26 April 2018
NGO Brief: Reports Assess EU Long-term Climate Planning, EU ETS
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This NGO brief has a special focus on the EU, highlighting a brief selection of contributions from NGOs and think tanks in the past month that are providing inputs to moving forward with the Paris Agreement and the SDGs.

A set of reports on the new EU long-term climate strategy outline several technical and policy options for the strategy, including on the process for developing the strategy, its content and scope, and the process for review and revision of the strategy once it is established.

Another report provides an assessment of the EU Emissions Trading System, finding that it is currently "fit for purpose" if assessed by its own standards, but that it requires enhancement to be in line with the long-term goals of the Paris Agreement.

Non-state actors have a crucial role to play in the implementation of the 2030 Agenda for Sustainable Development and its SDGs, and the Paris Agreement on climate change, including through engaging in political advocacy, providing expertise and insights on potential policy choices, as well as being directly responsible for the implementation of many of these decisions.

This NGO brief has a special focus on the EU, highlighting a brief selection of contributions from non-governmental organizations (NGOs) and think tanks in the past month that are providing inputs to moving forward these agendas.

Developing the EU Long-term Climate Strategy

Bruegel, the European Roundtable for Climate Change and Sustainable Transition (ERCST) and the International Centre for Trade and Sustainable Development (ICTSD) have released two special reports on the development of the new EU long-term climate strategy. Following a year-long process involving engagement with various stakeholders which began in June 2017, the project produced a policy report and a technical report. Together these reports titled, ‘Developing the EU Long-term Climate Strategy,’ outline a “roadmap” for the development and delivery of the EU long-term strategy, describing the main issues to be addressed, policy choices for the design of the strategy, and the implied trade-offs.

Underscoring the need for a new EU long-term climate strategy, the report highlights the many different options that will need to be taken into account and the different political implications for each choice. The report underscores several key overarching considerations, including: the urgent need for global and economy-wide action to tackle the unique challenge of climate change and its impacts which pose “an existential threat to many inhabitants of Earth’s biosphere, including its human population”; the need for adequate ambition within the strategy to respond to this challenge; and the importance of stakeholder participation in the development of the strategy.

The report highlights considerations about the type of document that will be produced, outlining two possible options: a communication from the European Commission as a technical document to inform policymakers and stakeholders; or a legally binding document, which would set out long-term, binding targets for EU member States. Noting that a legally binding document has “the highest possible level of ownership and provides the clearest and strongest communication,” the report underscores several difficulties associated with developing such a document, including those related to consensus decision making in the European Commission. It concludes that the strategy itself need not be binding but rather the targets or milestones could form the more appropriate legally-binding aspects.

In relation to the “update cycle,” the authors list several options including a one-off document, or a document which is regularly reviewed and updated. The report suggests that the second option would ensure that the assumptions and scenarios within the strategy remain valid, incorporate “non-linear effects” the authors highlight as difficult to anticipate in advance, and add certainty for businesses and investors, reducing the perceived risk in certain investment projects. The report suggests aligning the review cycles of the EU long-term strategy with the five-year review cycles of the Paris Agreement on climate change would be a “sensible analytical basis and process.”

The report underlines the importance of a participatory process in relation to the development process of the strategy, highlighting the need to engage with stakeholders to bring ownership of the strategy. It notes that a strategy that has undergone a rigorous engagement process is likely to be perceived as more stable, sustainable and credible. The report suggests a thorough and broad stakeholder engagement process which could involve tailored outreach workshops and brainstorming sessions with citizens and organisations, allowing for broad participation and in-depth informed discussions with all relevant stakeholders that wish to contribute, including citizens, EU institutions and member States, academics, business associations, labor unions, think tanks and local governments.

State of the EU ETS

Following a series of stakeholder consultations with NGOs, think tanks, academia, policymakers, market participants and representatives of industry, ERCST, the Wegener Center for Climate and Global Change, Nomisma Energia, I4CE, and the EcoAct Group published a paper on the EU Emissions Trading System (ETS). The report titled, ‘2018 State of the EU ETS,’ aims to provide an overview of the current state of play in the EU ETS as well as an independent assessment to ensure that it is “fit for purpose.”

While the report notes that “availability of public data has been identified as a barrier to some parts of [the] analysis,” it evaluates the current functioning of the ETS, and identifies areas that can be improved. The publication first outlines the expectations of the EU ETS, noting that it can be reasonably expected to deliver on several areas: environmental targets in different timeframes; decarbonization in an economically efficient way, including protection against the risk of carbon leakage; and good market functioning and price discovery. It then assesses outcomes against these expectations, concluding that against these benchmarks the market can be said to be “fit for purpose.”

In terms of the environmental impact, the report details that although emissions rose slightly in 2017, the EU ETS target for 2020 (a reduction of 21% in emissions for ETS sectors compared to 2005) has already been achieved, with the latest figures from the end of 2016 showing a 26% reduction in emissions compared to 2005. However, the authors note that the current operation and targets set for the EU ETS post-2020 will require improvement if they are to achieve an emissions trajectory that is aligned with the EU’s own 2050 Roadmap and the goals of the Paris Agreement.

The report considers the potential impact on the objectives and market dynamics of the ETS of several international political and scientific moments in 2018, including: the expected adoption of the Paris Agreement implementation guidelines at the 24th session of the Conference of the Parties (COP 24) to the UNFCCC in Katowice, Poland, in December 2018; the Talanoa Dialogue, taking place throughout 2018; and the Intergovernmental Panel on Climate Change (IPCC) Special Report on Global Warming of 1.5ºC (SR15). The publication notes that outcomes of the Talanoa Dialogue could lead to a push to enhance current Nationally Determined Contributions (NDCs), countries’ climate commitments under the UNFCCC, which, combined with the outcomes of SR15, could significantly reinforce the sense of urgency to act and political pressure on the negotiation process at COP 24.

To respond to future challenges, and remain “fit for purpose,” the report makes several recommendations, including: restore short-term scarcity through the Market Stability Reserve; make the EU ETS resilient to policy interactions and to policy uncertainty; make the EU ETS governance operational; manage carbon leakage risk; align the EU ETS with the long-term EU climate ambition, compatible with Paris Agreement goals; and provide financial support for low-carbon competitiveness of EU industry and the transition towards a low-carbon economy.

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