On 22 January the European Commission published a major package of white papers on climate and energy, including proposals on 2030 climate targets and policies and on ETS reform. The proposals are only the first step in a long process towards the adoption of legislation, and underneath the strong headlines, many crucial details have not yet been resolved.

As a target for 2030 the Commission proposes a 40% reduction in greenhouse gas emissions from 1990 levels, to be met entirely through domestic effort (without international offsets). If a global climate agreement is reached in 2015, this target could increase (using offsets). The 40% would be implemented through a division of labour between the ETS and non-ETS („effort-sharing“) sectors: 43% in the ETS, and 30% in the non-ETS. The Commission suggests that 43% in the ETS would require an increase in the current 1.74% cap annual linear reduction factor to 2.2% from 2021 (an emissions reduction of 49Mt/yr).

In addition, the market stability reserve seeks to mitigate the problem of carbon market demand/supply imbalance by enabling the withdrawal of EUAs under specific, objective, and predictable conditions: if 12% of the total number of EUAs in circulation in the market in any one year is equal to 100Mt or more, the corresponding number of EUAs would be withdrawn from the auction volume for future years and placed in a reserve. In case the total number of EUAs in circulation in any one year falls below 400m, or carbon prices increase dramatically, additional EUAs would be released from the reserve.

The 2030 proposals on RES are much less concrete. The Commission proposes an EU target level of 27% of total energy consumption compared to 1990, and predicts that this would result in at least 45% RES in the electricity mix by 2030 (21% today, 35% by 2020). However, the Commission also predicts that the 40% greenhouse gas target “should by itself encourage” at least 27% RES. Consequently, the Commission will not propose additional RES promotion measures at the EU level until after it has carried out a further assessment of member states’ RES plans. The Commission also warns that member state plans can „address national and regional specificities“ but must not „hinder“ market integration, reduce cost-efficiency, or “affect the competitiveness of other energy sources”.

The Commission calls for „renewed ambition“ on energy efficiency, but postpones any target decision until after completion of the mid-2014 review of energy efficiency policies. Its proposals on transport, CCS, and innovation support beyond 2020 are also vague. The Commission notes that there is „no evidence“ of carbon leakage occurring due to the ETS that energy prices have risen since 2008 in nearly every member state “mainly because of taxes and levies, but also due to higher
network costs” that wind and solar have exerted downward pressure on electricity wholesale prices, while contributing to higher prices in retail markets and that „rising energy prices can be partly mitigated by ensuring cost effective energy and climate policies, competitive energy markets and improved energy efficiency“, including through the reduced importation and use of fossil fuels.
EU heads of government are expected to endorse most of the

Commission’s proposals at a European Council summit on 20-21 March. The new European Parliament which takes office in summer 2014 will also be asked to endorse the 40% greenhouse gas target before the end of the year.