EU Climate Policy

EU Climate and Energy Policy

Climate action is one of the European Union’s policy priorities. In the Paris Agreement of 2015, the international community committed to limiting global warming to below two degrees Celsius, or less than 1.5 degrees Celsius if possible, compared to pre-industrial levels. The goal is to limit the negative impacts of climate change.

To achieve a climate-friendly economy, the European Union is basing its approach on overarching targets, EU-wide measures and binding national climate targets. In December 2019, the EU heads of state and government committed to reaching the goal of climate neutrality by 2050. This means that by 2050 all greenhouse gas emissions in the European Union should be avoided to the extent possible. The remaining emissions must be offset through processes that remove greenhouse gases from the atmosphere, in particular sustainably managed forests and soil. With the European Green Deal, the European Union demonstrates that it continues to be an international climate action pioneer. Germany plays an active role in shaping European climate policy.

In its NDC (“Nationally Determined Contribution”) set in the Paris Agreement, the European Union committed to reducing its greenhouse gas emissions by at least 40 percent by 2030 compared to 1990. In 2020, there will be a debate on the European Commission’s proposal to raise the European NDC to an emissions reduction of 50 to 55 percent by 2030. Until 23 July, citizens, stakeholders from civil society, industry and science as well as national, regional and local authorities can express their views on the plan to raise the 2030 EU climate target to 50 to 55 percent in a public consultation organised by the European Commission.

In the second semester of 2020, Germany will assume the rotating EU Council Presidency. Germany aims to drive forward EU climate policy and raise climate ambition during the Presidency.

The European Green Deal

The European Green Deal (EGD) is the European Commission’s new key project. The Green Deal is a comprehensive growth strategy for a climate-neutral and resource-efficient economy. Its primary objective is to achieve EU-wide net zero emissions by 2050, which would make Europe the first climate-neutral continent in the world. On 11 December 2019, the Commission presented a Communication setting out its vision for the Green Deal and a comprehensive work programme to develop EU policies along these lines. The European Green Deal shows how sustainable transformation can succeed. It contains a range of different measures spanning climate action, nature conservation, biodiversity conservation and mobility and industrial policy to energy, agricultural and consumer protection policy.

The European Climate Law

On 4 March 2020, the European Commission presented its draft for a European Climate Law, an important component of the European Green Deal. The aim is to make the goal of EU-wide climate neutrality binding by 2050 and to create a common roadmap up to 2050 for all EU policy areas.

The law is intended to serve as a guide and provide planning certainty to authorities, businesses and citizens. Apart from the goal of greenhouse gas neutrality by 2050 and a potentially more ambitious emissions reduction target by 2030, the European Climate Law also contains measures for successful adaptation to climate change and attaches importance to long-term public involvement.

The next step at EU level will be the deliberations on the draft legislation in the European Parliament and the Council of the European Union. During the German Council Presidency in the second half of 2020, Germany is committed to advancing the negotiations on the European Climate Law.

Under the Paris resolutions, all countries are called upon to submit a long-term climate strategy

Under the Paris resolutions, all countries are called upon to submit a long-term climate strategy by 2020. With its Climate Action Plan 2050, Germany developed an overarching reduction strategy already in 2016. On 7 March 2020, the European Union communicated its long-term climate strategy to the United Nations, setting itself the goal of greenhouse gas neutrality by 2050. The EU strategy is based on the Commission’s Communication “A clean planet for all”, which for the first time outlined the vision of a climate-neutral EU by 2050.

Key EU instruments for climate action

The emissions trading system (EU ETS) and the Effort Sharing Regulation (ESR) are two EU-wide core instruments for reducing greenhouse gas emissions. While emissions trading mainly focusses on the energy sector and industry, the Effort Sharing Regulation establishes targets for most activities in non-ETS sectors (in particular the transport, buildings and agricultural sectors and small industrial installations). From 2021 onwards, the LULUCF Regulation will also integrate the climate impacts of forest and land management into the European climate and energy framework.

Emissions trading

The EU Emissions Trading System (EU ETS) is the EU’s core instrument for reducing greenhouse gas emissions in the energy, industry and air transport sectors. The system establishes an upper limit (cap) on emissions for energy-intensive companies in these sectors. These companies may only produce emissions for which they have tradable emission allowances. This creates a market for these allowances (trade) as well as an economic incentive to cut emissions. Nevertheless, there has been a surplus of emission allowances for quite some time.

To ensure that the market is more flexible and can react to fluctuations in demand (e.g. triggered by an economic crisis), the market stability reserve (MSR) was set up in 2015 to gradually reduce the allowance surplus. The reform of the emissions trading system in view of the fourth trading period (2021 to 2030) has made it possible for the MSR to reduce the surplus more quickly and sustainably since 2019. The cap on emissions will fall by 2.2 percent annually from 2021 onwards. This means that by 2030, the EU ETS sectors will reduce greenhouse gas emissions EU-wide by 43 percent compared to 2005 levels. In addition to strengthening emissions trading, rules for industry facing international competition were adapted to ensure that production and emissions are not moved from the EU to countries with less restrictive climate policies.

Effort Sharing Regulation

For sectors outside the EU emissions trading system (in particular transport, buildings, agriculture and small industrial installations), the EU climate target is divided among the individual EU member states. The Effort Sharing Regulation (ESR) of 2018 stipulates for the period 2021 to 2030 that emissions in all relevant sectors across Europe are to be lowered by 30 percent compared to 2005 levels.

Due to the vast regional differences within the EU, the contribution of each member state to achieving this reduction has been set on the basis of gross domestic product per capita and the varying degree to which member states can contribute to reducing greenhouse gases. The 2030 targets vary between 40 percent greenhouse gas reduction compared to 2005 levels for the largest economies and a cap on emissions at 2005 levels for the economically weakest member state. Germany is expected to reduce its greenhouse gas emissions by 38 percent in the respective sectors by 2030.

Land-use regulation

Greenhouse gas emissions and emission removals from land use, land-use change and forestry (LULUCF) will be integrated into the EU climate and energy framework for the first time in the period 2021 to 2030. The LULUCF Regulation specifies how emissions and sinks (i.e. the emission and storage of CO2) from forests and soil are calculated in the greenhouse gas balance and creates incentives to improve the sector’s climate impact. Since the land-use sector is subject to natural fluctuations and accounting is subject to considerable uncertainty, the greenhouse gas balance is not directly credited towards the EU climate targets.

Each EU member state compares real carbon dioxide removals from forests and soil using benchmarks defined in the regulation. A reduction in carbon dioxide removals compared to the benchmark results in debits, an increase in credits. Depending on the properties of each individual land category, different benchmarks are used. Benchmarks are applied to distinguish between natural and man-made (anthropogenic) changes. Only anthropogenic changes are credited towards the member states.

  • To calculate the climate mitigation performance of agricultural soil, the greenhouse gas balance is compared to the period 2005 to 2009.
  • There are no benchmarks for reforested and deforested areas: the emissions balance of these areas is credited in full to the sector’s climate balance.
  • For managed forests, every member state submits a modelled reference level which also takes account of future fluctuations caused by the age structure of the forest.

Member states have submitted their national forestry accounting plans and forest reference levels to the European Commission for the period 2021 to 2025. Member states must ensure that their balance reflects more credits than debits. Surplus debits must be compensated either through additional climate action within the land-use sector or in other non-ETS sectors. At the same time, a limited number of credits may be transferred to the sectors regulated by the Effort Sharing Regulation.

Germany's role in European Climate Action

German climate policy is closely linked to European climate policy. The energy concept of 2010 and the Climate Action Plan 2050 adopted in 2016 laid down a reduction target for Germany of 55 percent by 2030 compared to 1990. If the targets of the European climate instruments are calculated in comparison to 1990, this would mean a total emissions reduction of approximately 53 percent for Germany. Furthermore, it was decided that the land-use sector should be maintained as a carbon sink. The targets set out in the Climate Action Plan are therefore comparable to the German obligations under European climate legislation. Based on the long-term reduction target laid down in the Paris Agreement, Germany aims to achieve extensive greenhouse gas neutrality by 2050.

In 2017, the Federal Environment Ministry launched the European Climate Initiative (EUKI). It focusses on specific local climate action projects which create networks between smaller stakeholders, in particular in Central, East and South-East Europe, thereby driving forward European climate action. EUKI aims to foster cohesion within Europe and create momentum for the necessary transformation towards a climate-neutral future.