Europe’s strategy for a low-carbon future

In January, the European Commission presented a blueprint for international climate action up to 2050 and explained how it plans to manage the transition to an EU low-carbon energy system. Keith Tyrell examines the proposals

Europe can lead the world to a new industrial revolution: the development of a low-carbon economy," according to Energy Commissioner Andris Piebalgs.

Commission President José Manuel Barroso echoed his words: "The decisions we take today are the decisions for a low-carbon economy, the decisions for a post-industrial revolution. We have already left behind our coal-based industrial past. It is time to embrace our low-carbon future."

Both men were speaking at the launch of an integrated energy and climate strategy proposed by the European Commission which aims to slash Europe’s greenhouse gas emissions and improve the bloc’s energy security.

The strategy is made up of several reports which European leaders will consider at their spring summit in March.1,2

It marks a watershed in that it explicitly links EU energy and climate policies. Energy is responsible for 80% of EU greenhouse gas emissions, but until now the Commission has struggled to connect the two policy areas effectively.

The Commission has proposed a unilateral target for the EU to cut emissions by 20% on 1990 levels by 2020. This will require a major cut in emissions from energy production. By 2050 the Commission wants EU energy production to be largely decarbonised. This will mean an increase in the contribution of renewables, and carbon capture and storage used in all fossil fuel plant.

Europe takes the lead
The Commission has taken the existing EU objective of keeping the rise in global temperature below 2°C as the starting point for its climate strategy. This, it says, will require atmospheric concentrations of greenhouse gases to be stabilised at 450ppm CO2 equivalent but, even at this level, there is still a 50:50 chance that temperature rises will exceed 2°C.

Given atmospheric concentrations currently stand at 430ppm and are rising at 2-3ppm a year, keeping them below 450ppm is a tall order. The Commission has therefore opted for an emissions reduction scenario which would see atmospheric concentrations initially exceed the limit before falling in the long term.

Its approach is in line with the conclusions of the EU Environment Council in 2005, which said global emissions should peak within the next two decades before falling by as much as 50% on 1990 levels by 2050 (ENDS Report 363, p 59 ).

The pathway to 450ppm presented in the strategy’s impact assessment3 would require global emissions to peak at about 25% above 1990 levels in 2025 and then reduce to about 25% below 1990 levels by 2050. This scenario broadly corresponds with the option presented by Sir Nicholas Stern, in his review for the UK government, to keep atmospheric concentrations between 450ppm and 550ppm (ENDS Report 382, pp 34-36 ).

The Commission recognises that the EU cannot combat climate change alone. The strategy presents the Commission’s goals for a new international agreement after 2012 when existing commitments under the Kyoto Protocol expire.

It agrees with Stern that developed nations should shoulder most of the burden of reducing emissions. A 25% cut in global emissions by 2050 could mean a 60% cut in developed country emissions, while a 50% global reduction might require an 80% cut.

By 2020, the Commission says emissions from major developed countries should be 30% below 1990 levels and this should be the goal of any post-2012 international climate agreement. In the meantime, the EU should commit itself to a unilateral 20% cut in its own emissions by 2020 regardless of action elsewhere to "demonstrate international leadership."

Green groups welcomed the target for industrial countries, but slammed the unilateral goal for lacking ambition - some of the EU’s biggest emitters including Germany and the UK have already indicated they will support a 30% target.

A "lower target for the EU casts doubt on the Commission’s understanding of quite how serious a problem climate change will be," said John Hontalez of the European Environmental Bureau.

But the unilateral target goes far beyond most other countries. What is more, the proposed 30% target is unlikely to go down well with other developed nations like the US and Australia, which have refused to ratify the Kyoto Protocol, or Canada which is struggling to meet its Kyoto commitment.

While there are signs the US’s stance on climate change is beginning to soften (see p 13  ), it is unlikely to countenance emissions reductions on the scale proposed by the Commission. US emissions are about 16% above 1990 levels and rising, so meeting the proposed 30% target would mean annual cuts of 3-4%.

"What the Commission is proposing is even more demanding than the most stringent target proposed by Congress," said Andrew Aulisi, climate director at the World Resources Institute in Washington.

Jason Anderson of the Institute for European Environmental Policy agreed. "Everything I’ve seen from the US points to stabilising at 1990 levels," he said. "I can see why the Commission has gone for 30% - that’s what the science says - but it’s a very big jump for the US."

Nevertheless, he thinks US action is essential. "You can only show leadership for so long, after that you’ve got to take people with you," he said.

"If we have a 30% bubble for developed countries, the US does nothing and we take up the slack then we’re all going to be living in yurts and planting a lot of trees."

Reining in China and India

Even though developed countries will bear most of the cuts, the Commission insists developing nations will have to take some action. It points out that developing countries’ emissions will overtake those from developed countries by 2020, more than offsetting any cuts Europe can make.

It wants large developing countries like China, India and Brazil to take steps to slow emissions growth. The poorest countries would not be required to make cuts.

The Commission suggests that by 2020 large developing countries should stabilise emissions and begin to make absolute cuts. It says each country’s reductions should be "in accordance with its per capita emissions, its potential to reduce emissions, and its technical and financial capacity" to make cuts.

Under its reduction scenario, developed countries’ emissions in 2020 would be twice those of 1990 and by 2050 they would still be 46% above 1990 levels, but under a business-as-usual scenario their emissions would be more than three times higher.

Even though developed countries take responsibility for most reductions under this approach, developing countries will still view it as demanding.

"A global bargain that would see India and China’s emissions levelling off would lighten the load on more developed economies, but it is a pretty aggressive position and it’s not clear they [developed countries] will go for it," said the WRI’s Andrew Aulisi.

To sweeten the pill, developed countries should get help with the costs through development aid and targeted loans from international institutions. The Commission also proposes a revamp of the Kyoto Protocol’s clean development mechanism (CDM). It suggests the scheme be expanded to cover entire national sectors. The idea is that credits would be generated if a sector manages to cut emissions beyond a specified target.

While this approach could stimulate investment in swathes of industry and kick-start sector-wide action, it would make the mechanism more complex to administer.

In particular, it would require detailed data collection to underpin target-setting, and emissions reductions credits could be generated through economic downturns or abnormal weather.

The EU’s own emissions trading scheme has suffered from lax target-setting in spite of extensive data collection and detailed sectoral emissions forecasts. Some developing countries would struggle to carry out similar exercises.

Decarbonising the global energy system
The transfer to a low-carbon economy will require cuts across all sectors, but the biggest will come in the international energy system. The EU’s own energy strategy charts a course to decarbonising the EU energy sector (see box  ), but similar action will be required globally. In its impact assessment, the Commission expects two-thirds of global emissions reductions in 2030 to come from the power sector.

This is made even more challenging by a soaring demand for energy - by 2050 electricity use is expected to rise by nearly 75%.

Even an expanded CDM would be inadequate to fund the forecast investment in new electricity generation. The International Energy Agency estimates annual investment in energy infrastructure in developing countries could be as high as $200 billion until 2030. Opting for low-carbon energy sources could increase these costs by about 20%, but would reduce fuel bills substantially.

Renewables, including hydropower, are expected to grow more than four-fold by 2050 and those other than hydro are expected to grow 24 times. By 2020 renewables will supply 19% of primary energy and 40% by 2050.

Fossil fuels will continue to play a significant role, but the Commission is banking on carbon capture and storage (CCS) to deal with emissions from this source. It predicts that by 2030 nearly a third of the power sector’s remaining emissions will be captured this way, rising to 60% in 2050. Much of this will take place in developing countries so that in China, for instance, 40% of emissions will be captured in 2030, rising to two thirds in 2050.

Nuclear is also projected to grow to account for about a quarter of electricity in 2030 and 2050 and energy efficiency is expected to contribute.

The other priority is to halt tropical deforestation within the next 20 years and to begin reafforestation thereafter.

The Food and Agriculture Organisation estimates 13 million hectares of forests are lost each year, adding 20% to global CO2 emissions. By 2025 a further 5% of the world’s forests will be lost.

To reverse this trend, financial incentives for protecting forests will be needed. Talks are in progress under the UN Framework Convention on Climate Change to develop such incentives, but the Commission wants them speeded up. It proposes a series of large-scale pilot schemes to apply a carbon price to forest resources.

Such an approach is fraught with problems, not least because it will have to ensure that those relying on forest resources receive the compensation for retaining the forests. But it is not impossible and recent initiatives to offer direct incentive payments have been established in parts of Latin America.

How much will it cost?
The Commission insists its proposals are affordable. It calculates they will knock just 0.19% off global GDP each year up to 2030, leading to a reduction of 0.5% in global GDP in 2030. In contrast, the global economy is predicted to double over the same period.

Inevitably, the costs will be unevenly spread. EU growth could be reduced by as much as 0.24% a year, while Brazil and China would only see GDP growth trimmed by 0.06% annually.

These costs are based on a range of assumptions. One of the most important is the generation of a high and stable price for carbon through an international emissions trading system based on the EUETS and CDM to encourage emissions reductions to take place in the most economic way.

The Commission estimates the international carbon market will grow ten-fold between 2010 and 2030. The carbon price would be €31 per tonne of CO2 in 2020, rising to €65 per tonne in 2030.

To maintain this price, developed countries will need to accept and meet a 30% reduction target. To help this, the Commission wants any future international agreement to be able to enforce the commitments.

A line in the sand

Some have questioned the wisdom of the Commission in setting out its negotiating position for a post-2012 agreement so publicly. But in doing so - and by being guided by the science in setting its targets - it has drawn a line in the sand and it will be up to other players to come forward with alternative pathways to avoid dangerous climate change.

The proposals now go to the European leaders for consideration and could be watered down, but they are less ambitious than some member states have proposed publicly and the Commission has been careful to shadow the approaches endorsed by environment ministers and the European Parliament.

The Commission has tried to show leadership; it remains to be seen whether the US, China and India are willing to follow.