The 21st Century climate challenge

Box 3.4The European Union—2020 targets and strategiesfor energy and climate change“The aim is that the European Union leads the world in accelerating the shift to a low-carboneconomy.”José Manuel Barroso, President of the European Commission, January 2007What the European Union does in energy policy matters for the world. Its 27 countries accountfor around 15 percent of CO 2emissions worldwide and Europe has a strong voice in internationalnegotiations. Making that voice count depends critically on the demonstration of leadership bypractical example.Ambitious targets have been set. In 2006, European governments agreed to aim at cuts of 20percent in greenhouse gas emissions against 1990 levels by 2020, rising to 30 percent in the event ofan international agreement. At the heart of the strategy for achieving the target is a commitment to a20 percent increase in energy efficiency.Translating targets into concrete policies is proving more diffi cult. Proposals from the EuropeanUnion to achieve greater efficiency through market liberalization, including the ‘unbundling’ of energyproduction, are contested by several member states. More broadly, there is no European Union-widestrategy for translating the 20 percent reduction commitment into national carbon budgets throughtaxation, strengthened efficiency standards or a more stringent cap-and-trade system. The EuropeanUnion Emission Trading Scheme (EU ETS) is the world’s largest cap-and-trade programme but it isnot geared towards attainment of the 20–30 percent cuts in emissions (section 3.2).Prospects for the European Union meeting its Kyoto Protocol reduction commitments remainuncertain. For the pre-2004 member states, it is estimated that current policies will achieve a reductionof 0.6 percent from the 1990 baseline. This means that the member states are less than one-tenthof the way to achieving the target of an 8 percent reduction. More stringent enforcement of existingenergy efficiency regulations would go a long way towards closing the gap.The European Union has taken one step towards leadership in global carbon mitigation: it has setambitious targets. Translating these targets into a coherent set of policies will require greater coherenceand bold reforms of the EU ETS, including far more stringent cuts in quota.3Avoiding dangerous climate change: strategies for mitigationSource: CEC 2006b, 2007a; EC 2006c, 2007b; High-Level Task Force on UK Energy Security, Climate Change andDevelopment Assistance 2007.Governments in countries that ratified theKyoto Protocol have also engaged with the privatesector in voluntary initiatives. In Japan,the Voluntary Action Plan (VAP) was drawnup by Government in consultation with theJapanese Business Federation. It covers sevenmajor industrial sectors. The problem is thatcompanies are free to set their own targets.In 2005, the Japanese Government set out anew plan aimed at getting the country backon-track to meet its Kyoto commitments byachieving a 9 percent cut in emissions of theindustrial sector by 2010. The target underthe VAP is for the industrial and energy convertingsectors is to achieve emissions levels in2010 that are below those in 1990. 27None of this is to downplay the importanceof corporate sector voluntary action. In theUnited States, many companies are not waitingfor mandatory government targets to changebusiness practices. They are acting now. 28 In2003, 35 investors with US$4.5 trillion in assetssigned up to the Carbon Disclosure Project—avoluntary arrangement for reporting corporateemissions. There are now 155 institutionalinvestors with combined assets of US$21trillion represented. 29 Many are participating ina voluntary programme—‘Energy Star’—thatsets standards for energy efficiency. Companiesin the power sector are investing in the developmentof renewable energy capacity. Meanwhile,one of the world’s largest energy supply companies—AmericanElectric Power—has set itselfthe ambitious target of building one or moreIntegrated Gas Combine Cycle power-plantsby 2010. Pollution-intensive industries—suchas steel and cement—have also developedtechnologies to cut emissions.HUMAN DEVELOPMENT REPORT 2007/2008 123