Targets: the end of the road?

A decision to scrap renewable energy targets after 2020 will have profound effects on the industry

Last month, the European Commission’s announcement of a plan to scrap renewable energy and transport targets after 2020 sent shockwaves through the sector. The target for renewables is one of three established for 2020 by EU leaders back in 2008 – on emissions reduction, renewable energy share, and energy efficiency. For 2030, the Commission wants to set only one nationally binding climate target – a 40% reduction in emissions from 1990 levels, double the reduction of 20% set for 2020. The Commission says this headline goal will still spur growth in the renewables sector because countries without nuclear capability will need renewable energy to meet the emissions target.

But environmental campaigners, along with solar, wind and biofuel companies, claim that the change will kill the industry. They are trying to convince national governments not to back the Commission’s plan when they discuss the issue at the European Council on 20-21 March. Already they have convinced MEPs to support their cause. Earlier this month, the European Parliament narrowly approved a resolution calling for a new nationally binding renewable energy target for 2030, and for transport fuel targets to be extended.

But national leaders are unlikely to back this stance. Many countries, including the UK, have said a binding target is no longer appropriate after 2020 because the market will be mature by then, and because the target is already distorting subsidies. It is extremely unlikely that Poland would ever back a 2030 renewable energy target. Even the 40% emissions reduction target will be a hard sell in coal-dependent Poland.

The current 2020 target is broken down into nationally binding sub-targets. The Commission can take member states to court if they do not meet their targets. In January, the Commission said that for 2030 it would set a goal of achieving at least a 27% share of energy consumption coming from renewable sources. This goal will be “binding” only at EU level, meaning that the Commission will oblige itself to meet it. But there will be no requirement for member states to do anything and, given that the Commission cannot take itself to court, the concept of a binding EU target is effectively meaningless.

“Just five years ago, the Commission sent the signal to investors that renewable energy was to be the future for Europe,” says Rainer Hinrichs-Rahlwes, the president of the European Renewable Energy Council, an industry association. “Now the Commission is acting in reverse mode, setting a cap for renewables, not a target for 2030.”

The agricultural sector is also alarmed about the change. “A greenhouse-gas target alone is not sufficient to achieve the EU climate and energy agenda” said Pekka Pesonen, secretary-general of farmers’ lobbying group Copa-Cogeca, in a letter to the Commission.

The Commission’s impact assessment, published in December, indicates that renewable energy will grow to a share of only 24.4% by 2030 without new targets. The assessment found that a nationally binding 30% renewable energy target for 2030 would create about 600,000 jobs and save €258 billion in fossil fuel imports.

Last week, at the European Business Day, the chief executives of some of Europe’s big energy companies – including Alstom, Enercon, ERG Renew, RES Med and Vestas – held a press conference to say that without binding targets they do not expect significant investment in renewable energy. They delivered a statement, signed by 90 companies and organisations, calling for a legally-binding target.

But some national leaders and MEPs say that current EU policy is resulting in distorted renewable energy subsidies in Germany and other countries, and that ending the subsidies after 2020 will result in a healthier energy market in which renewable energy still gets a fair chance.

Biofuel companies say the Commission has added insult to injury by also recommending scrapping two existing targets for transport fuel – a target of sourcing 10% of transport fuel from renewables by 2020, and another obliging fuel providers to reduce the greenhouse-gas intensity of their fuels by 6% by 2020. Combined with the uncertainty created by the Commission’s proposal to restrict biofuel based on indirect land-use change (ILUC) – an issue that is unresolved – the news that the EU is likely to have no biofuel target at all after 2020 may cause investors to opt out. On Tuesday (18 February), seven industry associations representing different parts of the biofuel industry sent a letter to energy ministers asking them to call for a separate framework for renewable energy in transport at their meeting on 4 March.

The European Biodiesel Board, an industry association, says that biodiesel alone is expected to account for 8.6% of overall transport consumption by 2020, as a direct result of the EU’s renewable transport targets. “Despite uncertainties surrounding the ILUC debate, biodiesel investors are willing to contribute to sustainable mobility,” says Raffaello Garofalo, the group’s secretary-general. “Specific targets for 2030 would restore investors’ confidence and support the deployment of a sustainable and advanced alternative to diesel.”

Environmental groups such as Friends of the Earth say that scrapping the 6% fuel target will leave the EU with no real strategy to reduce emissions from transport fuel, which currently accounts for 25% of total emissions. Transport is expected to be the largest cause of emissions by 2020.

The Commission says that just because there are no targets it does not mean that EU policy cannot encourage biofuel. “There are still discussions to be had on how to proceed on the tools,” says Connie Hedegaard, the European commissioner for climate action. The Commission is expected to put forward a proposal to revise the fuel-quality directive in the spring, although this will principally focus on establishing a methodology for calculating emissions from different types of fuel.

The Commission is trying to convince organisations in the sector that they do not need subsidies to survive and that there are policy tools at the EU’s disposal other than targets. But the policy shift has made renewable energy companies and their investors very nervous about the future.