European Commission has presented in the Energy 2050 Roadmap (December
2011) various scenarios outlining the consequences of a carbon-free
energy system and the policy framework needed to reach the established
long-term target of reducing CO2 emissions by 80% - 95% below the 1990
levels by 2050.
Fortum welcomes the Commission's aim to launch a
discussion on longer term targets and policies already now. Especially
the policy framework for 2030 should be established as soon as possible,
but the pathways for 2040 and 2050 should also be discussed. Due to the
long investment cycles of the energy sector, it is important to get
clarity also on the longer term milestones. Policy uncertainty is a key
risk for investors.
Although the discussion is
now moving towards outlining the future EU energy and climate policy
framework, it is important to keep the focus on the implementation of
existing commitments. Policies can only deliver when they are
Fortum is of the opinion that:
• Year 2020 (up to which the
EU has binding targets) is very close, especially taking into account
the amount of new investments and changes in the energy production
capacity that will be needed. Therefore the focus should now be put on
the longer term perspective (2030 and 2050). The EU should
agree, as soon as possible, on a sufficiently ambitious intermediate
target for CO2 emissions reduction, i.e. for 2030, on the way to the
agreed 80 - 95% emissions reduction target by 2050.
• An ambitious climate target for 2030 would make other related targets (renewables, energy efficiency) unnecessary.
If other targets were still considered necessary, they must be seen in
the context of the CO2 reduction target and set only after a CO2 target
has been agreed upon; measures should primarily concentrate on
eliminating possible obstacles to renewable energy and energy
efficiency. Compatibility of the targets must be ensured so that they
are not overlapping or conflicting and so that they are not watering
down the effectiveness of each other, as we have witnessed with the
current policy framework.
• A successful and
cost-efficient transition towards a low-carbon economy is not possible
without a well-functioning internal market. Compatibility of climate and energy policy targets and measures with the internal EU energy market must be ensured.
• The Emissions Trading
Scheme (ETS) has been operating, from a technical point of view, as
planned. However, historically low CO2 prices have not been able to
incentivise low-carbon investments. The CO2 price level is not due to
the ETS mechanism as such, but to an economic downturn and overlapping
steering mechanisms, including the proposed energy-efficiency directive
and schemes supporting renewable energy sources (RES). The most
efficient way to bring certainty to the carbon market would be to
establish a demanding CO2 target for 2030 as soon as possible.
• Regarding the topical ETS set-aside debate,
Fortum does not support interventions in the CO2 market solely to
eliminate the impact of an economic downturn on the CO2 price. However,
if there is clear evidence that other legislative acts (e.g. energy
efficiency, RES support schemes) would have an impact on the EU ETS, a
set-aside to eliminate that impact could be done. We therefore welcome
Commissioner Hedegaard's announcement in the context of the Informal
Environmental Council on 18 - 19 April 2012 that her service will bring
forward the first annual ETS report already by autumn 2012, and, based
on the report, the Commission could make a proposal before the end of
• With the financial crisis shaking Europe, more attention should be paid to the costs of decarbonisation.
Hundreds of billions of euros are needed for investments both in
low-emission energy generation and transmission infrastructure. Much
more emphasis should be put on the EU-level mechanisms instead of
national ones in order to bring in efficiency and cost-savings.
• An energy-only market
design can guarantee investments and efficiency in the best way.
However, there is a growing debate among the energy industry and
academic world about the capability of the current market model to
guarantee sufficient flexible capacity to balance an increasing amount
of intermittent renewable energy in the market. A clear trend towards
capacity payments in some countries can be noted. The Commission should
follow the development very closely and promote European-wide approaches
instead of national mechanisms, in line with the internal market