COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 14.05.1997 
COM(97) 196 final 
COMMUNICATION FROM THE COMMISSION 
TO THE COUNCIL, THE EUROPEAN PARLIAMENT, 
THE ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 
THE ENERGY DIMENSION OF 
CLIMATE CHANGE 

TABLE OF CONTENTS 
THE CHALLENGE / 
The commitment to reduce emissions 1 
C02 Emission trends 2 
The need for policy decisions 4 
POTENTIAL AREAS FOR ACTION IN ENERGY POLICY 4 
Energy Efficiency and Energy Saving 4 
Greater co-operation with economic operators; role of environmental agreements 5 
Accelerating the penetration of renewable energy sources 5 
Better energy management at local, island and regional level 6 
Promoting combined heat and power production initiatives 7 
Electricity generation 8 
Integration with other policies 9 
Technology and Innovation 10 
Limiting other greenhouse gas emissions 10 
Fiscal instruments and resourcing 11 
REQUIREMENTS AND IMPLICA TIONS OF FUTURE POLICY CHOICES 11 
ANNEX 16 
1 
COMMISSION COMMUNICATION TO THE 
EUROPEAN PARLIAMENT, THE COUNCIL, THE ECONOMICAL AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS ON 
THE ENERGY DIMENSION OF CLIMATE CHANGE 
THE CHALLENGE 
The commitment to reduce emissions 
1. Climate change is a subject of widespread public concern. There is a growing public 
expectation and political pressure that climate change issues are dealt with in the wider 
framework of sustainable development. Policy makers have to respond to the need to take 
action to reduce emissions. The real challenge facing the European Union is to adopt 
policies which are effective, realistic and implementable. The political commitment to 
objectives therefore needs to be supported by the political willingness to act. 
2. The Third Conference of the Parties to the United Nations Framework Convention on 
Climate Change (CQP-3) to be held in Kyoto in December 1997 needs to produce 
decisions that the Parties and society at targe can accept and can carry out. In the context 
of the Berlin Mandate, the parties are at present engaged in negotiations aimed at stepping 
up the commitments of the industrialised countries through the adoption of quantified 
limitation and reduction objectives within specified time frames such as 2005l, 2010 and 
2020, to be achieved by implementing policies and measures. The ultimate goal of these 
negotiations is to establish a legally binding protocol at the COP-3. 
3. The Council conclusions on climate change of 3 March 1997 showed the Community's 
determination to act, agreement having been reached that the Community will propose 
that the OECD member countries and the countries with economies in transition (Annex X 
to the Framework Convention) should commit themselves to a .15% reduction in their 
emissions of the main greenhouse gases (C02, CH4 and N2O)2 by 2010, both compared 
with the reference year 1990. If we consider that CO 2 emissions, assuming the application 
of current policies and measures, are estimated to increase by some 8% in 2010 compared 
with 1990, there would be a divergence of more than 20 points over the negotiation 
position that the Council has set itself. To cover this significant gap, policies and 
measures will have to be ambitious, in particular in the field of energy, and could lead to a 
reorientation of society's objectives. It will require genuine political will to bring the 
necessary policies into being. 
4. The decisions that will be taken at the Third Conference of the Parties will therefore have 
major repercussions, if the targets that will be negotiated are to be achieved. The Council 
has taken the view that the decisions on the policies and measures to be adopted should be 
taken at the Council meetings responsible for the Community policies in question. The 
Commission is in favour of an approach whereby other policies which cut across 
environmental protection policy are involved in the decision-making process. It intends to 
produce later this year a broad based Communication on climate change, outlining all the 
policy implications and actions necessary across a range of policies. This present 
Communication, dedicated to the energy dimension of climate change, aims to 
1 The Council has not yet taken a negotiation position for 2005 
2 C02 is the major greenhouse gas in the basket 
2 
stimulate the Kyoto process debate and focuses on the implications for energy in 
preparation of a broader Commission Communication covering all relevant sectors 
to follow in the autumn. The objective is to outline the challenge posed to energy policy 
makers, identify a number of areas of policy action which may help face this challenge 
and seek to stimulate a debate as to how the commitments we undertake for emissions 
reduction can be fulfilled in a cost effective manner. 
5. There clearly exists within the Community a political will to achieve a substantial rate of 
reduction, but the success of this determination will only be demonstrated once the 
emission reduction figures indicated by the Council have been reached. On the basis of its 
position in Kyoto, the Union will call upon other Annex I parties to the Convention, 
namely the industrialised countries and the countries in transition, to make comparable 
efforts. The Union itself must however also show its political willingness to take the 
necessary, often difficult, decisions to implement its targets. 
6. As a starting point, the contribution of common and co-ordinated policies is necessary 
both for the Community and for the Member States so that appropriate action can be 
decided upon in the various Councils dealing with policies and measures in the field of 
economic instruments, taxation, energy, RTD, industry, transport and agriculture. This 
communication provides a first analysis of the contribution that the energy sector would 
need to make in order to achieve the objective agreed upon. Given the extent of the 
structural changes which could result from the decisions which would be required to 
implement the Kyoto Protocol, we need to be aware of the fact it will not be through 
gradual change, but through radical changes in the political choices, that the imperatives 
of environmental protection and of sustainable economic development could be met. 
C02 Emission trends 
7. As background for the debate the Commission has recently had a study carried out to 
analyse how energy trends could evolve if the current situation continues. This pre-Kyoto 
scenario is designed to examine the necessary scale of policies and measures to achieve a 
limitation and reduction of greenhouse gases.3The pre-Kyoto scenario is based on 
"business as usual" with no new policies and measures to reduce C02 emissions4. With 
economic growth of over 2% per annum after 1990, this scenario indicates a steady 
increase in C02 emissions of 8 % between 1990 and 2010 for the European Union as a 
whole. A sectorial projection of C02 emissions gives the following figures (in millions of 
tonnes of CO2) : 
A meeting oil this study was held on 19 March between Member States' energy analysts and the 
Commission Services. 
There are other scenarios such as PRIME or BAT which, based on other assumptions and very specific 
policies and measures indicate that a reduction of 10% in C02 emissions compared to 1990 can be 
achieved by 2010. 
Percentage change compared with 199Ù 
p___ """"""""l Î995 "1995 2000 " ™35l0*~™ 
Industry " 626 ' - 10% ' - 14% - 15% 
j Transports 743 + 9% + 22% + 39% 
Domestic/Tertiary 654 -3% -1% +4% 
Electricity/heat production 1036 -5% -2% +2% 
| Energy industry 141 +7% +9% +12% 
! Total emissions 3200 -2% +2% +8% 
I J „ 
8. It should also be noted that global C02 emissions are predicted to increase substantially 
over the next two decades. This strong CO2 emission increase is due to population 
growth and industrialisation in Asia, Latin America and Africa. About three quarters of 
the projected C02 emission increase by 2020 will originate from developing countries. 
The share of Annex I countries in global emissions of some 70% in 1990 is bound to 
decrease significantly in the next few decades. By 2020, the contribution of Annex 1 
countries to global C02 emissions could be reduced to slightly over 50% . The Union is 
at present responsible for about 16% of global energy related C02 emissions with 
only 6 % of the world population. In a conventional wisdom development this share is 
bound to decrease to some 12% . In the case of strong policy action, this share would be 
even lower since most of the action must be undertaken in Annex I countries and the 
European Community. The global analysis shows that even strong action in the 
Community can change world trends only to some extent. Co-operation with developing 
countries is essential . Nevertheless, strong Community action is needed to initiate and 
support global endeavours. 
9. The results of the pre-Kyoto analysis quoted are based on the following main assumptions: 
- economic growth of 3% p.a. in the next years and over the whole period between 1990 
and 2020 average GDP growth of slightly over 2% p.a.; 
- continued increased output of heavy industry; 
- no new policies for influencing energy and transport demand; 
- price for imported energy rise until 2020; the oil price is assumed at 32 (95)$ / bbl in 
2020, with natural gas prices increasing in line with the oil price development, and 
coal prices increasing at a slower pace; 
- electricity generation investments determined on the basis of long run marginal costs; 
the lifetime of nuclear power stations is assumed to be as long as 40 years. 
As a consequence, 
• energy intensity is assumed to fall at an average rate of 1.3 % p.a. between 1990 and 
2020.. (Energy intensity should improve by 1.3 % p.a. between 1995 and 2005, by 1.6 
% p.a. over the following 5 years up to 2010, and by 1.4 % p.a. between 2010 and 
2020). 
• there is no significant carbon intensity reductions. The rate of carbon intensity 
improvement of 1.0% p.a. in the first half of the 1990s is not expected to continue. It is 
assumed that carbon intensity will improve at a rate of only 0.4 % p.a. between 1995 
and 2005, and by 0.3% in the following 5 years to 2010, there might be a reversal of 
trends leading to an increase of carbon intensity by 0.4% p.a. between 2010 and 2020. 
The need for policy decisions 
10. The desired degree of C02 emission reduction determines the scale of the policies and 
measures to be adopted. With the post 2000 trend as predicted in the pre-Kyoto 
scenario, achieving a 15% reduction in greenhouse gases by 2010 in the Union will 
require major energy policy decisions, focusing on reducing energy intensity (in 
particular through energy management and energy saving) and carbon intensity (in 
particular by promoting renewables) at constant GDP. 
11. There are different combinations of policies and instruments which can be applied in 
order to reduce greenhouse emissions. Decisions will need to be taken as to the 
directions that should be taken. The most cost-effective package of measures to achieve 
the desired environmental result need to be identified. 
12. In determining the best of the available options, more specific decisions need to be taken 
as to what legislative and voluntary measures may be required, whether we should adopt 
a specific fuel mix strategy, whether to set targets for energy intensity or renewables 
penetration, and to what extent implementation of the measures wi!l be shared between 
governments and industry and other economic sectors. 
13. We must be aware of the fact that facing this major challenge will require mobilisation 
of resources. The questions of what are the costs involved and what resources the Union 
and individual Member States are prepared to allocate need to be addressed. 
14. The purpose of this Communication is to stimulate this debate both inside and outside 
the Community Institutions, as regards specifically the energy sector. There are no easy 
answers, but the magnitude of the problem of facing anthropogenic climate change must 
not impede us from searching for the most effective and practicable solutions. In order to 
provide a basis for discussion on policy decision to be taken, some potential areas of 
action are presented in this Communication. 
POTENTIAL AREAS FOR ACTION IN ENERGY POLICY 
Energy Efficiency and Energy Saving 
Î5. Energy saving is as a very effective and often "cost-free" way of reducing greenhouse 
gases. "Unused" energy sources in fact correspond best to the concept of sustainable 
development. In addition they reduce energy imports and increase security of supply 
while creating related jobs. Energy consumption does not necessarily have to grow, 
even if GDP is growing. However, in the pre-Kyoto study, a steady increase in demand 
is predicted despite the assumption of a fall in energy intensity of 1.3% between 1995 
and 2005, and 1.6?/o between 2005 and 2010. A proactive energy management policy 
promoting energy saving and energy efficiency is seeded to realise the often 
numerous cost free opportunities and to curb this demand growth. This has to be 
complemented by measures based on the price mechanism. 
16. The SAVE programme is an important element of the Community's C02 reduction 
strategy. The JOULE-THERMIE also supports research and demonstration for new 
energy saving technology. However, it should be recognised that the obstacles to energy 
efficiency and energy saving are not mainly technological. That is why under SAVE I a 
series of legislative proposal were made. A European energy consumption !abelling 
system for household appliances has been introduced and efficiency standards for boilers, 
refrigerators and freezers have been set but there is scope for much more action to 
promote energy saving. 
Î7. The experience of SAVE shows that the Council has not always been willing to play its 
role in the adoption of certain energy efficiency legislation and the provision of financial 
resources commensurate with the energy saving potential in the Community' and the 
climate change issues. New commitments for emission reductions must lead to serious 
reflection on how to go well beyond what has been achieved in recent years for 
energy saving. 
18. The Commission has attempted to encourage electricity and gas distribution companies to 
regard themselves not as suppliers but as service companies; this could lead to significant 
reduction in energy demand which will be particularly effective in the domestic sector. To 
this end, the Commission has submitted a proposal for a directive encouraging the use of 
rational planning techniques in the supply and demand cycle. This has not yet been 
adopted by Council. Energy undertakings need to be transformed into energy service 
companies to offer consumers a whole range of energy services which will ultimately 
save them energy while offering a better quality of service. The Commission will 
promote the dialogue with the energy supply industry with the view to promoting energy 
saving services and more efficient energy production. Priority also needs to be given to 
the concept of efficient and economic energy services in RTD activities, especially for the 
short and medium terms. 
Greater co-operation with economic operators; role of environmental agreements 
19. While recognising that progress towards energy saving and energy efficiency has been 
made in recent years by industry, more action is needed, including in the area of 
environmental agreements. Long-term agreements are tools which should be developed 
where appropriate. Successfully applied throughout the Union, this instrument could 
improve energy efficiency and bring about a significant reduction in CO2 emissions. In 
addition, there is a considerable scope for reducing C02 emissions in the motor vehicles 
sector and large firms should be encouraged to get involved in this process on a 
voluntary basis5. 
Accelerating the penetration of renewable energy sources 
20. Although efforts have been made in Europe, and elsewhere, for more than 20 years to 
encourage the use of renewables, the economic potential available has been far from 
fully exploited. In November 1996 the Commission published a Green Paper6 on a 
strategy to increase the penetration of renewable energy sources which are capable of 
underpinning sustainable development in the long run since they generally do not 
produce net C02, they do not entail technological hazards, they are, indigenous energy 
sources and present many other advantages. 
21. The Commission takes the view that a doubling of the share accounted for by these 
energy sources by 2010 (from 6% to 12%) could be an ambitious but realistic 
objective. The implications of increasing the share of renewables are analysed for 
Example : Commitment on the part of FIAT towards the Italian government to reduce by 20 % C02 
emissions 
COM(96) 576 of 20 November 1996. 
example under the TERES II study, in particular with respect to parameters including 
C02 emissions, security of supply and employment. With respect to C02 emissions, the 
"Best Practice Policy" scenario of 12.5% share of renewables predicts a reduction in 
C02 emissions of 386 million tonnes per year by 2010 (representing 12% of C02 
emissions), calculated using the SAFIRE model. 
22. Political determination is needed to take actions which will help increase significantly 
the share of renewables. Not only would these energy sources make a significant 
contribution towards limiting our own greenhouse gas emissions, but given the even 
greater potential in the developing countries, they would also make it possible to ensure 
the supply of energy with a low environmental impact in areas not yet connected up to 
energy networks. In the context of the Community programmes, and especially the 
JOULE-THERMIE programme, several technologies in the field of renewables 
have been developed and their competitiveness proved (e.g. for biomass, wind 
energy and photovoltaic energy). Many of the latter are deployed in decentralised 
systems. To increase their market integration, it is important that they should also be 
integrated in the centralised systems; this will be facilitated by stepping up 
demonstration and dissemination activities. 
23. The links between agriculture and forestry, environment and energy need to be 
highlighted. Biomass is an energy source which could make a significant contribution 
towards the efforts to combat climate change. Agriculture and forestry could help to 
absorb C02 through the development of carbon sinks which could then be used for 
energy purposes. Research, technological development and demonstration activities and 
tax measures should be stepped up so that this option becomes an economic reality 
through an reinforcement of research, demonstration and dissemination activities, and 
also by social and economic research activities in the field of market integration process. 
24. The continuation of the process of removing barriers to the more widespread use of 
renewables through harmonisation, standards, and financial assistance for pilot and 
information schemes are objectives set out in the Commission's new proposal 
concerning the ALTENER programme. The Council needs to adopt this programme 
rapidly, and, in order for it to make a valid contribution to the promotion of renewables, 
sufficient resources must be allocated to the programme. 
25. It is important to promote dialogue with the electricity generating companies aiming at 
achieving an undertaking on their part to produce a non-marginai quantity of electricity 
from renewable energy sources. Schemes in progress in certain Member States in this 
area show that this obligation helps to create a climate favourable to the penetration of 
renewables. Additional consideration also needs to be given to various incentives for 
promoting renewables. The Commission is reflecting on proposals in this connection, in 
particular by examining the possibility of guaranteeing a minimum price for these energy 
sources. 
26. The reaction to the Green Paper so far from the vast majority of interested parties 
supports the Commission's point of view on the need to significantly increase the share of 
renewables. The Commission will make concrete proposals in the White Paper and 
Action Plan in preparation. The measures to be taken should be commensurate with the 
objectives to be set. Member States also need to develop their own national strategies for 
the promotion of renewable energy sources. 
Better energy management at island, local, and regional level 
27. Greater decentralisation of energy management and increased public involvement will 
contribute towards better management of global issues and greater control over the 
increase in energy demand. The June 1996 Habitat II Conference in Istanbul recognised 
that the bulk of population growth will take place in towns and cities which now account 
for 75% of the population of the Union and 70% of its energy consumption. This 
means that attention should increasingly be focused on the problems of energy 
management in urban centres. The Commission and the Member States should give 
priority to RTD activities in towns and cities, taking full account of the energy aspects in 
preparation for the key action of the 5th FP "City of Tomorrow". 
28. The local and regional authorities have many powers in the services, housing and 
transport sectors. As a result of its programme of energy management at regional and 
local level, which is now part of the SAVE programme, the Commission is encouraging 
the involvement of elected representatives, alongside the other local partners concerned, 
by supporting the establishment of energy management agencies in regions, islands and 
cities. The main role of the Energy agencies is to promote energy saving and renewables. 
There are also useful networks set up7 whose role should be expanded in order to 
promote transnational schemes. 
29. AH the public contracts awarded by the local and regional authorities in the Union 
represent an enormous energy saving potential. They should take account of the 
energy dimension and of climate change. The public authorities could thus play a 
leading role in the adoption of products entailing less energy consumption and hence 
producing fewer greenhouse gas emissions. The local and regional authorities could also 
automatically incorporate energy management principles in their new buildings. Studies 
have shown that certain public buildings in one and the same area can consume up to 
four times as much energy as others. 
30. There is significant C02 reduction potential to be exploited at the local and regional 
level. The Committee of Regions could play an important role particularly in promoting 
energy saving and renewable energy sources alongside the other relevant levels of 
decision making. 
Promoting combined heat and power production initiatives 
31. The technologies for electricity production and cogeneration has been progressing 
rapidly, so that considerable efficiency improvements can be expected through the 
deployment of best available technology. In many cases, such advanced technologies 
also offer advantages in terms of cost-effectiveness. The Commission is preparing a 
communication on cogeneration in order to promote its use. There are already many 
examples in certain Member States which demonstrate the merits of this technologically 
mature option though there is great variation between Member States as regards its 
penetration. 
32. The synergy between combined heat and power production and district heating or 
cooling networks needs to be better exploited. The use of biomass in cogeneration is a 
factor facilitating the penetration of this option. One way of accelerating the 
introduction of cogeneration is the third party financing (TPF) concept which should be 
promoted among the financial institutions so that they make greater use of it. In a 
market economy context, in the long run cogeneration is likely to be developed if there 
are transparent and fair rules with regard to the quantity and price of the electricity 
produced; and if the new gas contract situation ensures competitiveness. 
FEDARENE for regions, ENERGIE CITES for towns and cities, and ISLENET for islands. 
33. It is worth noting that even a significant penetration of cogeneration would not be 
sufficient to avoid an overall increase in C02 emissions. However, the Commission 
believes that there is scope for cogeneration to contribute to emission reduction 
Electricity generation 
34. Developments in the electricity /heat generation sector are crucial for overall C02 
emission trends. This sector not only accounts for about a third of total emissions, 
but it is capable of limiting C02 despite growing electricity and heat demand. In the 
Pre-Kyoto scenario, power station C02 emissions are expected to remain close to their 
1990 level up to 2010. 
In addition, the process of establishing transeuropean networks now in progress is 
intended to ensure optimum utilisation of electricity generation capacities throughout the 
Union and supply low carbon fuels to regions of Europe in which such products were not 
hitherto available. 
35. However, while there is little scope for fuel switching in the transport sector, the 
electricity sector offers various possibilities for introducing or maintaining zero carbon 
fuels or increasing the use of low carbon fuels. C02 policies and measures should consider 
the role that electricity can play as one of the major elements in the development of 
innovative means of production, communication and mobility which could abate C02 
emissions by reducing carbon intensity and energy intensity. The following table shows in 
detail the development of C02 emissions from the production of electricity and heat as 
well as energy intensity and carbon intensity in this sector. 
Average annual change (% per annum) 
I 1990-2000 2000-2010 1990-2010 
C02 emissions - 0.2% + 0.3% +0.1% 
Energy intensity -0.5% -1.5% -1.0% 
Carbon intensity - 1.7% - 0.5% - 1.1% 
{pre-Kyoto study) 
The services of the Commission are completing with the European Electricity Supply 
Industry a major review of the potential contribution of electricity to sustainable 
development and in particular meeting the challenge of climate change. 
36 As a result of technological progress since the industrial revolution there has been a 
constant improvement in the efficiency of power stations. This improvement should 
continue or even increase, since there is still an insufficiently exploited theoretical 
potential. For example, the penetration of clean and efficient natural gas, coal and 
lignite combustion technologies could improve electricity generating efficiency by 
5-10%, resulting in a reduction in fuel costs and a 15-30% reduction in greenhouse gas 
emissions. The overall impact will depend to a large extent on the degree of penetration 
of technologies in the Union and in a large part of the planet which will be making 
greater use of solid fuel (China, India, ASEAN, etc.). A Community programme for clean 
and efficient technologies using solid fuel and other heavy products could be 
appropriate, 
37 Mention needs to be made of the contribution of nuclear energy to limiting greenhouse 
gases. According to current plans, the installed nuclear capacity in the Community is 
likely to increase only slightly in the next few years. Between now and 2010, nuclear 
energy can be expected to continue to contribute, although to a lesser extent, towards 
limiting the growth of greenhouse gas emissions. After 2010, a number of nuclear power 
plants will enter the decommissioning phase. The longer term issues concerning nuclear 
power are outlined in the Commission's Indicative Nuclear Programme.8 
38. There is currently rapid penetration of the electricity sector by natural gas, but this will 
probably have reached a maximum rate of penetration in 2010. After that in particular 
for reasons of security of supply, serious consideration will need to be given to this 
level of penetration. 
39. It is clear that the current overall energy consumption is incompatible with the long-term 
requirements for sustainable development. A significant limitation of tfee use of fossil 
fuels is required to ensure that the Community can meet its emissions reduction 
objectives contemplated m the Protocol on the Climate Change Convention. This is 
by now widely recognised by main international organisations, national governments, 
and perhaps most importantly, large segments of the energy industry itself. 
Integration with other policies 
40. Since energy demand is dependent on other economic activities, it is important that 
energy demand management principles should be applied so that, for a given quality of 
energy service, the increase in demand is as low as possible and efficiency as high as 
possible. In this context, other policies, in particular agricultural and forestry policy, 
environmental protection and waste management policy, transport policy, research and 
development policy, fiscal policy, regional planning policy, and regional and local 
development policy should gradually incorporate objectives regarding the reduction of 
greenhouse gas emissions and the development of carbon sinks. The Commission will 
provide an overall view in a Communication later in 1997 which will integrate all the 
measures in relation to climate change in all the policy areas. 
41. It is important to consider how the Structural Funds and the Cohesion Fund might be 
used to an even greater extent to provide funding for projects reducing greenhouse 
gas emissions, particularly in relation to renewable energies and carbon sinks. In 
addition to energy projectsper se, infrastructure projects could also make a contribution to 
the action to combat climate change. Future programmes and measures under the 
Structural Funds need to take account of this. 
42. Measures to combat climate change will also entail the creation of jobs in specific 
related sectors. The Commission in co-operation with Member States should make a 
detailed study of the job-creation impact of measures to combat climate change. Greater 
effort should be also made concerning training. For example, the ECDVT (European 
Centre for the Development of Vocational Training) should establish energy management 
orientated profiles. 
43. Where the common agricultural policy (CAP) is concerned, an initiative concerning the 
use of biomass to produce energy in the context of the reform of the CAP could 
represent another practical option which is virtually neutral from the point of view of 
greenhouse gases emissions. Properly thought out, this solution could also contribute 
towards furthering the objectives of the CAP. Improving energy efficiency and 
developing biofuels in agriculture are also viable solutions which should be studied in 
greater detail. The development of C02 sinks should also be carried out in those countries 
where it is needed. 
COM(96) 339 of 25 September 1996 - Indicative nuclear programme with the meaning of Article 40 
of the Euratom Treaty. 
iU 
Technology and Innovation 
44. The recent adoption of the Commission proposal for the fifth research and 
technological development framework programme (FP 5) coincides with the Kyoto 
Agenda. Close and continuous co-ordination of RTD policy and energy policy is 
essential. Clean technologies can make a positive contribution, the results of which are 
lasting. The FP 5, and in particular the key action "systems and advanced energy 
services" and the current "JOULE-THERMIE" and "Environment and Climate" RTD 
Programmes, should assign an important role to activities promoting technologies 
whose energy efficiency and carbon efficiency represent major improvements compared 
with what is currently available on the market. 
45. Efficient and sustainable energy services should be developed through the use of 
various energy technologies. On the energy supply side, mention can be made of the 
following: combine cycles, clean coal, fuel cells, renewables (wind, biomass, solar-
thermal, solar photovoltaic), new thermodynamic cycles, etc. On the demand side, 
efforts should continue to be made in the field of new vehicles and engines, 
improvements in the efficiency of household appliances (in particular cooling 
equipment), electrotechnical equipment, electronic energy-control devices in the home, 
development of the City of the Future, etc. Social research, should also be reinforced 
since not enough attention has yet been paid to examining consumer behaviour when 
faced with energy choices, in particular the reaction of the public as energy consumers. 
Limiting other greenhouse gas emissions 
46. Apart from C02 emissions, coal-mines are a major source of methane emissions, and 
natural gas production and distribution inevitably entails gas leakage's.9 Where 
emissions due to coal-mining are concerned, preventive techniques are used to a large 
extent within the Union. This should be disseminated to our partners in the associated 
. countries. Where natural gas is concerned, it is necessary to tighten up controls with 
regard to the quality of distribution networks, so as to limit leakage's. In this area, the 
Commission will encourage voluntary agreements with the gas industry.10 Here too, it is 
necessary to increase the transfer of know-how and good practices to third countries. 
Applied research in the gas production and transportation sector should also be stepped 
up to bring about improvements which are also economically justified. 
47. Although the waste sector is not directly connected with the energy sector, there are 
sometimes synergies between these sectors. With the abundance of energy sources, this 
sector can quite easily do without the production of energy from waste. However, waste 
management is a major concern of local authorities and while giving top priority to 
recycling, there may remain a final fraction to be landfilled, which will inevitably 
produce methane emissions. In such cases, landfill gas should be recovered and used to 
produce energy, or at least burned. Composting the organic faction of waste can also 
make a significant energy contribution. On the other hand, where economically and 
environmentally justified, certain waste could be burned with a net energy recovery. In 
10 In its communication COM(96)557 final on methane dated 15 November 1996, the Commission 
proposed various measures that it intends to promote in order to limit such emissions. 
For example, the gas industry in the Netherlands has concluded a voluntary agreement with the 
government, undertaking to reduce methane emissions by 10%. 
11 
the framework of the waste strategy, legislative and technological actions in favour of 
minimising greenhouse gases emissions will be presented. 
48. Last but not least, with regard to emissions of N20, fluidised bed combustion, one of the 
most promising technologies as regards the clean combustion of solid fuels, produces 
small quantities of greenhouse gas. In the context of the research programmes, greater 
importance should be given to understanding the mechanisms giving rise to this gas and 
means of mitigating it. Several research projects from the "Environment and Climate" 
programme deal with emissions, atmospheric balances and impacts on climate of 
greenhouse gases other that C02. 
Fiscal instruments and resourcing 
49. On 12 March 1997 the Commission adopted a proposal for a directive extending the 
Community system of minimum rates of excise duties to all energy products. By 
differentiating between renewable energy sources, energy efficiency and innovation, the 
proposal endorses the approach pursued in this Communication. In addition to 
restructuring the tax system, it also contributes towards the complex task of 
internalisation of external costs. The Commission advocated applying this principle in 
1993 in its White Paper on growth, competitiveness and employment. 
50. If greenhouse gas emissions in the Union are to be reduced by approximately 20% 
compared with the pre-Kyoto scenario, an ambitious programme of polkies and 
measures will be required.. The experience in certain Member States can provide 
guidance as to the direction to be taken. Measures such as "green loans" in the 
Netherlands or "green electricity" purchased by certain consumers in Germany should be 
examined and made use of, where appropriate, at Community level, as should the French 
biofuels pilot projects. Another idea was put forward in the Green Paper on a 
Community strategy for renewable energy sources: a renewable energy credit system. 
51. If a major new policy initiative is required, we may need to examine very carefully 
the merits of mobilisation of funds at the appropriate level so as to provide resources for 
funds earmarked for energy management and renewables. In 1995 energy expenditure 
in the Union amounted to over ECU 500 000 million which shows that it should be 
possible to raise funds to finance at the appropriate level energy management and the 
penetration of renewables. Consequently, a minimum contribution would be sufficient 
to raise funds to ensure that the policies and measures adopted post-Kyoto are 
implemented. Experience in the United Kingdom with regard to non-fossil fuel 
obligations and the other trials mentioned above justify an examination in the general 
interest 
REQUIREMENTS AND IMPLICATIONS OF FUTURE POLICY CHOICES 
52. The table below indicates the annual average change in GDP, energy intensity, carbon 
intensity and C02 emissions, which illustrates the scale of the challenges we face. 
1990-2000 2000-2010 1990-2010 
: 
GDP growth +2.1% + 2.4% + 2.2% 
Energy intensity -1.0% -1.6% -1.3% | 
Carbon intensity -0.90% -0.2% -0.5% 
CQ2 emissions + 0.2% +0.6% +0.4% j 
{pre-Kyoto study) 
12 
53. The impact and cost of a commitment at Kyoto of a 15% reduction in greenhouse 
emissions has not yet been fully assessed. It could however be considerable. As 
background to the debate on the implications of choices made, it is worth noting that there 
are several Commission studies, based on different assumptions, exploring the possible 
scenarios for a reduction of greenhouse gas emissions. One of the studies undertaken by 
the Commission is the "European Energy 2020 study"11, where the "Forum" scenario 
indicates that considerable changes will need to be made to the current structures in order 
to achieve an emission reduction of some 6% in 2010. This scenario presented an 
attractive energy future, especially for the environment and the security of energy supply. 
54. It is also worth noting, that in order to achieve the 6% emission reduction under this 
forum scenario it is assumed that there is a change in the sources of government finances, 
with a gradual switch in taxation from labour to natural resources, reaching 1,5 of GDP by 
2005. Compared to the pre-Kyoto scenario outlined in this Communication, under the 
Forum scenario the cost of energy in 2010 will be higher. 
55. For a Forum scenario to be achieved by 2010, the following are prerequisites: 
• considerable intensity and efficiency gains in all end-use sectors and in power 
generation; 
• a clear decoupling of C02 emissions from GDP growth, because of combined results in 
energy savings and carbon-free energy supply actions; 
• new supply structures in power generation, in favour of decentralised generation (heat, 
renewables, biomass, fuel cells), in biofuel production, in hydrogen production and the 
market penetration of fuel cell and electric vehicles. 
• agricultural policy in favour of biomass; 
• a combination of taxation policy and favourable conditions in capital markets resulting 
in low discount rates, despite an international environment characterised by low import 
prices for fuels; 
56. An estimation of investment requirements in Forum indicates that more than 391000 
MECU investment for electricity generation and refineries would be necessary for the 
period 1991 to 2010. 
57. The example of this Forum scenario shows that there are ways of reducing by some 6% 
the CO2 emissions in 2010 if we take quite radical measures. This is one of many possible 
scenarios, mentioned here by way of illustration. This does not imply that the Commission 
favours the specific policy proposals in any particular scenario. 
Another scenario using the PRIMES model, indicates that a 10% reduction of C02 
emissions by 2010 compared to 1990 can be achieved by a combination of measures. 
These include promotion of energy efficiency and energy saving, higher penetration of 
combined heat and power, changes in fuel mix and reduction in fuel consumption in 
transport. The achievement of 10% emission reduction under this scenario also implies a 
10% share of renewable energy sources by 2010. Another ongoing analysis of the Kyoto 
emission reduction targets, using the PRIMES model, indicates that the application of 
SEC (95) 2283 of 20/12/95 
13 
Best Available Technologies, (BAT)^though not enough by itself, can make a significant 
contribution to emission reduction. 
58. The policies and measures that the Community should launch in order to make up 
the 20% gap between the expected rise in emissions of 8% and a committed reduction 
of 15% will have to take account of the constraints imposed by the Union's new 
financial, perspective. The Commission needs to address as a matter of urgency the 
quantification of the cost - at least on investment - of the current EU negotiation 
position. 
59. The financial implications also need to be examined in the light of their impact on 
economy both at micro-economic and macro-economic level which will inevitably be 
examined by the various economic operators involved. The complexity arising from the 
number of variables will require innovative solutions that should be examined case by 
case with the parties involved. It will be necessary to develop a methodology which 
takes account of this multi-dimensional approach (e.g. objective - time frames -
instrument - cost), together with reliable evaluation and analysis tools. Certain Member 
States are already adopting greenhouse gas emissions limitation strategies backed up by 
specific programmes of policies and measures and an evaluation of costs. It is necessary 
for all the Member States and the Commission to benefit from this experience, 
particularly as regards the evaluation of the financial implications and the methodologies 
adopted. Joint analyses work will be a necessary tool for assessing better the 
implications of the decisions taken. 
60. In the context of the internal market, a sound joint analysis of the energy situation by 
the Member States and the Commission is also indispensable in order to determine 
more clearly the issues and solutions related to climate change. For a better definition of 
policies and measures, it is necessary first of all to have a better understanding of the 
sectors and actors consuming energy and producing greenhouse gas emissions. Through 
its research programme, the Commission is developing the capacity to evaluate Policies 
and Measures taking into account social, economic and scientific aspects of Climate 
Change (JOULE, Environment and Climate programmes). 
61. A stronger energy policy, taking account of its impact on climate change, should be 
backed up by better co-ordination of all measures directly affecting energy, 
including those taken in the context of other sectorial policies. The Union needs to 
demonstrate its ability to adopt a comprehensive strategy. It also needs to involve the 
economic actors. One of the roles of the Consultative Committee on Energy established 
by Commission decision will be to look to how the Energy dimension to the 
Community's climate change strategy can be reinforced by the economic actors. 
62. The climate change challenge is by definition an international one. In particular, 
substantial efforts will need to be undertaken on the part of the Union and the associated 
States to ensure that energy efficiency in those countries reaches a level comparable to 
that observed in recent years in the Union. The decisions that will be taken in Kyoto 
will ultimately have to be applied to the Associated Countries which want to join the 
Union. One of the objectives for the Central and Eastern European Countries during the 
current transformation process is to reform their energy sectors. These reforms remain 
their responsibility. However, co-operation between the Union and these countries has 
been established in different forms i.e. to promote energy saving and energy efficiency. 
The efforts made by the countries concerned are of importance in view of their 
compliance with the acquis communautaire in this area , i.e. emission reductions of 
greenhouse gases. 
14 
63. In the context of the structured dialogue of 3 March 1997, the Council and the 
Environment Ministers of the associated countries of Central and Eastern Europe 
stressed the importance of close co-operation between them and the Union, in particular 
in the context of activities implemented jointly and the requisite strengthening of the 
mechanisms to promote policies to combat climate change and encourage energy 
efficiency. In this context, it was acknowledged that programmes of technological co­
operation as INCO-RTD and the JOULE-THERMIE programme should place greater 
importance on climate change issues, regarding as priority the energy measures foreseen 
to respond to the objective of reducing greenhouse gas emissions. It is also necessary to 
provide for greater support from the EIB, the EBRD and the World Bank. The 
Community will focus the structured dialogue on reinforcing efforts to improve Energy 
efficiency and to the adaptation of the Energy system to reduce emissions. 
64. The Union will also need to insist that our industrialised parties make a firm commitment 
to combat greenhouse gas emissions by agreeing to strong reduction objectives in the 
future Kyoto Protocol since there can be no question of our European economy suffering 
the consequences of an unilateral global environmental protection policy while our 
trading partners could avoid measures influencing energy prices and hence the 
competitiveness of industry and employment. 
65. In the general context of energy relations, the reality of the common challenge in the 
field of energy between OECD and non-OECD partners requires a response which 
specifically takes account of the major impacts of energy supply. The Energy 
Charter Treaty and its protocol on energy efficiency and related environmental aspects 
could serve as a joint basis for co-operation. Equally, the implementation of the 
Partnership and Co-operation Agreements with the majority of the countries of the NIS 
as well as the execution of technical assistance programmes would contribute to energy 
efficiency and energy saving. Energy co-operation with the developing countries should 
also incorporate the dimension of climate change policies. To this end, the 3 
March 1997 Council recognised that the rules governing joint implementation should be 
part of the Kyoto Protocol, even if initially it is necessary to await the results of the pilot 
projects in progress. 
66. The initiatives concerning co-operation with the Mediterranean countries should also 
as soon as possible, focus to a large extent on energy projects and in particular projects 
relating to renewable energy sources and energy efficiency. This will provide a lasting 
solution, enabling industry in those countries to adopt and adapt appropriate 
technologies. In addition, the Committee on Co-operation between the Union and the 
Gulf Co-operation Council countries reiterated the two parties' interest in this issue on 
16 December 1996. The possibilities as regards joint analysis, co-operation and 
exchange of scientific information and experience were recognised as useful instruments 
in this area. Their deployment should now be formalised in the context of appropriate 
programmes. 
67. The challenge of climate change is such that the development of policies and 
measures need to be pursued jointly by the Member States and the Community at 
Community, national, regional and local level in order to achieve the agreed 
reduction targets and the burden-sharing decided upon between the Member 
States. Common policies and measures, or policies and measures requiring co­
ordination between Member States at Community level, are necessary and will need to 
be the subject of an integrated approach. But in order to develop this approach, the 
questions outlined in the first section of this document (para. 10-14) need to be 
addressed. 
15 
The Commission wants a strong political signal from the European Parliament and the 
Council, with the support of the Economic and Social Committee and the Committee of 
the Regions. It believes that the Community should do all that it can to ensure that the 
Conference of the Parties to the United Nations Convention on Climate Change in Kyoto 
in December adopt a protocol that will reduce greenhouse gas emissions significantly 
through policies adopted and measures taken by all the Annex X parties. But we must be 
certain that the commitments can be fulfilled, and that the political will and resources 
required are indeed forthcoming. 
16 
ANNEX 
Energy related C02 emissions (mill, t C02) in the Pre-Kyoto Scenario: 
Assuming no new policy initiatives in the Member States nor at the Community level, 
C02 emissions would change in the following way 12: 
MtC02 
EUR 1990 
3200 percentage change over 1990 
1995 
-2% 2000 
+2% 2005 
+6% 2010 
+8% 2020 
+ 16% 
Energy related C02 emissions by sector (mill, t C02) 
industry 
transport 
domestic/tertiary 
power/heat production 
energy branch 
total emissions 1990 
626 
743 
654 
1036 
141 
3200 percentage change over 1990 
1995 2000 2005 2010 2020 
-10% -14% -14% -15% -15% 
+ 9% +22% +31% +39% +49% 
- 3 % - 1% + 2% + 4% + 6% 
-5% -2% +2% +2% +17% 
+ 7% +9% +11% +12% +13% 
-2% +2% +6% +8% +16% 
12 The EU analysis is based on modelling results with the MIDAS model undertaken by Prof. Capros of 
the National Technical University of Athens, study commissioned by DG XVII, April 1997 
EU: pre-Kyoto scenario: development of GDP, C02 emissions, 
gross inland consum ption, energy and carbon intensity 
1990 = 100 
200 
GDP 
energy consumption 
C O 2 em issions 
carbon intensity 
-» energy intensity 
1990 1995 2000 2005 2010 2015 2020 
EU: pre-Kyoto scenario: total energy consumption 1990 - 2020 
Illustration of underlying factors for CO 2 emission change 
250C 
2 250' 
2 0CQ 
1 7 50 
g 15 0 o 4 
| 10 0 0 
?. 5 0 
0 j 
X-GDP growth 
upward pressure energy intensity gains 
downward pressure / balance 
EUr pre-Kyoto scenario: power/heat production 1990 - 2020 
Illustration of underlying factors for CO: emission change 
1000 
upwsirci pressure d o w'ii v»' Ë r d pressure / balance 

ISSN 0254-1475 
COM(97) 196 final 
DOCUMENTS 
EN 12 14 
Catalogue number : CB-CO-97-223-EN-C 
ISBN 92-78-19778-5 
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