Towards a low-carbon energy future

Dr Derek M. Taylor

Energy Adviser

European Commission

Content

• Energy the EU in 2006

• The first Energy and Climate Change Package

• Completion of the Internal Energy Market

• The second Energy and Climate Change Package

• A new Energy Package

• Where are we now?

The European system

European Commission

European Council (Representatives of EU Member States)

European Parliament

PROPOSES

ADOPTS

for policy development and legislation for policy development and legislation -- Very simplifiedVery simplified!!

EU energy situation in 2006

Our energy supply:

• Was increasingly dependent on imported sources

• Was increasingly expensive (and making us less competitive with others)

• Was increasing pollution and accelerating climate change

- So a new energy policy was urgently needed

Security of supply

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

total oil natural gas solids

2000 2010 2020 2030

Main sources of imports

• Main suppliers of oil

– Russia (31%)

– Norway (20%)

– Saudi Arabia* (13%)

– Libya (10%)

– Iran* ( 7%)

– (* Total Middle East ~22%)

• Main suppliers of gas– Russia (42%)

– Norway (24%)

– Algeria (18%)

– Mainly LNG (16%)

• Main suppliers of coal

– South Africa (26%)

– Russia (16%)

– Australia (15%)

– Colombia (12%)

Border prices for oil and gas

Changes in CO2 emissions(in millions of tonnes – relative to 1990)

-200

-100

0

100

200

300

400

500

600

2000/1990 2010/1990 2020/1990 2030/1990

transport industry electricity/steam other total CO2

On a clear day …..

But all too often ……

….and the cause?

Energy and Climate Change- 1 -

• The first “Energy and Climate Change”package was adopted by the Commission in January 2007

• It became known as the “3 x 20 by 2020”

• It forms the basis of an EU energy policy

Core Objective

The core objective of the policy is:

• A 20% reduction of the greenhouse gas emissions thatenergy produces by 2020

• A « must do » target is we are to slow down climate change

And even …..

One very important target of 30%

• The Commission believes that when an international agreement is reached on the post-2012 Kyoto targets, that this shouldlead to a 30% cut in greenhouse gasemissions from developed countries by 2020 (of course!)

The other “20”s

Renewable energies

• Increase the level of renewable energiesin the EU’s overall energy mix to 20% by 2020

Energy efficiency

• The policy calls for a ambitiousimprovement in energy efficiency of 20%by 2020

European Summit of March 2007

• At the European Summit of March 2007 the Heads of State/Head of Government of the EU Member States strongly endorsed the Commission’s proposal.

• All three “20”s were endorsed by the Member States.

• The Commission was invited to follow up with proposals for legislation in a number of areas.

The Internal Energy Market

• The expected opening of the EU energy markets is slower than expected

• Further EU liberalisation is an important element of Community energy policy

• The Council clearly supported the Commission’s efforts to secure an effective liberalisation of EU energy markets and its work to secure more open and transparent energy markets.

As a result:

• Adoption by the Commission of the third package on energy market liberalisation on 19 September 2007

Main elements of the 3rd Internal Market Package

• The main elements of the Third Package are:

– Unbundling

– Control of EU networks – third country companies

– Facilitating cross-border transfers – new Agency

– More effective national regulators - measures

– Promoting cross-border collaboration and investment – European Network of TSOs

– Greater transparency - network operation and supply and pricing

– Increased solidarity – in the face of threats to supply

Energy and Climate Change - 2 -

• In January 2008 the Commission adopted the second “Energy and Climate Change”Package

• The main focus of this was on new legislation covering:

– Emission Trading (the ETS)

– Renewables

– Carbon Capture and Storage

Reducing Greenhouse Gases

• Proposal to amend the Directive which establishes the EU ETS.

• Cover the period beyond 2012

• Objective is to strengthen, expand and improve the functioning of the ETS

• The Directive defines MS emissions of GHG in 2020

Main changes to existing Directive

• Some of the main changes to the scheme include:– There will be one EU-wide cap on the number of

emission allowances instead of 27 national caps.– The annual cap will decrease along a linear trend line,

which will continue beyond the end of the third trading period (2013-2020).

– A much larger share of allowances will be auctioned instead of allocated free of charge.

– A number of new industries (e.g. aluminium and ammonia producers) will be included in the ETS; so will two further gases (nitrous oxide and perfluorocarbons).

Use of renewable energies

• This proposed legislation is to establish binding targets for the share of renewable energy sources in consumption and for biofuels in transport.

• A Community with target of 20% for renewables – with a specific binding target identified for each MS – by 2020

• Each MS to have 10% biofuels in transport

Current and future EU objectives for renewables

10%20%2020 (proposed

binding objective)

5.75%12%2010 (indicative

objective)

1.5%(2006)

8.5% (2005)Current (achieved)

BiofuelsRenewable

energy

Some examples….

13%6.1%Czech Republic

15%7.2%Poland

14%2.4%The Netherlands

15%1.3%UK

18%5.8%Germany

23%10%France

49%39.8%Sweden

38%28.5%Finland

16%9.4%Bulgaria

13%2.2%Belgium

Renewables Target 2020

Renewables 2005MS

Geological storage of CO2

• Main elements of a new Directive are:

– Enables CCS by providing legal framework

– Provisions for ensuring environmental integrity through the life-cycle of a storage plant (site selection up to post closure)

– CO2 captured and stored will be considered not emitted under the ETS

• The proposal is widely supported by Member States.

Demonstrating CCS

• While all technologies that will be used for CCS are in use, they have not been deployed together on a commercial scale

• Demonstration of CCS is therefore vital

• This should help convince the public (and politicians) that the technology works

• It should also result in technology improvements

• ….. and bring down the costs

Some of the (burden sharing) discussions are clearly proving to be very “difficult”….

Meanwhile ……

ETS and Renewables

• A big part of the debate is about “burden sharing” for both CO2 and RES

• The Commission proposals were based on exhaustive studies and analyses – in particular the “Impact Assessment” (SEC (2008) 85/3), its Annex (SEC (2008) 85 - 211 pages!) and other supporting documents

• All these documents are publicly available

• Please remember – the sole objective of the ETS is to drive down carbon emissions – in the fairest and most cost effective way possible

• Renewables, on the other hand, both reduce carbon emissions and increase security of supply.

Strategic Energy Review 2- and other documents

Adopted by the Commission on 13 November 2008 :

20 documents including:– 5 legislative proposals

• Oil stocks• Energy performance of buildings• Energy labelling• Tyres labelling• CHP Guidelines

– 8 Communications • Including SER, Green Paper on TEN E, Offshore wind, Update of

PINC, Energy efficiency proposals

– Remainder are staff working papers • Including one on energy demand, supply and investments

2nd Strategic Energy Review

• Title “An EU Energy Security and Solidarity Action Plan”(provisional)

• Number of interesting remarks– A competitive energy market is fundamental to achieving the

"20-20-20" targets.– The Energy Package will reduce energy consumption by as

much as 15% in 2020.– Complementary measures necessary to achieve 3 objectives –

above all security of supply.– Net imports of fossil fuels are expected to stay at roughly today's

level. – even when package fully implemented.

• Also looks at challenges to be faced beyond 2020

An EU Energy Security and

Solidarity Action Plan

• A five-point Action Plan covering:

– Infrastructure needs and the diversification of energy supplies

– External energy relations

– Oil and gas stocks and crisis response mechanisms

– Energy efficiency

– Making the best use of the EU’s indigenous energy resources.

Promoting energy infrastructure– 6 priorities

• Connect isolated energy markets - Baltic Interconnection Plan

• Southern gas corridor – must be developed –one of highest priorities

• Mid-2009 Communication

• LNG Action Plan in 2009• Communication on completing the

Mediterranean energy ring (2010)• N-S gas and electricity interconnection –

building on NETS initiative• Blueprint for a North Sea Offshore Grid – one of

building blocks for EU supergrid

A new impetus on energy efficiency

• 2008 Energy Efficiency Package

– Energy performance of Buildings – develop energy certificates of buildings into a real market instrument

– Revision of Energy Labelling Directive – extend beyond household appliances

– New energy label for car tyres

– Intensification of implementation of the Ecodesign Directive – e.g. new minimum requirements for light bulbs to be adopted, stand-by and off mode functions, street and office lighting ….

Energy efficiency continued…

– Promotion of co-generation – detailed guidelines for implementation of the Cogeneration Directive

– Cohesion Programme allocated over €9 billion to promotion of EE and RES

– Green Tax Package – review Energy Tax Directive and examine VAT and other fiscal instruments to see how they can be used to promote energy efficiency.

– Build on the IPEEC

– Evaluate the Energy Efficiency Action Plan in 2009 and prepare a more focused plan

Main scenario in 2020

233218249221257Nuclear

274270221197123Renewables

253216340342320Solids

345399443505445Gas

567608648702666Oil

16721712190319681811P.E.D.

New Policy

$100/bbl

New Policy

$61/bbl

Baseline $100/bbl

Baseline $61/bbl

2005mtoe

Vision for 2050

• Decarbonising EU electricity supply

• Ending oil dependence in transport

• Low energy and positive power buildings

• Smart electricity grid

• Prepare a "Roadmap towards a 2050 Energy Policy" in the framework of the SET Plan.

Finally…..

• The 20-20-20 by 2020 are targets that, once met, will set us well on the road towards achieving our vision for 2050

• They are important – in fact, very important if not vital – steps to a sustainable future

• If we fail to achieve them the cost to ourselves -and to the next and future generations – cannot be overestimated. But it will certainly be enormous.

• If you think life it hard now ……