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EU says higher climate goal requires €350B extra energy investment per year

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EU says higher climate goal requires €350B extra energy investment per year

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An offshore wind farm in Denmark. EU member states would be able to pitch in to finance renewables projects in other countries under a new proposal.
Source: Orsted

A higher 2030 climate target as proposed by the EU's executive arm would require an additional €350 billion in annual investment into the energy system over the coming decade, according to the body's own assessment.

The European Commission said on Sept. 17 that the higher target, aiming for a 55% cut in emissions by the end of the decade, would also imply a significantly higher share of renewables in total energy use, and proposed to launch cross-country tenders for wind and solar projects.

"We need both long-term targets and short-term action" on climate change, the EU's energy commissioner, Kadri Simson, said during a press conference in Brussels. "[This is] not just a plan to cut emissions faster and cheaper, but transforming how we produce, consume and transport energy ... the energy sector has a big role to play."

The 2030 emissions target would be attached to a climate law already under discussion, which seeks to enshrine the EU's longer-term net-zero emissions target into binding legislation.

Provided bureaucrats can get the European Parliament and member state leaders on board, the commission is planning to publish detailed proposals for overhauling a raft of legislation by June 2021 to take the higher 2030 emissions target into account. This includes the renewable energy directive, which imposes binding bloc-wide targets for green power, and the emissions trading mechanism, which regulates the EU's carbon market.

In its impact assessment for the 55% economywide emissions cut, the commission said it would require renewable energy to reach a share of 38% to 40% of gross final energy consumption across the EU. It said an evaluation of individual countries' national energy and climate plans showed the bloc is currently on track to slightly overshoot its existing target for a 32% share.

To make up for part of the gap, the commission wants to launch regular public tenders for renewable energy developers from the start of 2021, with member states also able to pay into the scheme to finance wind and solar parks in other countries. Simson said this approach would let countries invest in technologies abroad that are less viable at home, while contributing to both countries' renewable energy targets.

"This mechanism provides an additional tool to facilitate investment in clean energy projects. It will encourage cooperation between member states and give a practical boost to our green recovery efforts in the coming years," Simson said in a statement, naming offshore wind parks funded by land-locked member states as an example.

'Massive change'

The updated climate target would have wide-ranging effects on every part of the EU's economy, but mostly hit fossil fuel use, which contributes three quarters of EU emissions. While renewables are set to surge, Simson said that, by 2030, coal consumption would be reduced by more than 70% compared to 2015 and oil and gas by more than 30% and 25%, respectively, to achieve the 55% emissions cut.

"We know that each of these mean massive change, but our careful assessment shows it's doable," she said, adding that the plan would reduce fuel expenses and dependence on fossil fuel imports in the long run.

The commission said €350 billion in additional annual investment will need to be made between 2021 and 2030, compared with the previous decade. Most of the extra money is to finance interconnections to link up countries' grids and new capacity, including replacing old power and industrial plants.

While the power sector has so far made the greatest strides toward decarbonization, officials emphasized that much more needs to be done in industry and transport, as well as the energy efficiency of buildings. The commission proposes to bring the maritime, buildings and road transport sectors under the umbrella of the emissions trading system and strengthen the overall cap to drive drive up the carbon price. It also wants to raise CO2 standards for cars and potentially set an earlier phase-out date for internal combustion engines.

'Uphill battles'

The broad scope of the proposal has the potential to cause issues, according to some analysts.

"To meet the necessary climate targets, decarbonization policies will have to touch every single corner of our economies," Simone Tagliapietra, a research fellow at the Bruegel think tank, wrote in a blog post. "It should be stressed that these issues have all been long argued over, and progress in some areas will continue to be uphill battles."

In the meantime, EU officials emphasized that countries now have a unique opportunity to use funds from the bloc's €750 billion pandemic recovery package to green-light sustainable projects. Simson also said that EU member states give away some €50 billion in subsidies to fossil fuels every year, which is one area that will require the EU to "rethink and reset."

The 2030 target also presents a chance for the EU to increase its nationally determined contribution under the Paris agreement on climate change by the end of the year. Frans Timmermans, the commission's executive vice-president for the Green Deal, said this would set the bar for other countries to follow suit ahead of next year's United Nations climate conference.

"I know it's ambitious, but we plan to achieve the same reductions in this decade as we have over the past 25 years," he said. "I'm confident this can be done. We have the policy, the commitment and the funds to do it."