EU emissions scheme trumps individual state action on climate change

In advance of this autumn's global climate conference in Glasgow, major world players have announced new, more far-ranging commitments to reduce greenhouse gas emissions. The Biden administration has seriously engaged with tackling climate change, and has set an ambitious target to reduce emissions of greenhouse gases by 50 per cent in 2030 compared with 2005.

The European Union, which had already set a significant target for 2030, has now agreed to a tougher one, of reducing emissions by 55 per cent relative to 1990. This is more consistent with the Paris agreement goal to halt climate change by 2050. The UK, a joint host of the conference, has also talked about increasing its own ambition, though what this means in terms of policy and legislation have still to be worked through.

This increased attention to the climate challenges we face is welcome. However, there are concerns that setting targets, even if enshrined in legislation, does not make them happen. What is now needed is more attention across the world to policy measures that will drive down emissions, consistent with the ambitious targets. This will be much harder than legislating for targets, as some of the measures will, inevitably, be painful for households, companies and governments.

Decarbonising electricity

Over the last decade very significant progress in reducing emissions was made in the UK, especially in decarbonising electricity. In Ireland we failed to meet our modest target for 2020; however, for us too electricity was the one area where we made major progress in reducing emissions.

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The progress in decarbonising electricity across many countries reflected the fact that it came cheap. In the Irish case, it probably even saved money. Over the coming decade the task of dramatically cutting greenhouse gas emissions by companies and households will be more costly, and hence more difficult to implement.

Over the last 15 years EU policy has been central in driving Ireland to tackle climate change. Without EU legislation, Irish performance might have been even worse than it was.

To date the EU approach has had two prongs: one targeted at big industry – the emissions trading scheme (ETS) – and one dealing with the rest of the economy, commonly referred to as “burden-sharing”.

In the case of the ETS, the EU set the amount of greenhouse gases that industry could emit over the period 2013-2020. The EU issued permits equal to the allowed emissions, and industry had to have the permits if they burned fossil fuels. Some permits were issued free to industries considered vulnerable to trade from outside the EU, but for other sectors, such as electricity, they had to buy the permits.

The scheme was successful in that it delivered the required reduction in emissions at an EU level. The problem was that the target for 2020 was not ambitious enough – the widespread deployment of renewables made it easier than expected. Nonetheless it proved that paying for emissions is a successful mechanism for delivering reductions in emissions.

Burden-sharing

The burden-sharing approach left it to individual countries to take the required policy action to meet their national targets. However, in Ireland, we did not take effective action, and we missed our target. This highlighted the major problem with this prong of EU policy – countries can ignore their obligations.

For the future, the EU is considering two options: continuing with the existing two-pronged approach or, alternatively, using an EU ETS for heat and transport, rather than leaving action there to national governments. Given the higher probability of meeting the EU target with the ETS approach, it would seem to be the way to go. Continued reliance on all countries doing their bit seems a high-risk strategy.

However, if the EU were to use emissions trading as its strategy across the board, it would effectively supersede individual national targets. In effect, it would be like drawing up an EU-wide carbon budget, rather than individual national carbon budgets, such as in our own climate Bill.

Everyone who wanted to sell fossil fuels to consumers would have to buy permits, paying a common EU price. So, business and consumers across the continent would face similar costs for carbon use. If it proved difficult to cut emissions, then the price of the permits would rise, with the pain being shared across the EU.

However, to ensure a just transition, where vulnerable households and those losing jobs in fossil fuel industries are protected, it will be essential that the revenue in any EU-wide permit scheme accrues to national governments, so they can fund such protection and invest in green technologies.