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Effort-sharing for non-ETS sectors

with Jos Delbeke
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The EU has decided to reduce its emissions by 2030 with 55% based, compared to 1990. Now, the question is how are these emissions reductions going to be achieved and the EU decided about two blocks. We have the market-based instrument, the ETS, on the one side, and we have the sectors of the economy not falling under the ETS. So, let’s focus one minute on the Emissions Trading System. This is covering the sectors of energy, industry and internal aviation inside the EU and the reduction percentage is 61% by 2030 based on 2005 emissions. So, that’s quite an ambitious target for the ETS.
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Then, the other sectors not falling under the ETS are basically the sectors covered by what we would call the “small emitters”, the citizens, there are too many of them compared to the Emissions Trading System where we have big companies being the responsible actors. Now, under the non-ETS or what we then later will call the effort sharing, the target is -40% by 2030 based on 2005. And, if we look at the sectors covered by the effort sharing,
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three elements stick out: buildings, transport and agriculture. And these are subjects that, or sectors that have to be dealt with in developing appropriate policies basically by the Member States. So, that’s why the effort sharing, the “small emitters” sectors, these are translated into a separate piece of policy separate from the ETS and they are defined in targets for the Member States, but they are differentiated. They are differentiated according to the particularities of these Member States and in particular the levels of wealth they have reached so far.
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So, if we take the ambition level that was developed originally for the 40% by 2030, the differentiation is being, you know, sketched out on this graph and you see that some Member States like Bulgaria, for example, and Romania, who are the least wealthy Member States, can limit themselves with zero reduction of greenhouse gas emissions, while the most wealthy Member States such as Luxembourg and Sweden have to reduce their emissions with -40%.
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These figures now need to be recalculated and that is going to be the result of the negotiations that are unfolding, but you can imagine that the smallest reduction percentage is going to be 10% and the highest 50% with differentiation according to the different wealth levels of the different Member States. Now, if we have a look at what happened in the past since 1990 and where we have been reducing our emissions in the most important manner, the energy supply and the industry, the manufacturing industry stands up. There we have been reducing our emissions with degrees 25, 30, 35%, so steadily and gradually in those sectors we are reducing our emissions.
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But this is not the case in sectors such as transport where instead by 2017, as you can see on the table, we have increased the emissions compared to where we were in 2005. And, if we have a look at international aviation, for example, we have multiplied our emissions coming from this sector. Of course, transport and international aviation are in terms of size somewhat less important compared to energy and manufacturing, but still it signals that there is a very differentiated record in how we were able so far to reduce our emissions. Now, what are the lessons we can draw out of the climate policy experience since 2005?
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The first lesson is certainly that all noses have to be put in the same direction. We do that globally through the Paris Agreement but, inside the EU, the European Council, the European Parliament have been very important to develop a scheme within which all Member States take the same direction of travel and that is very crucial, that is that all noses have been put in the same direction. A second lesson is that we have a gradual introduction. Measures, policies are difficult to get started but once they have been put in place they need to be modified and tightened up and gradually they produce the emissions reductions over time.
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A third lesson is that everybody needs to be involved in the policy design because every policy has distributive effects and the social effects can be very important. Think about the transport sector, think about the price in carbon and energy at the pump, we have seen the phenomenon of the Gilets Jaunes in France and so the social impact needs to be explicitly addressed through the development of climate policies. Now, efficiency, and that’s the fourth element, is very important and a price on CO2 that has been developed through the carbon market or through carbon taxes is very important to guide the efficiency of the overall effort. And, of course, innovation.
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The way we produce things, the way we consume things is very important and is crucial but they must be rolled out in investment. It’s not just sufficient to have good ideas being developed in universities and in laboratoria, they have to be developed into low-carbon investments and that is why the effort of the EU and the Green Deal in particular is basically a major investment effort. What are the key messages then that we would draw over what our experience is in Europe?
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Well, we succeeded in bringing down the greenhouse gas emissions since 1990 with 24% and the Green Deal will take that further and we were able to increase our GDP, our overall level of wealth and the economy, so we succeeded to decouple emissions from economic development. Europe aims for climate neutrality by 2050 and so the target, the intermediate target is 55% reduction by 2030 compared to 1990, and the development of a long raft of policies is currently taking place and is evolving every day.
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A range of policies is important because every sector is different, every Member State is different and it incorporates re-distribution mechanisms, as well as pricing mechanisms, so a range of policies is what really matters and that is what the Green Deal of the European Union is offering.

How can the EU commitment to reduce greenhouse gas emissions be achieved? What are the instruments that target the EU as a whole (single market), and how can the differences between EU Members States be accounted for?

One important characteristic of EU climate policy is that it distinguishes between big and small emitters. The European Emissions Trading System that targets big industries (like for example energy companies and the manufacturing sector) will be covered in more detail next week (Week 2: The EU Emissions Trading System).

In this video, Jos Delbeke introduces the so-called effort sharing decisions that addresses these differences. He also concludes on the key lessons we can derive from the EU climate policy-making experience.

Download the graph on the EU Member States national 2020 targets under the Effort Sharing Decision (ESD) and proposed targets for 2030

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