Enerdata. Mind the gap: Aligning the 2030 EU climate and energy policy framework to meet long-term climate goals

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1 CLIMATE BRIEF N 52 Mind th gap: Aligning th 2030 EU climat and nrgy policy framwork to mt long-trm climat goals For a bttr coordination of climat and nrgy policis through th rgulation on th Govrnanc of th Enrgy Union Paris, April 2018 Authors: Charlott VAILLES Émili ALBEROLA Blais FARROKHI (I4CE) Cyril CASSISA Jérémy BONNEFOUS (Enrdata) Enrdata SUMMARY With th rvision of its 2030 climat and nrgy policy framwork, and in particular th ngotiations on th Govrnanc of th Enrgy Union, a window of opportunity is currntly opn in th Europan Union (EU). Th most should b mad of this opportunity to implmnt a cohrnt and ambitious policy mix in th EU to fulfill its climat commitmnt undr th Paris Agrmnt. This climat brif provids a synthsis of ky rsults from a rport to b publishd within th framwork of th rsarch program COPEC II (COordination of EU Policis for Enrgy and CO 2 by 2030). Launchd in April 2017, th rsarch program aims at prparing policymakrs for th rvision of th 2030 climat and nrgy packag. A first rport, availabl onlin, was alrady publishd on th EU ETS rform for th post-2020 priod. Th authors tak sol rsponsibility for findings or idas prsntd in this rport as wll as any rrors or omissions. This rport dos not rflct th opinion of any govrnmnts or privat companis. Th authors would lik to thank th sponsors of this rsarch program for thir financial support. Thy would also lik to thank xtrnal xprts for thir valuabl inputs on th rport: Jan-Yvs Canill (Indpndant climat xprt), Paula Coussy (IFPn) and Pirr Marion (IFPn). Th EU committd through its Nationally Dtrmind Contribution (NDC) to rduc its GHG missions by at last 40% in 2030 compard to 1990 lvls. This targt is to b achivd through two policy instrumnts: th EU missions trading schm (EU ETS) and th Effort Sharing Rgulation (ESR). In th EU 2030 climat and nrgy policy framwork, countrproductiv intractions crat surplus on th EU ETS in spit of th implmntation of th Markt Stability Rsrv (MSR) in 2019 and on th ESR, which undrmins thir ffctivnss and jopardizs th achivmnt of climat targts. Th policy framwork as currntly ngotiatd lacks concrt provisions to mitigat th ffct of countrproductiv intractions. An alignmnt of th EU policy framwork, by taking into account GHG missions rductions coming from othr policis in stting th EU ETS cap and th annual missions allocations undr th ESR, would rstor thir rspctiv ffctivnss by 2030 and byond. Furthrmor, th EU 2030 climat and nrgy framwork falls short of its long-trm climat ambition, which should itslf b incrasd to fulfill its commitmnt undr th Paris Agrmnt. First, EU long-trm ambition should b incrasd in lin with th objctiv of th Paris Agrmnt and aim at nt-zro missions by Scondly, th 2030 climat and nrgy framwork should b alignd to this incrasd long-trm ambition. Tn policy rcommndations ar dfind, to mak th EU climat and nrgy policy framwork consistnt with th Paris Agrmnt bfor 2030, by: 1. Stting th EU long-trm climat targts right, taking into account th goals of th Paris Agrmnt; 2. Dfining a climat and nrgy policy framwork alignd with long-trm targts at th EU and national lvls; 3. Ensuring th cohrncy of th policy framwork and mitigating countractiv intractions. April Climat Brif n 52 I4CE 1

2 Outlin Introduction 2 1. Th EU GHG missions rduction targt for 2030 is to b achivd through two policy instrumnts: th EU ETS and th ESR, which dfin carbon budgts ovr A. Th carbon budgt approach crats som uncrtainty: th complianc with th EU ETS and with th ESR dos not nsur th achivmnt of th EU s NDC by B. Th carbon budgts dfind by th EU ETS and th ESR should b calibratd accuratly 3 2. In th EU climat and nrgy framwork, countrproductiv policy intractions undrmin th ffctivnss of th EU ETS and th ESR 5 A. Historically, th incras in nrgy fficincy and th dploymnt of rnwabl nrgy sourcs contributd gratly to rducing GHG missions across th EU 5 B. Enrgy fficincy and rnwabl nrgy policis ar xpctd to continu to significantly contribut to rducing GHG missions in th post-2020 priod 7 C. Ths policy intractions undrmin th ffctivnss of th EU ETS and th ESR 9 3. An nhancd govrnanc approach to th EU climat and nrgy framwork is rquird 11 A. Assssing th impact of policis on othrs is a ncssary stp 11 B. Aligning EU climat and nrgy policis in th 2030 policy framwork nabls to mitigat countractiv intractions 12 C. Aligning th EU 2030 policy framwork to an incrasd long-trm ambition sts th EU on a pathway mor compatibl with th goals of th Paris Agrmnt 12 Conclusion and policy rcommndations Policy rcommndations to mak th EU climat and nrgy policy framwork consistnt with th Paris Agrmnt bfor Bibliography 16 Introduction Th 2030 climat and nrgy policy framwork is currntly bing ngotiatd in th EU. Th first pic of this policy framwork was th rvision of th EU ETS - th EU missions trading schm - for th priod on which an agrmnt was found btwn EU institutions in Novmbr An agrmnt was also found in Dcmbr 2017 on th Effort Sharing Rgulation (ESR), which sts missions rduction targts for grnhous gass (GHG) missions in sctors not covrd by th EU ETS. Th othr lgislativ pics of th 2030 climat and nrgy framwork ar currntly undr ngotiation. Th EU Commission publishd in Novmbr 2016 lgislativ proposals on nrgy fficincy, rnwabl sourcs of nrgy, th organization of powr markts and on th govrnanc of th Enrgy Union, a txt of particular importanc, as it will aim at nsuring th cohrncy of EU action on climat and nrgy. A policy window is currntly opn and th most should b mad of this opportunity to implmnt in th EU an ambitious policy mix to fulfill its commitmnt undr th Paris Agrmnt. As dmonstratd by our first COPEC II rport, countrproductiv policy intractions undrmin th functioning of th EU ETS and th trajctory of its missions cap is not alignd to th EU long-trm climat ambition. In ordr to xtnd ths rsults, and to fd-in th ongoing ngotiations on th Govrnanc of th Enrgy Union and on othr lgislativ pics, this climat brif provids: An analysis of intractions btwn EU nrgy and climat policis. Th analysis is carrid out on historical data ( ) and on projctions until 2030 Options on how to bttr align policis to mitigat countractiv intractions and mt an incrasd EU long-trm climat ambition in lin with th Paris Agrmnt. 2 I4CE Climat Brif n 52 - April 2018

3 1. Th EU GHG missions rduction targt for 2030 is to b achivd through two policy instrumnts: th EU ETS and th ESR, which dfin carbon budgts ovr Th EU committd through its Nationally Dtrmind Contribution (NDC) to rduc its GHG missions by at last 40% in 2030 compard to 1990 lvls. Whil th EU ETS sts an EU-wid cap on GHG missions from larg-scal facilitis in th powr and industrial sctors and on flights within th Europan Economic Ara, th ESR sts an annual cap on GHG missions from non- ETS sctors with th xcption of land-us for ach Mmbr Stat -its annual missions allocations (AEAs). Th conomy-wid GHG missions rduction targt in 2030 is to b achivd through a rduction in GHG missions covrd by th EU ETS and by th ESR of rspctivly 43% and 30% compard to 2005 lvls in 2030 (s Figur 1). Th EU ETS and ESR, as thy rspctivly allow th carry-ovr of allowancs and AEAs ovr th priod (gnrally calld banking ), dfin carbon budgts: cumulatd GHG missions ovr th priod cannot b highr than th cumulatd EU ETS cap in ETS sctors and than cumulatd AEAs in non-ets sctors. A. Th carbon budgt approach crats som uncrtainty: th complianc with th EU ETS and with th ESR dos not nsur th achivmnt of th EU s NDC by 2030 This carbon budgt approach maks sns bcaus climat chang dpnds on cumulatd GHG missions and not on th lvl of GHG missions in a spcific yar. Howvr, by dfinition, th budgt approach dos not nsur th achivmnt of a givn rduction targt in GHG missions in a spcific yar (s Figur 2). Th dvil is th dtail of EU lgislations: th NDC rquirs a rduction in GHG missions in 2030, whil th ESR and th EU ETS limit GHG missions ovr a givn priod. This dsign diffrnc crats uncrtainty about th ability of th EU ETS and th ESR to nsur th achivmnt of th EU s NDC in In th sam way, th complianc with th EU ETS and with th Effort Sharing Dirctiv (ESD) until 2020 dos not nsur th achivmnt of EU s 2020 climat targt, which is split btwn a 21% rduction compard to 2005 in ETS sctors and a rduction of around 10% compard to 2005 in non- ETS sctors. As an ordr of magnitud, th cumulativ surplus of AEAs was quivalnt to 744 MtCO 2 in Using this ntir surplus in 2020 assuming no mor surplus is cratd in would allow a 16% incras in covrd GHG missions in 2020 compard to 2005 lvls, whil complying with th ESD. FIGURE 1. SPLIT OF 2030 GHG EMISSIONS REDUCTION TARGET BETWEEN THE EU ETS AND THE ESR Th EU-wid 2030 climat targt is to b achivd through GHG missions rductions in sctors covrd by th EU ETS and by th ESR, with accounting flxibilitis btwn th policy instrumnts In 2030: 40% rduction in GHG missions compard to 1990 lvls 43 % rduction compard to 2005 in % rduction compard to 2005 in 2030 Covrs around 45% of GHG missions EU ETS Larg-scal facilitis in th powr and industry sctors, and aviation ESR Road & rail transport, housing, srvics, agricultur, wast, small industrial facilitis Covrs around 55% of GHG missions LULUCF An Europan GHG missions cap 28 national GHG missions rduction objctivs No-dbit rul Flxibility of 280 MtCO 2 Flxibility of 100 MtCO 2 Not: LULUCF stands for Land us, land us-chang and forstry. Th no-dbit rul aims at nsuring that accountd CO2 missions from land us ar ntirly compnsatd Not: LULUCF stands for Land Us, Land Us-Chang and Forstry. Th no-dbit rul aims at nsuring that accountd CO 2 missions from land us ar ntirly compnsatd by an quivalnt rmoval of CO 2 from th atmosphr through action in th sam sctor. Sourc: I4CE, 2017 April Climat Brif n 52 I4CE 3

4 FIGURE 2. ILLUSTRATION OF POSSIBLE GHG EMISSIONS TRAJECTORIES RESPECTING THE SAME CUMULATED CARBON BUDGET A FIGURE policy instrumnt 2. ILLUSTRATION dfind - as A a POLICY carbon INSTRUMENT budgt dos not DEFINED nsur a AS givn A CARBON rduction BUDGET in GHG missions DOES NOT in ENSURE a spcific A yar GIVEN REDUCTION IN GHG EMISSIONS IN A SPECIFIC YEAR GHG missions GHG missions -70% Tim Possibility to us unusd allowancs for complianc in latr yars. -30% RECOMMENDATION 1: Evaluating th EU carbon budgt in rlation to th 2018 IPCC 1.5 C rport, basd on th principls of capability, quality and rsponsibility. RECOMMENDATION 2: Translating this carbon budgt as wll as th nt-zro missions targt in an updatd 2050 EU roadmap, jointly laboratd with rprsntativs from all sctors through an opnly carrid out prospctiv xrcis. This calibration should b don as soon as possibl bfor 2030, using all possibl windows offrd by th Govrnanc rgulation timlin and othr rviw procsss. In particular, th agrd rviw of th EU ETS dirctiv in th contxt of ach global stocktak undr th Paris Agrmnt will b th opportunity to incras th Linar Rduction Factor (LRF) of th EU ETS cap to a valu compatibl with th updatd EU 2050 roadmap. Cumulatd GHG missions Annual cap on GHG missions Tim Intrprtation of th graph: this illustrativ situation, a policy instrumnt dfind as Intrprtation of th graph: in this illustrativ situation, a policy an annual cap on GHG missions is implmntd, with th possibility to carry-ovr instrumnt unusd mission dfind allowancs. as In an both annual cass, th cap constraint GHG on GHG missions is implmntd, dfind by th policy with instrumnt th possibility is rspctd: to carry-ovr cumulatd unusd GHG missions mission ar lowr than th cumulatd cap on missions. In th cas at th top, GHG allowancs. missions ar in In th both last yar cass, 70% blow th constraint thir rfrnc on lvl, GHG whil thy missions ar only dfind 30% lowr by in th cas policy at th instrumnt bottom. is rspctd: cumulatd GHG missions Sourc: I4CE, ar 2018lowr than th cumulatd cap on missions. In th cas at th top, GHG missions ar in th last yar 70% blow thir rfrnc lvl, whil thy ar only 30% lowr in th cas at th bottom. Sourc: I4CE, 2018 B. Th carbon budgts dfind by th EU ETS and th ESR should b calibratd accuratly Th carbon budgts dfind by th EU ETS and th ESR should b consistnt with long-trm global climat goals In currnt lgislations, th carbon budgts dfind by th EU ETS and th ESR dpnd on historical GHG missions. To b consistnt with climat scinc, th EU could valuat its shar of th global carbon budgt compatibl with an incras in tmpraturs of 2 C or 1.5 C basd on th IPCC principls of capability, quality and rsponsibility. Th translation of this carbon budgt and th nt-zro missions targt in an updatd 2050 roadmap would nabl an accurat calibration of th EU ETS and th ESR to achiv climat objctivs. RECOMMENDATION 4: Calibrating EU policy instrumnts (in particular th EU ETS and th ESR) according to th updatd 2050 roadmap as soon as possibl bfor 2030, using all possibl windows offrd by th Govrnanc timlin and othr rviw procsss (i.. for th EU ETS, building on th intndd rviws in th light of th implmntation of th Paris Agrmnt to appropriatly incras th linar rduction factor of th cap). Th carbon budgts dfind by th EU ETS and th ESR should b calibratd so as to limit th formation of surplus in ordr to achiv 2030 climat targt Idally, both th total carbon budgt and a rduction ovr tim in GHG missions should b binding. Policy instrumnts dfining carbon budgts should b calibratd so as to kp within bounds th formation of surplus. Limiting to a crtain xtnt th intrtmporal carry-ovr of unusd allowancs (as will b don with AEAs from th first priod of ESD which will not b transfrrabl to th priod) or adquatly canclling xcss allowancs may b options to gt closr to th achivmnt of GHG missions rduction targts through policy instrumnts dfining carbon budgts. Th biannual assssmnt of EU progrss towards mting 2030 targts by th EU Commission proposd in th Govrnanc Rgulation is wlcomd, as it will giv visibility on how to gradually bridg th gap to th achivmnt of 2030 climat targts. 4 I4CE Climat Brif n 52 - April 2018

5 2. In th EU climat and nrgy framwork, countrproductiv policy intractions undrmin th ffctivnss of th EU ETS and th ESR As shown in Figur 3, diffrnt lgislations aim at achiving EU objctivs: rducing GHG missions, dploying rnwabl sourcs of nrgy, incrasing nrgy fficincy. Othr lgislativ txts than th EU ETS and th ESR aim at rducing GHG missions in diffrnt sctors of th conomy. A. Historically, th incras in nrgy fficincy and th dploymnt of rnwabl nrgy sourcs contributd gratly to rducing GHG missions across th EU Th dcoupling of final nrgy dmand and GDP was th most important drivr in dcrasing GHG missions in th EU ovr Btwn 2005 and 2015, GHG missions in th EU dcrasd by around 900 MtCO 2 - a dcras of 16.7%. A quantifid analysis of th contribution of diffrnt drivrs to th variations in GHG missions 2 shows that th dcoupling of final nrgy dmand and GDP was th most important drivr in dcrasing GHG missions in th EU ovr and contributd to dcras GHG missions by mor than 950 MtCO 2 in total (s Figur 4). Th improvmnt in final nrgy intnsity rsults from an incrasd fficincy of nrgy us, as wll as structural changs in th EU conomy. Th mov towards lss carbon-intnsiv fuls and improvmnts in th transformation fficincy of nrgy also participatd in th dcras in GHG missions ovr , rspctivly and - 94 MtCO 2. 2 A dcomposition analysis was carrid out to quantify th contribution of diffrnt drivrs to th variations in GHG missions in th EU ovr th priod Th Log Man Divisia Indx (LMDI) mthod was usd. Four LMDI wr carrid out: on on total GHG missions in th EU, and thr sctoral LMDI, for th powr sctor, th iron and stl sctor and th rfining sctor. Mor dtails on th mthodology will b givn in th full rport to b publishd aftr this Climat brif. FIGURE 3. MAPPING EU LEGISLATIONS IN THE 2030 CLIMATE AND ENERGY POLICY FRAMEWORK EU lgislations in th 2030 climat and nrgy framwork ar strongly intrrlatd: svral lgislativ txts apply to ach sctor and svral txts aim to achiv ach EU objctiv Objctivs Sctors Utilitis Enrgy Rfinris Industry Transport Aviation Shipping Road Rsidntial and commrcial Agricultur and forstry Wast EU ETS ESR Industrial Emissions Dirctiv (IED) Effort sharing Rgulation (ESR) IED GHG missions rduction LULUCF rgulation Dploymnt of rnwabl nrgy sourcs Incras in nrgy fficincy Ful Quality dirctiv F-gass rgulation Ecodsign dirctiv Ful Quality dirctiv Rnwabl Enrgy Dirctiv (RED) Enrgy Efficincy Dirctiv (EED) F-gass rgulation EPBD* Govrnanc Rgulation Enrgy Lablling rgulation Lgnd: In rvision or rvisd as part of 2030 climat and nrgy framwork * EPBD: Enrgy prformanc of buildings dirctiv In forc Intrprtation of th graph: Th diffrnt objctivs in th lft-nd column ar to b achivd through th lgislativ txts in th fram with th sam color. Thos lgislativ txts apply in th sctors in th rspctiv columns. Sourc: I4CE, 2018 April Climat Brif n 52 I4CE 5

6 FIGURE 4. DRIVERS OF GHG EMISSIONS VARIATIONS IN THE EU28 ( ) Th dcoupling of final nrgy dmand and GDP was th most important drivr of GHG missions rductions in th EU ovr ,000 MtCO 2 6,000 5,000 4,000 3,000 2,000 5, % 70% 68% 7% % 4,512 1, MtCO MtCO 2 0 Dmography 2005 GHG missions Economic dvlopmnt Final nrgy intnsity Transformation fficincy Carbon intnsity 2015 GHG missions Sourc: I4CE, 2017 On th contrary, an incras in th population and in th GDP/capita contributd to an incras in GHG missions ovr : rspctivly and MtCO 2. In ordr to bttr undrstand th contribution of th diffrnt drivrs, in-dpth sctoral analyss wr carrid out. In th powr sctor, GHG missions rductions mainly cam from th dploymnt of rnwabls In th powr sctor, GHG missions rductions ovr mainly cam from th dploymnt of rnwabl sourcs of nrgy, which contributd to dcras GHG missions by 359 MtCO 2 in total (s Figur 5). Wind powr contributd th most to GHG missions rductions, with an stimatd 186 MtCO 2 of cumulatd missions rductions ovr th priod. Solar powr and powr from biomass and biofuls com nxt, with rspctivly 73 MtCO 2 and 69 MtCO 2 of missions rductions. On th contrary, th dcras in th shar of nuclar powr ovr th priod ld to an incras in GHG missions (+ 84 MtCO 2 ). Th dcras in powr gnration was th scond most important contributor to GHG missions rductions (- 43 MtCO 2 ), followd by an improvmnt in th ful fficincy of thrmal powr plants (- 15 MtCO 2 ). On th contrary, th volution of th carbon contnt of th diffrnt fossil fuls slightly contributd to incrasing GHG missions (+ 8 MtCO 2 ovr th priod) 3. 3 This variabl dos not rflct a switch from on ful to th othr (i.. a coalto-gas switch), but th variation in th avrag carbon contnt of ach ful, for xampl du to a variation in th rlativ shars of lignit and brown coal usd for coal powr gnration. FIGURE 5. DRIVERS OF GHG EMISSIONS VARIATIONS FROM THE POWER SECTOR IN THE EU ( ) Ovr GHG missions rductions in th powr sctor mainly cam from th dploymnt of rnwabl nrgy sourcs in th EU MtCO 2 1,600 1,400 1,200 1, , % 21% 72% 86% 10% 4% MtCO MtCO GHG missions Carbon contnt Fossil fuls mix Nuclar Rnwabls Powr Transformation 2015 gnration fficincy GHG missions Sourc: I4CE, I4CE Climat Brif n 52 - April 2018

7 As for th volution of th fossil fuls powr mix, whil it contributd to rducing GHG missions btwn 2005 and 2010, it was a nt contributor to th incras in missions from 2011 on. Indd, during th priod , th rlativ shar of coal in powr gnration from fossil fuls dcrasd at th advantag of gas, and th trnd rvrsd from 2011 on, with coal accounting in 2015 for two-thirds of powr gnration from fossil fuls. In total ovr , th volution of th fossil fuls mix was a nt contributor to th incras in GHG missions (+ 25 MtCO 2 ). In both th iron and stl and th rfining sctors, th dcras in dmand and an incrasd nrgy fficincy gratly contributd to rducing GHG missions Equivalnt analyss wr carrid out in th iron and stl sctor and in th rfining sctor. In both cass, th dcras in th dmand rspctivly for iron and stl and for rfind products- gratly contributd to th dcras in GHG missions. In th iron and stl sctor, nrgy fficincy was th most important drivr in dcrasing GHG missions ovr , followd by th rlocation of production outsid th EU. In th rfining sctor, an incrasd nrgy fficincy also contributd to rducing GHG missions, but this dclin was countrbalancd by an incras in GHG missions coming from th growing complxity of rfind products 4. 4 Mor dtails on th analysis will b givn in th full rport. B. Enrgy fficincy and rnwabl nrgy policis ar xpctd to continu to significantly contribut to rducing GHG missions in th post-2020 priod In total ovr , nrgy fficincy and rnwabl nrgy policis ar stimatd to contribut to a rduction of 2.2 GtCO 2 in GHG missions covrd by th EU ETS (s Figur 6) 5, undr th assumption that spcific policis ar implmntd to achiv 2030 targts for nrgy fficincy and rnwabl sourcs of nrgy. Ovr th EU ETS Phas IV, it is quivalnt to 1.5 yars of allowancs around 15% of th cumulatd cap 6. In sctors covrd by th ESR, nrgy fficincy and rnwabl nrgy policis ar stimatd to contribut to a rduction of 2.1 GtCO 2 in GHG missions ovr , which rprsnts around 10% of cumulatd AEAs 7. 5 Th contribution of nrgy fficincy policis and rnwabl nrgy policis on GHG missions covrd by th EU ETS and by th ESR is stimatd as th diffrnc in GHG missions btwn two scnarios: th GHG only scnario, in which th only EU policy instrumnts ar th EU ETS and th ESR and an intrmdiat scnario ( EE&RE contribution scnario ) in which th EU ETS and th ESR function as if thy wr th only policy instrumnts but in which EU targts for rnwabl nrgy and nrgy fficincy ar achivd. 6 Th contribution of rnwabl nrgy and nrgy fficincy policis to GHG missions rductions rprsnts almost 95% of rductions rquird from ETS sctors ovr its Phas IV, calculatd as th diffrnc btwn cumulatd GHG missions in th No Policy scnario -a countrfactual scnario in which no climat and nrgy policis ar implmntd and th cumulatd EU ETS cap ovr Th contribution of rnwabl nrgy and nrgy fficincy policis to GHG missions rductions rprsnts mor than 2.5 tims th amount of rductions rquird from non-ets sctors ovr , calculatd as th diffrnc btwn cumulatd GHG missions in th No Policy scnario -a countrfactual scnario in which no climat and nrgy policis ar implmntd and th cumulatd AEAs ovr FIGURE 6. GHG EMISSIONS COVERED BY THE EU ETS (LEFT) AND CONTRIBUTION OF ENERGY EFFICIENCY AND RENEWABLE ENERGY POLICIES TO GHG EMISSIONS REDUCTIONS IN ETS-SECTORS OVER (RIGHT) In total ovr , nrgy fficincy and rnwabl nrgy policis ar stimatd to contribut to a rduction of 2.2 GtCO 2 in GHG missions covrd by th EU ETS MtCO 2 2,000 1,800 1,600 1,400 1,200 1, MtCO 2 4,000 3,500 3,000 2,500 2,000 1,500 1, ,223 2,201 Powr Aviation Othr transf. GHG only scnario Industry EE&RE contribution scnario Sourc: Enrdata, 2017 April Climat Brif n 52 I4CE 7

8 BOX 1. THE ACHIEVEMENT OF EACH EU 2030 CLIMATE AND ENERGY TARGET CONTRIBUTES TO THE ACHIEVEMENT OF OTHERS Undrstanding th intractions btwn EU 2030 climat and nrgy policis rquirs assssing th contribution of th achivmnt of on targt to th achivmnt of othrs. Th modlling of thr thortical scnarios with POLES 8 is usd to valuat th contribution of targts and policis to th achivmnt of 2030 climat and nrgy targts: GHG only : in this countrfactual scnario, thr ar no EU targts for th dploymnt of rnwabls nor for nrgy fficincy. Only th EU ETS and th Effort Sharing Rgulation ar implmntd. 8 For mor dtails on POLES modl, plas consult Enrdata s wbsit. RE27 only : in this countrfactual scnario, thr ar no EU targts for nrgy fficincy and th EU ETS and th Effort Sharing Rgulation ar not implmntd. It is assumd that spcific policis ar implmntd to achiv a shar of 27% of rnwabl nrgy sourcs in gross final consumption by EE30 only : in this countrfactual scnario, thr ar no EU targts for rnwabl nrgy sourcs and th EU ETS and th Effort Sharing Rgulation ar not implmntd. It is assumd that spcific policis ar implmntd to achiv a targt of 30% of nrgy fficincy by 2030 (for both primary and final nrgy consumption). FIGURE 7. ACHIEVEMENT OF EU 2030 TARGETS IN DIFFERENT SCENARIOS Policis implmntd to achiv an EU targt contribut to th achivmnt of th othrs 27,0% RE 27,0% 25,7% 24,6% Lgnd: EE - PE 2030 targts Sc. GHG Only GHG ETS Rduction in GHG missions from ETS sctors (compard to 2005 lvls) GHG ESR Rduction in GHG missions from non-ets sctors (compard to 2005 lvls) RE Shar of rnwabl nrgy in gross final consumtion EE - FC Dcras in final nrgy consumption compard to 2007 Baslin scnario EE - PE Dcras in primary nrgy consumption compard to 2007 Baslin scnario Sourc: Enrdata, 2017 GHG ETS -43,0% -41,7% -38,9% -38,02% -30,0% -30,0% -22,8% -22,9% -25,5% -22,2% -26,0% -30,0% Sc. RE27 Only Sc. EE30 Only -30,0% -29,8% -34,3% EE - FC GHG ESR -36,3% Th achivmnt of th 2030 rnwabl nrgy targt strongly rducs GHG missions in ETS sctors and to a lssr xtnt in non-ets sctors. As for th nrgy fficincy targt, it strongly rducs GHG missions in non-ets sctors, and to a lssr xtnt in ETS sctors. Its achivmnt in trms of primary nrgy lads to th ovrachivmnt of th targt in trms of final nrgy consumption. Convrsly, th EU ETS and th ESR by thmslvs contribut to th achivmnt of 2030 rnwabl nrgy and nrgy fficincy targts. By construction, in th GHG only scnario, th EU ETS and th ESR ar complid with (i.. carbon budgts dfind by Europan txts ar rspctd). Howvr, GHG missions rduction targts for 2030 in ETS and non-ets sctors ar not achivd du to th dsign of th EU ETS and th ESR: for th EU ETS, th possibility to us th surplus of allowancs and th rlas of additional allowancs from th MSR on th markt, and for th ESR, th possibility to carryovr unusd AEAs throughout th priod (s sction 1). Additionally, th achivmnt of th rnwabl nrgy targt contributs to th nrgy fficincy targt in trms of primary nrgy. As for th achivmnt of th nrgy fficincy targt, it contributs to th rnwabl nrgy targt, as it dcrass th absolut production of rnwabl nrgy rquird to achiv th 2030 targt xprssd as a shar of gross final nrgy consumption. Not: Th cntral point of th figur corrsponds to th achivmnt of th diffrnt 2030 targts in th «No Policy» scnario, a countrfactual scnario in which no climat and nrgy policis ar implmntd (-27% for ETS GHG missions, -25% for ESR GHG missions, 23% for rnwabl nrgy sourcs, -22% for final nrgy consumption, and -19% for primary nrgy consumption). 8 I4CE Climat Brif n 52 - April 2018

9 C. Ths policy intractions undrmin th ffctivnss of th EU ETS and th ESR A two-fold rol can b xpctd from th EU ETS: driving GHG missions rductions through its carbon pric signal and guaranting th achivmnt of climat targts by stting a cap on GHG missions. Historically, th EU ETS had a minor impact on GHG missions rductions - at last in th powr sctor Th x-post impact of th EU ETS on GHG missions rductions is difficult to assss as many factors com into play.g. th carbon pric signal, th anticipations of stakholdrs In our quantifid analysis of th historical contribution of diffrnt drivrs to th variations in GHG missions, w only valuatd th impact of th EU ETS on GHG missions rductions in th powr sctor. It was stimatd as GHG missions rductions coming from a coal-to-gas switch in th yars in which th pric of EU allowancs (EUAs) was within th rang of th coalto-gas switching pric. Givn th rlativ coal and gas prics, and taking into account a larg rang of possibl thrmal fficincis for coal and gas powr plants, th pric of EUAs could only triggr a coal-to-gas switch in th priod (s Figur 8). Consquntly, only th rductions in GHG missions coming from th volution of th fossil fuls mix in this priod can b attributd to th carbon pric signal inducd by th EU ETS: around 50 MtCO 2, which wr mor than offst by additional GHG missions stmming from a gas-to-coal switch aftr Th dprssd carbon pric signal on th EU ETS is partly du to countractiv intractions with rnwabl nrgy and nrgy fficincy policis, which contributd to crat an imbalanc btwn supply and dmand. Bcaus of countractiv intractions, th EU ETS is not xpctd to driv GHG missions rductions in th post-2020 priod Looking ahad to th post-2020 priod, and taking into account th dsign paramtrs of th EU ETS in its Phas IV 9, GHG missions rductions coming from rnwabl nrgy and nrgy fficincy policis will b sufficint to rspct th EU ETS cap in its Phas IV undr th assumption that spcific policis ar implmntd to achiv 2030 targts. As GHG missions rductions coming from othr policis will b sufficint to rspct th EU ETS cap, its carbon pric signal will b dprssd and it will not b abl to driv low-carbon invstmnts. Evn th chapst abatmnt options such as switching from coal to gas in powr gnration for xampl will b disrgardd. 9 A 2017 Baslin scnario is modlld with POLES, rprsnting th dal on th EU ETS rform agrd on in Novmbr 2017 and th Commission s proposals from Novmbr 2016 on 2030 targts for rnwabl nrgy and nrgy fficincy. FIGURE 8. CARBON SWITCHING PRICE FOR DIFFERENT COAL AND GAS GENERATION EFFICIENCY IN THE EU28 IN COMPARISON WITH THE EU ETS PRICE From 2011 on, th pric of EUAs has bn wll blow th pric lvl which would hav triggrd a coal-to-gas switch in powr gnration /tco Coal-gas: 47%-47% Coal-gas: 36%-47% Coal-gas: 36%-58% EUAs pric Sourc: I4CE, from BP 2017 (Gas: Hrn NBP Indx; Coal: IHS Northwst Europ); and from ICE futurs Europ (forward dc 2007 for EUAs pric phas I and spot pric for phass II & III). April Climat Brif n 52 I4CE 9

10 Countrproductiv intractions continu to jopardiz th achivmnt of EU ETS climat targts by 2030 As dscribd in sction 1.C, complianc with th EU ETS dos not guarant th achivmnt of 2020 and 2030 climat targts. Countractiv intractions, as thy contribut to th formation of th surplus of allowancs, mphasiz this ffct. In th post-2020 priod, w stimat that th MSR will not b abl to mitigat th ffct of othr policis on th EU ETS whil absorbing th historical surplus (s Figur 9). Bcaus of this surplus, th achivmnt of th 2030 climat targt will not b guarantd. Countrproductiv intractions rduc th incntiv for additional GHG missions rductions in non-ets sctors Th situation is diffrnt for th ESR, but in th sam way as GHG missions rductions from nrgy fficincy policis and rnwabl nrgy policis will lowr th pric of EUAs and th incntiv for additional mission rductions, thy will rduc th incntiv for GHG mission rductions in non-ets sctors and som abatmnt options may b disrgardd. Furthrmor, th formation of a surplus of AEAs will jopardiz th achivmnt of 2030 climat targts. FIGURE 9. VOLUME OF THE MSR (LEFT) AND EVOLUTION OF THE SURPLUS (RIGHT) IN THE 2017 BASELINE SCENARIO BY 2030 In spit of th doubling of its withdrawal rat until 2023, th MSR is not abl to mitigat th ffct of othr policis on th EU ETS during its Phas IV whil absorbing th historical surplus of EUAs MtCO 2 3,500 3,000 2,500 2,000 1,500 1, : cancllation of almost 2.4 billion allowancs from th MSR MtCO 2 3,500 3,000 2,500 2,000 1,500 1, Nots: Th 2017 Baslin scnario rprsnts th dal on th EU ETS rform agrd on in Novmbr 2017 and th Commission s proposals from Novmbr 2016 on 2030 targts for rnwabl nrgy and nrgy fficincy. Sourc: Enrdata, I4CE Climat Brif n 52 - April 2018

11 3. An nhancd govrnanc approach to th EU climat and nrgy framwork is rquird A. Assssing th impact of policis on othrs is a ncssary stp In th currnt climat and nrgy policis packag, only th nrgy fficincy dirctiv includs th rquirmnt to assss its impact on othr policis (s Figur 10). Th proposd rgulation on th Govrnanc of th Enrgy Union, as it aims at nsuring that th objctivs of th Enrgy Union ar mt whil nsuring policy cohrncy, is a first intrsting stp. It would rquir in particular th assssmnt of intractions btwn policis and masurs at th lvl of Mmbr Stats. Th EU Parliamnt is in favor of additionally rqusting th assssmnt of intractions with Union climat policis and masurs in particular th EU ETS. Howvr, th txt in discussion today still lacks concrt provisions to bttr align th policy packag. It would b ncssary to carry out an x-ant assssmnt of th intractions btwn nrgy and climat policis at th national and EU lvls, as wll as annual x-post assssmnts. Provisions to adapt policis accordingly should b introducd dirctly at th EU lvl and through rcommndations by th Commission for an adaptation of policis in th Mmbr Stats Intgratd National Enrgy and Climat Plans (INECPs) According to th proposd rgulation for th Govrnanc of th Enrgy Union, Mmbr Stats will b rsponsibl for drafting tn-yar Intgratd National Enrgy and Climat Plans (INECPs) dscribing thir targts as wll as policis and masurs aimd at achiving ths targts. RECOMMENDATION 9: Carrying out an x-ant assssmnt of th intractions btwn nrgy and climat policis at th national and EU lvls, as wll as annual x-post assssmnts. FIGURE 10. INTERACTIONS BETWEEN THE LEGISLATIVE TEXTS OF THE CLIMATE AND ENERGY FRAMEWORK In th currnt climat and nrgy framwork, only th nrgy fficincy dirctiv rquirs th assssmnt of its impact on othr policis. Th proposd rgulation on th Govrnanc of th Enrgy Union is a first stp towards a mor cohrnt policy packag but it dos not includ rquirmnts to assss th impact of policis on on anothr at EU lvl Sctors Enrgy Industry Transport Objctivs Utilitis Rfinris Aviation Shipping Road Rsidntial and commrcial Agricultur and forstry Wast EU ETS ESR Effort Sharing Rgulation (ESR) GHG missions rduction Dploymnt of rnwabl nrgy sourcs Incras in nrgy fficincy Industrial Emissions Dirctivs (IED) Ful Quality dirctiv F-gass rgulation Ecodsign dirctiv Ful Quality dirctiv Rnwabl Enrgy Dirctiv (RED) Enrgy Efficincy Dirctiv (EED) F-gass rgulation EPBD* LULUCF rgulation IED Govrnanc Rgulation Enrgy Lablling rgulation Lgnd: In forc Complmntarity of covrag «Accounting» flxibility In rvision or rvisd as part of 2030 climat and nrgy framwork Ncssity to tak into account * EPBD: Enrgy prformanc of buildings dirctiv. Mutualization of framwork Assss impact of a txt on anothr Rport & assssmnt of progrss Intrprtation of th graph: Th arrows rprsnt th intractions btwn th diffrnt lgislativ txts of th climat and nrgy framwork. Th colors rprsnt th natur of th intractions. Nontransparnt arrows rprsnt intractions which wr introducd with th rvision of th 2030 climat and nrgy framwork. Sourc: I4CE, 2018 April Climat Brif n 52 I4CE 11

12 B. Aligning EU climat and nrgy policis in th 2030 policy framwork nabls to mitigat countractiv intractions To mitigat countractiv intractions, an alignmnt of th EU ETS and of th ESR to account for GHG missions rductions coming from othr policis is proposd: th ida is to rmov from th EU ETS cap and from ESR AEAs th contribution of othr policis to GHG missions rductions 11. Th alignmnt of th EU ETS cap within th EU 2030 nrgy and climat framwork rstors its ffctivnss: th surplus is quickly rsorbd and th EU ETS bcoms a drivr of abatmnt On th on hand, with th alignmnt of th EU ETS cap, th surplus of EUAs is vry quickly rsorbd and gos blow th lowr thrshold of th MSR from On th othr hand, th carbon pric signal inducd by th Alignd EU ETS lads to a dploymnt of rnwabl nrgy sourcs sufficint to achiv EU 2030 targt 12. Furthrmor, it lads to an immdiat switch to lss carbon-intnsiv nrgy sourcs and for xampl, it furthr drivs down th shar of coal in powr gnration. In 2030, GHG missions in ETS sctors ar 7% lowr than in th situation without th alignmnt of th EU ETS cap, which corrsponds to a rduction of 47% compard to 2005 lvls. In practic, this alignmnt of th EU ETS could b achivd through provisions in th Govrnanc Rgulation to adapt policis dirctly at th EU lvl. Th rviws of th MSR in 2021 and 2026 will also b th opportunity to adapt th EU ETS to th ffct of othr policis on GHG missions. Th alignmnt of AEAs incntivizs additional GHG missions rductions in sctors covrd by th ESR Withdrawing from AEAs th contribution of nrgy fficincy and rnwabl nrgy policis to GHG mission rduction in non-ets sctors maks th ESR stringnt from This stringncy would incntiviz Mmbr Stats to furthr rduc GHG mission rductions in non-ets sctors. In 2030, GHG missions in non-ets sctors ar 3% lowr 11 An additional scnario is modlld with POLES, th Alignd scnario, in which th annual x-ant stimatd contribution of nrgy fficincy and rnwabl nrgy policis is rmovd from th EU ETS cap and from Mmbr Stats AEAs in th priod In total, 2.2 billion allowancs ar canclld from th EU ETS and cumulativ AEAs ar rducd by 2.1 GtCO 2. In rality, this assssmnt should b carrid out dynamically to valuat th ffctiv impact of rnwabl nrgy and nrgy fficincy policis, as wll as othr policis (i.. mission standards, coal phas out). 12 On of th outcom of POLES modlling is th carbon valu, which is not th EU ETS markt pric. It rprsnts th cost of GHG missions rductions rquird to rspct th constraint st by th EU ETS considring a sliding 5-yars carbon budgt. Whil in th 2017 Baslin scnario, th carbon valu stays at 0 until th nd of Phas IV rvaling that GHG missions rductions coming from othr policis ar sufficint to rspct th constraint st by th EU ETS, in th Alignd scnario, th carbon valu incrass from 2018 to rach 44 /tco 2 in It is assumd that th surplus accumulatd on th ESD in th priod hids th upcoming stringncy of th ESR. than in th situation without th alignmnt of AEAs, which corrsponds to a rduction of 37% compard to 2005 lvls. RECOMMENDATION 10: Introducing provisions to adapt policis accordingly as soon as possibl dirctly at EU lvl and through rcommndations by th EU Commission for an adaptation of policis in th INECPs. C. Aligning th EU 2030 policy framwork to an incrasd long-trm ambition sts th EU on a pathway mor compatibl with th goals of th Paris Agrmnt Incrasing EU long-trm ambition in lin with th objctiv of th Paris Agrmnt EU currnt climat and nrgy policis and targts fall short of its commitmnts undr th Paris Agrmnt (s Figur 11). On th on hand, th EU st itslf an objctiv of rducing GHG missions by 80-95% in 2050 compard to 1990 lvls. This objctiv was st in 2009, bfor th Paris Agrmnt and its objctiv of limiting th global avrag tmpratur incras to wll blow 2 C abov pr-industrial lvls. EU long-trm ambition should b rviwd accordingly and aim at nt-zro missions by Aligning th EU 2030 climat and nrgy framwork to its incrasd long-trm ambition On th othr hand, GHG missions trnds dfind by th 2030 climat and nrgy framwork as currntly ngotiatd fall short of th EU 2050 objctiv. Efforts would nd to incras aftr 2030 to vn nabl th achivmnt of a rduction in GHG missions of 80% in 2050 (s Figur 12). To hav a sustainabl dcarbonisation pathway, an anticipation of th suitabl transformation of th nrgy systm to achiv drastic GHG missions rductions in th longtrm is rquird, as wll as a timly dploymnt of low-carbon solutions 14. An updat of th 2050 roadmap consistntly with th EU carbon budgt and th nt-zro missions targt, as dscribd in sction 1.B, would inform th adquat adaptation of climat and nrgy policis, at th EU-lvl and at th national lvl. 14 An AmbitionPlus scnario is modlld with POLES, in which 2030 targts for rnwabl nrgy and nrgy fficincy ar incrasd: rspctivly 35% and 40%. In this scnario, rnwabl nrgy and nrgy fficincy solutions ar quickly scald up, which sts th EU on a pathway mor compatibl with long-trm climat ambition (s Figur 12). In such a configuration, countractiv intractions with th EU ETS and th ESR would nd to b mitigatd to avoid a lock-in of carbon-intnsiv tchnologis, as dscribd in sction 3.B. 12 I4CE Climat Brif n 52 - April 2018

13 FIGURE 11. EU CLIMATE AND ENERGY POLICIES BROUGHT INTO COMPARISON WITH ITS CLIMATE COMMITMENT UNDER THE PARIS AGREEMENT EU currnt climat and nrgy policis and targts fall short of its commitmnts undr th Paris Agrmnt: currntly ngotiatd climat and nrgy policis ar not sufficint to mt EU long-trm ambition, which itslf is not consistnt with th global tmpratur goal of th Paris Agrmnt EU commitmnt undr th Paris Agrmnt [2015] Holding th incras in th global avrag tmpratur to wll blow 2 C abov prindustrial lvls and pursuing fforts to limit th tmpratur incras to 1.5 C EU s submittd contribution to Paris Agrmnt EU translation of long-trm tmpratur goal EU long-trm objctiv was st in 2009, bfor th Paris Agrmnt and th goal of maintaining global tmpratur incras to wll-blow 2 C. MID-TERM (2030) LONG-TERM (2050) EU NDC [2015] Binding targt of an at last 40% domstic rductlon in GHG missions by 2030 compard to 1990 EU long-trm climat obictiv [2009] Objctiv ndorsd by EU ladrs, in th contxt of ncssary rductions according to th IPCC by dvlopd countris as a group, to rduc its missions by 80-95% by 2050 compard to 1990 lmplmntation in EU lgislation EU main policy instrumnts to achiv GHG mission rduction torgts - th EU ETS and th Ettort Sharing - dfin carbon budgts and thus do not nsur th achivmnt of EU NDC climat and nrgy framwork [2017- ] EU lgislation to implmnt 2030 targts: in particular th EU ETS and th Effort Sharing Rgulation Dfinition of 2030 targt basd on 2050 roadmap modlling Th continuation of GHG missions trnds dfind by th 2030 climat and nrgy framwork would not nabl to achiv th 2050 objctiv. Efforts would nd to significantly incras aftr 2030 to rach a rduction in GHG missions of 80-95%/1990 lvls in Modlling of a pathway compatibl with long trm objctiv 2050 low-carbon conomy roadmap [2011] Roadmap publishd by th Commission to dscrib a pathway consistnt with a rduction of 80% compard to 1990 in domstic GHG missions in 2050 Th EU ETS trajctory-dfind by th annual rduction of its cap-corrsponds in 2050 to an 85% rduction compard to 2005 lvls in GHG missions covrd by th EU ETS, whil th 2050 roadmap projcts a rduction of 90% in 2050 compard to 2005 in GHG missions in ETS-sctors. EU intrnational commitmnt EU lgislation Sourc: I4CE, 2018 EU objctiv (ndorsd by Council but not implmntd in lgislation) EU Commission s publication (no lgal valu) Link btwn th diffrnt lmnts Misalignmnt In particular, th roadmap would nabl stting appropriat long-trm targts for th EU ETS and th ESR, as wll as intrmdiat 2040 targts, which would giv mor visibility to stakholdrs whil making th long-trm targt mor tangibl. This roadmap could also b usd to laborat a corridor of trajctoris for th social valu of carbon in th EU, which conomic stakholdrs could us as a rfrnc, and on which public policis could lan. RECOMMENDATION 3: Stting appropriat and ralistic 2050 targts for sctors covrd by th EU ETS and th ESR with intrmdiat 2040 targts. RECOMMENDATION 5: Calculating a corridor of social valus of carbon in th EU until 2050, alignd with long-trm climat ambition, which conomic stakholdrs could us as a rfrnc and on which could lan public policis. April Climat Brif n 52 I4CE 13

14 At th national lvl, th Mmbr Stats INECPs and thir long-trm low carbon stratgis- as rquird by th proposd rgulation on th Govrnanc of th Enrgy Union - should also b consistnt with th updatd EU 2050 roadmap. Finally, th policy framwork should allow a priodic ratchting up of ambition in lin with th stocktaks of th Paris Agrmnt. RECOMMENDATION 7: Calling for an alignmnt of Mmbr Stats long trm low-carbon stratgis to th 2050 low-carbon roadmap. RECOMMENDATION 8: Making sur Mmbr Stats 10-yar intgratd national climat and nrgy plans (INECPs) ar alignd to thir long-trm low-carbon stratgy and to th 2050 EU roadmap. RECOMMENDATION 6: Assssing rgularly EU progrss towards mting its targts and introducing provisions to allow a priodic ratchting up of ambition in lin with th stocktaks of th Paris Agrmnt. FIGURE 12. GHG EMISSIONS IN THE EU PARALLELED WITH EU CLIMATE TARGETS PATHWAY GHG missions trnds dfind by th 2030 climat and nrgy framwork as currntly ngotiatd fall short of th EU 2050 objctiv. A FIGURE 12. GHG EMISSIONS IN THE EU IN THE AMBITIONPLUS AND 2017 BASELINE SCENARIOS timly PARALLELED dploymnt WITH of low-carbon EU CLIMATE options TARGETS is ncssary PATHWAY to st th EU on a pathway mor compatibl with long-trm ambition 6,000 5,000 4,000-20% in % in 2030 Btwn -80 and -95% in EU GHG missions MtCO 2 3,000 2,000 1, EU ETS - Powr ESR - Transport Othr missions EU ETS - Othr transf. ESR - Buildings EU ETS Industry ESR - Othrs 2017 Baslin - EU ETS missions 2017 Baslin - ESR missions 2017 Baslin - othr missions Nots: Th 2017 Baslin scnario rprsnts th dal on th EU ETS rform agrd on in Novmbr 2017 and th Commission s proposals from Novmbr Nots: 2016 on Th targts Baslin for rnwabl scnario nrgy and rprsnts nrgy fficincy. th dal In th on AmbitionPlus th EU ETS rform scnario, agrd 2030 targts on in for Novmbr rnwabl 2017 nrgy and nrgy th Commission s fficincy ar proposals incrasd: rspctivly from Novmbr 35% and %. on 2030 targts for rnwabl nrgy and nrgy fficincy. In th AmbitionPlus scnario, 2030 targts for Sourc: I4CE and Enrdata, 2018, with data from th Europan Environmnt Agncy rnwabl nrgy and nrgy fficincy ar incrasd: rspctivly 35% and 40%. Sourc: I4CE and Enrdata, 2018, with data from th Europan Environmnt Agncy 14 I4CE Climat Brif n 52 - April 2018

15 Conclusion and policy rcommndations Th ngotiations on th EU 2030 climat and nrgy framwork, and in particular on th Govrnanc of th Enrgy Union, ar th opportunity to implmnt in th EU a cohrnt and ambitious policy mix to fulfill its commitmnt undr th Paris Agrmnt. Th lgislativ txts as currntly ngotiatd lack adquat provisions to mitigat countrproductiv intractions which undrmin th ffctivnss of th 2030 climat and nrgy framwork and jopardiz th achivmnt of climat targts. Furthrmor, thy fall short of th EU long-trm ambition, which is itslf insufficint to rspct its commitmnt undr th Paris Agrmnt. A two-fold alignmnt of th policy packag is thus rquird: within th 2030 climat and nrgy framwork to mitigat countractiv policy intractions and with an incrasd long-trm ambition. 10 POLICY RECOMMENDATIONS TO MAKE THE EU CLIMATE AND ENERGY POLICY FRAMEWORK CONSISTENT WITH THE PARIS AGREEMENT BEFORE 2030 STEP 1: Stting th EU long-trm climat targts right 1. Evaluating th EU carbon budgt in rlation to th 2018 IPCC 1.5 C rport, basd on th principls of capability, quality and rsponsibility. 2. Translating this carbon budgt as wll as th nt-zro missions targt in an updatd 2050 EU roadmap, jointly laboratd with rprsntativs from all sctors through an opnly carrid out prospctiv xrcis. 3. Stting appropriat and ralistic 2050 targts for sctors covrd by th EU ETS and th ESR with intrmdiat 2040 targts. STEP 2: Dfining a climat and nrgy policy framwork alignd with long-trm climat targts At th EU lvl: 4. Calibrating EU policy instrumnts (in particular th EU ETS and th ESR) according to th updatd 2050 roadmap as soon as possibl bfor 2030, using all possibl windows offrd by th Govrnanc timlin and othr rviw procsss (i.. for th EU ETS, building on th intndd rviws in th light of th implmntation of th Paris Agrmnt to appropriatly incras th linar rduction factor of th cap). 5. Calculating a corridor of social valus of carbon in th EU until 2050, alignd with long-trm climat ambition, which conomic stakholdrs could us as a rfrnc and on which could lan public policis. 6. Assssing rgularly EU progrss towards mting its targts and introducing provisions to allow a priodic ratchting up of ambition in lin with th stocktaks of th Paris Agrmnt. At th national lvl: 7. Calling for an alignmnt of Mmbr Stats long trm low-carbon stratgis to th 2050 low-carbon roadmap. 8. Making sur Mmbr Stats 10-yar intgratd national climat and nrgy plans (INECPs) ar alignd to thir long-trm low-carbon stratgy and to th 2050 EU roadmap. STEP 3: Ensuring th cohrncy of th diffrnt pics of th climat and nrgy policy framwork 9. Carrying out an x-ant assssmnt of th intractions btwn nrgy and climat policis at th national and EU lvls, as wll as annual x-post assssmnts. 10. Introducing provisions to adapt policis accordingly as soon as possibl dirctly at EU lvl and through rcommndations by th EU Commission for an adaptation of policis in th INECPs. April Climat Brif n 52 I4CE 15

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