Imbalance in Europe's Effort Sharing Decision: Scope for strengthening incentives for energy savings in the non-ETS sectors

Abstract

Europe’s 2020 greenhouse gas (GHG) reduction target consists of two sub-targets: one for the Emissions Trading Scheme (ETS) sectors and one for the non-ETS sectors. The non-ETS target covers CO2 emissions in buildings, transport and non-ETS industry and non-CO2 GHG emissions. The non-ETS target is known as Europe’s Effort Sharing Decision. This article discusses the GDP per capita method the European Commission has applied in setting Member State specific targets for the non-ETS (‘‘the effort sharing’’) and shows that it results in an imbalanced reduction effort among the Member States. It turns out that the principal mechanism of the GDP per capita method (low-GDP countries get room to catch up with high-GDP countries by allowing them to increase emissions) is obscured by the non-CO2 GHGs, the baseline projections of which are highly policy-induced and not correlated with the growth of GDP per capita. We propose an alternative method that (1) corrects for the policy-induced decrease of non-CO2 GHG emissions and (2) is based on energy savings potentials. This approach could be used in future target setting for non-ETS sectors – including in the case that the overarching EU-wide target would be strengthened – and would provide a direct support to Europe’s energy savings ambitions and policies.