Towards a Low Carbon Transition: Review of European Renewable Energy Targets

Background

In November 2010, the European Commission adopted its actual Energy Strategy, which, together with the EU Climate and Energy Package of 2009, defined the energy priorities for 2020 and set long-term actions to be taken. The main objectives of the strategy were set in 2009 and consist of reducing GHG emissions by 20% compared to 1990 levels, increasing the share of renewable energy to 20% and improving 20% energy efficiency (European Commission, 2011). These decisions have been taken in a context in which energy prices are continuously increasing and a high dependence on energy imports exists. At the same time, energy related emissions account for almost 80% of the EU’s total GHG emissions (European Commission, 2011). For these reasons, renewable energy sources play a key role in both decreasing GHG emissions and reducing dependency on fossil fuels.

Renewable energy production has considerably grown during the past years, especially in those Member States which have developed supportive policies. Some EU level initiatives which has promoted this improvement were the “Green electricity Directive” and the “Biofuels Directive”. On one hand, the first one fixed an overall EU target of 21% and individual national indicative targets for the RES shares in the final electricity consumption to be achieved by 2010. On the other, the “Biofuels Directive” established that all Member States should have ensured at least 5.75% of their total transport fuel consumption came from biofuels and other renewable fuels (European Commission, 2010).

In December 2008, the new legal framework promoted by the Renewable Energy Directive established for the first time binding targets; which aim to achieve the overall 20% renewable energy target for the European Union by 2020. At the same time, the Directive also set individual targets for the share of RES in final energy consumption for each Member State.

Hence, there has been an increase in the renewable energy share in the final energy consumption of the European Union; rising from 8,5% in 2005 to 13% in 2011 (European Commission, 2012). This progress has been due to the significant investments that the majority of Member States have made during the past years in renewable sources of energy. Nevertheless, the economic crisis has had a great negative impact on those policies that promote RES. This way, the outlook for 2020 seems highly pessimistic for some Member States; especially for Malta, the Netherlands or the UK (see figure 1 below).

Figure 1: Member States progress towards 2020 targets in renewable energy consumption

 

Current situation

Therefore, one of the main constrains to expand the share of renewable sources have been economic issues. In particular, those related to cost-effectiveness; as renewable energy sources generally cost more than conventional energies. Thus, the EU should further promote policies to support the future development of those technologies in order to drive down the costs in the future.

For these reasons, many theories about what is the best way to reduce costs of the low carbon energy transition have emerged. Basically, there are three complementary approaches to assist the replacement of fossil fuels by renewable energies. The first option is by subsiding renewables until they become competitive. The second one is by making fossil fuel technologies uncompetitive through taxes or regulations. And the third, by promoting innovation in renewable energies sources in order to reduce their costs in the medium-long term. The latter seems the most viable option, as the other two are considered highly expensive. Therefore, innovation could be encouraged by two ways:

  • Developing public deployment policies. Public policies such as subsidies could reduce long term costs in renewable technologies, as subsidies could lead to innovation.
  • Promoting RD&D. Public expenditure in RD&D is demonstrated to stimulate innovation.
Heretofore, both measures have been implemented by Member States; however, the majority of them in an unbalanced way. Generally, public expenditure on deployment has been two orders of magnitude larger than expenditure on RD&D support ( Zachmann G., Serwaah A. and Peruzzi M., 2014).


Future trends

Therefore, it is obvious that long-term investments are required in order to achieve the decarbonisation targets proposed for the upcoming years (see figure 2 below). This way, it is unlikely to achieve 40% carbon cuts by 2030 and 80% reduction in GHG emissions by 2050 compared to 1990 levels without an ambitious innovation plan in all Member States

Figure 2: EU Decarbonisation scenarios-2030 and 2050 range of fuel shares in primary energy consumption compared with 2005 outcome (in %) Source: European Commission (2010)

 

In January 2014, a new target on RES share was proposed by the European Commission as part of the 2030 Framework for Climate and Energy Policies; which consists of 27% rise by 2030. However, there is an important difference compared to 2020 target. This is a fully binding goal for the EU as a whole but not at the member state level. This modification has been included after the recent experience with the current 2020 framework; which has demonstrated that renewable energy policies also require market integration, high levels of investment, cost-efficiency and undistorted competition (European Commission, 2014).  As those aspects are difficult to achieve, the European Commission has given greater flexibility to Member States to decide the most cost-effective way to promote the transition towards a low carbon economy.

This variation has been welcomed by the UK, as Cameron had a key role pushing this new policy. Consequently, the UK will not have a renewable energy target beyond 2020. They consider that the best way to reduce CO₂ emissions is a matter of national sovereignty. This way, the UK believes that cap and trade would deliver the most cost effective option instead of national mandatory targets, as a result of current uncertainties. Thus, apart from renewable energy sources, the UK government aims to achieve its target of reducing 40% CO₂ emissions by 2030 compared to 1990 levels also through nuclear power, energy efficiency, an expansion of the use of gas or carbon capture and storage.

At this point, a question arises:  what is the way to reduce CO₂ emissions in order to reach the targets proposed by the EU for 2020, 2030 and 2050? Should the EU fix a renewable energy target for each Member State as they did for 2020? Or should each Member decide by which technology they attain the emissions cuts imposed by the EU? What is clear is that every country has a specific situation. Moreover, there are other available technologies to reduce CO₂ emissions apart from renewable energy sources. For these reasons, the best option could be that each Member State could decide what the most cost-effective way for them is, in order to promote the low carbon transition.

 

References:

European Commission (2010), Communication. Energy 2020: A Strategy for Competitive, Sustainable and Secure Energy

European Commission (2011), Introduction. Energy 2020: A Strategy for Competitive, Sustainable and Secure Energy

European Commission (2012), Europe 2020 Targets: Climate Change and Energy

European Commission (2014), Questions and Answers on 2030 Framework on Climate and Energy

UK Government, Department of Energy & Climate Change (2011), UK Renewable Energy Roadmap

Zachmann G., Serwaah A. and Peruzzi M. (2014), “When and how to support renewables? Letting the data speak” in Bruegel Working Paper, Februery 2014


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