How to Raise Europe’s Climate Ambitions for 2030 Implementing a -55 Target in EU Policy Architecture IMPULSEPlease cite as ko-Institut and Agora Energiewende 2020 How to Raise Europe’s Climate Ambitions for 2030 Implementing a -55 Target in EU Policy Architecture www.agora-energiewende.de ACKNOWLEDGEMENTS First and foremost, we would like to thank the colleagues from ko-Institut for their enormous commitment and dedication to this project and without whom it could not have been realized. We would also like to thank the col - leagues and network partners that volunteered time and effort to provide rapid feedback to questions arising on the way, in particular Christian Hochfeld and Dr. Gnter Hrmandinger from Agora Verkehrswende. How to Raise Europe’s Climate Ambitions for 2030 IMPULSE How to Raise Europe’s Climate Ambitions for 2030 Implementing a -55 Target in EU Policy Architecture ON BEHALF OF Agora Energiewende Anna-Louisa-Karsch-Strae 2 | 10178 Berlin T 49 030 700 14 35-000 F 49 030 700 14 35-129 www.agora-energiewende.de infoagora-energiewende.de WRITTEN BY / IN COOPERATION WITH ko-Institut e.V. – Institute for Applied Ecology Borkumstrae 2 | 13189 Berlin T 49 030 405085-0 F 49 030 405085-388 https//www.oeko.de/en/ infooeko.de Jakob Graichen, Dr. Felix Chr. Matthes, Sabine Gores, Felix Fallasch PROJECT LEAD Andreas Graf Andreas.Grafagora-energiewende.de Dr. Patrick Graichen COMMISSIONED BY Layout RadiCon | Berlin, Kerstin Conradi Cover Anton Murygin/Unsplash Proofreading WordSolid 185/05-I-2020/EN Version 1.2, September 2020 This publication is available for download under this QR code.3 Preface Dear reader, The 26 th UN Climate Change Conference of the Parties COP26, rescheduled to take place in Glasgow on 1–12 November 2021, will be a crucial moment for the Paris Agreement. In applying the accord’s ‘review and ratcheting up’ procedure for the first time, the conference will show whether the climate treaty can deliver stronger climate action to close the current gap on the way to keeping global warming ‘well below 2 degrees’. To ensure the success of the agreement, the EU must make a substantial contribution to increasing climate action by raising its outdated climate target framework. Key conclusions 1 An economy-wide -55 per cent GHG 2030 target is technically and economically feasible. Technically feasible emissions reductions compatible with the 55 per cent target relative to 1990 for the EU-27 range from 45 per cent to 49 per cent for the non-ETS sectors and from 59 to 63 per cent for the ETS sectors both relative to 2005. Our central scenario of -47 per cent for non-ETS sectors and -61 per cent for ETS sectors represents a reasonable balance. 2 Delivering a climate target of -55 per cent is possible with a mix of additional domestic and EU measures. Adopting additional policy measures at the Member State level, enhanced EU-wide policies and measures and a re of the EU-ETS are the key elements in achieving a higher target. Some Member States have already set climate goals or measures that are broadly in line with higher climate ambition in the non-ETS sectors. 3 There are many flexibility options that allow Member States to deliver higher climate ambition targets in the effort-sharing sectors. These include the trading of AEAs between Member States, enhanced land-use change and afforestation, greater use of ETS allowances and the inclusion of parts of the effort-sharing sectors in the EU ETS. Some of the flexibility options depend to a great extent on early action by Member States in delivering emissions reductions, which is why quick re proposals are needed. 4 A -55 per cent target will require changes to the current climate policy architecture and dedicated solidarity mechanisms. Member States with below-average GDP per-capita levels will need to make greater contributions than is currently the case; otherwise there will be no credible pathway to climate neutrality by 2050. These additional efforts should be supported by dedicated solidarity mechanisms both within the Effort Sharing Regulation and in the upcoming EU budgets. The European Commission has announced that by September 2020 it will present a comprehensive plan for increasing the EU’s GHG emissions reduction targets for 2030 to at least 50 per cent and well on the way to 55 per cent relative to 1990 levels. This report, written together with the ko-Institut, explores the question of ‘How’ by mapping options for implementing a -55 per cent target in the EU’s policy architecture. I hope you find this report inative and stimulating. Patrick Graichen, cutive Director, Agora Energiewende4 Agora Energiewende | How to Raise Europe’s Climate Ambitions for 20305 Inhalt Summary 9 1 Introduction 13 2 The climate targets of the European Union 15 3 Pathways towards a 55 per cent reduction of emissions 19 4 Raising ambitions in the Effort Sharing Regulation 23 5 Ensuring fairness and solidarity when implementing the higher target 30 6 Where do we stand today Current Member State scenario projection 33 7 Meeting the enhanced Effort Sharing Regulation target 35 7.1 Option 1 Deliver existing energy targets and legislation 35 7.2 Option 2 Adopt additional policies and measures at the Member State level 36 7.3 Option 3 Expand and enhance EU-wide policies and measures 40 7.4 Flexibility 1 Market-based mechanisms 47 7.5 Flexibility 2 LULUCF 50 7.6 Flexibility 3 ETS allowances 53 8 Re of the EU ETS 55 8.1 Adjustment of the EU ETS cap 55 8.2 Inclusion of new sectors in the ETS 56 References 636 List of Figures Figure 1 Historical emissions and the recent target architecture for the EU-27, 1990-2030 16 Figure 2 Historical ESD/ESR and stationary ETS emissions, and the range of recent projections for the EU-27, 1990-2030 20 Figure 3 The NDC commitment of 55 and the different patterns of ESR and ETS targets in the context of historical trends and the current policy framework 21 Figure 4 Per capita ESR emissions 2005 to 2030 by income bracket 24 Figure 5 Average year-on-year ESR emission reduction rates by Member State 2005 to 2050 26 Figure 6 Enhanced 2030 ESR targets by Member State 27 Figure 7 Share of cohesion policy funding in public investment per Member State 2015-2017 30 Figure 8 Differences of cumulated AEA between WEM and WAM scenario 33 Figure 9 Impact of additional measures reported by Member States 34 Figure 10 Development of emissions in the transport and buildings sectors in select Member States, 2005–2018 2005100 37 Figure 11 Select national government targets for combustion engine car bans as of April 2020 38 Figure 12 GHG emissions from Light and Heavy Duty Vehicles LDVs Additional allowance cancellations by the Member States as a complementary measure for coal phase- out policies etc. as well as allowance cancellations by a few eligible Member States for compliance under the Effort Sharing Regulation could further decrease the amount of emission allowances; → Greenhouse gas emissions from all other sources, except aviation, international shipping and LULUCF, are regulated by the commitment system estab- lished by the Effort Sharing Regulation ESR which aims at an emissions reduction of 30 per cent below 2005 emission levels for the EU-28. It also estab- lishes linear emission reduction trajectories for all EU Member States from 2021 to 2030 with emission target levels ranging from 0 to -40 per cent relative to 2005, depending on economic strength measured by Gross Domestic Product GDP per capita. Again, these targets do not directly translate into 2030 emission levels Due to the high ambition level of the UK under the ESR -37 per cent the existing member state targets under the ESR amount only to an emission reduction of the ESR-regulated GHG emissions of approx. 29 per cent. The remaining gap in the 30 per cent target for EU-27 is approx. 30 Mt CO 2 eq. All Member States can bank or borrow emission allowances within certain limits. The AEAs technically implement the emission reduction trajectory. The European Union’s international and internal climate policy commitments for the period from 2021 to 2030 are based on a complex structure 1. Under the Paris Agreement the EU has ted a Nationally Determined Contribution NDC including a greenhouse gas emission reduction target based on the following elements → The base year for the commitment is 1990. → The scope of the emission reduction targets includes all greenhouse gas emissions from energy CRF category 1, industrial processes and product use CRF category 2, agriculture CRF category 3, waste CRF category 5 as well as emissions from international aviation reported as a memo item under the UNFCCC; it does not include emissions from international navigation reported as a memo item under the UNFCCC. → The approach for including land use, land use change and forestry LULUCF, CRF category 4 in the commitment has not yet been ally ted under the international framework of the UNFCCC. → Domestic greenhouse gas emissions must be reduced to a level of at least 40 per cent below the base-year emissions. 2. This international commitment has been translated into an internal EU commitment structure → The CO 2 emissions from energy-intensive industries as well as N 2 O emissions from specific industrial processes and CO 2 emissions from EU-internal aviation are regulated by the European Union Emissions Trading System EU ETS. It sets an aggregate target for all EU Member States and other linked countries that is based on a continually decreasing linear reduction factor. Currently, the factor leads to a EU cap in 2030 that is 43 per cent below 2005 emissions levels -44 per cent for stationary installations and -27 per cent for Agora Energiewende | How to Raise Europe’s Climate Ambitions for 2030 16 → The LULUCF regulation for greenhouse gas sources and sinks from land use requires that Member States ensure that accounted greenhouse gas emissions from LULUCF are offset by at least the equivalent removal of CO₂ from the atmosphere in the 2021–2030 period “no debit rule”. → The greenhouse gas emissions from international aviation remain unregulated as long as they are not effectively covered by the EU ETS or any other mechanism. Fig 1 All Member States can buy or sell AEAs to or from other Member States. Certain Member States can cancel emission allowances from the EU ETS to meet their annual ESR targets within certain limits not exceeding 100 million allowances EU-wide for the entire 2021–2030 period. All Member States can use credits from LULUCF within certain limits not exceeding 280 million credits EU-wide for the entire 2021–2030 period and only in specific circumstances.         
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SD4 SD33 TS TS33 TS48 T 4 [mO„] TSr SD/ SR v Historical emissions and the recent target architecture for the EU-27, 1990–2030 Figure 1IMPULSE | How to Raise Europe’s Climate Ambitions for 2030 17 Paris Agreement, is currently foreseen neither in the overall EU targets nor in the compliance of national targets for internal EU mechanisms. The EU climate policy architecture was developed originally for the EU-28, including the UK. With a view on the progress of EU climate policy to date, the UK’s leaving of the EU leads to the following changes for the EU-27 The overall greenhouse gas emission reduction with international aviation from 1990 to 2018 decreases from 23 per cent EU-28 to 21 per cent EU-27. The greenhouse gas emission reduction from the energy sector decreases from 36 per cent to 31 per cent. Greenhouse gas emissions from transport w/o avi- ation from 1990 to 2018 increases by 24 per cent for the EU-27 and only by 20 per cent for the EU-28. Greenhouse gas emissions from industrial process decreases by 23 per cent for the EU-27 and by 28 per cent for the EU-28. Meeting the emission reduction targets for 2030 will therefore require a greater emission reduction effort for the remaining 27 EU Member States than would have been the case in the EU-28. 3. As a companion strategy for greenhouse gas emission reduction commitments, the EU has set itself additional binding targets for energy efficiency and renewable energies that contribute significantly to overall greenhouse gas emission reduction objectives → The binding energy efficiency target, to be achieved collectively across the EU, is set by the Energy Efficiency Directive and requires a reduc- tion of primary energy consumption by at least 32.5 per cent relative to the 2007 modelling projections for 2030. For the EU-28, primary energy consumption must not exceed 1,273 million tons of oil equivalents mtoe in 2030 and the corresponding final energy consumption must not exceed 956 mtoe. → The binding target for the use of energy from renewable sources is set by the Renewables Directive and requires that EU Member States collectively increase the share of energy from renewable sources in gross final energy consumption to at least 32 per cent by 2030. The existing commitment framework for reducing greenhouse gas emissions targets only domestic emissions reductions Figure 1. The use of international credits, based on Article 6 of the Agora Energiewende | How to Raise Europe’s Climate Ambitions for 2030 18IMPULSE | How to Raise Europe’s Climate Ambitions for 2030 19 3 Pathways towards a 55 per cent reduction of emissions reflected in the Euco32325 scenario as of 2019. In the scenario, the total greenhouse gas emission reduction for the period from 1990 to 2030 amounts to approx. 44 per cent; the greenhouse gas emissions from stationary installations regulated by the EU ETS decrease by 54 per cent from 2005 to 2030; and the greenhouse gas emissions from sources that are covered by the ESR decrease by 32 per cent from 2005 to 2030. → The upper bound of emission reductions that could be feasible in light of limits regarding infrastructure, capital stock, and the availability of key technologies and transative options such as hydrogen is described by the Vision Scenario ko-Institut 2018, which was updated for the EU-27 and the latest developments in the power sector. With regards to EU targets these limits are as follows total greenhouse gas emissions reduction for the period from 1990 to 2030 amounts to approx. 57 per cent; greenhouse gas emissions from stationary installations regulated by the EU ETS-decrease by 63 per cent from 2005 to 2030; and greenhouse gas emissions from sources that are covered by the ESR decrease by 49 per cent from 2005 to 2030. Based on this upper bound, we estimate that the technically feasible emissions reductions compatible with the 55 per cent target range between a target combination of 45 per cent for non-ETS s