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Back from the brink?

This week, the European Commission made its latest proposals on energy and climate change policy, summarised in the news release 2030 climate and energy goals for a competitive, secure and low-carbon EU economy. This may not be the snappiest headline, but it is nonetheless very significant.

The first thing to note is the order of the words: competitive and secure come before low-carbon. This could be taken as a signal that priorities are changing, with the need for emissions reduction no longer trumping everything else. But, as with most things in the EU, it’s not as simple as that, and we have to look as much at what is not said as the words themselves.

One of the most important points is that binding national targets for renewable energy are dropped. Beyond 2020, for which goals are still in place, Member States would not risk large fines for missing targets. But although there are no national targets, a new figure of a 27% contribution of renewables across the EU as a whole is proposed (from 20% in 2020). As the policy statement (2030 framework for climate and energy policies) puts it, “While binding on the EU, the target would not be translated into national targets through EU legislation.” In what way such a target could be ‘binding’ is not clear: would the Commission fine itself?

The renewables industry will wait with bated breath for the details to become clear, but the best interpretation of this for them is that enthusiasm and support for wind, solar and even less well-developed technologies is declining and will drop off substantially after 2020, unless costs of both generation and system integration come down substantially. This could mark the beginning of the end for heavily subsidised renewables, which have proved to be a very expensive way to make even modest reductions in carbon dioxide emissions.

On the other hand, the rhetoric does not suggest a weakening of the overall ambition on climate mitigation; the other key goal in the policy is a reduction in emissions of 40% by 2030. Although the green lobby is criticising the weakness of the target, this is actually a very big ask, considering that the 20% target for 2020 will to a large extent only have been achieved (if indeed it is) by continued run-down of heavy industries during the 1990s, with considerable help from the extended economic crisis and period of recession in recent years. Energy efficiency has also surely had a role to play, but this has probably been driven as much by the natural desire to cut costs as utility bills mount as by government policy.  

Commission President Barroso is quoted as saying "Climate action is central for the future of our planet, while a truly European energy policy is key for our competitiveness. Today's package proves that tackling the two issues simultaneously is not contradictory, but mutually reinforcing. It is in the EU's interest to build a job-rich economy that is less dependent on imported energy through increased efficiency and greater reliance on domestically produced clean energy. An ambitious 40% greenhouse reduction target for 2030 is the most cost-effective milestone in our path towards a low-carbon economy. And the renewables target of at least 27% is an important signal: to give stability to investors, boost green jobs and support our security of supply".

Well, he would say that, wouldn’t he. But, whatever the fine words, the thrust of EU policy on emissions reduction has been weakened, possibly fatally, by the lack of binding targets for Member States. Despite the threat of large fines, enforcing 27 different national goals is never going to be easy, but achieving a much more demanding overarching EU one will surely be impossible without the availability of some sanctions against countries which drag their feet. The policy will be increasingly costly to implement and if it has no teeth then failure is pretty much guaranteed.

The Economist sums up the current situation pretty well in a leader (European climate policy – worse than useless): “The policies it has adopted are designed with two aims in mind: to cut European emissions drastically and to push other big emitters into adopting similar policies. By both measures, they have failed.” It argues for the abandonment of renewables targets entirely, with a renewed focus on establishing a functional carbon market.

This would, indeed, be much preferable to more of the same. But governments have already committed to continued subsidies for years to come by guaranteeing feed-in tariffs. And, as the Economist points out, the largest source of renewable energy in Europe at present is wood, ‘hardly the fuel of the future’. What they fail to mention is that increasing amounts of this are being imported and that the natural growing cycle of new trees will mean that any calculated reduction in CO2 emissions will be delayed by decades. This seems somewhat inconsistent with the apparent pressing need for reductions as soon as possible.

Despite its criticism of current policies, the Economist still firmly believes climate change mitigation action must be taken now: “The continent therefore has a responsibility to get the world to change its ways—and to change its own. . .if Europeans could make their carbon market work, other countries might even take notice and follow suit.”

This seems a naïve and forlorn hope. As mentioned in last week’s newsletter (Fuelling the future), the BP Energy Outlook 2035 paints a different picture, which does not seem to have been seriously questioned. By this reckoning, global energy demand will have risen by 41% from 2012 to 2035, with carbon dioxide emissions being 29% higher. Even if the EU had a coherent and workable emissions reduction policy, there seems no rational incentive for China, India, Brazil or the USA to follow suit unless it makes economic sense.

Perhaps the outgoing European Commission is beginning to bow to the inevitable, pulling us back from the brink of an unworkable near future based on unaffordable renewable energy. Let’s hope so.

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Letter published in The Times, 19 May 2014, A proper energy policy means tough choices