EU adopts 20-20-20 plan, includes emissions trading

By Susanne Retka Schill
Web exclusive posted Dec. 29, 2008, at 11:56 a.m. CST

The European Union officially adopted a 20-20-20 Renewable Energy Directive on Dec. 17 setting climate change reduction goals for the next decade. The targets call for a 20 percent reduction in greenhouse gas (GHG) emissions by 2020 compared with 1990 levels, a 20 percent cut in energy consumption through improved energy efficiency by 2020 and a 20 percent increase in the use of renewable energy by 2020. In 2005 renewable energies from hydro power, solar, wind, biomass or geothermal sources accounted for less than seven percent of the EU's total energy consumption.

To achieve the 20 percent target, the new directive lays down mandatory national targets to be achieved by the member states through promoting the use of renewable energy in the electricity, transport, heating and cooling sectors. Targets for GHG emission reductions include all transport fuels fossil fuels as well as biofuels, blends, electricity and hydrogen. The directive requires fuel suppliers to reduce GHG emission caused by extraction or cultivation, including land use changes, transportation and distribution, processing and combustion of transport fuels. Reductions in GHG emissions could be achieved by using more biofuels, alternative fuels, or by reducing gas flaring and venting at oil wells or refineries.

The directive includes GHG reduction and sustainability goals for biofuels. It seeks to promote more sustainable biofuels by allowing second-generation biofuels to be double credited in the 10 percent target. Second-generation biofuels don't compete with food or feed production, since they include wastes, residues, non-food cellulosic and ligno-cellulosic biomass such as algae, wood residues or paper waste. The directive calls for the European Commission to develop a methodology to measure GHG emission from indirect land use change by 2010.

The revised EU Emission Trading System is a key tool for achieving the EU's GHG reduction goals. It will apply from 2013 to 2020, and is expected to reduce GHG by 21 percent compared to 2005 levels. First launched in 2005, the Emission Trading System is a "cap and trade" system that limits the overall level of GHG emissions allowed, however, within that limit, allows participants to buy and sell allowances. In the current system, the great majority of allowances are allocated free of cost. The revised directive calls for auctioning to begin in 2013, with several exceptions. For the manufacturing sector, auction of carbon credits will be phased in gradually, starting with free allocation of 80 percent of allowances in 2013. Several allowances also were made for the less wealthy and new member states, although in return they are asked to modernize their electrical generation system. The directive also calls for at least half of the Emission Trading System auction revenues to be used for climate-related adaptation and mitigation by the member states. Those revenues are estimated to total 50 billion ($70 billion) annually by 2020.

In other provisions in the Renewable Energy Directive, member states may offset their emissions by buying credits from projects in third countries under the United Nation's Clean Development Mechanism. However, no more than 50 percent of the EU-wide reductions through 2020 may stem from such credits.

For more information about the directive, visit the European Parliament's Web site: www.europarl.europa.eu/news/expert/background_page/064-44005-343-12-50-911-20081208BKG44004-08-12-2008-2008-false/default_en.htm.