The new EU energy package : towards more decarbonization and more complexity

In December 2016, the European Commission has presented a new package (entitled “Clean Energy for all Europeans”). This more or less completed the legislative program announced in 2014 in the framework of the Energy Union. The legislative activity is going to be intensive during the next two years. For general observers, it becomes quite difficult to understand the global strategy behind this tide of new regulations, directives, reports and impact assessments.

(Photo credit: Buzz2013, Flickr)

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The new EU energy package : towards more decarbonization and more complexity

In December 2016, the European Commission has presented a new package (entitled “Clean Energy for all Europeans”). This more or less completed the legislative program announced in 2014 in the framework of the Energy Union. The legislative activity is going to be intensive during the next two years. For general observers, it becomes quite difficult to understand the global strategy behind this tide of new regulations, directives, reports and impact assessments.

To begin with, it is necessary to remember the global context. In 2008, the EU adopted a first Climate and Energy strategy. So-called the “20/20/20 strategy”, it aimed to cut greenhouse gases by 20 % and reach 20 % of renewable energy in 2020 (20 % more energy efficiency was added later). It also prepared the Copenhagen climate summit of 2009 (largely a flop). A lot of things changed and in 2014 the EU adopted a second strategy, called now “the Energy Union”. The EU aimed to reach by 2030 a 40 % reduction of greenhouse gases (GHG) emissions, 27 % renewable energy in the total final consumption, and 27 % more energy efficiency. This also prepared the Paris climate summit of 2015 (partly a success). To do this, the Commission proposes a battery of various measures. There are basically four different axes in the December 2016 proposals.

The most important one is the strengthening of the EU strategy regarding energy efficiency. The Commission proposes to revise both the 2012/27 Energy Efficiency Directive (EED) and the Energy Performance  of  Buildings 2010/31 Directive (EPBD). The objectives for 2030 will be updated, the texts simplified, and implementation facilitated at national level.

In the revised EED, based on a comprehensive costs and benefits assessment, the target should be increased to a binding 30% progress at EU level by 2030. The energy saving obligation requiring energy suppliers and distributors to save 1.5% of energy will be extended, each year from 2021 to 2030, to attract private investment and support the emergence of new market actors. The directive will also improve metering and billing of energy consumption for heating and cooling consumers.

In the revised EPBD, the use of ICT will be encouraged to ensure buildings operate efficiently. Building renovation will be encouraged, by strengthening the links between achieving higher renovation rates, funding and energy performance certificates as well as by reinforcing provisions on national long-term building renovation strategies. Smart finance for smart buildings will support private financing for energy efficiency and renewables in buildings.

A new Ecodesign Working Plan for the 2016-2019 period will include a list of new product groups. It will also contribute to circular economy objectives. Products will be selected according to the importance of potential energy savings. Additionally, previous work plans will be reviewed, with a view to adapting existing Ecodesign standards to technological progress.

Second, it is proposed to improve in various ways the functioning of the electricity system. Electricity is at the heart of the decarbonisation strategy. It is meant to eliminate progressively the use of non fossil energy sources in our economic system. However, there remain many hurdles on that path. The national markets are still imperfectly integrated in the EU. The build up of renewable (and generally unstable) electricity sources provokes growing difficulties in the networks. Preferences granted to renewable sources make the traditional producers using fossil energy sources less profitable. To improve these elements, Directive 2009/72 on common rules for the internal market in electricity, Regulation 714/2009 on conditions of electricity cross border exchanges and Regulation 713/2009 establishing a European Agency for the Cooperation of Energy Regulators must be recast.

Third, the Commission has proposed a change of Directive 2009/28 on renewable energy. It aims to impose more market discipline to the sector after a strong development, to create more incentives in the difficult domains of heating/cooling and transport, to establish stronger sustainability criteria for biofuels, and to improve the protection of consumers.

Fourth, a new regulation is proposed concerning energy governance in the EU. It relies firstly on biennial National Energy and Climate Plans which should clarify responsibilities, define precise objectives, improve the consultation of various stakeholders up to 2030 and so contribute to regulatory stability and investment certainty. These integrated national energy and climate plans will cover ten-year periods. They will set out national objectives for each of the five Energy Union key dimensions and corresponding policies to meet those objectives. On this basis the Commission will issue recommendations to the Member States. This new Regulation will include provisions from other texts on climate monitoring mechanisms : the climate  Monitoring  Mechanism Regulation (MMR), the binding  greenhouse  gas  emission reductions for Member States  for 2021-2030 (‘Effort Sharing  Regulation’)  and  the land  use  sector  (‘LULUCF’) Regulation. There are obvious parallels with the existing monitoring mechanisms already covering the macroeconomic and structural policies of the Member States.

What will be the impact of all this ? A few careful conclusions can already be drawn.

This package is characterized by an extreme complexity. All relevant documents cover together approximately 1200 pages. This does not take into consideration the other proposals presented in 2015 (ETS reform) and 2016 (Effort sharing Regulation and LULUCF Regulation). The whole makes for an extremely difficult analysis. Many people in the Parliaments and governments, the regulatory authorities at all levels, and the operators, will have however to do it. Decarbonization is an extremely ambitious endeavour. As the EU progresses on that path, new problems arise.

This package also illustrates the difficulty to explain to the public the evolution of the energy system, and the role of the European Union in it. Everybody enjoys electricity in television, heat in housing, and petrol in the car, but not everyone appreciates necessarily how they happen to be there. This challenge will certainly grow in the next years.

The greatest challenge will remain to implement a deep reform of our energy system. Our past system was national, centralised, state-planned, and carbon-heavy. The new one must be transnational, decentralized, market oriented and decarbonized. This will a very long odyssey. The EU has already made some progress, but there will still be many stages.   One suspects – horresco  referens – that this huge package will not be the last one.

Franklin DEHOUSSE

Professor at the University of Liège

Former Special Representative of Belgium

Former judge at the Court of Justice of the European Union