Caspian Report - Issue: 08 - Fall 2014

with introducing new measures that
could imply higher costs for households
and firms, especially for those
belonging to energy intensive sectors.
Actually, the agreement was
accepted by all member states only
after several correcting mechanisms
were introduced, as the free allocations
of a share of emissions’ rights
after 2020 for industries subject to
carbon leakage and for the power
sector of the poorest member states.
Indeed, such a quid-pro-quo is the
main similarity between the 2014
and the 2008 climate and energy
deals. Basically, each member state
has been able to get at the meeting
something in return for something
else: Poland got the possibility to
give free permits and no binding targets
for renewables and efficiency;
the United Kingdom got the focus
on the ETS as the main tool for fighting
climate change and the possibility
to resort more widely to nuclear
power; Spain got more attention to
the issue of interconnection; Denmark
got the promise that land use
and forestry will be included in the
emission reduction framework at
the latest by 2020, etc. One of the result
of such tough negotiations has
been the weakening of the target on
energy efficiency, in apparent contrast
with the suggestions expressed
by the EC – it had proposed a 30%
target – and its acknowledged relevance
in improving cost-effectively
the security of supply of member
states and reduce both GHG emissions
and energy bills.
Despite the fanfare after the meeting
in Brussels, much work remains
to be done. The agreement is broad
but many specifications are still required.
In particular, since the main
tool for climate policy after 2020
will be represented by the ETS, it is
necessary to fix it and make it function
properly. This is not easy and
DESPITE THE FANFARE AFTER THE MEETING IN BRUSSELS,
MUCH WORK REMAINS TO BE DONE.
debates about the Stability Market
Instrument are on-going. Even more
unclear is the precise form that the
new energy governance will take.
Member states seem unwilling to
concede more power to the EC and
the preferences of the European Parliament
(EP) on the issue are still to
be tested, as are those on the other
aspects of the agreement. The election
that took place last May changed
significantly the composition of the
EP and it is not obvious that the new
members of the Parliament will be
as “green” as the old ones were.
In short, the deal agreed by EU leaders
reveals that the EU will go on
with its fight against climate change
but such fight will be probably less
intense and may be side-lined from
time to time. Long term investors
should be aware of that and continue
to watch carefully what will
happen in Brussels in the coming
months and years.
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CASPIAN REPORT, FALL 2014