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Høringssvar 2010

Submission and comments for the “Towards a new Energy Strategy for Europe 2011 – 2020”

The Danish Ecological Council hereby sends its points of view on the hearing for the new Energy Strategy for Europe.

The Danish Ecological Council[1] hereby sends its points of view on the hearing for the new Energy Strategy for Europe.

The DEC associates itself with the submission made by the EEB of which we are a member. To underline this association we include the submission made by the EEB below.

On top of that we would like to add some points that are in the focus of the work of the DEC:

  • Energy renovation of buildings should not only be assessed on the basis of a narrow pay-back time in terms of only energy cost savings. Calculate also the so-called non-energy benefits that can have substantial positive benefits for health, learning abilities, work productivity, indoor climate and comfort in buildings when energy renovated correctly. The economic benefits of those NEB’s might easily be higher than the actual savings in terms of reduced costs for energy purchase.
  • Consider introducing a minimum price for AAU’s emission allowances in the EU ETS from 2013, in order to stimulate a higher price to give incentives for European industry innovation to be more energy efficient. The minimum price could be at the level of 150 to 200 Euros per tonne CO2. The increased revenue should be used for energy efficiency and renewables.
  • Reduce the possibility in the EU ETS to use non additional CER’s coming from CDM projects and substitute by additional CER’s – or even better by projects that do not allow increase of emissions in the donor country. The CDM system currently promotes non additional CDM projects – especially the destruction of HFC23 – that currently is half of the total volume of CER’s, with great damage for the climate.
  • Rethink the EU demands for CO2-emissions from cars. The development in just the recent couple of years shows that there are many possibilities to reduce emissions from cars. Conventional fossil fuel based cars has become much more energy efficient. Thereby the CO2-targets of the EU regulation for cars from 2008 are already not ambitious enough – and the ongoing negotiations on the regulation for vans should lead to more ambitious standards. Electric cars are on the verge of a break through demanding a smart charging system that prevents charging in peak hours and rewards charging when there is a surplus of electricity in the grid system. And biogas driven cars could have a much larger share – especially for heavy vehicles.
  • Introduce midterm targets for renewables for all member states in order to shift common national focus on achieving the 2020 in the easiest way over to consider if the efforts done for achieving the 2020 target actually leads the EU and its member states to the final goal of having totally phased out fossil fuels in 2050. Setting interim targets for 2025, 2030 etc. and ask for countries to report will help countries to choose the right efforts for the 2020 leading the way to next targets and the ultimate goal in 2050.
  • Elaborate much more on business and industry possibilities within the EU improving competitiveness when following economic incentives for energy efficiency by introducing ambitious targets supported by funding for the investment needs.
  • Take into consideration the need for job creation (and the following education and training) by carrying through a very ambitious strategy for energy efficiency by renovating buildings and production systems all over Europe.

 

The EEB submission with which we fully associate ourselves:

As Europe prepares for a new Energy Strategy for Europe 2011 – 2020, with the overall objectives to ensure that consumers and enterprises obtain safe, secure, sustainable and low-carbon energy at affordable and competitive prices, the EEB sets out below some priorities that must take precedence in order to achieve these objectives.

  • Set a binding energy savings reduction target for 20% by 2020, economy wide across all sectors, including the ETS, with specific national targets.

  • Introduce a clear, coherent and comprehensive policy package including innovative, targeted finance and investment sources and initiatives that will put the EU on track to meet the energy saving target.

  • A grading of financial support to encourage the most ambitious energy saving measures.

  • Introduce innovative energy management methods, to help consumers become more energy aware and to build an energy smart Europe

  • Adopt a more ambitious greenhouse gas reduction target, to at least 30%, based on domestic reductions, while opening the debate on taking the target to 40%.

  • Meeting the 20% renewables by 2020 target and developing a long term vision on renewables with the view of achieving 100% renewables by 2050, within a framework of considerable reduction of energy use in absolute terms.

  • An Emissions Trading Scheme that reduces emissions in the targeted sectors, auctions 100% of permits and delivers the funds for major energy efficiency and renewables promotion as well as sufficient investments in developing countries.

  • Initiate a coordinated EU-wide tax shift towards more taxes on energy use and natural resource pollution, including carbon while reducing labour taxes.

  • Revision of the Energy Tax Directive with sufficient minimum rates to reduce emissions and energy use.

  • Phase out fossil fuel subsidies with money re-directed to energy saving measures and renewable energies.

 

Energy Savings as a Core Contribution to the Strategy

The EU is the largest energy importer in the world. It currently imports 50% of its energy with estimates that this will rise to 70% in the coming 20 years if no further action is taken. The EU’s growing energy import dependency is a significant risk on many levels. Its is clear that consuming less energy is therefore critical in order to assure the EU’s economic stability and prosperity independently of the political and economic strategies of its suppliers. This is very important since our dependency on foreign sources of energy increases energy-price volatility, so harming the economy whilst endangering the poorest EU citizens who are especially vulnerable to steep increases in their energy bills.

Rising and volatile oil and natural gas prices should also be a significant motivation upon the need to reduce our energy use and increase its efficiency. Simply using less energy saves money, therefore reducing the economic burden of energy costs, bringing significant savings on household energy bills and a direct positive impact on the everyday lives of all European citizens.

The economic crisis gives us greater imperative to create greener, more efficient recovery and growth, and as an opportunity to transform our unemployed, or underemployed workforce creating local, long terms jobs across Europe. Energy saving investments are widely recognised to create new, or retain existing jobs. Targeting the building sector is particularly relevant in this regard.

As well as security issues, energy savings offer the largest, fastest and most cost-effective way to reduce our greenhouse gas emissions. Using one of the World Outlook stabilisation scenarios, it suggests energy efficiency could account for more than half of the reductions in energy related CO2 emissions by 2030. By investing increased efforts into energy saving practices, we can therefore do more to address climate change. By reducing energy use, in addition to the benefits mentioned above, we also meet our renewable energy targets faster.

Despite the known additional benefits and the political rhetoric of support to energy saving measures, particularly as a low cost solution to reduced emissions, energy savings have yet to be fully realised and serious political attention to be fully given to such actions. EU legislation thus far has been fragmented, non-binding, unambitious and poorly enforced. The 2006 Action Plan for Energy Efficiency for example, failed to mobilise as it was intended. As a result, we are not on track to meet our existing non-binding commitments. According to the Commission’s own projections, current policies will deliver only an 11% reduction on the 20% non-binding energy saving target. Preliminary findings from the “Energy Savings 2020” study to be published in September 2010 demonstrate that in 2020 a gap of around 208Mtoe will remain towards the EU policy target.

In the case of energy savings however, voluntary efforts have proved to be insufficient; neither driving the innovation, the policy nor the change with the immediacy and focus that an ambitious binding target can.

The stock-taking document itself recognises that in the area of renewable energy, there has been progress, due to the presence of a legally binding target. It is time therefore that energy savings, where it is given such political rhetoric and yet such little attention should be given equivalent consideration with opportunities for enforcement. The role and mandate of an EU wide regulator, ACER should be extended to energy savings.

The EEB calls for a legally binding absolute energy savings reduction target of 20% by 2020. The coverage of such a target should extend to all sectors, including the ETS, with specific national targets for each Member State. A level of ambiguity surrounds the existing policy target, particularly in terms of its baseline, and the definition as an energy saving or energy efficiency target. Introducing a target with the aim and intention to achieve net energy savings, combined with fixing a baseline year on which to track progress can help build clarity and focus.

The Commission’s stock taking document itself cites that it is not sufficient that a legislative framework is in place: it must also be implemented. We agree with this. This framework would need to be supported by a coherent and determined set of policy measures and innovative, targeted finance and investment schemes. Such a legally binding target may need to be sector specific, so that sectors can be appropriately addressed according to their contribution and potentials. It may also be necessary to consider the need for burden sharing measures adapting the target to each Member State. While high level discussions under the Europe2020 strategy consider the scope for national targets, this must not detract from the call for a binding savings target that can be shared across Member States. Establishing binding national energy saving targets can offer flexibility in choosing optimal and appropriate measures that are consistent with other national goals.

EEB believes it necessary to encourage the greatest energy savings, rather than picking off the shallow easy wins. For example, opportunities to renovate an existing building come only every 20 to 30 years, for that reason it is critical that we do not waste opportunities with small, incremental savings, but rather introduce ambitious and deep renovation programmes. For that reason we regard a grading of financial support would be beneficial, with the top level of funds available for the most ambitious energy saving measures in a deep renovation programme for existing buildings.

The EU Structural and Cohesion funds have the potential to catalyse the transition to a low carbon

economy in Central and Eastern Europe (CEE), particularly by giving priority attention to energy efficiency. Recent analysis from CEE Bankwatch Network and Friends of the Earth Europe[2] reveals however that the prospect of this transition still remains remote for now. As we approach the midpoint of the 2007- 2013 programming period, the pace of absorption of EU funds for renewable energy (RE) and energy efficiency (EE) projects remains slow even if the demand for financing is steadily on the rise. The report identifies a number of obstacles which cannot be ignored if the funds are to realise the potential in energy saving:

  • limited capacity of the managing authorities
  • a complicated application process and criteria
  • a lack of co-financing and upfront investment
  • lack of prioritisation by many governments

The European Investment Bank and its risk-capital subsidiary, the European Investment Fund, must broaden significantly their support for energy saving. Increasing the scope of the European Regional Development Funds and opening the Structural Funds to support energy saving activities will be needed. EEB welcomes a recent measure on the ERDF which allows all Member States up to 4% of their total allocation to be spent on energy efficiency improvements, including quality district heating and cooling and renewable energy investments in housing. The maximum amount available has been estimated at around €8 billion for housing projects. Using up to 4% of the ERDF allocation for energy efficiency improvements and the use of renewable energy is not an obligation but only a possibility. We would also like to see increased technical assistance made available to help Member States to access fully and effectively the increased money available for energy saving measures. This money should act as a major leverage to mobilize private sector financing, with long term investment, and a guaranteed pay back period based on the cost savings made (estimated at €25bn a year by 2020). Funds must be targeted towards low income households and social housing. Funds must also be allocated to implement training and retraining programmes and practical courses to help build a new workforce. Innovative financing schemes can play an important role here, including use of pension schemes, green bonds that can be diverted towards a dedicated energy saving fund. Pay As You Save schemes and targeted loans can help to initiate and target specific activities.

 

Tackling Climate Change

Efforts to reduce emissions must be a priority objective for the EU Energy Strategy. As outlined above, the full contribution from energy savings on abatement efforts must be taken into account. Realising full decarbonisation of the power sector by 2050 should take strong consideration to this, including extending the Renewables Directive with mid-term targets and to reach 100% renewables by 2050. Considerable analysis has been carried by others to show that this is possible.[3]

The stock taking document explicitly mentions the long term EU objective of a 80-95% reduction in greenhouse gas emissions by 2050 compared to 1990 levels. However our existing 20% emissions reduction target does little to ensure that we are on track to meet that long term goal. The recent European Commission Communication[4] unequivocally demonstrates that reaching a 30% target, below 1990 levels is easily technically achievable, affordable, and brings greater benefits to our economy and society. What is clear from this analysis is that the existing 20% target is redundant now on many levels. Recent data shows the EU’s 2009 emission were at 14% below 1990 levels, thus the 20% target no longer drives the ambition and innovation so necessary in determining our new Energy Strategy.

To be clear, for the EEB, even a 30% scenario is not enough. We promote a 40% emission reduction scenario for 2020. Only by doing so, provided it is mirrored with comparable policies in other parts of the world, do we have a greater chance of avoiding disastrous climate change impacts.

The ETS is a central tool to reduce CO2 emissions provided that it is effectively regulated, reformed and improved. However the ETS does not directly target energy efficiency of generation, but only indirectly by setting a cap on CO2 emissions. It also does not provide direct incentives to promote cogeneration. But the use of the heat losses from cogeneration decreases energy losses in energy conversion thus helping to increase energy efficiency and achieving the overall EU ETS cap.

NGOs have long endorsed an emission trading system based on 100% auctioning of allowances and with ambitious caps as the best way to generate a visible carbon price through the production and consumption chain. By now it is also clear that auctioning is the simplest and most transparent way to allocate allowances. Therefore, auctioning of allowances will be an important part of the allocation methodology after 2012. We are calling for a clear commitment that the revenue generated from 100% auctioning will be invested into energy saving and renewables, with transparent reporting that can be checked by the Commission and stakeholders. The EU ETS cap should be adjusted due to positive results of end use energy savings especially in buildings due to otherwise funded schemes for buildings, district heating, heat pumps, energy efficient cooling etc. EU – wide allocation rules for free allowances for some sectors will be based upon benchmarks. European benchmarks, if they are ambitious, can be a major driving force towards a profitable, innovative and efficient manufacturing industry in Europe.

 

Driving Innovation

Since 2008, when the 20% emission reduction target was set, European economics have changed. New emission projections show that achieving a 30% reduction target or more now comes within arms reach - moreover, the opportunities that come with such action far outweigh the costs. The Commission states in the Communication[5] that the extra costs of an unconditional greenhouse gas reduction target of 30% are easily compensated with important co-benefits such as green jobs creation, reduction of air pollution and industrial innovation.

There is growing evidence that Europe is losing its comparative advantage in clean technologies compared to other major economic players across the globe. Increasing Europe’s climate ambition is precisely in line with one of the core objectives formulated in the Europe 2020 strategy, namely to reorient our industrial and economic model. Furthermore, if we do not act fast, we risk losing out on what is increasingly becoming the global race to the low carbon, green economy. In fact, by sticking with the 20% emission reduction target we are undermining rather than stimulating innovation and economic recovery.

In terms of consumer information and tools to help change behaviour and traditional mindsets, a number of innovative energy management methods, would assist Europe in becoming energy smart, such as: smart metering, allowing for remote energy use management. It is crucial to be able to add flexibility to energy consumption patterns, in order to increase energy consumption when surplus is available and reduce energy consumption in scarce times; demand side management (DSM), allowing for active use management; hence, permitting daily use variations to be levelled out, optimising the operational costs of the system, improving its security and protecting it from excessive, unnecessary investments in the development of production capacity; smart grid, connecting energy systems that compliment each other will be needed – the best example is the optimal connection of wind and hydro in order to use hydro more and more as a reserve power when wind is not available.

 

Fiscal Reform

As the Europe 2020 strategy begins amidst the worst economic crisis in Europe’s lifetime, it has a complicated message for national governments: reduce your deficits as soon as possible, but also invest in activities that create long term growth. However, these are not mutually exclusive demands. It’s motto: “for smart, sustainable and inclusive growth”, points at knowledge, education and training, climate action and resource efficiency, and reducing poverty as key drivers for the economy of the next decade. Moreover, when it comes to the most immediate challenge, budgetary consolidation, Europe2020 clearly advises, in case increased tax income is necessary, “to shift the tax burden from labour to energy and environmental taxes as part of a “greening” of taxation systems.”, calling this a “growth friendly” strategy.

It is important that the Commission calls for environmental fiscal reform as part of a healthier taxation system. The current pricing system does not guarantee that external costs are included. Clearly, this is not an incentive to consume less, or to produce energy from more environmentally friendly sources. EEB believes that using market based instruments to give the right price signals should not be left for consideration in the longer term as proposed in the Commission’s stock taking document. As an effective tool, such reform and instruments must be introduced immediately, with a view that they become part of the short and long term solutions.

A tax introduced for a specific environmental purpose provides a clear statement of intent from government and politicians. Carefully designed product taxes targeted at discouraging the use of products that waste energy and money are required while a complementary reduced VAT for energy saving services, goods and products needs to be introduced.

EEB agrees with the Commission that “Experience has shown that taxation, as a means to internalize external costs, is a powerful tool in promoting energy efficiency.”[6] The Energy Strategy for Europe must include specific proposals by starting a coordinated EU-wide tax shift towards more taxes on energy use and natural resource pollution while reducing labour taxes. Given concerns about subsidiarity and the unanimity requirement in the Council, EEB proposes using the Open Method of Coordination (OMC) to establish such a common EU objective and guidelines in order to initiate an EU wide shift in taxation. OMC commits all Member States to work together towards shared goals while respecting legitimate national diversity. Once an EU-objective has been set, those Member States that are interested in further coordination of specific approaches could do so via the enhanced cooperation method. Introducing dynamic, standard setting schemes in the EU that address environmental as well as performance requirements in an integrated manner, along the lines of the Japanese Top Runner and the EuP Directive approach should be done without delay.

The long awaited revision of the Energy Tax Directive, should be used to decouple energy from growth and to get prices right, based on the principle of internalisation of all external costs. Ultimately, at this time, when an EU wide CO2 tax is back in high level discussions, the EEB insists on some basic principles; namely, that the revision of Energy Tax Directive leads to effective reduction of greenhouse gas emissions and of energy use in general. The tax levels have to reflect the currently unincorporated environmental costs of energy use. For example, a 30% emission reduction target might require a tax of 204 € per tonne. Exemptions should be minimized and rather accommodated with targeted social compensatory measures. The taxation policies should foresee a gradual build-up over a decade to both provide longer term certainty on the trend, and to give time to adapt. All or a large part of the money raised should be used to assist low income groups in coping with the consequences and for reducing costs, for example through VAT reductions, of environmentally friendly goods and services that need a boost on the market

Finally, recent analysis undertaken by the International Energy Agency to be presented in the World Energy Outlook (WEO) 2010, to be released in November[7] shows that fossil fuel subsidies are much higher than previously thought, rising to US$557bn in 2008 from US$342bn in the previous year. By phasing out these subsidies, it would send a significant price signal to create incentives for more efficient use. Such subsidies could be re-directed into renewable energy industries and energy saving practices.

 

With regards

 

Søren Dyck-Madsen

 

Policy officer on Energy, energy savings, renewables and climate

The Danish Ecological Council

Blegdamsvej 4B

2200 Copenhagen N

DK Denmark

+45 33 15 09 77

soeren@ecocouncil.dk

 

 


[1] The Danish Ecological Council DEC (Det Økologiske Råd) is a Danish NGO founded in 1991. Our main objective is to promote a sustainable development, where environmental concerns, social justice and human well-being are main focal points. The Ecological Council is different from other Danish NGOs in the way that it is an academic organisation dealing with environmental policy on a scientific basis, but at the same time trying to inform and have a dialogue with both politicians and the general public.

[2] Potential unfulfilled : http://bankwatch.org/documents/potentialunfulfilled.pdf

[3] http://www.roadmap2050.eu/

[4] "Analysis of options to move beyond 20% greenhouse gas emission reductions and assessing the risk of carbon leakage”

[5] "Analysis of options to move beyond 20% greenhouse gas emission reductions and assessing the risk of carbon leakage”

[6] COM(2006)545 final; Action Plan for Energy Efficiency: Realising the Potential, p. 17

[7] http://www.iea.org/files/energy_subsidies.pdf


     

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