ECN

Westerduinweg 3, 1755 LE Petten, The Netherlands

+31 (0)224564431

National Renewable Energy Laboratory

1617 Cole Blvd.

Golden, CO 80401-3305

+1-(303)-275-3000

http://www.nrel.gov/

This paper aims to improve mutual understanding between the EU and US with regard to climate 

change policy, suggesting specific opportunities for transatlantic cooperation in this arena. A background on the environmental, legislative, and economic contexts of the EU and US as they relate

to climate policy sets the context. This is followed by an overview of how cap & trade, renewable 

energy, and sustainable transportation policies have taken shape in the EU and the US. Some observations and lessons learnt within each of these areas are highlighted. Building on these insights, 

recommendations are made regarding the carbon market, possibilities for new technologies to

bridge the valley of death, and best practices and standards.
 

 

 

Energy research Centre of the Netherlands (ECN) 

ECN Policy Studies is part of the Energy research Centre of the Netherlands (ECN). The unit Policy 

Studies carries out research and provides advice in the field of energy policy. Key activities are development of scenarios, analyses of energy markets, comparison and evaluation of energy and environmental 

policies and socio-economic analyses of innovation and transitions. The 65 researchers of ECN Policy 

Studies form a multidisciplinary team with academic and applied energy knowledge of drivers, markets, 

sectors, policies and technologies. A range of modelling tools is available to support the analyses. More 

information is available at www.ecn.nl/ps 

Energy research Centre of the Netherlands 

P.O. Box 1 

1755 ZG Petten 

The Netherlands 

Tel: +31 224 56 49 49 

Fax: +31 224 56 83 38 

National Renewable Energy Laboratory (NREL) 

The National Renewable Energy Laboratory (NREL) is the primary laboratory for renewable energy and 

energy efficiency research and development in the United States. NREL develops renewable energy and 

energy efficiency technologies and practices, advances related science and engineering, and transfers 

knowledge and innovations to address the nation’s energy and environmental goals. NREL is a national 

laboratory of the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy; NREL 

is operated by the Alliance for Sustainable Energy, LLC. 

National Renewable Energy Laboratory 

1617 Cole Blvd. 

Golden, CO 80401-3305 

+1-(303)-275-3000 

http://www.nrel.gov/ 

Cover images: from the NREL picture gallery 

November 2009 
 

 

 

 

 

A climate for collaboration 

Analysis of US and EU lessons and 

opportunities in energy and climate policy 

ECN: Alessia De Vita, Heleen de Coninck 

NREL: Joyce McLaren, Jaquelin Cochran 

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Acknowledgement 

This report was produced as a joint effort between the Energy research Centre of the 

Netherlands (ECN) and the National Renewable Energy Laboratory (NREL) in the US. The 

project is registered with ECN under project number 5.0116, and is managed by Alessia De Vita 

(tel: +31 224 56 4227; e-mail: devita@ecn.nl). The NREL report number is NREL/TP-6A2­

46420, and the NREL contact is Joyce McLaren (+1 303 384-7362; joyce.mclaren@nrel.gov). 

The authors would like to thank Ron Benioff, Pieter Boot, David Kline, Xander van Tilburg and 

Ryan Daley for the time they contributed to reviewing the report and for their useful comments. 

We would also like to thank the supporting staff that assisted with the formatting and graphics. 

Any remaining errors are the responsibility of the authors. 

Abstract 

This paper aims to improve mutual understanding between the EU and US with regard to 

climate change and energy policy, suggesting specific opportunities for transatlantic cooperation 

in this area. A background on the environmental, legislative, and economic contexts of the EU 

and US as they relate to climate policy sets the context. This is followed by an overview of how 

cap & trade, renewable energy, and sustainable transportation policies have taken shape in the 

EU and the US. Some observations and lessons learnt within each of these areas are highlighted. 

Building on these insights, recommendations are made regarding the carbon market, 

possibilities for new technologies to bridge the valley of death, and best practices and standards. 

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Contents 

1.	 Introduction 7
 

2.	 Setting the context to climate change policy: US and EU Key climate and
 

energy parameters 8
 

2.1	 Economic and energy data 8
 

2.2	 Policy factors 13
 

3.	 Overview and discussion of US and EU energy and climate policies 17
 

3.1	 Introduction 17
 

3.2	 Cap and trade policy 17
 

3.3	 Renewable energy policy 21
 

3.4	 Sustainable transportation policy 28
 

4.	 Emerging opportunities for transatlantic cooperation 34
 

4.1	 Cap and trade: lessons and observations 34
 

4.2	 Renewable energy policies: lessons and observations 35
 

4.3	 Vehicle standards and low emitting fuels 35
 

5.	 Not-to-miss opportunities for transatlantic cooperation 37
 

5.1	 The carbon market 37
 

5.2	 Bridging the valley of death together 37
 

5.3	 Best practices and standards 37
 

Appendix A Glossary	 43
 

A.1	 Renewable electricity policies 43
 

A.2	 Sustainable transport policies 45
 

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List of tables 

Table 3.1 RGGI policy overview 19 

Table 3.2 EU ETS policy overview 20 

Table 3.3 US state-level Renewable Portfolio Standards - policy overview 22 

Table 3.4 EU Renewable Energy directive - policy overview 24 

Table 3.5 EEG, SDE, and ROC - policy overview 24 

Table 3.6 Barriers to RE development and policies that address them 27 

Table 3.7 US federal sustainable transport standards- policy overview 29 

Table 3.8 California’s Low Carbon Fuel Standard-policy overview 30 

Table 3.9 CO2 standards for passenger vehicles - policy overview 30 

Table 3.10 Barriers to sustainable transportation and policies that address them 33 

List of figures 

Figure 2.1 US and EU Population Densities 9 

Figure 2.2 US and EU GDP per Capita 10 

Figure 2.3 US and EU CO2 emission trends 11 

Figure 2.4 US and EU electricity consumption from non-hydroelectric renewable sources 11 

Figure 2.5 US and EU Electricity Production, by Source 12 

Figure 3.1 US States with Renewable Portfolio Standards 22 

List of text boxes 

Text Box 1 Climate-related Lobbying in the US 12 

Text Box 2 Government Structure in the US - An Overview 13 

Text Box 3 The European Union Governmental Structure - An Overview 14 

Text Box 4 Climate-related lobbying in the EU 15 

Text Box 5 Supporting Renewable Energy programs through public benefit charges 23 

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Executive Summary 

After having followed notably different policy paths over the past decade, the perspectives on climate and energy policies of the US and the EU are now converging. This opens up new opportunities for cooperation in climate change and energy policy analysis and implementation. Constructive 

collaboration requires mutual understanding of the starting points, gaps and strengths within the US 

and EU systems. In contribution to achieving such understanding, this work presents a comparative 

evaluation of three policy areas related to climate change mitigation: cap and trade, renewable energy, and sustainable transportation. A review of the EU and US policies elucidates where both 

economies can benefit from each other’s experience. 

Climate policy in the US has, thus far, been primarily limited to local, state, and regional efforts. 

For example, the northeast Regional Greenhouse Gas Initiative caps CO2 emissions of electricity 

generating sources and distributes allowances through auctioning. The EU, however, began with a 

centralised system: the European Union Emissions Trading Scheme (EU ETS), which in its initial 

phases used a free allocation system to distribute allowances and has since tightened its rules to implement more ambitious caps and auctioning of allowances. Reciprocal learning could increase efficiency of the mechanisms in both jurisdictions. 

The Renewable Portfolio Standard (RPS) is a commonly employed mechanism to encourage renewable energy development within the US states. Within the EU, renewable energy support 

mechanisms vary considerably by Member State (MS). Germany has a feed-in tariff, the Dutch 

have a feed-in premium, and the UK an obligation system, all of which aim to contribute to the EU 

objective of achieving 20% of gross final energy consumption through renewable energy. All these 

systems have specific merits and drawbacks, and are effective in different fields. There is much 

scope for mutual learning on best practices although this must be carefully considered within the 

specific context in order to ensure effectiveness and compatibility with other policies. 

In sustainable transport, both the US and the EU are currently implementing a low-carbon fuel standard - the US following California’s example and in the EU moving from a voluntary to an obligatory system. The US standard requires the emissions per energy content of the fuel to be reduced 

and considers the overall life cycle emissions, while the EU CO2 emission standard focuses on increasing carbon efficiency of vehicles, as high fuel prices in the EU already render a relatively fuelefficient vehicle fleet. 

Based on the overview of EU and US climate policies, lessons learned and observations, we offer 

recommendations on opportunities for coordination in the following areas: the carbon market, innovation for low-carbon technology in the demonstration phase and common policy best practices and 

standards. 

Facilitating a dialogue between relevant policymakers, industry and policy researchers across the 

EU and US could assist in optimising emissions trading and its effectiveness on both sides of the 

Atlantic and globally through streamlining offsetting mechanisms. Sharing experiences and conducting collaborative research into the mechanisms to support technologies through to commercialization could be of great benefit. Policymakers and researchers could further converge on best 

practices for policies in various sectors. For sectors not covered by a cap-and-trade system, setting 

uniform technology standards could help level the playing field and increase cooperation, with 

global spill-over benefits. 

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1. Introduction 

The climate and energy policies of the United States of America and the European Union have recently been converging, after having followed notably different paths in the first decade of the 21st 

century. While the EU adopted the Kyoto Protocol and embraced a domestic cap-and-trade system, 

the US focused on developing low-carbon technology and energy security policy. Recently US 

House of Representatives has adopted a cap-and-trade bill, and the EU is supporting technologyspecific climate and energy policies. These developments open up new opportunities for cooperation in climate change policy analysis and implementation. At the same time, lack of knowledge on 

each other’s starting points, policy drivers and systems still leads to misunderstanding on climate 

and energy policy with policymakers, researchers and other stakeholders on both sides of the Atlantic. 

After years of minimal cooperation and information exchange between the US and EU, opportunities for sharing climate and energy policy experiences are ample. This paper identifies a selection 

based on a high-level review of policies in energy and climate. The convergence in perspectives and 

policies provides significant opportunities, not only to share best practices, but also to view how to 

catalyze the transformation to a clean-energy economy. Moreover transatlantic cooperation in the 

field of energy and climate could create momentum for clean producers, potentially even leading to 

a tipping point in the global market. 

A deepening of cooperation between the US and the EU requires mutual trust, and understanding of 

current policies, challenges and successes. Through providing such understanding among policymakers, industry and other stakeholders in both economies, opportunities for transatlantic cooperation on climate change and energy policy emerge. This paper sets out by discussing the environmental, legislative, and economic contexts of the EU and US as related to climate. This context is 

essential to understanding how cap-and-trade, renewable energy and sustainable transportation policies have taken shape in the EU and the US, as described in Chapter 3.1 For each of these policies, a 

barrier analysis and discussion is provided. Chapter 4 builds off this improved understanding to list 

observations and possible lessons learned. The paper concludes with recommendations on topics 

where EU and US interests align, and where further cooperation could prove beneficial. 

1	 Cap and trade, renewable energy and sustainable transport were selected for consideration here because they are major 

areas of policy concern in current discussions surrounding climate change mitigation. Energy efficiency is acknowledged as an additional sector with enormous potential to contribute to climate change mitigation at a minimal cost, 

however due to the scope of policies involved and the limited resources available to the authors, it was not included in 

this study. 

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2.	 Setting the context to climate change policy: US and EU Key climate and energy parameters 

2.1	 Economic and energy data 

The energy system of a country is not only shaped by policies, parameters like population densities, 

economic status, electricity sources and per capita emissions also matter. A review of such data 

provides a reference point from which coordination on climate policy can begin. 

As the maps here show, the EU is characterized by higher population densities. The area of the US 

is more than double that of the EU2

. This is relevant to the discussion here on several levels. Population density is one indicator of the amount of land potentially available for renewable energy development or the population potentially displaced or affected due to changing climate conditions; 

on the other hand larger area indicates larger distances for transportation and for distribution infrastructure. 

Note: The maps presented in this report are not to scale. 

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Figure 2.1 US and EU Population Densities
 

Note: Countries in grey are not part of the EU and are only shown for graphical purposes.
 

There are a variety of economic factors that affect the motivation of government at all levels to pursue climate policies, including the real and external costs of environmental emissions, electricity 

prices, local resource availability, gross income levels, and broader economic climate. Comparisons 

of the gross domestic product per capita indicate that, while the economic conditions within the two 

regions are similar, the US overall has a higher GDP per capita than in the EU, particularly as compared to eastern Europe. 

In the US, states with an abundance of coal, nuclear, or hydroelectric power, may have less incentive to invest in local non-hydro renewable energy (RE) resources than states that must import electricity or fuels at a high cost (EIA a, EIA b). States with higher gross state products have more resources that can be funneled to climate change mitigation programs, including renewable energy 

development. Many states now cite the anticipated manufacturing and job creation as a major driver 

in dedicating limited state resources to the renewable energy and energy efficiency sectors. Programs to assist the US workforce transition from energy-intensive activities to clean-energy jobs 

could, thus, prove to be a valued aspect of any proposed climate change policy. 

A recent study concludes that the American Recovery and Reinvestment Act, a stimulus package 

emphasizing job creation and clean energy production, combined with the House climate legislation, would generate public and private investments in clean energy of $150 billion/year, yielding a 

net gain of 1.7 million jobs annually (Pollin et al. 2009). New jobs created through these investments stem from building retrofits that require, for example, electricians, installers, carpenters, construction equipment operators, procurement specialists, and engineers. 

In the EU, the energy intensity of the entire economy varies by a factor of almost ten between Ireland and Denmark (103 kgoe/1000€GDP 3 and 105 kgoe/1000 €GDP in 2007) and Bulgaria (1016 

kgoe /1000€GDP), which joined the EU in 2007. The number of employees in the energy sector has 

decreased since the mid 1990s (EMCC 2008). The decrease was mainly in lower skilled personnel. 

1 kgoe= 6.84barrels of oil equivalent=39 623Btu (mean). 

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The necessity for higher skilled employees is expected to rise in future as the large energy companies are becoming more efficient and the RE sector expands. Also improving general infrastructure 

necessary to develop a clean energy economy is expected to contribute more jobs (EMCC 2008). 

Figure 2.2 US and EU GDP per Capita
 

Note: Countries in grey are not part of the EU and are only shown for graphical purposes.
 

Emission trends over the period 1990-2006 show an immediate divergence between the US and EU, 

with US emissions rising steadily over the following sixteen years and EU emissions falling until 

the mid-1990s, after which they stabilized. 

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Figure 2.3 US and EU CO2 emission trends 

The emission trend lines are in part explained by the economic restructuring in Eastern Europe and 

the increased use of gas after market liberalization beginning in 1990. The EU’s trend line is consistent with the Kyoto target. As shown in the figure below, the consumption of renewable energy 

within the US has grown more slowly. 

Figure 2.4 US and EU electricity consumption from non-hydroelectric renewable sources 

As demonstrated by the charts below, the total US electricity consumption (at 4138 TWh in 2007) is 

somewhat larger than the EU-27 (3185 TWh), with a greater percentage of US electricity produced 

with coal. The EU produces a greater share of electricity from other sources, such as hydroelectric, 

nuclear, and renewable resources. 

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Text Box 1 Climate-related Lobbying in the US 

As climate policy has progressed at the national level, so too has the breadth of lobbying interests. A recent study reports that 770 companies and interest groups hired 2340 

lobbyists to influence federal climate change legislation over the previous year (Lavelle 2009). Dominating lobbying interests are the sectors most directly affected by climate legislation - coal, utilities, manufacturers, and oil and gas. But the list of other 

lobbying groups, both for and against the emerging climate legislation, continues to 

proliferate, sometimes from unexpected quarters. Apart from environmental interests 

and the RE and biofuel sectors, active lobbying comes from labor groups that are concerned that jobs will move to countries without carbon caps, cities and public transit 

authorities that seek funding from the auctioning of carbon permits, and financial institutions that are eager to influence the structure of carbon trading (Ibid). 

Figure 2.5 US and EU Electricity Production, by Source 

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2.2 Policy factors 

2.2.1 Climate policy formulation within the US governmental structure 

The formulation of climate policy in the US is subject to two primary dynamics - those between the 

three branches of the federal government, and those between the federal government and the states. 

On the federal level, the executive branch has the power to control emissions through its jurisdiction 

over such areas as fuel economy, national appliance standards, and regulation of national carbon 

markets. In particular, the executive branch’s Environmental Protection Agency (EPA) has broad 

authority to set regulations that reduce carbon emissions under the Clean Air Act. 

Although implementing climate policy at a federal level has the advantage of scope, achieving legislation at this level has proven challenging. States have been able to customize climate policies to 

their own political and economic contexts more easily, as evidenced by the current existence of 

thirty-three state-level climate plans. These state policies are in stark contrast to those at the federal 

level, where there exists a suite of climate-related policies, but no comprehensive plan signed into 

law. Because climate policy is now being formulated at both the federal and state levels, there are 

inevitable tensions - as well as opportunities for cooperation - between these two spheres. 

Certain policies, when implemented at the federal level, prevent the implementation of more aggressive policies by states. Appliance and fuel economy standards, for example, are federally mandated to minimize the burden to manufacturers, and cannot be altered by states. States wishing to 

implement robust climate plans can find such federal standards restricting. Other federal initiatives, 

e.g., tax incentives and technical assistance, can work in harmony with similar state-level programs. 

Text Box 2 Government Structure in the US - An Overview 

The US federal government is composed of three branches: executive, legislative and 

judicial. Each branch has its own powers and areas of influence. The executive branch 

includes the power afforded to the President, who is responsible for the execution, enforcement and administration of federal agencies and legislation. The legislative 

branch consists of the two chambers of Congress: the Senate and the House of Representatives. Proposed legislation is introduced into either the Senate or House and is 

first debated by the appropriate committee(s). If approved by the committee, it is voted 

on by the full chamber. Once similar legislation is approved in both chambers, it is sent 

to a joint committee of the House and Senate, which writes compromise legislation. 

This legislation is returned to each chamber for a final vote. 

Once both the House and the Senate approve identical bills, it is sent to the President, 

who has the power to either veto it or sign it into law. Congress can override a presidential veto, but this requires a two-thirds vote by a quorum of both the House and 

Senate. The executive branch then implements the legislation. If the bill is challenged 

to be in violation of the constitution, the case is brought to court, where the judicial 

branch interprets its constitutionality. 

The state government process is largely parallel to the federal process, with the Governor serving as head of the executive branch, and a state legislature that typically consists of two chambers. The division of jurisdiction between federal and state levels is 

stipulated in the state’s constitution and interpreted through the judicial branch. The 

need to continually interpret this division as applied to new and complex challenges, 

like climate change, is a source of many judicial and political disputes. 

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There are also key areas of climate change policy currently outside the federal government’s domain, e.g., building codes and power generation - two of the strongest determinants of carbon emissions. As the federal government moves toward a comprehensive climate plan, however, states may 

lose some of their control over such sectors - a source of tension for many states. For example, although states currently hold jurisdiction over whether and where new transmission lines are constructed, federal preemption laws mean that they could loose some or all of this control if a federal 

policy regarding transmission line expansion is made (NREL 2009). 

One important benefit of diversity in state climate-related policies to date has been the development 

of best practices that inform national level climate policy (Doris 2009). However, state activity in 

climate policy has not significantly shaped international climate policy. Representation in international climate discussions occurs at the federal level, and states have historically had limited ability 

to influence US participation or positioning in international climate agreements. 

2.2.2 Climate policy formulation within the European Union structure 

The confederation character of the European Union has opportunities and challenges for climate 

change and energy policy. For climate change, it is considered an opportunity to coordinate and legislate climate policy. The EU Emissions Trading Scheme (ETS) would not have had the same impact within single Member States (MS). Also, at UNFCCC Conferences of Parties, the EU negotiates as one country, with the Member State that holds the EU presidency representing other Member States and affiliated countries, such as Norway and Switzerland. 

For some areas, however, coordination is more difficult. Decisions in the Council have to be made 

by consensus between 27 MS with sometimes very different interests. This makes it difficult to 

overcome the interests of single states, even when they are small, and to agree on proposals quickly. 

In addition, the complexity of the procedures can lead to months or years between the proposal and 

the implementation of a measure. The ETS took four years between the first proposal and the start 

of the scheme, and this was considered a very fast procedure. In the field of energy security of supply, there is no coherent EU policy. 

Text Box 3 The European Union Governmental Structure - An Overview 

The European Union is a confederation of countries that began with the treaty of Rome 

in 1957, the foundation of what was then called the European Economic Community 

(EEC). It now has 27 Member States, of which 12 share a common single currency. 

The legislation is divided into two main parts: the primary legislation or the founding 

treaties of the EU, and the secondary legislation made up of Directives and other formal regulations. Environmental legislation is usually laid down in Directives. Directives need to be transformed into national legislation for the directive to take effect in 

each state. This can result in differences in implementation and enforcement of climate 

and energy policies. Partial or late implementation is subject to a fine by the European 

Court of Justice. 

The EU has three main bodies that make decisions: 

(i)	 The Council of the EU: The Council consists of relevant ministers of the Member 

States and shares legislative power with the European Parliament. The presidency 

of the Council rotates between Member States (MS) in periods of six months. 

(ii) The European Parliament is an elected body with 736 members and 20 committees 

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bourg. It has three ways to participate in the legislative procedure: 

- through the ‘cooperation procedure’ it makes comments on directives and regulations proposed by the Commission, which must be considered; 

- the ‘assent procedure’ gives the Parliament the power to assent to international 

agreements negotiated by the Commission; 

- the ‘co-decision procedure’, in which Parliament shares power and develops 

policies interactively with the Council. Through this power it can also override 

Council decisions. 

(iii) The European Commission (EC) ‘manages and runs’ the EU and is the only institution allowed too make official new policy proposals. Each Directorate General 

of the EC is headed by a Commissioner, who is appointed for five years - the same 

period as the European Parliament. It ensures that regulations and directives 

adopted by the Council and Parliament are being implemented by MS into national legislation and that the timetable for implementation is followed. The EC is 

based in Brussels. 

Text Box 4 Climate-related lobbying in the EU 

The European Commission estimates that around 15 000 lobbyists are active in Brussels, 

providing information to and attempting to influence the European Commission and the 

European Parliament (Euractiv, 2009). All major companies, trade associations, and NGOs 

have offices in Brussels - some 2 600 of them - and many think tanks and other special interest groups also have a presence. In 2005, after criticism on the lack of transparency in 

influencing processes, the responsible European Commissioner launched a ‘Transparency 

Initiative,’ with, e.g., a voluntary registry and information of beneficiaries of European 

funds. Lobbyists in Brussels cannot exercise much power during elections; there are no 

known cases of special interest groups funding election campaigns. 

2.2.3 Energy security issues for the EU and US 

Energy security is an often-used term, yet one for which there is no agreed definition. In fact, the phrase 

has different implications in the EU and US. This is because different energy security issues manifest 

themselves in the two regions, largely due to the differences in fuel source dependencies. 

The EU dependence on Russia for natural gas to produce heat and electricity causes wide concern for 

future energy security. Energy security became a central point of EU policy in 1996 with the Green Paper presented by the European Commission, “Towards a European strategy for energy security and supply.” Strong voices, e.g., through the above-mentioned Green Paper and follow-up documents, call for 

more collaboration in the field of energy security, and many political parties are in favour of the concept. 

However, contrary to the climate policy arena, energy security policy in the EU has, thus far, made little 

headway. Although the EU is a large market that could have a strong influence on energy suppliers, 

these suppliers still successfully employ a ‘divide-and-rule’ tactic, to their own benefit. The EU has not 

been able to overcome the market failures that incentivize free-ridership, and has fallen short of kindling 

energy security cooperation (Gerrits 2008). 

The EU directive on renewable energies is explicitly intended to address security of energy supply, as 

well as to promote technological development and innovation and providing opportunities for employment and regional development, especially in rural and isolated areas. These points are not mentioned 

explicitly in the national RE policies, but act as drivers for designing specific RE support strategies. 

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In the US, energy security has a slightly different implication than in the EU. The term ‘energy independence’ is more commonly used in the political context, to refer to either reducing dependence on foreign oil through increased domestic drilling (by the political right) or the need for development of renewable energy resources (by the political left). Since the US is not dependent on imported natural gas 

for electricity production needs, as is the EU, it does not face the same challenges with regards to energy 

security. Despite the different natures of the challenges of energy security, the basic issue (and terminology) is shared. 

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3.	 Overview and discussion of US and EU energy and climate policies 

3.1	 Introduction 

This chapter presents a high-level evaluation of EU and US climate-related policies against a list of 

recognized barriers to development of climate change mitigation technologies and programs. This 

comparative evaluation is done for three policy areas related to climate change mitigation: cap & 

trade, renewable energy, and sustainable transportation. 

First, barriers to the adoption of RE and sustainable transportation were identified through a literature search. We then matched these barriers against major policies in the US and EU, to provide an 

overview of the range of policy responses and to identify barriers that require further attention. 

Table 3.6 and Table 3.10 present the results of this process. 

This discussion of US and EU policies do not distinguish jurisdiction (i.e., federal and state, EU and 

Member States). All policies are considered relevant to the study, even if they are implemented in a 

limited region. The eventual aim of the study, implemented in chapter 5, is to identify opportunities 

for collaboration and information exchange, not to evaluate the thoroughness or effectiveness of 

climate change mitigation efforts. The Appendix includes a more detailed description of policies 

and notes, for reference, level of jurisdiction. 

3.2	 Cap and trade policy 

Policies that reduce carbon emissions are critical to mitigating climate change. Policies should be 

robust in the sense that they don’t cause more emissions elsewhere. Cap and trade policies are seen 

as a cost-effective instrument to reduce emissions. 

The structure and implementation of the underlying policies is critical to the efficacy of the emission-reduction policy. This is particularly true when there is only a single policy tool. The climate policy section of this paper provides an overview of how cap-and-trade policies have taken 

shape in the US and the EU, as well as an initial assessment of the strengths and weaknesses of 

these policies. 

3.2.1	 US cap and trade policy 

The US is gaining interest in cap-and-trade programs to reduce greenhouse gas emissions, and the 

House of Representatives has passed its first legislation mandating cap-and-trade - the American 

Clean Energy and Security Act (H.R. 2454), commonly referred to as the Waxman-Markey bill. 

While a federal cap and trade policy is still many steps away from being finalized, the process has 

drawn much national and international attention, thus warranting discussion here. 

Unwilling to wait for federal action, many states have already implemented climate policies tailored 

to state needs. The first cap and trade effort in the US, and the one that is furthest along in its development, is the Northeast Regional Greenhouse Gas Initiative, detailed below. In addition, the Western Climate Initiative has released the design of its cap and trade program, which is scheduled to 

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ern Greenhouse Gas Reduction Accord also aims to develop a regional cap and trade system. In 

contrast to the EU cap-and-trade policy, none of the active or proposed US systems include industries (such as iron and steel). 

US Federal Cap and Trade Policy 

The Waxman-Markey bill (H.R. 2454) was released in a draft form in March 2009 and passed by 

the US House of Representatives on 26 June by a vote of 219 to 212. The bill comprises five titles, 

the third of which would create a national cap and trade scheme that would reduce greenhouse gas 

emissions from major sources by 17% by 2020 and 83% by 2050, relative to 2005 levels. 

The Senate has drafted a comparable bill on energy and climate change, called the American Clean 

Energy Leadership Act (ACELA), which passed the Senate Energy & Natural Resources Committee on 17 June 2009. However, it is unlikely that the full Senate will address cap-and-trade legislation before 2010. 

If the Senate passes a climate change bill, then the House and Senate versions will have to be reconciled, which will likely result in further changes and compromises to their current forms. If reconciliation can be achieved, the joint legislation will be sent to both chambers (the House of Representatives and the Senate) for a final vote, before being sent to the President for signing into law. 

Given the complexity of this process and the likelihood of alterations in the provisions of the bills, it 

is impossible at this point to predict the outcome or the strength of any future federal climate 

change legislation. 

Northeast Regional Greenhouse Gas Initiative (RGGI) 

The first cap and trade effort in the US, and the one that is furthest along in its development, is the 

Northeast Regional Greenhouse Gas Initiative (RGGI, pronounced ‘reggie’). RGGI went into effect 

on January 1, 2009, capping CO2 emissions from electricity generating sources of 25 MW or larger. 

The first phase stabilizes emissions through 2014. Beginning in 2015 the goal is to reduce regional 

emissions by 2.5% each year, for a total of a 10% reduction by 2018. If successful, the program 

may expand to cap other emissions from other sources. 

The RGGI Memorandum of Understanding (MOU) was signed by 10 states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, 

and Vermont. In addition, the District of Columbia, Pennsylvania, Ontario, Quebec, the Eastern Canadian Provinces, and New Brunswick are observers to the process (RGGI MOU 2005). 

All 10 RGGI states committed to auction the vast majority of their carbon allowances. This decision 

was in response to experience with the EU ETS that indicates that providing a free allocation of 

carbon allowances to generators reduces the incentive to invest in low CO2 technologies and provides significant windfall profits (Point Carbon 2008). The first three auctions, held quarterly in 

September 2008, January 2009, and March 2009, raised a total of $262.3 million for the states. Subsequent auctions in June and September 2009 were 30% lower (RGGI 2009), likely due to an excess of available allowances, the effects of the economic recession and low natural gas prices. 

The RGGI MOU commits states to invest 25% of revenue from carbon credits to energy efficiency, 

support renewable energy innovation and deployment, reduce greenhouse gas emissions, and help 

consumers control energy costs. Revenues from the RGGI auctions will be an important source of 

funding for the ambitious goals a number of Northeast states have set for the implementation of 

measures and technologies to enhance energy savings and emissions reductions (Union of Concerned Scientists 2009). The commitment to energy efficiency is one mechanism being used by the 

participating states to reduce the problem of ‘leakage’ (the transfer of emissions to outside of the 

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RGGI region). Other policies being considered to reduce leakage are those that cap carbon emissions related to electricity use or directly address these emissions through, e.g. emissions portfolio 

standards. The baseline needed to effectively monitor potential leakage has been developed using 

data from the New England Independent System Operator (RGGI 2008). 

After a three-year compliance period, each facility must have a sufficient number of allowances to 

cover the emissions during the compliance period. CO2 offset allowances may be used to satisfy up 

to 3.3% of a regulated power plant's compliance obligation, although this may be expanded to 5 and 

10 percent if certain CO2 allowance price thresholds are reached. Entities with a surplus of allowances may either bank them for future use or sell them, with unlimited banking of allowances possible. Verification and reporting within the program is controlled through the required use of stateaccredited, independent verifiers. A comprehensive review of the RGGI program will be conducted 

in 2012 (RGGI MOU 2005). 

Table 3.1 RGGI policy overview 

Overall aim Voluntary efforts by state governments to reduce CO2 prompted the formation of 

RGGI to develop a formal CO2 trading program. 

Target and 

timeframe 

Emission permit auctioning began in September 2008, and the first three-year 

compliance period began on January 1, 2009. The first program phase stabilizes 

emissions through 2014, while the second phase will reduce emissions 10% by 

2018. 

Responsible 

body 

RGGI Staff Working Group acts as the enforcing entity; the environmental and 

state regulatory agencies within the participating states are the promulgating 

agencies. 

Means of 

enforcement 

Compliance enforcement is the responsibility of each signatory state. Verification 

is required by independent third-parties meeting accreditation standards. 

Sectoral 

coverage 

All fossil fuel-fired electric generating units serving a generator 25 MW or greater 

are required to comply with the CO2 Budget Trading Program. All power plants in 

the participating states are allowed to purchase CO2 allowances to offset emissions 

from generation activities. 

Other 

provisions 

The starting point of the cap is 4% above the average 2000-2004 annual emissions. 

Amount of 

allocations 

Power sector CO2 emissions are capped at 188 million short tons per year through 

2014. The cap will then be reduced by 2.5 percent in each of the four years 2015 

through 2018, for a total reduction of 10 percent. 

3.2.2 EU Emission Trading Scheme (EU ETS) 

The EU Emissions Trading Scheme is a domestic cap and trade scheme, covering almost half of EU 

CO2 emissions, and is the centerpiece of EU climate policymaking. The scheme aims to costeffectively reduce and control emissions in the industrial and power generating sectors. The first 

phase of the EU ETS started in 2005 as a trial for the establishment of the system. Phase II, beginning in 2008, is expected to help the EU-15 achieve its Kyoto target of 8% reductions below 1990; 

while phase III should help achieve its unilateral commitment to 20% emission reductions below 

1990 by 2020. In addition, there are plans to incorporate new sectors and gases in phase III, in particular aviation. Beginning with phase II the scheme allows the use of credits generated through the 

flexible mechanisms of the Kyoto Protocol, Joint Implementation (JI), and Clean Development 

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Mechanism (CDM) - thus creating a link to the global carbon market. Each MS allocates allowances, for free in phases I and II and partially through auction in phase III. To provide a framework 

for allocation, phases I and II require the use of National Allocation Plans (NAP), which must be 

approved by the Commission. Phase III includes an EU-wide cap and centralized allocation rules, 

so no NAPs are necessary. The free allocations in the early phases are used to encourage broad public acceptance. Now that the scheme is operational, auctions will be used to a greater degree in order to stimulate the adoption of clean energy technologies. 

Table 3.2 EU ETS policy overview 

Overall aim “to promote reductions of greenhouse gas emissions in a cost-effective and 

economically efficient manner” (Directive 2009/29/EC) 

Target and 

timeframe 

Phase I (2005-2007): cap setting decentralized process between Commission and 

Member State governments; approximately 2150 MtCO2/year 

Phase II (2008-2012): cap setting decentralized process between Commission and 

Member State governments; on average a cap of 2080 MtCO2/year 

Phase III (2013-2020): cap for 2020 is 1720 MtCO2 (decline of 1.74% p.a.) 

Responsible 

body 

European Commission, appropriate competent authority for implementation of 

rules of Directive (2003/87/EC) 

Means of 

enforcement 

EU wide penalties 

Sectoral 

coverage 

Power: all electric thermal power plants above 20MW installed capacity Industry: 

Installations from the following sub-sectors: (1) iron and steel, (2) cookeries, 

refineries and cracker, (3) cement and lime producing plants, (4) glass, bricks and 

ceramic plants, and (5) paper and pulp factories 

Other 

provisions 

Total allowed CDM/JI over 2008-2020 1610MtCO2 

Amount of 

allocations 

1.9 billion tonnes CO2 allocated in 2008 (CITL) 

The trial phase (phase I) provided insightful lessons on the operation of an ETS, and led to more 

centralized allocation procedures in subsequent phases, particularly for phase III (Convery 2008, 

Ellerman 2008). Industries participating in the scheme need to take into consideration the price of 

carbon in their decision making. The extent of emissions reductions depends highly on the number 

of allowances and the resulting CO2 price. In 2008 emissions in participating sectors of the EU ETS 

were reduced by about 3%, compared to the previous year, after a reduction in allowances of 6.5% 

for the second trading period; thus with the start of phase II the scheme has started to make a difference (Europa 2009). 

The cost effectiveness of the ETS is difficult to estimate. In principle, a well-constructed carbon 

market supports least-cost actions to reduce emissions. However, phase I showed significant price 

volatility, which resulted from several factors, e.g., energy prices, economic conditions, information, and, in the first phase only, the impossibility to bank emissions for subsequent phases. The last 

factor, dependent on how the scheme is established, reduced the efficiency of the scheme, as it 

shortened the decision horizon (Convery 2008). All factors contributed to distrust in the market. 

One of the measures to address this problem in phases II and III is banking of credits between 

phases, which should theoretically contribute to price stability (Lewis 2008). 

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Beyond emissions reductions, ETS also supports three other policy goals: innovation, air pollution, 

and energy security. Innovation relates to the EU ‘Lisbon agenda’ of making the EU economy more 

sustainable and competitive. Side-effects include the increased use of energy efficiency, innovation, 

and technological development (Para 28, Directive 2009/29/EC). Many ETS-related measures also 

reduce non CO2 air pollution, e.g., particulates from industrial plants due to improved efficiency. 

Energy security as a co-benefit is debatable. On the one hand, the ETS supports higher energy efficiency. On the other hand, it supports fuel switching from coal to gas, which is generally not considered compatible with energy security concerns. 

In conclusion, the ETS needs to be robust enough for investors to estimate the consequences of inaction. So far price volatility has caused insecurity for investors. It is expected that this will improve 

in the phases II and III of the scheme, particularly because of better market information, stronger 

long-term targets and banking of allowances. The ETS has also shown to be able to respond to new 

developments such as the integration of the Norwegian trading scheme in 2008 and of Romania and 

Bulgaria, when they became EU member states in 2007. 

3.3 Renewable energy policy 

Renewable energy technologies are an answer to environmental pollution, energy security, health 

impacts and local economic impacts. Significant market barriers prevent renewable energy technologies from competing with traditional energy sources in the current market structure, since externalities are not included in the market price. This effectively gives RE a competitive disadvantage. 

The role of policy is to account for the benefits of renewable energy that are not captured by the 

market and to reduce the barriers to technological development and deployment. Policies play this 

role by, for example, placing a price on pollution, providing subsidies to encourage the adoption of 

early-stage technologies, or offering low-cost financing options for these technologies. Gaps and 

barriers occur at various stages on the road to market, thus a variety of policies must be used to address each of these issues. The section below provides an overview of the variety of policies being 

implemented in the US and the EU to support renewable energy and indicates which market barriers 

they address. It provides examples of key policies, and describes contextual factors that affect implementation. This overview is in support of identifying areas of potential transatlantic collaboration in Chapter 4. 

3.3.1 Policy discussion: US state-level Renewable Portfolio Standards 

The US does not have a federal RE electricity standard in place, although various federal tax incentives exist to spur investment in renewable energy. However the individual States do implement RE 

policies. The policy drivers range from environmental considerations, energy security needs, and 

various economic benefits, including job creation and industrial development. Renewable portfolio 

standards (RPS) and goals are currently a high profile and widely implemented policy at the state 

level in the US. 

A renewable portfolio standard is a mandate requiring certain electricity retailers to provide a 

minimum specified share of their total electricity sales from qualifying renewable power generation. 

Utilities may be allowed to meet part or the entire requirement through the purchase of renewable 

energy certificates (REC), which represent renewable power generated by other renewable power 

producers. Renewable portfolio goals are similar to RPS policies in that they set a target percentage 

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of RE, but unlike the RPS, are not legally binding. The term ‘set-aside’ or ‘carve-out’ refers to a 

provision within an RPS that requires utilities to satisfy a portion of the required renewable power 

using a specific resource, typically solar energy (DSIRE 2009, Doris et al. 2009). 

Table 3.3 US state-level Renewable Portfolio Standards - policy overview 

Overall aim Ensure minimum level of renewable energy production 

Target and timeframe Varies by State, see Figure 3.1 

Responsible body State governments 

As of June 2009, twenty-nine states and the District of Columbia have renewable portfolio standards. Five additional states and the territory of Guam have non-binding renewable portfolio goals. 

Although the state of Iowa began an RPS in 1983, most of the state RPS policies have been established within the last 10 years (Doris et al. 2009). States having implemented this policy by June 

2009 are illustrated in the figure below. 

Figure 3.1 US States with Renewable Portfolio Standards 

An RPS can work in any regulatory structure, from traditional cost-of-service regulation to competitive restructuring, and can be designed to function within a wide variety of circumstances. Varying 

resource availability and technology costs in different regions affect what design elements should 

be selected, however some overarching best practice elements have been identified. These include 

the establishment of REC trading and tracking, financial penalties for non-compliance, encouraging 

long-term financing through contract duration requirements, central procurement, credit protection 

policies and/or RE fund support, and a defined reporting and policy review process. In addition, allowing for a portion of the commitment to be met through out-of-state projects, and including setasides for distributed generation or solar projects are considered to be best-practice design elements. 

An RPS is best suited to states that know where the most cost-effective renewable resources are, 

and have a holistic strategy for getting those resources to market. If a state does not have its own 

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abundant, accessible, low-cost resources, achieving the ideal will require either the use of RECs or 

additional policies to ensure that the regional transmission system is sufficiently robust to move renewable power from resource-rich areas to the state’s load centers. Creating a robust system may 

depend on the existence - or the creation - of multistate institutions to coordinate transmission planning and expansion. Thus, an RPS is more likely to be effective when accompanied by complementary policies, such as resource assessments, transmission expansion, and regional collaboration. 

When estimating the economic impact of an RPS, there are two important considerations: (1) 

whether the policy allows for the eligibility of out-of-state renewable resources, and (2) to what degree in-state resources are used for manufacturing of materials and the construction and operation of 

new RE facilities. These factors influence how much of the economic impact of the RPS will occur 

locally vs. non-locally. When designing an RPS, there may be a tension between local economic 

growth and minimizing ratepayer impacts if the most cost-effective renewable resources are in a 

neighboring state or country. Extending RPS eligibility to non-local resources can reduce ratepayer 

impacts, but allows another state to realize the local economic development benefits associated with 

those resources (Hurlbut 2008). 

Some US states have responded to the risk of ratepayer impacts resulting from RPS implementation 

by including provisions to prevent costs from escalating excessively. Important issues that must be 

decided when setting the price cap include how often it is triggered, the effect on investment and 

development risk, and the magnitude of renewable energy’s incremental cost relative to the price of 

other fuels (Hurlbut, 2008). 

Text Box 5 Supporting Renewable Energy programs through public benefit charges 

Some US governments and utilities fund renewable energy programs through a public 

benefit charge (PBC), which is typically collected as a $/kWh surcharge added to utility customer bills. The funds collected through the surcharge can be distributed to a variety of renewable energy programs to support renewable energy development, such as 

research programs, low-cost financing, demonstration projects, or public education efforts. 

In the United States, seventeen states plus the District of Columbia have public benefits funds ranging from several million to several hundred million USD. Because these 

monies are collected through utility bills rather than the general budget, funding has 

remained stable despite severe cuts in public spending in 2009. 

3.3.2 Policy discussion: EU renewable energy policy 

The EU Energy and Climate package includes a target to increase RE use to 20% of the EU’s gross 

final energy consumption4 by 2020. The target is distributed differentially among Member States, 

based on national income and RE potential. This agreement takes into account previously installed 

capacity and the potential for expanding the share of RE.5 For example the RE share in Germany 

will have to increase from 5.8% in 2005 to 18% in 2020, that of the Netherlands from 2.4% to 14% 

and that of the UK from 1.3% to 15%. Sweden, which already has high RE production from hydropower, must increase the percentage from 39.8% to 49%. As part of the legislation, each MS must 

develop and submit a national RE action plan to the European Commission by 30 June 2010, con4 Gross final energy consumption includes the direct use of renewable fuels (e.g. biofuels) plus energy produced from 

renewable fuels (e.g. wind, hydro). 5 The shares in 2005 and the 2020 targets can be found in Annex I of the EU Directive 2009/28/EC. 

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taining the share of RE in 2020 for each of the following sectors: transport,6 electricity, and heating 

and cooling. The overall amount of incentives devoted to renewable energy in the EU has not been 

researched. 

Table 3.4 EU Renewable Energy directive - policy overview 

Overall aim Reduction of GHG emissions 

Target and timeframe 20% RE of gross final consumption of energy by 2020 

Responsible body Commission, national governments 

Most MS have implemented some form of incentive to promote national RE production. In general, 

three main support schemes are used to promote renewable energy: feed-in tariffs and premiums 

(Germany, Spain, Netherlands), tendering procedures (Netherlands selectively and formerly in Ireland) and obligation systems (UK, Belgium). Feed-in tariffs determine a fixed tariff for every kWh 

fed into the electricity grid. The tariff can change depending on the generation technology. In a system with feed-in premiums the electricity is sold on the electricity market and the producer is provided the difference between the market price and a predetermined tariff. In a tendering procedure 

generation capacities are tendered by electricity suppliers who consent to specific contractual 

agreements. Obligation or quota systems specify how much of the electricity supply needs to come 

from RE sources, similarly to the RPS. The obligation can be for the utility or for the end consumer. 

Below, the support schemes in Germany, the Netherlands and the UK are discussed in more detail. 

Germany’s ‘Erneuerbaren Energien Gesetz’ (EEG- Renewable Energy Law) aims to source 30% of 

its electricity from RE in 2020 (EEG 2009). The system provides tariffs of varying levels for each 

technology. The system does not cap the amount of RE that are eligible to receive these tariffs. The 

Dutch “Subsidieregeling Duurzame Energy” (SDE - Subsidy regulations for sustainable energy) is 

used to increase the share of RE to 20% in 2020, but the resources currently devoted to the system 

are considered to be insufficient to achieve the proposed target. It is estimated that renewable electricity will achieve only a 12% share under current legislation and subsidies (Dril, 2009). The support scheme (based on Renewable Obligation Certificates - ROC) in the UK obliges electricity suppliers to source a certain amount of electricity from RE resources. If a supplier cannot meet its obligation it must pay a predetermined amount into a buy-out fund (UK 2009). 

Table 3.5 EEG, SDE, and ROC - policy overview 

Germany: EEG Netherlands: SDE UK: ROCs 

Overall aim Increase sustainability of the energy system 

Target and 

timeframe 

30% renewable electricity 

by 2020 

14% of heat use 

20% of RE in 2020 15.4% of RE in 2020 

Responsible body Ministry of Environment Ministry of Economic 

Affairs 

Department for Energy 

and Climate Change 

Input Paid by electricity 

suppliers who pass it on to 

consumers 

Government budget; 

recently changed to 

energy tax funding 

Paid by electricity 

suppliers who pass it on 

to consumers 

6 Also see the discussion regarding biofuels, in this chapter. 

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Shares of RE in each of the three countries energy mix have risen recently. Business as usual scenarios forecast that there will be 12-14% RE across the EU in 2020; thus expenditures on policies 

that support RE have to greatly increase for countries to achieve the 20% target (Coenraads et al. 

2008). The 2004 version of the German EEG set an intermediate target of 12.5% of renewable electricity production for 2010. It is likely that this target will be achieved, as RE covered 14.2% of final electricity production in 2007 (BMU 2008). Germany has the highest installed capacity of both 

wind and PV in Europe, mainly due to favorable financial conditions offered through the support 

scheme. Both technologies are not yet commercially competitive, but it has led the country to be 

one of the leading producers of PV and wind (EurObserv’ER 2008). The positive employment consequences of this have contributed to broad political and societal support for the EEG. 

Prior to the feed-in system, the Netherlands had a tax incentive for RE consumption. Even so, imported RE certificates were less expensive than building additional RE capacity within the Netherlands, and the country experienced a gradual reduction in national RE investments. Subsequently a 

feed-in tariff was established but the lack of a predefined ceiling on program funds resulted in all 

applications for feed-in tariff funding being accepted. This led to excessive costs and the eventual 

freezing of the program in 2006. The current Dutch SDE came into effect in April 2007, its effectiveness still cannot be assessed.. . Although it provides more stability, the numerous changes and 

non-economic barriers still stifle development, and the SDE does not appear to be sufficient to overcome them. 

The ROC system in the UK achieved an increase of renewable electricity from 1.8% in 2002 to 

5.3% in 2008 (excluding hydro) (UK 2009). Despite this growth, in 2004 the system was evaluated 

as having low effectiveness (under 5%) and high added costs (just below 0.06 €/kWh) (Ragwitz et 

al. 2007). A new review has been ongoing since September 2007, with no results yet. Consultations 

are taking place (summer 2009) to investigate the impacts of including a feed-in tariff to subsidize 

small-scale decentralized clean electricity production. This would be in addition to the Renewable 

Obligations, which primarily supports large-scale renewable electricity projects (UK 2009). 

The costs of the three systems also vary. The EEG costs cannot be estimated a priori as there is no 

way of knowing how much electricity will be fed into the grid from a specific energy source. The 

additional costs are largely paid for by consumers. In the Netherlands the premiums of the SDE are 

paid for by the government and cover the difference between the electricity price obtained at the 

market and a predetermined tariff. An overall budget ceiling is determined by the government. In 

the British system the costs are carried through the system to the end user. 

Each of the three systems offers different levels of financial risk to investors. The feed-in systems 

implemented in Germany and Netherlands offer high security for the investors, as they secure revenues over long time periods - generally 10 to 20 years depending on the technologies. In the German system consumers pay the higher costs due to feed-in tariffs. This provides more financial stability for investors than the Dutch system, where the subsidies are funded by the government, and 

are thus subject to changes in political priorities on a yearly basis. The tariffs for new installations 

decrease over time, due to expected improvement in technology. 

The system in the UK subjects investments to greater risks because contracts have shorter terms. 

The government has tried to stabilize the system by ensuring that the system will be in place until 

2027. The system is being considered for extension through 2037 (UK 2009). There are consultations in progress to decide how to encourage stability of the price of the ROCs (Ibid.). 

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3.3.3 Barriers to the development of RE and the policies to address them 

Table 3.6, below, lists some commonly discussed barriers to renewable energy development down 

the left-hand column, along with policies used by the US and EU along the top. The table indicates 

the barriers that each policy is designed to address, which may differ between the US and the EU 

for similar policies. The table is not designed to indicate the effectiveness of the policies at addressing the barriers, only the intended effect of the policy. In some cases, other barriers may also be addressed to a lesser extent or in a secondary way. The table only indicates the primary barrier(s) a 

policy intends to address. Each policy is more fully described in the annex. 

The purpose of the table is to: (1) allow for a comparison of EU and US policies, and (2) provide a 

visual method of exploring the extent to which barriers to renewable energy development are being 

addressed in the two regions. This provides an opportunity to identify areas in which knowledge can 

be exchanged and collaboration may be beneficial. If one region addresses a particular barrier more 

completely, this may be an opportunity for learning. This table should be considered a work-inprogress, rather than a completed product. It is hoped that this work can be refined and expanded on 

through future efforts. 

One notable gap evidenced by the table is the lack of policies to address permitting barriers. The US 

has resource access laws, which ensure that building owners who want to install renewable energy 

systems have necessary access to renewable resources (typically solar). There is, however, a shortage of policies that address the broader permitting issues affecting larger-scale renewable energy 

projects. This is discussed further in Chapter 4. 

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Table 3.6 Barriers to RE development and policies that address them 

Note: [1] e.g. Conventional generating technologies receive subsidies for research and development; [2] This affects the areas of R&D, enviemployment/economic development/price stability; [3] This includes barriers such as a lack of clearly defined roles or responsibilities, lack communication or a lack of institutional leadership; [4] RE projects face high financing costs and lack of access to capital due to the small sof the companies, the perceived risks, and high capital cost of the projects; [5] If the public benefit funds are directed toward research and dbenefit funds are directed toward public information and education efforts; [7] Residential Renewable Resource Access NREL/TP-6A2-46420 27 ECN-E--09-070 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.4 Sustainable transportation policy 

Like policies that promote renewable energy, those that promote sustainable transportation vary 

greatly. They include mandatory regulations, such as vehicle standards, to policies encouraging 

voluntary reductions in fuel consumption, such as vehicle labeling and congestion pricing. This 

sustainable transportation section provides an overview of the sector from a policy standpoint, 

including an analysis of fuel and emission standards for vehicles within the EU and US. The focus here is on personal vehicles and light duty trucks for road transport. 

3.4.1 Policy discussion: US sustainable transport policies 

Federal CAFÉ standard 

One of the oldest and most well recognized transportation policies in the US is the Corporate 

Average Fuel Economy (CAFÉ) standard. In 1975, in response to the 1973-74 oil embargo, the 

Energy Policy Conservation Act established fuel economy standards for passenger cars and light 

trucks. The standard sets the fuel economy (expressed in miles per gallon of fuel) for fleets of 

passenger vehicles manufactured in the US during any given year. Vehicles with a gross vehicle 

weight rating of 8,500 pounds or less are subject to the standard, which is currently set at 27.5 

mpg for passenger cars. The National Highway Traffic Safety Administration is responsible for 

enforcing and amending these standards, as well as administering all aspects of the regulation, 

including considering petitions for exemptions and issues of domestic production by foreign 

manufacturers (Title 49 US Code 2006). 

Federal CO2 emission standard for passenger cars and light-duty trucks 

In 2009, the US EPA, in response to the Supreme Court ruling that ruled greenhouse gases are 

air pollutants under the Clean Air Act, proposed a CO2 emission standard for passenger vehicles 

and light-duty trucks, effective for model year 2012. Vehicles and trucks have differing standards based on their size, but the standard stipulates that by 2016, the fleet-wide average of vehicles and light-duty trucks combined can emit no more than 250 g CO2/mile (155 g CO2/km). 

The standard allows this emission target to be met in part through credits, e.g., through the use 

of biofuels and improved efficiencies in the air conditioning systems. The standard assumes that 

overall CO2 targets can be achieved through more widespread use of existing technologies. The 

EPA estimates that this regulation, in conjunction with strengthened fuel-efficiency standards 

through the Department of Transportation’s National Highway Traffic Safety Administration, 

will reduce US CO2 emissions by 950 million metric tons between 2012-2016 (EPA 2009). 

Federal Renewable Fuels Standard 

The federal renewable fuels standard (RFS), originally adopted in 2005, requires that certain 

amounts of renewable fuels be blended into gasoline. In 2007, the program increased the volume of renewable fuels required from 9 billion gallons in 2008 to 36 billion gallons by 2022. 

Twenty-one billion gallons of these fuels must be “advanced” lower carbon biofuels, while the 

remaining 15 billion gallons can be corn ethanol (EISA 2007). The Environmental Protection 

Agency is responsible for implementing the regulations (EPA 2009). 

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Table 3.7 US federal sustainable transport standards- policy overview 

CAFE CO2 emission standard RFS 

Overall aim Increase the sustainability of the transport system 

Target and 

timeframe 

27.5 mpg for passenger 

cars built since 1990 

fleet-wide average of 

less than 250 g 

CO2/mile (155 g 

CO2/km) 

36 billion gallons of 

renewable fuel by 

2022 

Responsible body National Highway 

Traffic Safety 

Administration 

Environmental 

Protection Agency 

Environmental 

Protection Agency 

Means of 

enforcement 

Penalties paid by 

manufacturers for each 

tenth of a mile per gallon 

under target for each 

model year 

EPA may test to 

ensure vehicle fleet 

compliance; 

manufacturers required 

to remediate in the 

case of noncompliance 

Obligated parties 

subject to report 

auditing, violators 

subject to penalties 

State-level Low Carbon Fuel Standards 

Designed to supplement the federal renewable fuels standard, California Governor Schwarzenegger issued an Executive Order in 2007 establishing a Low Carbon Fuel Standard (LCFS) 

for transportation fuels. California’s transportation - 96% of which is fossil-fuel based, produces 

40% of the state’s greenhouse gases (Crane et al. 2007). The LCFS requires fuel providers to 

reduce the carbon intensity of California's transportation fuels, beginning with modest reductions in 2011, and growing to 10 % reduction by 2020 (ARB 2007, ARB 2009). The LCFS establishes certainty of demand for low-carbon fuels, without favoring one fuel over another. 

LCFS requires fuel providers (e.g., producers, importers, refiners) to limit the life-cycle7 CO2 

emissions associated with each fuel sold (gram CO2eq/BTU), the calculation of which includes 

indirect sources of carbon emissions, e.g., based on cultivation practices and fuel transportation. 

Fuel providers can meet their target through a variety of mechanisms: 

•	 different biofuel mixes, e.g., selling more E85 concentrations, using cellulosic ethanol, and 

increasing biofuel concentrations in conventional fuel from the standard 5.7% to 10% by volume 

•	 low-carbon hydrogen for fuel-cell cars 

•	 buying credits from electric utilities that fuel electric vehicles 

•	 buying credits from providers who exceeded minimum performance standards 

•	 using banked credits from previous years 

Critical to the success of LCFS in achieving net CO2 reductions is the inclusion of indirect land 

use changes in calculating the fuels’ life-cycle carbon intensity. When cultivated land that is 

used for fuel instead of food, e.g., for corn ethanol, induces uncultivated land elsewhere to be 

converted to agriculture, e.g., for corn, the loss of rich carbon-sinks in forests and soil causes net 

increases in carbon emissions - potentially the most significant factor in a fuel’s life-cycle assessment (see e.g., Searchinger et al. 2008, Farrell et al. 2007). The LCFS supports the growth 

of next-generation, low-carbon biofuels - e.g., from switch grass or algae, which do not require 

cultivated land - by including land-use changes in its calculations. The LCFS, however, does not 

include assessments of wider sustainability impacts, e.g., on food prices, biodiversity, fertilizerbased pollution, social impacts, and water consumption. 

Also known as well-to-wheels. 

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Table 3.8 California’s Low Carbon Fuel Standard-policy overview 

Overall aim Reduction of CO2 emissions 

Target and timeframe 10% reduction in lifecycle CO2 emissions by 2020 

Responsible body Coordination carried out by the California Environmental 

Protection Agency, in coordination with the University of 

California, the California Energy Commission and other state 

agencies. 

Means of enforcement A LCFS Compliance and Reporting Tool, managed by the 

California Air Resources Board, will be used for reporting and 

tracking credits and penalties. 

3.4.2 Policy discussion: EU sustainable transport policies 

In 2005, the transport sector was responsible for 22% of total EU GHG emissions. The emissions in the EU are projected to grow from 767MtCO2-eq in 1990 to 1091 MtCO2-eq in 2020, 

maintaining the same growth rate as between 1990 and 2005 (EEA, 2008). As part of the Energy and Climate package, in April 2009 two legally binding EU policies were approved for the 

transport sector: (1) regulation instituting legally binding standards for CO2 emissions from passenger cars (EC 2009a) and (2) the RE directive, which contains regulations for biofuels (EC 

2009b). 

CO2 emission standard for passenger cars 

In 2007, the European Commission and car manufacturers agreed on a voluntary emission standard, for tailpipe emissions of 130gCO2/km8 for the average passenger car fleet in 2012. In 2007 

and 2008, however, various studies showed (e.g., EEA, 2008) that there was a severe lack of 

progress and that the target was essentially out of reach. The Commission, through the Climate 

and Energy Package, then delayed the target year to allow the industry to reach the target, but 

made it legally binding and enforceable. 

Table 3.9 CO2 standards for passenger vehicles - policy overview 

Overall aim Reduction of CO2 emissions 

Target and timeframe 120 gCO2/km by 2015, 95 gCO2/km by 20209 

Responsible body European Commission10 

Means of enforcement European Commission imposes excess emission premiums 

The new, binding CO2 emission standard for passenger cars obliges all car manufacturers to 

produce fleets with an average carbon efficiency of 120 gCO2/km by 2015. The target of 

120 gCO2/km is to be achieved in two ways: by improvements in the engine technology (to 

reach 130 gCO2/km) and more efficient vehicle features such as more efficient tyres or airconditioning systems to achieve the additional 10 gCO2/km. The manufacturers of light duty 

vehicles need to adapt their fleet in three steps: in 2012, 65% of the fleet must comply with the 

target, 75% in 2012 and 80% in 2014. There are penalties for non compliance. Between 2012 

and 2018 the penalties will be €5 per newly registered car for the first gram above the limit, €15 

for the second gram and 95€ for the third gram. Starting in 2019 it will be €95 from the first 

gram. Exclusion of niche manufacturers can occur under certain conditions. 

8 130gCO2/km is equivalent to 209.215gCO2/mile. 9 Subject to revision no later than 2013 (AEA 2009); 120gCO2/km=193.12gCO2/mile and 95gCO2/km = 

152.9gCO2/mile. All values refer to tailpipe emissions. 10 Excess emissions premium shall be considered as revenue for the general budget of the European Union (Article 

9, para. 4, REGULATION (EC) No 443/2009 (EC 2009a)). 

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The process of agreeing on a CO2 emission target showed that the initial voluntary agreement 

was insufficient, and that the European Commission had to take aggressive steps to make the 

industry comply. Due to the obligation, it is expected that the target will be met in the average 

fleet in the EU, but would need to be strengthened to eventually achieve 100% fleet compliance 

after 2014 (Hoen et al., 2009). It can be expected that car companies will also manufacture more 

CO2-efficient cars outside of the EU. 

Biofuel target 

The EU, as part of its Directive on the use of RE, adopted a target of 10% renewable fuels in the 

2020 fuel mix for the entire transport energy consumption. This target can also be met through 

the use of electric vehicles. Previously, the 2003 biofuels directive had given indicative targets 

for biofuels of 2% and 5.75% by 2005 and 2010, respectively, but these were not enforced. 

Many MS are not on track to achieve them (Pelkmans et al., 2008). Biofuels are an attractive 

climate policy option as they require less radical change to infrastructure than, e.g., hydrogen or 

electric vehicles, and can be accommodated at high percentages in new cars through slight modifications to the engine. The German example - a country on track to achieve high shares of biofuels - is discussed in detail below. 

Biofuels in Germany 

At the moment, biofuels in the transport sector are not competitive with regular petrol, and 

therefore require subsidies or obligations to increase their market share. Germany addressed this 

problem by implementing a bundle of measures to achieve the targets established in the Biofuels 

Directive, including: standards, mandates for distributors, and tax exemptions. The German policies primarily affected biodiesel; bioethanol use grew, but did not achieve the expected growth 

(Pelkmans et al. 2008). 

So far, the share increased from 1.21% in 2003 to 6.7% in 2007, and therefore seems on track 

for the 10% target in 2020. The cooperation of the German car manufacturers proved important 

for the increased use of biodiesel (Pelkmans et al. 2008). That cooperation was in turn due to the 

public pressure on manufacturers to extend their guarantees to biodiesel in pure and blended 

form, as biodiesel was for several years cheaper than fossil diesel. 

Initially biofuels were exempt from taxation11. From 2006 onwards, the government decided to 

re-introduce a tax on biofuels for consumers to start aligning it with the taxes on fossil fuels, and 

enforced a mandate for distributors, with high (>0.50 €/litre) penalties for non-compliance. 

Consumers were initially attracted to biofuels due to their relative low-cost compared to conventional diesel, which is more heavily taxed. However, with the reduction of tax exemptions, 

biodiesel has again become more expensive, and the use of biodiesel B100 is projected to decrease (Pelkmans et al. 2008), endangering the compliance of Germany with the biofuel targets. 

In addition to reducing GHG emissions, if sustainability criteria are met, the use of biofuels also 

increases energy security. Approx. 92% of German biodiesel is produced in Germany, (Pelkmans et al. 2008), boosting employment in rural and economically disadvantaged areas, primarily in the eastern part of the country (e.structure 2009). 

The change in quotas and tax exemptions for biofuels and resultant decrease in use (Biofuels 

Barometer 2008) show that biofuel prices have not yet decreased enough to be competitive with 

conventional fuels. The EU policy framework adds some robustness to the German policy, but 

continuous policy support remains a condition for success. 

11 The minimum excise duty for diesel adopted by the Council in Directive 2003/96/EC on October 27, 2003 is 302 

€/1000 litres, equivalent to approx. 768 US$/1000gallon (exchange rate 1€=1.4874 US$, 27 th October 2009) (EC 

2009c). 

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3.4.3	 Barriers to the development of sustainable transportation and the policies 

to address them 

Table 3.10, below, shows the major barriers to developing a sustainable transportation system, 

and the policies in use across the US and EU designed to address these barriers, which may differ between the US and the EU for similar policies. As with Table 3.3, this effort is a work in 

progress, and should not be considered exhaustive. It is an attempt to provide a quick visual 

comparison of the policy efforts being used in the two regions, and identify potential opportunities for knowledge exchange and collaboration. 

The table indicates that there are numerous policies in both the EU and US that aim to address 

public awareness of sustainable transportation. This would imply that, if these policies are effective, that public awareness should no longer be a significant barrier to increasing transportation 

sustainability. Whether this assumption is true, or not, is potentially an interesting question, as is 

understanding which other barriers have not been sufficiently addressed and identifying an effective portfolio of policies that effectively support each other. 

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Table 3.10 Barriers to sustainable transportation and policies that address them 

Note: [1] with very strict targets; [2] High Occupancy Vehicle. NREL/TP-6A2-46420 33
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4. Emerging opportunities for transatlantic cooperation 

What are the opportunities for policy cooperation and knowledge sharing between the US and 

the EU? A series of observations and lessons based on the case studies in chapter 3 are presented below. Recommendations for actions and opportunities, based on these observations, are 

then presented in Chapter 5. 

4.1 Cap and trade: lessons and observations 

The United States and the European Union both employ, to varying extents, emissions trading 

as a policy instrument to address climate change. The EU has implemented the EU Emissions 

Trading Scheme in a top-down manner. Emissions trading in the US began with emissions trading for sulphur oxide and continued with state-based and voluntary markets, which are currently 

in the process of being integrated into a nation-wide accounting system. 

Facilitating a dialogue between relevant policymakers, industry and policy researchers across 

the European Union and the United States could assist in optimising emissions trading mechanisms and enhance its effectiveness on both sides of the Atlantic. Opportunities for mutually 

beneficial exchange between the US and the EU with regards to emissions trading are apparent 

as the EU top-down and US bottom-up approaches both contain important lessons that should 

be shared. While the EU ETS is relatively fixed, policy development within the US is in a dynamic state. Failures and successes in the EU have been referred to in the US debate, but more 

attention could be given to the EU lessons learned. Furthermore, reviews of the EU ETS will 

take place, and some alterations are still possible. 

Some elements in particular can be observed in the case studies that might be important for future developments and analyses. First, both the RGGI and the EU ETS initially had problems 

with insufficient information about the emissions of single emitters. In both cases, this caused 

prices to rise at the beginning of the first trading period and then to fall steadily after it became 

evident that allowances were less scarce. When developing new systems or modifications, it is 

important to take into account that there may be initial lack of information and that price fluctuations may result from this. 

Second, a difference in scope can be seen between the two systems, both geographically and 

sectorally speaking. The RGGI has a smaller geographic scope than the EU ETS which may result in leakage of emissions outside the system boundaries. The EU ETS is much larger and 

therefore has fewer problems with leakage to neighboring areas; there are also provisions to discourage industries from leaving the area. Further, the EU ETS already includes most major 

emitting sectors and accounts for approximately 46% of overall EU emissions. The RGGI is expected to be expanded to other sectors if the current system proves to be successful. 

A third consideration to be made for both the RGGI and the EU ETS is the offsetting mechanisms used. The RGGI includes the possibility to buy domestic allowances from specified nonpower sectors to offset emissions from generating electricity. The federal US system may develop an own offsetting system. The EU ETS avoided significant transaction costs by allowing 

offsetting through the existing global carbon market as offsetting takes place primarily through 

the CDM Kyoto mechanism. 

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4.2 Renewable energy policies: lessons and observations 

A variety of instruments is used in the US and EU to support and increase the growth of RE including: Renewable Portfolio Standards (RPS) in the US, the Renewable Obligation Certificate 

(ROC) system in the UK, feed-in tariffs and premiums in a number of EU Member States, and 

the EU wide target of 20% of gross final energy consumption in 2020. The case studies indicate 

that policy and budget robustness as well as a long-term perspective for investors are important 

characteristics of effective policies, since these characteristics contribute to investment certainty 

for developers. In connection, it can be observed that a budget neutral policy (one that does not 

depend on annual government budget decisions or funding) is more likely to provide investor 

certainty. Where additional costs are passed on to the consumers, electricity prices may increase, but the RE support system is more stable. Furthermore, it is beneficial if there is broad 

political support12 for RE and the policy chosen to support it. If this is not the case a change in 

government may result in an alteration of rules and regulations regarding RE support, thus increasing investor uncertainty. 

Another important factor supporting RE is the development of new low-carbon technologies, 

from the initial stages of technological development through to commercialization, with each 

phase being crucial to ultimate success. Although each technology faces its own unique challenges, common elements can be identified across technologies and across country boundaries. 

For example, in both the EU and the US, technologies in the demonstration phase often face a 

‘valley of death’ between the R&D stage and market commercialization. Technology developers 

still have much to learn about the conditions necessary to overcoming the associated barriers 

and successfully bringing technologies to the market. Toward this goal, the US has provided access to capital for demonstrations, while the EU has given developers long-term signals, largely 

through RE policies and targets, high fossil fuel taxes and climate policies. Both may be necessary for successful market introduction of a new technology. 

In addition to the elements above, there are other aspects of RE development where establishing 

collaborative investigation could be beneficial. Examples include developing a better understanding of policy interactions and how contextual factors affect policy effectiveness. Despite 

geographical distances, the EU and US experience many common barriers to RE development, 

such as land use conflicts and public acceptance issues, for which sharing experiences could 

prove useful. 

4.3 Vehicle standards and low emitting fuels 

The transport sector is currently excluded from emissions trading. However, a variety of policies have been implemented in this sector, from which valuable lessons can be learned and applied elsewhere. Both the US and the EU have or are implementing some form of vehicle efficiency standards. 

Setting uniform technology standards could help level the playing field and increase trust and 

cooperation for sectors such as transport, which not covered by a cap-and-trade system. As 

shown in chapter 3, there has been convergence within the two jurisdictions towards establishing vehicle emission standards, in the form of limits to average fleet emissions. In the US this is 

being implemented through the Clean Air Act, whereas in the EU it is done through the directive on CO2 emission standards for passenger vehicles. Having comparable standards in sectors 

where trade issues come into play is particularly important to enhance the mutual trust between 

the EU and US that is essential for cooperation and create a level-playing field. 

This may also be the case for fuels. In chapter 3, two different approaches to reduce emission 

through fuel regulation were introduced. In California, low carbon fuel standards (LCFS) have 

12 In the context of the US, this would be called bipartisan. 

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been set to limit the amount of emissions per energy content of the fuel. The emissions are calculated taking into account the entire life cycle, including changes in land use. In this way, the 

life cycle analysis method remains neutral as possible. On the other hand, the EU has directly 

promoted renewable fuels through an RE fuel target. Criteria for the quality and sustainability of 

the biofuels, in particular, were set to avoid negative environmental impacts of biofuel production. As with the vehicle efficiency, a standard has been set for fuels. In the case of biofuels, 

there is a global debate on the contribution of biofuels to climate change mitigation and how 

they can be deployed more sustainably. 

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5. Not-to-miss opportunities for transatlantic cooperation 

Collaboration on climate change is not only in the individual domestic interests of the US and 

EU. Together, they can provide the critical mass and the momentum to change the energy system globally, and thus have an impact that goes beyond their own jurisdictions. What are the 

opportunities that would make the greatest difference? Based on the commonalities and differences in US and EU domestic circumstances and the lessons and observations reviewed in the 

previous chapters, we arrive at specific recommended areas of collaboration. 

5.1 The carbon market 

Given the EU and US steps towards emissions trading as a policy instrument to address climate 

change, the possibility of linking a federal carbon-trading instrument in the US with the EU ETS 

could now be explored, with an initial focus on design compatibility issues for the new US system as well as longer-term possibilities for international expansion. A common carbon market 

between the US and the EU would create momentum and send a strong signal to countries not 

yet engaged in carbon trading, but would also need to overcome barriers and choices that the 

EU and the US have made in the past. 

In addition to linking the US and EU carbon markets, the respective offset markets could be coordinated. The EU ETS currently uses credits from the Kyoto Protocol’s Clean Development 

Mechanism, whereas the United States is likely to set up its own offset scheme. Using a combined offset market is an option, but rules and regulations would need to be aligned to ensure 

comparable conditions. If the EU and the US operated jointly in this field, it would lower barriers for credit suppliers, especially those in developing countries, to bring their offsets to the 

market. 

5.2 Bridging the valley of death together 

The US and the EU are both highly innovative economies. Well over half of global energy R&D 

is spent in the US and the EU. Sharing experiences and conducting collaborative research to 

support technologies through to commercialization could be beneficial. Understanding the conditions in which development and commercialization occur is essential to the successful deployment of new technologies. Although each technology faces its own unique challenges, 

common elements can be identified across technologies and across country boundaries. 

Technologies in the demonstration phase often face a “valley of death”. Technology developers 

still have much to learn about the conditions necessary to successfully bring technologies to the 

market, and financiers need to be convinced in the absence of actual data. The US has been relatively successful in providing access to capital for innovators, but the longer-term signal has not 

yet been well proven. The EU has given developers firmer long-term signals, largely through 

renewable energy policies and targets, high fossil fuel taxes and climate policy. These provide 

incentives to invest in low-carbon technology, but have not been sufficient to pull large-scale 

technologies with high capital costs through the valley of death. Collaboration could involve 

joint R&D and demonstration, but also easier access to each other’s markets. 

5.3 Best practices and standards 

In sectors and technologies that are excluded from emissions trading, or for which market instruments have proven to be less effective, other policy mechanisms can be useful in overcomNREL/TP-6A2-46420 

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ing barriers. The policies that are used vary greatly across the US and EU at all levels of governance. The transport sector, for instance, has a variety of policies from which valuable lessons 

can be learned and applied elsewhere. Exchanging experiences on policy-lessons learned would 

be a no-risk activity with potentially high-benefits. 

Setting uniform technology standards could help level the playing field and increase trust and 

cooperation. To enhance the mutual trust between the EU and US in trade-sensitive sectors, a 

level-playing field is required. Emissions trading can help, but agreements between the US and 

EU regarding emission or technology standards for new appliances or personal vehicles sold or 

produced within their jurisdictions may create a tipping point for producers, leading to a change 

in the global market for those products. 

Standards can also be applied further upstream. In the case of biofuels, there is a global debate 

on the contribution of biofuels to climate change mitigation and how biofuels can be deployed 

more sustainably. The US and the EU collectively are an interesting market for biofuels. 

Agreement on standards for sustainable biofuels and on the creation of markets for such biofuels 

could foster international markets, create a global biofuel commodity and help developing countries produce biofuels in a way that is less harmful to food provision, local communities and 

ecosystems. Another potential area for best practice and standards is in testing and certification 

of wind turbines or quality control systems. 

While some best practices would be easily transferable, others will need to be altered according 

to differences between the regulatory systems in the EU and the US, as well as those between 

the EU Member States and US States. This is an area with much potential, but little previous 

exploration. 

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Acronyms
 

ACELA American Clean Energy Leadership Act 

CDM Clean Development Mechanism 

EC European Commission 

EEG Erneuerbaren Energien Gesetz (Renewable Energy Law) 

EPA Environmental Protection Agency 

ETS Emissions Trading Scheme 

GHG Greenhouse Gas 

HOV High Occupancy Vehicle 

JI Joint Implementation 

LCFS Low Carbon Fuel Standard 

MS Member State (EU) 

MOU Memorandum Of Understanding 

NAP National Allocation Plan 

PBC Public Benefit Charge 

PBF Public Benefit Fund 

RE Renewable Energy 

REC Renewable Energy Certificate 

RGGI Regional Greenhouse Gas Initiative 

ROC Renewable Obligation Certificate 

RPS Renewable Portfolio Standard 

SDE Subsidieregeling Duurzame Energy (Subsidy regulations for sustainable energy) 

SBC Systems Benefit Charge 

UNFCCC United Nations Framework Convention on Climate Change 

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NREL (2009): http://www.nrel.gov/features/20091002_transmission.html 

Optres (2009): http://www.optres.fhg.de/ Accessed 1 October 2009. 

Pelkmans, L., L. Govaerts, K. Kessels (2008): Inventory of biofuel policy measures and their 

impact on the market (Report D2.1 of ELOBIO subtasks 2.1-2.2). VITO - Flemish Institute for Technological Research, September 2008. 

Point Carbon (2008): EU ETS Phase II - The potential and scale of windfall profits in the power 

sector. A report for WWF by Point Carbon Advisory Services, March 2008. 

Political Economy Research Institute, University of Massachusetts, Amherst; Robert Pollin and 

Jeannette Wiks-Lim, Job Opportunities for the Green Economy: A State-by-State Picture of Occupations that Gain from Green Investments, June 2008. Available at: 

http://www.greenforall.org/resources/a-state-by-state-picture-of-occupations-that-gain 

Pollin, Robert et al. (2009): The Economic Benefits of Investing in Clean Energy. Center for 

American Progress. June. 

http://www.americanprogress.org/issues/2009/06/pdf/peri_report.pdf Accessed 23 July 

2009. 

Ragwitz, M. et al (2007): OPTRES Assessment and optimisation of renewable energy support 

schemes in the European electricity market. Intelligent Energy Europe 2007 

NREL (2005):Renewables Portfolio Standard Overview. Wind and Hydropower Technologies 

Program (Fact Sheet). (2005). 2 pp.; NREL Report No. FS-500-37627; DOE/GO102005-2073. 

Res2020 (2009): http://www.res2020.eu/ Accessed 1 October 2009. 

RGGI (2009): http://www.rggi.org/co2-auctions/results, Accessed 3 October 2009. 

RGGI (2008): Potential Emissions Leakage and the Regional Greenhouse Gas Initiative. Final 

report of the RGGI emissions leakage multi-state staff working group to the RGGI 

agency heads. March, 2008. 

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RPS (2009): Recommended Principles and Best Practices for State Renewable Portfolio Standard. By the State and Federal RPS Collaborative. 

Searchinger T. et al. (2008): Use of US Croplands for Biofuels Increases Greenhouse Gases 

through Emissions from Land-use Change. Science, 319, 1238-1240 

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Appendix A Glossary 

A.1 Renewable electricity policies 

Contractor Licensing (region: US) 

Specific licensing for contractors who want to install renewable energy systems is available, 

guaranteeing that the contractors have the experience and knowledge necessary to ensure proper 

installation and maintenance (DSIRE 2009). Requirements for certification vary by state, but 

generally include defined minimum experience and an examination. 

Equipment Certification (region: EU/US) 

Equipment certification policy requires that renewable energy equipment meets set standards, 

which ensures the quality of the equipment sold to consumers and reduces the problems associated with inferior equipment - issues that can result in a negative view of renewable energy 

technologies. Equipment requirements can be regulator-designed or modeled off nationally recognized standards (DSIRE 2009). 

Feed-in tariff (production incentive)/ Feed-in premiums (region: EU/US) 

Feed-in tariffs determine a fixed tariff for every kWh fed into the electricity grid. The tariff can 

change depending on the generation technology. In a system with feed-in premiums the electricity is sold on the electricity market and the producer is provided the difference between the 

market price and a predetermined tariff. 

Generation Disclosure (region: EU/US) 

Disclosure policies require utilities to provide customers with information about their electricity 

supply. This information, which is often included on the monthly bill, can include an explanation of fuel mix percentages and information on the related emissions. In states where the electricity market has been restructured, generation disclosure provides customers with valuable information that allows them to make informed choices on the electricity and provider they 

choose. Additionally, there may be a requirement that the utility company provide certification 

that any renewable energy sources that they use are certified as renewable. The Green-e certification, offered by the Center for Resource Solutions, is one example of a verifiable certification 

that can be used by utility companies (DSIRE 2009). 

Grid Access Standards (region: EU/US) 

Grid access policy sets minimum conditions regarding the interconnection of renewable energy 

projects to the electricity grid. These standards reduce uncertainty, time, and costs associated 

with negotiations between the producer and the utility or grid operator and facilitate the interconnection of renewable energy projects with the grid. 

Information Campaigns (region: EU) 

In the EU, information campaigns regarding renewable energy, energy efficiency are often 

mandated as articles of policies related to a specific subject. 

Investment subsidies (incl. rebates) and loans (region: EU/US) 

Investment subsidies promote the installation of renewable energy systems by decreasing the 

overall costs of project financing. Rebate programs are common mechanisms used to promote 

solar energy technologies, however they can be used for any technology. Loan programs, including low-interest or zero-interest loans, provide financing for the purchase of systems or 

equipment. 

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Line extension Analysis (region: US) 

When an electric customer requests service for a home or facility that is not currently serviced 

by the electric grid, typically the customer is required to pay a distance-based fee for the cost of 

extending power lines to the home or facility. Frequently, it is more economical to use an onsite renewable energy system to supply a prospective customer’s electricity needs. Certain states 

require utilities to provide information about renewable energy options when the customer requests a line extension (DSIRE 2009). 

Mandatory Green Power Option (region: US) 

Several states require specific classes of electric utilities to offer customers the option of purchasing electricity generated from renewable resources. Typically, utilities offer green power 

generated from renewable resources owned by the utility or purchased under contract. They may 

also buy renewable energy credits (RECs) from a renewable energy provider certified by a state 

public utilities commission (DSIRE 2009). 

Netmetering (region: US) 

The billing arrangement by which customers realize savings from their systems, where 1-kWh 

generated by the customer has the exact same value as 1-kWh consumed by the customer 

(NNEC 2008). For electric customers who generate their own electricity, net metering allows 

for the flow of electricity both to and from the customer. Typically, this process is accomplished 

through a single, bi-directional meter. During times when a customer’s generation exceeds the 

customer’s use, net-metering allows for electricity to flow from the customer back to the grid, 

offsetting electricity consumed by the customer at a different time. In effect, the customer uses 

excess generation to offset electricity that the customer otherwise would have to purchase at the 

utility’s full retail rate (DSIRE 2009). 

Public Benefits Fund (PBF) /Systems Benefit Charge (SBC) (region: US) 

Public benefit funds (PBF) are state-level programs typically developed during electric utility 

restructuring by some states in the late 1990s to ensure continued support for renewable energy 

resources, energy efficiency initiatives and low-income energy programs. These funds are most 

commonly supported through a small surcharge on electricity consumption. PBFs commonly 

support rebate programs for renewable energy systems, loan programs, research and development, and energy education programs (DSIRE 2009). Key elements of a clean energy fund include the funding source, the entity that administers the fund, and the model for allocating the 

funds. Three basics funding models are used to allocate funding (EPA 2007): 

1.	 The investment model uses state loans and equity to provide initial investment in clean energy companies and projects. 

2.	 The project development model directly promotes clean energy project installation by providing production incentives and grants or rebates. 

3.	 The industry development model uses business development grants, marketing support programs, research and development grants, resource assessments, technical assistance, consumer education, and demonstration projects to facilitate market transformation. 

Public Procurement (region US/EU) 

Public procurement policy requires government owned facilities to use a specific product, e.g. in 

the US seventy-five percent of new light-duty vehicles acquired by certain federal fleets must be 

AFVs (alternative fuel vehicles), including hybrid electric vehicles, fuel cell vehicles, and advanced lean burn vehicles. 

R&D funding (US also Grants) (region US/EU) 

Funding to public or private entities to carry out research and development projects. 

Renewable Portfolio Standard (Renewable Electricity Standard) (region: US) 

Renewable portfolio standards (RPS) require utilities to own or acquire renewable energy or 

RECs to account for a certain percentage of their retail electricity sales, or a certain amount of 

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generating capacity, within a specified timeframe. Renewable portfolio goals are similar to RPS 

policies, but renewable portfolio goals are not legally binding. The term ‘set-aside’ or ‘carveout’ refers to a provision within an RPS that requires utilities to use a specific renewable resource, typically solar energy, to account for a certain percentage of their retail electricity sales, 

or a certain amount of generating capacity, within a specified timeframe (DSIRE 2009). 

Resource Access Laws (region: US) 

Renewable energy access laws typically apply to solar and wind resources. Solar and wind access laws are designed to protect a consumer’s right to install and operate a solar or wind energy 

system at a home or business. Some solar access laws also ensure a system owner’s access to 

sunlight. In some states, access rights prohibit homeowners associations, neighborhood covenants or local ordinances from restricting a homeowner’s right to use solar energy. Easements, 

the most common form of solar access law, allow for the rights to existing access to a renewable 

resource on the part of one property owner to be secured from an owner whose property could 

be developed in such a way as to restrict that resource. An easement is usually transferred with 

the property title (DSIRE 2009). 

Tax Incentives (region US/EU) 

There are multiple types of tax incentives for which renewable energy systems may be eligible. 

The five primary categories of tax incentives that apply to renewable energy development are 

corporate, industry recruitment and support, personal, property, and sales tax incentives. The 

main objective is to reduce the relative cost difference between renewable energy systems and 

their not renewable alternative. 

A.2 Sustainable transport policies 

Biofuel targets (EU level): obligations (MS level) (region EU) 

Mandated targets for the percentage of biofuel in the overall fuel mix. 

Driving regulations (region US/EU) 

Both regions implement regulations to reduce the emissions from the transport sector, examples 

include speed limits and anti-idling rules in the US and eco-driving in the EU. 

Fuel standards (region US/EU) 

The US and the EU mandate fuel standards. In the US there are low carbon fuel standards and in 

the EU there are quality standards for all fuels, and for biofuels in particular. 

Land use planning and infrastructure for alternative transport (region US) 

This category of policies includes zoning (e.g., mixed-use and high-density zoning), infrastructure for vehicle alternatives (e.g., bicycle parking and lanes), and transportation plans that prioritize walking and public transportation. 

Non-financial incentives (HOV) (region US)
 

Many state and local governments offer non-financial incentives to drivers of low-emissions vehicles, such as access to parking and high-occupancy vehicle lanes.
 

Public education and labeling (region US/EU) 

This policy mandates public education programs and/or appliance labeling in order to improve 

public knowledge regarding the sustainability or energy efficiency of products or services. 

Public procurement mandates (region US/EU) 

The requirement that government owned facilities must use a specific product, e.g. in the US 

seventy-five percent of new light-duty vehicles acquired by certain federal fleets must be AFVs 

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(alternative fuel vehicles), including hybrid electric vehicles, fuel cell vehicles, and advanced 

lean burn vehicles. 

R&D (region US/EU) 

Funding to public or private entities to carry out research and development projects. 

Road Pricing (region US/EU) 

Road pricing are mechanisms that serve as disincentives for using personal vehicles, including 

congestion pricing or charges, parking fees, motorway tolls and environmental areas in city centres. 

Subsidies/tenders for fuel infrastructure (region US/EU) 

Subsidies to developers and businesses that expand the infrastructure for alternative fuels. 

Tax incentives (region US/EU) 

Tax incentives are used to give incentives to more sustainable transport, by reducing the cost of 

a less sustainable alternative. 

Technical assistance (e.g. assistance fleet conversion) (region US/EU) 

Support for government programs, e.g. for the US: 

•	 Air Pollution Control Program, which assists state, local, and tribal agencies in planning, developing, establishing, improving, and maintaining adequate programs to prevent and control 

air pollution and implement national air quality standards. 

•	 Alternative Transportation in Parks and Public Lands Program, which provides funds to support planning and capital expenses for alternative transportation systems in parks. 

•	 Congestion Mitigation and Air Quality (CMAQ) Improvement Program, which provides 

funding to states’ departments of transportation, municipal planning organizations, and transit agencies for projects and programs that reduce transportation-related emissions in air 

quality non-attainment and maintenance areas. 

•	 Clean Cities, which promotes the energy, economic, and environmental security of the 

United States by supporting local initiatives to adopt practices that reduce the use of petroleum in the transportation sector. 

•	 Clean School Bus USA, which reduces children’s exposure to harmful diesel exhaust 

through a public-private partnership that limits school bus idling, implements pollution reduction technologies, improves route logistics, and switches to clean fuels. 

Support for industry, e.g. for the US: 

•	 SmartWay Transport Partnership, which assists the ground freight industry in quantifying 

emissions and creating a plan to reduce fuel consumption. 

•	 Voluntary Airport Low Emission (VALE) Program, which reduces ground level emissions at 

commercial service airports located in designated ozone and carbon monoxide air quality 

nonattainment and maintenance areas. 

Vehicle Emission/Efficiency Standards (region US/EU) 

Standards imposed on vehicles to improve their efficiency or reduce their fuel consumption. 

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46 
National Renewable Energy Laboratory 

1617 Cole Blvd. 

Golden, CO 80401-3305 

+1-(303)-275-3000 

http://www.nrel.gov/ 

This paper aims to improve mutual understanding between the EU and US with regard to climate 

change policy, suggesting specific opportunities for transatlantic cooperation in this arena. A background on the environmental, legislative, and economic contexts of the EU and US as they relate 

to climate policy sets the context. This is followed by an overview of how cap & trade, renewable 

energy, and sustainable transportation policies have taken shape in the EU and the US. Some observations and lessons learnt within each of these areas are highlighted. Building on these insights, 

recommendations are made regarding the carbon market, possibilities for new technologies to 

bridge the valley of death, and best practices and standards. 

ECN 

Westerduinweg 3, 1755 LE Petten, The Netherlands 

+31 (0)224564431