30% Energy Reduction by 2030?

The Commission wants the EU to meet a 30% energy savings target by 2030 as part of the EU’s wider climate and energy framework goals. The target is presented in a Commission Communication published in late July.

The EU’s climate and energy framework, presented by the Commission in January 2014, proposed new targets for the reduction of greenhouse gas emissions and for an increase of the share of renewable energy sources in the EU energy mix to be achieved by 2030.

The latest Commission Communication assesses the EU’s progress towards the goal of a 20% increase in energy efficiency by 2020. The Communication finds that at the current pace energy savings of 18-19% will be made by the deadline, but that the 2020 target could still be achieved if all Member States fully implemented EU legislation in the area.  The Communication also addresses post-2020 goals, proposing the new 30% target for EU energy efficiency as part of the EU’s climate and energy framework.

The Commission’s focus on energy efficiency is part of a wider shift of EU energy policy towards energy security which has gained pace since the start of the crisis in the Ukraine which highlighted the EU’s dependency on foreign energy imports.

Energy efficiency is in fact seen as one of the key solutions to reduce Europe’s dependency on foreign suppliers, as well as one of the few investment plans that will guarantee “local jobs”.

Positions on energy efficiency in both Brussels and national capitals have seemingly changed from only two years ago, when many Member States were perceived to be directly or indirectly trying to water down the ambition of what was then the proposal for the Energy Efficiency Directive. Now the wind seems to have changed for good, as the explicit backing for the 30% target by Germany and France testifies.

The Commission’s Communication is structured as follows: 
(1) An assessment of the progress towards the 2020 target; 
(2) An analysis of the energy efficiency potential for 2030; 
(3) A description of the challenges related to the financing of energy efficiency measures; 
(4) A proposal for the way forward to 2030.

The Communication has three annexes; Annex I presents the policy developments reported in the 2014 National Energy Efficiency Action Plans, Annex II describes the status of transposition of the Energy Performance of Buildings Directive (EPBD), while Annex III focuses on the status of transposition of the Energy Efficiency Directive (EED).

Progress Towards the 2020 Target

The EU is currently trying to reach an indicative target of 20% energy savings by 2020, however according to the Commission’s Communication at current projections the EU will only achieve energy savings in the range 18-19% by 2020.

Although good progress is being reached in the building, appliances and transport sectors, the Commission specifies that around one third of energy savings are due to the effects of the financial and economic crisis which is still being felt in the EU.

The Commission therefore sees a need for increased efforts to be undertaken at the national level. The Commission believes that if all Member States fully implemented the legislation already in place, notably the Energy Efficiency Directive, the Energy Performance of Buildings Directive, the Ecodesign and Energy Labelling directives, regulations on CO2 performance standards for cars and vans, as well as the EU Emission Trading System (ETS), the 20% target would be achieved without additional measures.

The Commission calls on efforts to be focused firstly on strengthening local and regional verification of national building codes and exhaustively informing consumers on the energy performance of buildings for sale or rent and secondly, on increasing cooperation between utilities and customers in order to obtain energy savings. Finally, the Commission wants to improve market surveillance related to the Ecodesign and Energy Labelling framework, to ensure a level playing field for industry and proper information provision for consumers.

The Commission Communication outlines the key benefits that the Commission believes the continuation of an EU policy for energy efficiency will bring:

Competiveness

Investments in energy efficiency would have a positive impact on growth and employment. The Commission notes that those jobs would be “local” jobs, as they would be related to sectors not affected by delocalisation, i.e. the construction sector. Energy efficiency would also be beneficial for the competitiveness of the manufacturing industry, as it would allow the same output with reduced energy consumption.

Lower energy bills for consumers

According to the Commission, EU households spend on average 6.4% of their disposable income on energy bills. Improvements in the energy efficiency of buildings, as well as in the energy performance of household appliances, could reduce that figure. The Communication cites an estimate that every additional 1% in energy savings will lead to a reduction of about 0.4% in gas prices and of about 0.1% in oil prices by 2030.

Energy-efficient transport

Energy consumption in transport is currently decreasing. In addition, consumer behavior, especially in urban areas, is changing. The Commission suggests that the gradual transformation of the entire transport system should build on greater interaction between different modes, innovation and deployment of alternative fuels, as well as increased use of intelligent transport systems.

Financing of Energy Efficiency Investments

The biggest challenge to any energy efficiency policy is the nature of the related investments, for which a relatively high up-front cost is required with a long-term return rate. In this regard, the Commission considers putting in place appropriate financial instruments accessible to all groups of consumers particularly important.

The Communication highlights the funds for energy efficiency measures available under the current Multiannual Financial Framework (MFF) for 2014-2020. According to the Commission, the greatest energy-savings potential is in the building sector (which covers around 40% of the EU energy consumption). As almost 90% of the EU building floor space is privately owned, private financing will be key. In this regard, public funds should act as leverage for private capital; the Commission therefore argues that Member States should allocate important shares of EU and national funds to leverage investment for a low-carbon economy.

With regard to the demand side, the Commission highlights the importance of informing consumers of the full benefits of energy efficiency. Financing schemes should be attractive and easily available. In addition, socio-economic research on the behaviour of consumers should be carried out in order to better understand their decisions on energy efficiency investments.

Overall, the Commission considers that a number of key actions are needed to boost financing to energy efficiency measures: 
(1) Identification, measurement and valuation of the full benefits of energy efficiency investment and communicating them to consumers, businesses and the financial sector; 
(2) Development of standards for each element in the energy efficiency investment process; 
(3) Providing tools and services to consumers in order for them to be able to control their energy consumption and costs; 
(4) Target-oriented use of EU funds in order to increase investment volumes and leverage private funds; 
(5) Tailor-made national schemes that best address energy efficiency investment needs in the building sector. 
The Commission, for its part, will aim to strengthen cooperation with Member States and financial institutions (including the European Investment Bank) and ensure that EU law is adequately transposed and applied.

The Way Forward

The Commission proposes including an energy efficiency target of 30% for 2030  in the 2030 climate and energy framework, together with a 40% binding target for greenhouse gas (GHG) emission reduction and a target of a 27% share of renewable energy in the EU energy mix, binding at EU level only (meaning that there would be no binding national targets).

The Communication does not specify whether the energy efficiency target should be binding but points out that the approach followed with the 2020 target, - an indicative EU-level target and a mix of binding EU measures, is proving to be effective and should therefore be followed.

Under this approach, the Commission assesses whether the target will be met based on the national plans it receives periodically from the Member States. The Commission will review progress in 2017, including whether the use of additional indicators, such as energy intensity, would be more appropriate to monitor the progress in the sector and to take into account changes in GDP and population.

The Commission will also carry out a series of additional actions to support the energy efficiency objective: 
(1) Reviewing of the Energy Labelling Directive and of certain aspects of the Ecodesign Directive (expected at the end of 2014); 
(2) Further development and assistance with regard to financial instruments in order to leverage private investment; 
(3) Review of the Energy Efficiency Directive (various aspects over the coming years), the Energy Performance of Buildings Directive (expected by 2017); 
(4) Present an Action Plan (strategy) on retail markets, with the aim of increasing the diffusion of products promoting efficient use of energy; 
(5) Implementation of the market stability reserve of the ETS in order to boost energy efficiency improvement in the industrial sector; 
(6) Gradual implementation of the actions laid out by the 2011 White Paper on Transport; 
(7) Cooperation with Member States on the relevant EU research and innovation programmes. 

Next Steps

Heads of State and government are expected to discuss and endorse the EU’s 2030 climate and energy framework at the European Council of 23-24 October 2014.

Following the endorsement of the 2030 framework the Commission will come forward with a legislative initiative on the governance framework for energy efficiency which will include a 2030 target.