Europe’s 2030 Emissions Targets

Long regarded as one of the leading actors in the fight against climate change, the European Union recently revealed its newest targets for European climate change policy. By 2030, the EU aims to reduce its greenhouse gas emissions to 40 percent of their 1990 levels, increase the share of energy consumption from renewables to 27 percent, and increase energy efficiency by at least 27 percent. In addition to these targets, the EU also resolved to increase the interconnectivity of Europe’s energy markets and reform the Emissions Trading Scheme, a cap-and-trade mechanism that notoriously failed early on when too many emissions allowances were distributed and the price fell to virtually nothing. These are all worthy goals and, despite criticism, are among the most ambitious targets being pursued anywhere in the world. The new climate targets also have the potential to create many jobs and generate significant investment in Europe’s renewable energy infrastructure. This is important if the EU wants to play a leadership role in the 2015 Conference of the Parties (COP) of the United Nations Framework Convention on Climate Change (UNFCCC) in Paris.As with the European Union’s climate change targets for 2020, the exact means of achieving these goals will mostly be left to the individual member states, so that each of them can pursue these goals in the way that is most appropriate for them. Additionally, each member state will be held to different standards based on its GDP per capita and the overall EU targets. Since these 2030 targets were only just released, neither the EU nor its member states have specified many details on the implementation of these goals thus far. Yet the conclusions of the European Council, which announced these new targets, contain some insight into the steps member states will need to take.The most obvious requirement is the continuation of the transition to less carbon-intensive energy sources. While it is true that some part of the reduction could come from shifting from coal to cleaner fossil fuels, doing so could hinder future efforts to make larger emissions reductions. Instead, the primary emphasis should remain on developing renewable energy sources.While renewable technologies seem ideal for reducing carbon emissions in electricity generation, a number of obstacles must be overcome for them to be viable primary energy sources. Chief among these is intermittency. Because wind and solar energy can only be generated while the wind is blowing or the sun is shining, critics have argued that they cannot be more significant energy sources until cost-effective energy storage is developed. While intermittency is a problem, it is not as serious as these critics claim. Energy storage is already possible in many areas using technologies such as pumped-storage hydroelectricity. Even where this technology is not available, the interconnection of various energy sources spread over a large geographical area has been shown to alleviate the problem of intermittency. To address this, the EU included a new goal in its 2030 targets: increasing interconnection of gas and electricity distribution networks. If the EU can accomplish this goal, surpluses of gas and electricity in some areas may compensate for shortages elsewhere. If this trend continues in the long term, it will give electricity generation from renewable energy more space to develop within these networks, thereby easing the transition away from fossil fuels.Given the ambition of the 2030 emissions targets, analysts have provided plenty of skepticism regarding the plan’s economic feasibility for a struggling EU. Initial adjustments will be difficult, but the strategies to meet the targets should provide many economic benefits. The 2030 targets renew the EU’s commitment to renewable energy, which is the fastest growing market in power production. Employment in eco-industries, including renewable energy, grew by 2.7 percent each year between 2000 and 2008. Between 2005 and 2009 alone, earlier EU energy goals added 320,000 jobs in this burgeoning sector. Continued commitment to renewable energy should provide the stability needed to create more jobs in construction, manufacturing, and engineering.Although investment in renewable energy in Europe declined last year, the region remains at the forefront of the renewable energy sector. The new 2030 targets signal to investors that the renewable energy industry is not going away in Europe, and that the EU remains a safe home for industry investment. European governments—including Germay in 2013—are phasing out expensive subsidies, which should increase opportunities for private investment. Indeed, Bloomberg analysts predict that Europe will attract $1 trillion in new renewable energy investment in the coming years. The combination of these factors makes Europe an attractive place for investment in renewable technologies. This should come as no surprise, since investment opportunities are limited by national security concerns and political skepticism in China and the United States.Though the EU’s strategy to meet its energy targets is still in development, it offers economic hope. Foremost, reducing the oversupply of tradable emissions credits to increase their price will more adequately reflect the cost of greenhouse gas pollution in Europe. The EU should introduce an “intervention price” for the credits. If the value of credits falls below this price because of a surplus, the EU would buy credits back to reduce supply and raise carbon prices. Such a practice would incentivize more carbon-conscious practices in the private sector. Higher carbon prices and more efficient carbon practices at once address climate change and benefit the private sector’s productivity.EU countries should push hard to integrate their electric grids through super-grid projects, which would provide economies of scale to the region’s energy production sector. At a time of high unemployment, a large-scale infrastructure project like this would reintroduce thousands of workers into the economy. In the future, an integrated grid would allow European energy producers to more easily buy and sell energy across borders, reducing the cost of a significant input in other industries.Critics of the EU’s new greenhouse gas emissions targets fail to take into account the long-term economic benefits of emission reductions, as well as the importance of maintaining the European Union’s role as a global leader in addressing climate change.