The decision made by the European Council builds confidence in the political commitment to climate change mitigation. It also improves the prerequisites for investments in low-carbon energy production. The contents of the consensus reached can be considered a good compromise. The European Council committed to reduce greenhouse gas emissions by at least 40% from 1990, to increase the share of renewable energy to 27% of final energy consumption and to increase energy efficiency by 27%. The EU's decisions are an important first step towards the upcoming global climate negotiations in Paris in late 2015.
It is vital to maintain the central role of greenhouse gas reduction and emissions trading in the implementation of the EU climate policy. In the implementation of the targets for renewable energy and energy efficiency alongside the emission reduction target, measures should primarily focus on non-ETS sectors.
Urgent reform of ETS required
The European Council's clear position on the importance of a well-functioning and reformed emissions trading system in the implementation of the EU energy and climate policy is welcomed. Tightening of the emission reduction target alone is not enough to strengthen the emission trading system, but additional measures are needed already before 2021.
It is utmost important to introduce the market stability reserve mechanism that has been mentioned in the Council conclusions and is currently under negotiations already in 2017. The mechanism would increase stability and predictability in the allowance market, but would keep the emission cap unchanged. A well-functioning emissions trading system improves the competitiveness of low-carbon technologies and enables the climate targets to be met with the least cost.
Market-driven practices and cost efficiency the main principles for the legislation
The aim should be to use as uniform, market-based and cost-efficient tools as possible in the implementation of the agreed climate and energy targets up to 2030. This is the best way to support Europe's competitiveness and to secure low-carbon electricity at a competitive price to customers. Securing the competitiveness of the European industry is a true concern: the cost of the EU's climate targets to the industry should be compensated until other countries commit to comparable targets.
Efficient internal energy market a way to improved energy security
The Council conclusions highlight quite correctly the importance of a fully functioning and connected internal energy market in improving the EU's internal security of supply. Also a strong climate policy together with the emissions reduction target naturally contribute to a better security of supply by incentivizing both energy efficiency and development and deployment of renewable and other low-carbon energy sources.
Merja Paavola, Vice President, Corporate Relations, +358 50 396 1161
Kari Kankaanpää, Senior Manager, Climate Affairs, +358 50 453 2330
Fortum’s purpose is to create energy that improves life for present and future generations. Catering to the versatile needs of our customers, we generate, distribute and sell electricity and heat, and offer related expert services. Our operations focus on the Nordic and Baltic countries, Russia and Poland. In 2013, Fortum’s sales totalled EUR 6.1 billion and comparable operating profit was EUR 1.6 billion. We employ approximately 8,800 people. Fortum’s shares are traded on the NASDAQ OMX Helsinki. www.fortum.com