Calling it a “new deal” for Europe’s entire energy system and for consumers, EU Commission Vice-President for Energy Union Maroš Šefčovič on Wednesday presented the body’s proposal for power market and emission trading reform. The Commission’s summer package on energy also includes reform proposals for updating energy efficiency labelling in member states, and calls for consumer empowerment to make them “free to generate and consume their own energy under fair conditions”.
To become a “world leader in renewable energy” the EU would need a “fundamental transformation” of its electricity system, including a new power market design, the Commission said. It launched a public consultation process to collect ideas on how to combine cross-border competition and decentralised electricity generation.
The Commission’s reform proposal on the European Union Emissions Trading System (EU ETS) proved to be the most contentious part of the summer package. The market scheme requires industries and power stations in Europe to get permits for every tonne of CO2 they emit. Industry groups criticised the proposed changes as harmful for global competitiveness. Green politicians said they were not strict enough to ensure the EU meet its emission reduction targets. The overall quantity of allowances will decline by 2.2 percent every year starting from 2021, the Commission suggests (currently there’s a 1.74% annual reduction; Green MPs in the European Parliament demanded a 2.6% decline). In order to prevent "carbon leakage", i.e. industries shifting production and investment abroad to avoid paying for emissions in Europe (a contested issue), the Commission wants to see 57 percent of allowances auctioned and allocate the remaining 43 percent for free. Particularly eastern European countries like Poland had demanded the free allocation in return for agreeing to the EU's climate targets in the first place.
All measures in the summer package, and the EU ETS reform in particular, are designed to enable the European Union to meet its target of cutting greenhouse gas emissions by at least 40 percent by 2030 over 1990 levels. EU Commissioner for Climate Action and Energy, Miguel Arias Cañete, said: “My message to our global partners ahead of the Paris climate conference: the EU stands by its international commitments. And my message to investors, businesses and industry: invest in clean energy; it's here to stay and continue to grow.”
These are reactions from German business associations, consumer groups and environmental NGOs to the EU Commission’s summer package:
Ministry for Economic Affairs and Environemnt (BMWi)
“Baake: Commission proposal on market design shows important support for German power market reform process”
Rainer Baake, State Secretary at the BMWi, said the Commission’s suggestions for strengthening the European power market and incorporating a growing share of renewable energies into it, were matching German government proposals for a new national power market design, as recently laid out in a white paper (See a CLEW factsheet on the power market reform here). “I am happy that the Commission clearly focuses on a free market, advocating flexibility of supply and demand, and using price signals,” Baake said, according to a ministry press release.
See the press release in German here.
Ministry for the Environment (BMUB)
“Hendricks: Commission proposal good basis for further reform of emission trading scheme”
German environment minister Barbara Hendricks called the Commission’s proposal for ETS reform a "good basis" for further negotiations. “This is a further step towards reviving the emission trading system, and for shaping reliable framework conditions for long term climate action”. Hendricks called for speedy negotiations to give companies planning security for investment decisions, but also to reach climate targets efficiently. Hendricks said giving free allowances to companies facing international competition was prove the Commission struck a balance between ambitious climate action and securing competitiveness of European industry.
Read the press release in German here.
German Association of Local Utilities (VKU)
“European energy market has to be thought holistically”
The managing director of the VKU, Hans-Joachim Reck, applauded the Commission's focus on “consumer empowerment”: “We urgently need the acceptance of the general public when we tackle the transformation of the energy system.” This required more than just information campaigns on energy bills and smart meters. Installing smart meters alone did not automatically lead to a functioning smart grid, Reck said. Changing the energy infrastructure required big investments. It was crucial to determine who was responsible for supply security and grid stability, Reck said.
Press release in German here.
German Association of Energy and Water Industries (BDEW)
Discuss European framework for national capacity markets
The BDEW supports the EU Commission proposal to reduce CO2 allowances by 2.2 percent from 2021 – “this is an important step to enable the emissions trading scheme to contribute to European emission reduction targets,” a statement reads. BDEW Chairwoman Hildegard Müller said: “In the opinion of the BDEW, many of the proposals are suitable for strengthening the European single market for energy and for reviving the EU ETS.”
The BDEW noted the commission's scepticism about a rising number of national capacity mechanisms for power, now in seven member states. The BDEW said rules and criteria were necessary to introduce a European framework for such national measures, and to make them compatible with the single market.
Read the statement in German here.
“EU Commission strengthens emission trading – but refom is not enough”
“The Commission’s plans are a signal of half-heartedness” said Christoph Bals, Policy Director of Environmental NGO Germanwatch. The EU ETS had been strengthened, but still did not offer the necessary investment incentives. “The EU Commission shows that it has not given up on emissions trading. At the same time, it does not send the necessary signal for the climate conference in Paris, that the 2 degreee warming limit is not just something to talk about, but also something that Europe wants to implement,” Bals said. The EU should enable the ETS and European climate targets to be reformed and tightened every five years. The number of companies receiving emission allowance for free should be reduced considerably at regular intervals, Bals said.
Federation of German Consumer Organisations (VZBV)
“Energy label – more comprehensible for consumers”
The EU Commission wants to make energy efficiency labelling more comprehensive, rating products on a scale from A to G (A efficient, G not very efficient) instead of the current A+ and A+++ labelling where A+ marks low efficiency, a statement by consumer association VZBV explains. The VZBV has long demanded going back to the easier scale of A-G, saying this will make it easier for consumers to recognise the most energy efficient product.
The VZBV welcomes the Commission’s scepticism about power capacity markets. “Capacity markets involve an enormous risk of high costs for customers and hold the Energiewende back”, VZBV chairman Klaus Müller said.
Read the press release in German here.
German Renewable Energy Federation (BEE)
“EU consultation: Preparing European energy markets for renewables”
The Commission’s public consultation on the future power market design is pointing in the right direction, BEE managing director Hermann Falk said. Power markets have to become more flexible, they have to provide the right incentives for a wide range of different decentralised suppliers as well as consumers of renewable energies, and they have to be better coordinated, Falk commented. The BEE supports implementing suggestions from the German white paper on power market design, such as cross-border energy trade, to achieve a sustainable and secure power supply across Europe. “European policy has the mandate to form a fitting framework for the energy transition and to facilitate the development of renewable energies,” Falk said.
Read the press release in German here.
German Chemicals Industry Association (VCI)
"Losing sight of competitiveness"
The EU Commission proposal on the revision of the Emission Trading System (ETS) considerably increases the financial burden on energy-intensive industries, according to the VCI. The draft lacked suitable measures for securing the international competitiveness of key sectors like the chemical industry, said Utz Tillmann, the association's director-general, in a press release. “Instead of attaching more importance to competitiveness, the Commission is planning to put even more pressure on industry”, said Tillmann. He is also critical of the planned tighter thresholds for the inclusion of industrial sectors in the so-called carbon leakage list.
Read the press release in English here.