Annexes to COM(2011)624 - PROGRESS TOWARDS ACHIEVING THE KYOTO OBJECTIVES(required under Article 5 of Decision 280/2004/EC concerning a mechanism for monitoring Community greenhouse gas emissions and for implementing the Kyoto Protocol)

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dossier COM(2011)624 - PROGRESS TOWARDS ACHIEVING THE KYOTO OBJECTIVES(required under Article 5 of Decision 280/2004/EC concerning a mechanism for ...
document COM(2011)624 EN
date October  7, 2011
agreement has been reached on a proposal to start auctioning of up to 120 million allowances in the form of futures or forwards already in 2012, so ahead of the start of the 2013-2020 trading period. Its aim is to ensure a smooth transition from the second to the third trading period of the EU ETS, which underpins proper functioning of the secondary carbon market.

Work on enhanced rules for monitoring and reporting of GHG emissions by operators covered by the EU ETS as well as requirements for the verification of emission reports and the accreditation and supervision of verifiers is ongoing and aims for improved harmonisation of the applied rules. Two new regulations are to be finalised by the end of 2011.

Preparation of the implementing measures under the Effort Sharing Decision is ongoing and currently focuses on determining the absolute values for Member States' annual emissions targets in 2013-2020 and setting rules for transfers of annual emission allocations among Member States as well as ensuring their transparency.

In addition, the revision of the EU Monitoring Mechanism has started. It is driven by the need to address the reporting needs of the climate and energy package, Europe 2020 Strategy, new requirements deriving from the Cancun agreements as well as lessons learnt so far.

Work on the implementation measures of the Regulation (EC) 443/2009 related to emissions from cars is ongoing. The procedure for the approval and certification of innovative technologies for reducing CO2 emissions from passenger cars should be adopted soon.

In addition, a White Paper on Transport (COM(2011) 144 final) which sets out a list of important measures to be taken in order to reduce transport emission further in the coming years has been recently adopted.

Legal acts recently adopted

Implementation of the climate and energy package:

1. EU ETS Cap: Commission Decision 2010/634/EU6 adjusting the Union-wide quantity of allowances to be issued under the Union Scheme for 2013.

2. EU ETS Auctioning – third trading period: Commission Regulation (EU) No. 1031/20107 on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances.

3. EU ETS Harmonised allocation rules: Commission Decision 2011/278/EU8 determining transitional Union-wide rules for harmonised free allocation of emission allowances.

4. NER 300: Commission Decision 2010/670/EU9 laying down criteria and measures for the financing of commercial demonstration projects.

5. EU ETS Use of international credits: The Commission Regulation (EU) No 550/201110 on determining certain restrictions applicable to the use of international credits from projects involving industrial gases.

Other:

6. Aviation and the EU ETS: Commission Regulation (EU) No 394/201111 amending Regulation (EC) No 748/2009 on the list of aircraft operators.

7. CO 2 and cars: Commission Regulation (EU) No 1014/201012 on monitoring and reporting of data on the registration of new passenger cars.

8. CO 2 and cars: Commission Regulation (EU) No 63/201113 laying down detailed provisions for the application for a derogation from the specific CO2 emission targets.

9. CO 2 and vans: Regulation (EU) No 510/201114 setting emission performance standards for new light commercial vehicles.

Implementation of the EU Emissions Trading System (EU ETS)

The first period of the EU ETS covered the years 2005-2007. Currently, operators subject to the EU ETS are approaching the last year of the second trading period (2008-2012). In 2013, a substantially revised system will begin its operation. For more information on the implementation of the EU ETS as revised see section 3.2.

Second trading period (2008-2012)

The EU-wide average annual cap for 2008-2012 amounts to 2.081 billion allowances per year, 10.5% lower than what was initially proposed in the national allocation plans submitted by the Member States. In 2010, more than 12000 installations participated in the system. The total amount of verified emissions in 2010 from EU ETS installations in the EU-27 was 1.913 billion tonnes15 of CO2-eq., around 3% higher than in 2009. The increase reflects the economic recovery following the recession which caused an exceptional fall of 11.6% in 2009 emissions. However, the EU ETS emissions in 2010 remained well below the cap for the 2008-2012 period and in comparison to 2005 have fallen by an average of more than 8%.

In 2010 average emissions per installation were more than 17,000 tonnes CO2eq. lower than in 2005, when the EU ETS was launched. Although emissions increased slightly in 2007 as Romania and Bulgaria joined the Union, and again in 2010 in line with the recovery from the economic crisis, average annual emissions per installation are now 8.3% below 2005 levels. For more information see tables 10 and 11, and figure 2 in the SWP.

During the first 3 years 2008-2010 of the 2nd trading period, on aggregate, operators surrendered mostly allowances (EUAs) (appr. 95%) to cover their emissions. The remaining (appr. 5%) of their surrendering obligation was met with Certified Emission Reductions (CERs) and/or Emission Reduction Units (ERUs).

Use of JI and CDM by operators

As part of the second National Allocation Plans (NAPs), a limit was established by each Member State for the maximum use of project-based credits by operators (Joint Implementation (JI) and Clean Development Mechanism (CDM)). In total, up to 278 million CERs or ERUs may be used per year by ETS installations from all Member States in the second trading period, which corresponds to 13.4 % of the EU-wide cap for this period. In 2010, operators used 137 million CERs or ERUs which was 7.1% of all units surrendered for compliance. From 2013 onwards the rules for the use of JI and CDM credits will be revised as set in the EU ETS Directive as revised.16

Projected use of Kyoto mechanisms by Union's governments

Ten Member States of the EU-15 as well as Slovenia have decided to purchase and use Kyoto mechanisms to reach their Kyoto targets. Together, these EU-15 Member States would acquire up to 108.4 Mt CO2-eq. per year for compliance under the first commitment period under the Kyoto Protocol. This would represent approximately 2.5 percentage points towards the EU-15 Kyoto target of -8 % (see Table 12 in the SWP).

These 10 Member States together have decided to invest up to € 2.8 billion to acquire units through JI, CDM or emissions trading. Austria, the Netherlands, Spain, Ireland and Luxembourg allocated the largest budgets (€ 531 million, € 500 million, € 386 million, € 290 million and € 250 million, respectively) for the five-year commitment period. In Slovenia, the budget has been estimated for € 80 million. However, given the impact of the recent recession on GHG emissions MS might not need as many emission reduction credits as initially estimated. So far, this hypothesis seems to be supported by the fact that the amount of credits actually delivered to Member States' accounts in the registry only amounts to about 28 Mt CO2-eq.

As regards Assigned Amount Units (AAUs) sold by Member States, according to data in the registry about 56 Mt CO2-eq. have been transferred. The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Slovakia and Poland reported that they intend to further sell AAUs. One Member State (UK) has legislated that it would retire any surplus AAUs between the Kyoto target and UK unilateral ‘carbon budget’ after the 1st commitment period.

Projected use of carbon sinks

In addition to the policies and measures targeting various sources of GHG emissions, Member States can make use of carbon sinks. The information provided so far indicates that total net sequestration during the commitment period from afforestation and reforestation activities under Art. 3.3 of the Kyoto Protocol will be about 8.9 MtCO2 per year for the EU-15. In addition, the use of activities under Art. 3.4 is projected to contribute 27.7 MtCO2 per year of the commitment period in the EU-15. Taking in addition into account contributions from EU-12 it will amount to 35.5 MtCO2 per year (for details see Table 13 in the SWP).

Together, activities under Art. 3.3 and 3.4 in the EU-15 Member States are projected to reduce emissions by 40.2 Mt CO2 per year of the commitment period. This is equivalent to almost 1 percentage point of the EU-15 reduction commitment of 8 % during the 1st commitment period compared to base year emissions.

MEETING THE 2020 TARGET

U nion's GHG emission reduction target by 2020

The Climate and Energy Package set a 20% GHG emission reduction target for EU-27 by 2020 compared to 1990, which is equivalent to -14% compared with 2005. This effort will be divided between the EU ETS and non-ETS sectors as follows:

10. 21% reduction in EU ETS sector emissions by 2020 compared to 2005;

11. reduction of around 10% by 2020 compared to 2005 for the sectors that are not covered by the EU ETS.

These greenhouse gas emissions reduction targets were included in the Europe 2020 strategy for smart, sustainable and inclusive growth.

Policies contributing to the fulfilment of targets

The emission caps from 2013 until 2020 are defined in the Effort Sharing Decision (ESD) and the revised ETS Directive. The EU ETS is a market based mechanism covering over 12,000 installations. The ESD obliges Member States to limit their GHG emissions between 2013 and 2020 according to a linear trajectory with binding annual targets which will ensure a gradual move towards agreed 2020 targets. The ESD regulates GHG emissions in all sectors except installations and aviation covered by the EU ETS, LULUCF and international maritime shipping. In the ESD sectors, complementary Union-wide policies will contribute to reaching the targets by Member States, such as the binding targets for renewable energy, energy efficiency measures, the emission performance standards for new light-duty vehicles, the CCS Directive, F-Gases Regulation or the Fuel Quality Directive. Also the Commission's and Member States' efforts to facilitate the demonstration and deployment of innovative technologies in reducing GHG emissions such as under the SET Plan and the NER300 could play a role here.

Under the ESD, Member States will be responsible for implementing these Union-wide policies and measures in these sectors, and, if necessary, for defining additional national policies and measures to limit their emissions. A robust reporting and compliance system will be put in place for monitoring Member States' action and help them make any necessary corrective measures if they fail to meet their targets.

Projected distance to targets

Despite the positive trends towards KP commitment achievement shown by 2008-2012 projections, more effort and additional policies will be necessary to achieve the Union's 2020 objectives . The flexibilities provided for in the ESD and the revised ETS Directive, such as the use of project credits, will also contribute to the attainment of the targets. Figure 6 shows first estimates of the gap between non-ETS GHG emissions projections by 2020 and 2020 targets.

According to these provisional projections still much effort will be needed by individual Member States to deliver on their 2020 targets set for the non-ETS sectors. Only 11 Members States are expected to reach these commitments with existing policies and measures. Further 7 MS would meet their targets with planned additional policies and measures. 9 Member States are unlikely to be able to deliver on their commitments even with the additional measures foreseen for now. However, as regards EU-27, the estimates show that the overall non-ETS target would be delivered. This analysis does not yet take into account the use of credits from JI and CDM projects.

In order to pave the way for a smooth compliance with the 2020 target, it is imperative that Member States not only ensure timely delivery of emissions reductions of existing policies and measures but also accelerate the development and full implementation of their additional policies and measures as well as consider other options including the use of international credits.

Figure 6: Projected gap to 2020 targets for non-ETS sectors

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Note: (1) The underpinning data for this calculation are based on MS projections for 2020 non-ETS emissions, gap-filled and adjusted where necessary3, as well as estimated 2020 non-ETS targets for MS (still subject to some changes). Several Member States (CZ, EE, FI, LT, NL, PL) have not provided specific national projections for non-ETS sectors, so the share of these emissions had to be estimated. (2) The assessment provided in this figure should be treated as indicative, due to differences in methodology and assumptions. Some data, such as the Greek and Lithuanian projection for instance deviate substantially from the projections made for the 'EU energy trends to 2030 - update 2009' (Publication by the European Commission, Directorate-General for Energy in collaboration with Climate Action DG and Mobility and Transport DG, ISBN 978-92-79-16191-9).

Source : EEA, European Commission

ADAPTATION TO CLIMATE CHANGE

Reducing emissions in the coming decades can still avoid large scale dangerous climate change. However, even if the world keeps the average annual global temperature increase to below 2 degrees Celsius, European citizens and business will be affected by the adverse effects of inevitable climate change and therefore will have to adapt cost effectively.

The European Commission adopted the White Paper on Adaptation to Climate change in April 2009 outlining the Union's policy framework for action to improve Europe's resilience to climate change. The four key pillars of action established by the White paper are building a solid knowledge base on the impact and consequences of climate change for the Union, integrating adaptation into Union's key policy areas, employing a combination of policy instruments (market-based instruments, guidelines, public-private partnerships) to ensure effective delivery of adaptation and stepping up international cooperation on adaptation, which are currently in the process of being implemented by 33 actions (see table 15 in SWP).

The 2009 White Paper on Adaptation to Climate Change also foresees the establishment of a European Adaptation Clearinghouse Mechanism on climate change impacts. It is a web-based IT tool and database on adaptation to climate change, with the objective of providing an aid for the development and implementation of adaptation strategies. It will entail both technical functions (providing relevant data and information and visual insight in spatially-resolved impacts, vulnerability and adaptation issues) and policy support functions (in particular via an adaptation support tool, guiding users through the policy cycle for the development of adaptation strategies). The 1st prototype of the Union's Clearinghouse has been delivered at the end of April 2011 and is currently under evaluation. Following an additional development phase, the final version will go live in March 2012. From that date onwards, the European Environment Agency (EEA) will manage the Adaptation Clearinghouse.

The White Paper also put forward the idea of an Union's Adaptation Strategy , foreseen for adoption in 2013, with a time-frame for implementing actions under the Strategy from 2013-2020. The aim of this Strategy will be the development of a comprehensive framework for adaptation-related activities at all levels.

SITUATION IN THE UNION'S CANDIDATE COUNTRIES

Between 199017 and 2009 Croatia's GHG emissions decreased by 8%, and compared to 2008 they decreased by 7%. However, according to the GHG projections included in the 5th National Communication, Croatia is projected to face difficulties with achieving its Kyoto target with the current set of policies and measures.

Iceland's GHG emissions between 1990 and 2009 increased by 35% and in 2009 were 5.4% lower than in 2008. Taking into account decision 14/CP.7, and according to the GHG projections included in the 5th National Communication, Iceland is on track to meet its Kyoto target.

In 2009, Turkey’s GHG emissions were 369.6 MtCO2-eq. compared to 187 MtCO2-eq. in 1990, so increased by 97.6% and comparing to 2008 increased by 1%. While Turkey is an Annex I Party, it has no GHG target under the current 1st commitment period of the Kyoto Protocol.

An up-to-date inventory of GHG emissions in the former Yugoslav Republic of Macedonia is not available. Between 1990 and 2005 total GHG emissions decreased by around 19%.

For more information on GHG emissions in the Union's candidate countries please see section 2 of the SWP.