La revue de l’énergie – Interactions between the EU ETS and complementary energy policies
In operation since 2005, the European Emissions Trading Scheme (EU ETS) aims at sending a carbon price signal to the most emitting installations from power and industry to drive their decarbonization. After three Phases of functioning, the EU ETS meets new challenges in preparation of its Phase IV. Indeed on July 15th, the European Commission published a proposal for a revision of the EU ETS Directive for the post 2020 period. This proposal provides a 43% emissions reduction target for the EU ETS and a linear reduction factor increased to 2.2% from 2021. This new ambition is embedded in an energy and climate package composed with a binding 40% GHG reduction compared to 1990, a binding 27% share of Renewable Energy Sources (RES) in gross final energy consumption, and an indicative 27% energy efficiency (EE) improvement compared to 2007 baseline – both without any binding targets for Member States.
Such a design of the energy and climate policies package raises the issue of interactions between these policies and their impacts on the EU ETS, presented as the central pillar of the European climate policy. This article examines, in a first section, interactions between the EU ETS and complementary energy policies during Phases II and III and their consequences on European allowances (EUA) surplus. Then, results from the POLES model provide an assessment of energy and climate policies in the EU up to 2030, with only a GHG emissions target and further with additional RES and EE targets. Based on lessons from the 2020 energy and climate package, recommendations are provided to manage interactions between the EU ETS and complementary energy policies in order to improve the cost-effectiveness of the 2030 climate and energy policies package.
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