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February 01, 2012
A 30% Reduction in EU Emissions by 2020 will be Cheaper than Expected
    by Robert Kropp

Noting that emissions reductions reached 14% by 2010, the European Commission concludes that a 30% cut will cost less than anticipated, and the Institutional Investors Group on Climate Change calls for incentives to stimulate private investment.

In 2008, the European Union (EU) committed to a Climate and Energy Package that would reduce its greenhouse gas (GHG) emissions by 20% below 1990 levels by 2020. By 2010, thanks in large part to the global economic recession, the EU had already decreased its emissions by 14%.

The decrease in emissions recorded prompted calls to increase the 2020 target to 30%. According to Jason Anderson, Head of EU Climate and Energy Policy at World Wildlife Fund (WWF), "The 20% target will require virtually no effort to achieve."

In 2010, the EU indicated a preference for an international agreement before raising its 2020 target, pointing out that Europe is responsible for less than 10% of the world's emissions. But in October of that year, the EU asked the European Commission (EC) to study the feasibility of increasing the 2020 target.

In December, 2011, the EC adopted the Energy Roadmap 2050. While the Roadmap does not respond directly to political momentum for increasing emissions reduction targets, a recently published working paper by EC staff does.

The unforeseen decrease in EU emissions has created conditions in which "the low carbon transformation and innovation effect has been compromised," the working paper reports. "New but not yet fully commercial technologies… are not progressing towards the market as anticipated or may require more direct support."

Furthermore, decreased emissions also resulted in "a depressing effect on the price of allowances" in the EU's emissions trading system (ETS), "for years to come."

On the other hand, the paper continues, because the cost of a 20% reduction in emissions has decreased considerably, so too would a 30% target be cheaper to implement. The 30% target will cost $24 billion per year between 2016 and 2020, with the electricity
grid, power plants, and energy efficiency requiring the greater part of investment. However, the paper finds, fuel savings by 2020 could account for most of the investment needed.

The paper concluded that mechanisms exist that have the potential for meeting a 30% reduction target by 2020.

The Institutional Investors Group on Climate Change (IIGCC), a European forum for collaboration on climate change with more than 75 members representing almost $10 trillion in assets under management, has responded to the EC's working paper.

In its response, IIGCC's Executive Director, Stephanie Pfeifer, stated, "The analysis published by the Commission today opens the door for a discussion on how to reinvigorate the financial flows essential to enable the transition to a low carbon economy."

However, Pfeifer continued, "Both the public and private sectors need to play an active role in the development of a sustainable economic recovery. The current weak signal provided by the EU Emissions Trading Scheme hinders sustainable investment into low carbon assets. We support a strong and sustained carbon price, well designed carbon markets and appropriate incentives to stimulate private investment in low carbon opportunities."


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