EU 2030 energy and climate policy framework: Commission Green Paper

Europe needs clear and consistent energy and climate policies to support the competitiveness of its economy.

​When designing energy and climate policy targets and measures to reach them, the EU must rely on the core source of its competitiveness i.e. well-functioning internal energy markets. EU cannot afford policy measures that do not exploit the internal market or which are non-market based and/or predominantly national. Unfortunately, the current trend in this regard is very negative: National subsidies for renewable energy have raised the need for national capacity remuneration mechanisms that are either already introduced or planned in many member states. If the functioning of the emission trading is not addressed, the risk for national CO2-taxes increases. This development must be reversed.

We welcome the EU Commission's formal launch of a process to establish the 2030 EU energy and climate framework with the Green Paper that was published today. For the energy sector, where investments are capital intensive and with long lead times, it is crucial that key decisions concerning the future energy and climate policy framework will be made as soon as possible.

Energy sector is a major investor with even bigger investment potential. However, nearly all market based investments are currently on hold in Europe because of the increasing uncertainty regarding the future policy framework. The key source of uncertainty relates to the development of the EU emission trading scheme and to the role of the carbon price as a driver for de-carbonisation.

It is important to draw on lessons learned from the current framework, especially regarding the target setting. The current architecture, which is based on multiple targets and overlapping steering mechanisms, has created a complicated system where different measures are diluting each other's effectiveness and creating market distortions. An additional complication comes with the fact that only one of the EU level targets, namely the CO2 target, is implemented by a EU level mechanism whereas the other two targets are implemented with national measures. There is a clear need to streamline the current policy framework in order to avoid unnecessary cost and to protect the competitiveness of the EU economy.

In Fortum's view:
• Well-functioning and efficient internal energy market is essential for reaching the de-carbonisation target in the most cost-efficient way, lowering the overall social costs of de-carbonisation.
• The focus should be placed on carbon emission reduction. The 2030 framework should be based on a single binding headline target for CO2.
• The level of target should be in line with the 2050 de-carbonisation aspiration (80 - 95 % CO2 reduction from 1990 level) which in our view would be in the range of at least 40 % for 2030. The present trajectory will lead only to about 60 % CO2 reduction by 2050.

The EU ETS is the most efficient tool to be used to meet this target. Mechanisms to increase the stability of the EU ETS should be investigated.
• Additional targets for renewable energy or energy efficiency, if they are needed at all, should be supportive to the headline CO2-target. Measures promoting these targets should not water down the CO2-price incentive or undermine the functioning of the internal energy market, and they should be harmonized to the extent possible.
• European policy needs European implementation measures. Complementary national policies (CO2 taxes etc.) must be avoided in order to secure a level playing field in the common market as these would lead to unnecessarily high costs.

Next steps:
• Debate in the informal Energy and Environment Council meeting on 23 - 24 April
• European Council meeting on 22 May (focus in internal energy market)
• Public consultation open until 2 July 2013
• Publication of the Commission White Paper before the end of 2013