks that are most sustainable

Compatible with food security and biodiversity objectives

The LULUCF proposal

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Clean Energy for All Europeans Package

Clean Energy package

Energy Union Governance

New Electricity Market Design

Renewables

Energy Efficiency and Energy Performance of Buildings

Accelerating Clean Energy Innovation

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Energy Union Governance

To allow meeting the Energy Union objectives (notably the2030 targets)

To ensure compliance with the EU's international climatecommitments

To enhance investor certainty and predictability To enhance coherence of policy areas through integrated plans

by MS To ensure inclusiveness, participation, enhanced regional

cooperation

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A flexible wholesale market for electricity to integrate increasing production of renewables

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• Increase cross-border trading opportunities over short time frames (intraday and balancing markets)

• Reward flexibility for generation, demand-response and storage

• Allow prices to show real value of electricity (scarcity pricing)

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• Remove priority dispatch for all energy sources• Curtailment rules• Extended balancing responsibilities

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ms • Reliability standards to be set by Member States

• Transparent adequacy assessment, taking into account cross border capacities

• Minimize impact on decarbonisation objectives, exclusion of capacities with high emissions

Renewables Directive EU-wide target of 27%

• Electricity, heating and cooling, transport

New governance to reach EU-wide target • EU and Member States' measures as "gap fillers"

• e.g. MS could use EU ETS revenues to contribute to EU financing platform

Support schemes• Opening up to participation of cross-border investments• Detailed rules to be set in new State aid guidelines

2030 target for low-emission fuels of 6.8% in transport• To incentive advanced biofuels and "power-to-gas/liquid"• Cap on first-generation biofuels

Sustainability of bioenergy• e.g. use of biomass only in highly efficient CHP and not in electricity-

only plants 22

Energy Efficiency Directive

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New 30% target for 2030, binding a EU level to emphasisecommitment to put energy efficiency first

Setting the framework to improving energy efficiency ingeneral – continued obligation of 1.5% annual savings

Improving energy efficiency in buildings, promote e-mobilityby installing recharging points for electric vehicles

Improving energy performance of products (Ecodesign) andinforming consumers (energy labelling)

Financing for energy efficiency with the smart finance forsmart buildings

Commission Proposals for Next Year

Proposal on EU ETS - Aviation

The derogation for a reduced scope (intra-EEA) ends this year. Without new amendment the system is back to full scope.

Commission due to report on the outcome of the ICAO Assembly and make proposals.

The impact assessment is being finalised, the proposal is expected in January.

The intra-EEA ETS works well (99% compliance) and delivers (~17Mt emission reductions per year)

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Road Transport

Cars/vans: proposal on post-2020 CO2 standards• Key action under Low-Emission Mobility Strategy

Support long term decarbonisation of the economy Deliver on Effort Sharing Regulation and Paris Agreement commitments

• Targets to be based on new test procedure WLTP More realistic emission figures from type approval

• Foster move towards low- and zero-emission vehicles

Heavy Duty Vehicles• Proposal on certification of CO2 emission data (DG GROW)

adoption held up due to Council - EP disagreement on "Lisbonisation"

• Proposal on monitoring/reporting of (certified) CO2 emissions• Emission standards: within this Cion mandate

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Looking forward to 2017

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Challenges US new President Many elections in Europe Brexit

Opportunities Strong international determination to implement Paris "Train of low carbon technology (and competition) left the

station" Reinforced bilateral action, e.g. China, carbon markets,

technical modeling

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