COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 for a resilient Energy Union and to meet commitments under the Paris Agreement and amending Regulation No 525/2013 of the European Parliament and the Council on a mechanism for monitoring and reporting greenhouse gas emissions and other information relevant to climate change
Date: 2016-07-20
Institutions: Directorate-General for Climate Action, European Commission
Subjects: EU Member State, EU emission allowance, EU environmental policy, Kyoto Protocol, adaptation to climate change, climate change, environmental monitoring, greenhouse gas, pollution control, reduction of gas emissions

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 20.7.2016  SWD(2016) 247 final   COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT  Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 for a resilient Energy Union and to meet commitments under the Paris Agreement and amending Regulation No 525/2013 of the European Parliament and the Council on a mechanism for monitoring and reporting greenhouse gas emissions and other information relevant to climate change {COM(2016) 482 final} {SWD(2016) 248 final}  
 
 
Contents 

1.  WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM? ................................. 9 

1.1.  Policy context .................................................................................................... 9 

1.2.  The Effort Sharing Decision ............................................................................ 11 

1.2.1.  Background ........................................................................................ 11 

1.2.2.  Progress made and lessons learnt ...................................................... 12 

1.3.  What is the problem that should be addressed? ............................................... 16 

1.4.  LULUCF policies and its integration into the 2030 framework ...................... 21 

1.5.  Who will be affected and how? ....................................................................... 22 

2.  WHY SHOULD THE EU ACT? .............................................................................. 23 

3.  WHAT SHOULD BE ACHIEVED? ........................................................................ 23 

3.1.  General objective ............................................................................................. 23 

3.2.  Specific objective ............................................................................................ 24 

3.3.  Operational objective ....................................................................................... 24 

3.4.  Consistency with other policies and the Charter for fundamental rights ........ 24 

4.  WHAT  ARE  THE  VARIOUS  OPTIONS  TO  ACHIEVE  THE 

OBJECTIVES? .......................................................................................................... 25 

4.1.  Policy options for setting national 2030 targets .............................................. 28 

4.2.  Policy options for setting the starting point for target trajectories .................. 28 

4.3.  Policy options for a one-off flexibility between ETS and non-ETS ............... 29 

4.4.  Options  to  include  a  limited  LULUCF  flexibility  into  the  Effort 

Sharing ............................................................................................................. 30 

4.5.  Policy options for enhancing existing flexibility instruments ......................... 31 

4.6.  Policy options for administering compliance .................................................. 33 

5.  WHAT  ARE  THE  IMPACTS  OF  THE  DIFFERENT  POLICY  OPTIONS 

AND WHO WILL BE AFFECTED? ........................................................................ 34 

5.1.  Assessing policy options for setting national 2030 targets ............................. 36 

5.1.1.  Calculating  Effort  Sharing  Targets  based  on  fairness  (policy 

baseline option) ................................................................................. 36 

5.1.2.  Methodology 

to 
for  assessing  policy  options 
adjustment  to  targets  within  the  group  of  higher  income 
Member States ................................................................................... 39 

related 

5.1.3.  Divergence  of  cost  efficient  projection  and  targets,  using 
updated  projections  with  various  levels  of  energy  efficiency 
based on the 2016 Reference ............................................................. 40 

2 

 
 
  
5.1.4.  Divergence  of  cost  efficient  projection  and  targets,  using 

additional projections to confirm robustness ..................................... 41 

5.1.5.  Assessment of target adjustment options based on grouping of 

Member States ................................................................................... 43 

5.1.6.  Assessment  of  50/50  target  adjustment  options  based  on 

Member States proposals ................................................................... 48 

5.2.  Assessing the trajectory starting point ............................................................. 49 

5.3.  Assessing options for the one-off ETS/non-ETS flexibility ............................ 60 

5.3.1.  Determining limits for eligibility and amount of access ................... 61 

5.3.2.  Assessment of impacts ...................................................................... 64 

5.4.  Assessing options for the integration of LULUCF .......................................... 70 

5.5.  Assessing policy options for enhanced flexibilities ........................................ 76 

5.5.1. 

Inter-temporal flexibility ................................................................... 76 

5.5.2. 

Inter-Member State flexibility ........................................................... 77 

5.6.  Assessing policy options for administering compliance ................................. 80 

6.  HOW DO THE OPTIONS COMPARE? .................................................................. 83 

6.1.  Comparing  and  combining  the  approaches  to  2030  target  setting, 

starting point, one-off flexibility and access to LULUCF credits ................... 83 

6.2.  Comparing  and  combining 

the  approaches  related 

to  existing 

flexibilities and compliance ............................................................................. 88 

7.  HOW  WOULD  ACTUAL 

IMPACTS  BE  MONITORED  AND 

EVALUATED? ......................................................................................................... 90 

8.  ANNEXES ................................................................................................................ 92 

8.1.  Annex 8.1: Procedural information ................................................................. 92 

8.1.1.  Organisation and timing .................................................................... 92 

8.1.2.  Consultation of the Regulatory Scrutiny Board ................................ 92 

8.1.3.  Evidence and external expertise used ................................................ 93 

8.2.  Annex 8.2: Stakeholder consultation ............................................................... 94 

8.2.1. 

Introduction ....................................................................................... 94 

8.2.2.  Enhancing existing flexibility mechanisms ....................................... 96 

8.2.3.  Monitoring, reporting and compliance .............................................. 99 

8.2.4.  How  to  reflect  cost-effectiveness  in  a  fair  and  balanced 
manner  when  setting  national  greenhouse  gas  reduction 
targets .............................................................................................. 101 

8.2.5.  Complementary EU-wide action ..................................................... 103 

8.2.6.  Need for EU-organised capacity building and other support to 

implementation at national, regional and local level ....................... 105 

3 

 
8.2.7.  Appendix  1:  Consultation  on  the  Green  Paper  on  a  2030 
framework  for  climate  and  energy  policies  relevant  -  key 
conclusions relevant to the 2030 ESD ............................................. 106 

8.2.8.  Appendix  2:  Geographical  distribution  of  the  2015  ESD 

public consultation's respondents: ................................................... 107 

8.3.  Annex 8.3: Who is affected by the initiative and how .................................. 108 

8.4.  Annex  8.4:  Analytical  models  and  model-based  scenarios  used  in 

preparing the impact assessment. .................................................................. 109 

8.4.1.  Description of analytical models used ............................................. 109 

8.4.2.  The EU Reference scenario 2016 .................................................... 115 

8.4.3.  Overview of model based policy scenarios used ............................. 135 

8.5.  Annex 8.5: GDP per capita data used ............................................................ 143 

8.6.  Annex  8.6:  Assessing  impacts  on  Member  States  using  the  EUCO27 

projection ....................................................................................................... 144 

8.7.  Annex 8.7: Impacts on Member States of combinations of options for 
target  distribution,  access  to  the  one-off  ETS/ESR  flexibility  and 
LULUCF flexibility ....................................................................................... 146 

8.8.  Annex 8.8: Analysis of the starting point methodology ................................ 150 

8.9.  Annex  8.9:  Analysis  of  interaction  between  the  one-off  transfer 

between ETS and ESR sectors and the Market Stability Reserve ................. 152 

8.10.  Annex  8.10:  Provisions  for  flexibility  instruments  in  the  Effort 

Sharing Decision ........................................................................................... 155 

8.11.  Annex 8.11: ESD emissions in Member States in 2014 ................................ 156 

4 

 
 
 
 
Figures 

Figure 1: Member State greenhouse gas emission limits in 2020 under the ESD ........... 11 

Figure 2: Achieved EU-wide ESD emission reductions 2005-2013 ................................ 13 

Figure 3: Actual and projected total ESD emissions 2005-2020 ..................................... 14 

Figure 4: Emissions projected under current trends and policies and required reductions 
to achieve the 2030 target ......................................................................................... 19 

Figure 5: Intervention logic Impact Assessment  ............................................................. 27 

Figure  6:  National  effort  sharing  targets  for  2020  and  2030  resulting  from  the  current 
methodology in relation to GDP per capita .............................................................. 37 

Figure  7:  Gap  in  2030  between  GDP-based  targets  and  cost-effective  EU  emission 
reductions for high income Member States (as a % of 2005 emissions).................. 40 

Figure  8:  Gap  between  GDP-based  2030  targets  and  cost-efficient  emission  reductions 
for high income Member States (as a % of 2005 emissions) ................................... 42 

Figure 9: Gap between GDP-based 2030 targets and EUCO27 and EUCO30 projections 
for different target adjustments between groupings (as a % of 2005 emissions) ..... 45 

Figure 10: Towards convergence of ESR GHG per capita in 2030: T2 ........................... 47 

Figure 11: 2021-2030 target trajectory ............................................................................. 50 

Figure 12: Comparing 2021-2030 target trajectories using different starting points ....... 51 

Figure  13:  Sensitivity  S3  sees  overachievement  in  2021  but  risks  underachievement  in 
2030 .......................................................................................................................... 53 

Figure  14:  Gap  in  2030  between  GDP-based  targets  and  cost-efficient  emission 
reductions for all Member States with a target above -30% .................................... 63 

Figure 15: Stakeholders profiles – Based on 114 replies ................................................. 95 

Figure 16: Number of responses per question by stakeholder group ............................... 95 

Figure 17 Stakeholders by country ................................................................................. 107 

Figure 18: Inter-linkages between models ..................................................................... 110 

Figure 19: EU28 Gross Inland Consumption (Mtoe, left; shares (%), right) ................. 119 

Figure 20: EU28 energy production (Mtoe) ................................................................... 120 

Figure 21: Gas - production, net imports and demand (volumes expressed in bcm) ..... 121 

Figure 22: EU power generation (net) by fuel................................................................ 122 

Figure 23: Net power capacity investments by plant type (MWh  – for five year period)
 ................................................................................................................................ 123 

5 

 
Figure 24: Decomposition of electricity generation costs and prices (Euro'13 MWh) .. 124 

Figure  25:  Investment  expenditures  (5-year  period)  -  demand  side  (left,  excluding 
transport) and supply side (right) ........................................................................... 125 

Figure 26: Decoupling of EU energy use and intensity from GDP (2005=100) ............ 126 

Figure 27: Evolution of final energy demand by sector (Mtoe – left, shares – right) .... 126 

Figure 28: Evolution of final energy demand by fuel (Mtoe – left, shares – right) ....... 127 

Figure 29: Industrial energy demand versus activity (value added) ............................... 127 

Figure 30: Final energy demand in the residential sector ............................................... 128 

Figure 31: Trends in transport activity and energy consumption ................................... 128 

Figure 32: Evolution of CO2 emissions (Mt) by sector .................................................. 129 

Figure 33: Non CO2 GHG emissions by sector ............................................................. 131 

Figure 34: EU28 emissions/removals in the LULUCF sector in Mt CO2 until 2050 .... 133 

Figure 35: Illustrative levelized cost of electricity (expressed in €'2013/MWh-net) ..... 134 

Figure 36: Evolution of activity of passenger cars and vans by type and fuel ............... 135 

Figure 37: Projected evolution of energy system costs .................................................. 135 

Figure 38: Analysing the existing starting point methodology ...................................... 151 

Figure 39: Gap between ESD emissions and annual limits in 2014............................... 156 

6 

 
 
 
Tables 

Table 1: Targets for the non-ETS sectors based on GDP/Capita alone ........................... 38 

Table 2: Example of Gap analysis between cost-efficiency and GDP per capita ............ 39 

Table 3: Target adjustments for groupings of high income Member States .................... 44 

Table 4: Comparing the group based approach to targets set following the 50/50 proposal
 .................................................................................................................................. 48 

Table 5: Impact on the build-up of a surplus or deficit in sectors covered by the current 
ESD over the period 2021-2030 of different starting points for target trajectory .... 52 

Table 6: Impact on the build-up of a surplus or deficit in the ESR over the period 2021-
2030 of a combination of starting points for target trajectory .................................. 54 

Table 7: Development of surplus and deficit and potential to buy and sell AEAs .......... 54 

Table  8:  Impact  of  starting  point  options  on  Member  State  surplus  or  deficit  over  the 
period 2021-2030 using the EUCO30 projection ..................................................... 56 

Table  9:  Impact  of  an  additional  buffer  under  option  S1  recognising  that  for  some 
Member States Annual Emission Allocations increase up to 2020 .......................... 59 

Table 10: Access to the one-off flexibility, assessing who has a considerable gap over the 
period after target adjustment in 2030, using the EUCO30 projection .................... 63 

Table  11:  Options  for  limits  on  access  for  the  one-off  flexibility  from  ETS  for  eligible 
Member States .......................................................................................................... 65 

Table 12: Impact on the build-up of a surplus or deficit in the sectors in the current ESD 
over  the  period  2021-2030  of  different  options  for  limits  to  access  to  the  one-off 
flexibility .................................................................................................................. 66 

Table 13: Impact of the one-off flexibility for those that have a considerable gap over the 
period, using the EUCO30 projection ...................................................................... 67 

Table 14: Estimated size of one-off flexibility expressed as share of auctioning volumes 
over period 2021-2030 with maximum use of one-off flexibility ............................ 68 

Table 15: Development of Member States with a deficit and potential demand for AEAs, 
taking into account different options for starting point and one-off flexibility ........ 69 

Table  16:  Distribution  of  LULUCF  credit  limit  on  the  basis  of  the  share  of  agriculture 
non-CO2 in the ESD ................................................................................................. 72 

Table 17: Use of LULUCF credits by high income Member States, impact on distribution 
of use depending on choice of flexibilities using the EUCO30 projection .............. 75 

Table 18: Member State impacts of Combinations 1 and 2 ............................................. 84 

Table 19: Member State impacts of Combinations 1 and 3 ............................................. 86 

Table 20: Impacts of combination 2 on AEA transfer demand ........................................ 87 

7 

 
Table 21: EU wide impacts of combination 2 on overall scarcity ................................... 88 

Table 22: Synopsis of Member State responses to question 1 on flexibility options ....... 97 

Table 23: Synopsis of Member States responses to question 2 on compliance: .............. 99 

Table 24: Synopsis of private stakeholder responses on the ESD scope ....................... 104 

Table 25 Gross Domestic Product at market prices in euro per capita .......................... 143 

Table  26:  Impact  of  starting  point  options  on  Member  State  surplus  or  deficit  over  the 
period 2021-2030 using the EUCO27 projection ................................................... 144 

Table 27:  Access to the one-off flexibility, assessing which MS has a considerable gap 
over the period after target adjustment in 2030, using the EUCO27 projection .... 145 

Table  28:  Impact  of  the  one-off  flexibility  for  those  Member  States  that  have  a 
considerable gap over the period, using the EUCO27 projection .......................... 145 

Table 29: Use of LULUCF credits by high income Member States, impact on distribution 
of use depending on choice of flexibilities using the EUCO27 projection ............ 145 

Table  30:  Member  State  impacts  of  Combination  2  (T2,  O2,  L2)  with  EUCO27 
projection ................................................................................................................ 146 

Table  31:  Member  State  impacts  of  Combination  3  (T3,  O3,  L2),  with  EUCO27 
projection ................................................................................................................ 147 

Table  32:  Member  State  impacts  of  Combination  2  (T2,  O2,  L2)  with  EUCO30 
projection ................................................................................................................ 148 

Table  33:  Member  State  impacts  of  Combination  3  (T3,  O3,  L2),  with  EUCO30 
projection ................................................................................................................ 149 

Table 34: Stylised examples of interactions of the one-off flexibility and the function of 
the Market Stability Reserve .................................................................................. 153 

8 

 
 
 
1.  WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM? 

1.1.  Policy context 

The  Paris  Agreement  of  December  2015  under  the  United  Nations  Framework 
Convention  on  Climate  Change  (UNFCCC)  is  a  historically  significant  landmark 
agreement that covers almost all of the world's emissions. It has set the goal of holding 
the increase in the global average temperature to well below 2 degrees Celsius above pre-
industrial levels  and aims to  limit the increase to  1.5°C in order to reduce significantly 
the risks and impacts of climate change. To achieve this, all Parties are to undertake and 
communicate  ambitious  efforts  as  nationally  determined  contributions  to  the  global 
response to climate change. Developed country Parties should continue taking the lead by 
undertaking economy-wide absolute emission reduction targets.  

In  line  with  scientific  findings  reported  by  the  International  Panel  on  Climate  Change 
(IPCC) in the fourth Assessment Report, the EU's objective, in the context of necessary 
reductions by developed countries as a group, is to reduce GHG emissions by 80-95% by 
2050 compared to 1990. The Commission in its 2050 Low Carbon Economy Roadmap1 
proposed concrete milestones to ensure the EU is on track to reduce these emissions by at 
least  80%  domestically  by  2050,  with  milestones  of  40%  and  60%  reductions  in  2030 
and  2040.  In  preparation  of  Paris,  the  EU  and  its  Member  States  submitted  a  domestic 
2030 target of at least 40% GHG emission reductions compared to 1990 as its Intended 
Nationally Determined Contribution under the UNFCCC. 

For 2020, the EU had agreed in 2007 on an economy-wide and binding target of at least 
20%  GHG  emission  reductions,  as  well  as  a  binding  renewables  target  of  20%  and  an 
indicative  target  of  20%  energy  savings.  The  EU  is  expected  to  meet  its  2020  target. 
Total  GHG  emissions  (excluding  LULUCF)  in  the  EU  28  fell  by  23%  over  the  period 
1990-2014, while the overall economy grew by 46%2. 

The main policy architecture to implement the binding EU climate targets is comprised 
of the EU Emissions Trading System (ETS), which includes a cap for the EU-wide GHG 
emissions of the sectors covered, and a set of legally binding country specific targets for 
the  emissions  of  sectors  not  covered  by  the  EU  ETS  in  the  so-called  Effort  Sharing 
Decision  (ESD)3.  Emissions  and  removals  from  land  use,  land-use  change  and  forestry 
(LULUCF) are currently neither included in the ESD, nor in the ETS.  

With regard to post-2020 binding targets, the Commission proposed in its January 2014 
Commission Communication on a 2030 climate and energy framework4 a set of targets 
for  the  year  2030.  This  included  an  impact  assessment  that  examined  in  detail  the 
interaction of targets and policy instruments on greenhouse gases, renewable energy and 
energy efficiency, respectively. Taking this into account and in line with the EU’s long 
term climate objective the Commission proposed to reduce domestically GHG emissions 
by at least 40%, to be delivered collectively by the EU in the most cost-effective manner 

1 COM(2011) 112 final 
2 Climate action progress report, COM(2015) 576 final 
3 Decision No. 406/2009/EC of the European Parliament and of the Council of 23 April 2009 on the effort 
of  Member  States  to  reduce  their  greenhouse  gas  emissions  to  meet  the  Community's  greenhouse  gas 
reduction 
http://eur-lex.europa.eu/legal-
to 
content/EN/TXT/PDF/?uri=CELEX:32009D0406&from=EN 
4 Commission COM(2014)15, SWD(2014)15 

commitment 

2020; 

up 

9 

 
                                                 
possible,  with  the  reductions  in  the  ETS  and  non-ETS  sectors  amounting  to  43%  and 
30% by 2030 compared to 2005, respectively. 

The  impact  assessment  accompanying  the  2030  framework  proposal  also  assessed  in 
detail  the  cost  and  benefits  of  the  set  of  targets.  In  relation  to  the  40%  greenhouse  gas 
reduction it for instance concluded that a domestic 40% reduction of GHG emissions, the 
additional  energy  system  costs  compared  to  the  Reference  scenario  of  adapting  the 
energy system would be contained to 0.15–0.54% compared to GDP in 2030, compared 
to the Reference scenario. It also concluded that such costs are not a reduction of GDP 
compared to what would otherwise be the case, but reflect the increased costs for all final 
consumers  (industry,  consumers,  transport  users)  arising  from  changed  investment 
patterns and related fuel savings to receive the required energy services.  

These  need  to  increase  investments  upfront,  followed  with  reduced  costs  over  time,  of 
course would benefit of an enabling framework that fosters innovation and investments. 
Elements  of  such  an  enabling  framework  were  proposed  in  the  form  of  modernisation 
and innovation funds under the proposed revised ETS directive and by other policies that 
foster innovation and investment in the EU.  

After the endorsement of the European Parliament5, the October 2014 European Council 
(hereafter referred to as European Council) confirmed these climate targets, including the 
split between efforts in the ETS and non-ETS sectors. It asked for setting corresponding 
national  reduction  targets  for  the  non-ETS  sectors  and  for  the  LULUCF  sector  to  be 
included into the 2030 greenhouse gas mitigation framework. It also agreed a renewable 
energy target of at least 27%, binding at the EU level, an at least 27% indicative energy 
savings  target,  that  will  be  reviewed  having  in  mind  an  EU  level  of  30%  and  a  15% 
interconnection target. It gave further guidance on key elements for a 2030 Climate and 
Energy Policy Framework6. In March 2016, the European Council reaffirmed after Paris 
its  earlier  conclusions  and  invited  the  Commission  to  rapidly  present  all  the  remaining 
relevant proposals to this end so as to swiftly engage the legislative process. 

Continuing  an  ambitious  climate  policy  is  an  integral  part  of  the  Energy  Union  with  a 
forward  looking  climate  change  policy.  The  aim  is  an  Energy  Union  as  a  sustainable, 
low-carbon  and  climate-friendly  economy.  The  Commission  has  started  the  next  steps 
towards implementing these targets. In 2015 it presented a legislative proposal to amend 
the  ETS  for  the  period  after  20207.  This  impact  assessment  focusses  on  the 
implementation of the 2030 framework for the sectors outside the ETS as covered in the 
current  ESD,  i.e.  the  proposed  Regulation  on  binding  annual  greenhouse  gas  emission 
reductions by Member States from 2021 to 2030 for a resilient Energy Union and to meet 
commitments under the Paris Agreement (referred to in this document in short as Effort 
Sharing  Regulation,  ESR).  It  is  further  accompanied  by  an  impact  assessment  that 
focuses on the integration of LULUCF into the 2030 Climate and Energy Framework8. It 
is coherent with the impact assessment that is being prepared for the revision of energy 
efficiency  targets  under  the  Energy  Efficiency  Directive  for  the  2030  horizon  and  uses 
the 
central  policy  scenarios  also  used 

the  analytical  work  underpinning 

in 

5 European Parliament resolution P7_TA(2014)0094 of 5 February 2014 
6 http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/145397.pdf  
7 COM(2015) 337 final 
8  Impact  assessment  accompanying  the  proposal  for  a  Regulation of  the European  Parliament  and  of  the 
Council  on  the  inclusion  of  greenhouse gas emissions  and removals  from  land  use,  land  use  change  and 
forestry into the 2030 climate and energy framework, SWD(2016) 249  

10 

 
                                                 
Communication  on  the  decarbonisation  of  transport  and  other  impact  assessments  for 
policy  initiatives  prepared  in  2016  under  the  Energy  Union  such  as  the  revision  of  the 
Renewable  Energy  Directive.  These  central  policy  scenarios  are  not  abstract  policy 
scenarios  but  reflect  the  current  EU  policy  design,  modelling  among  others  ambitious 
energy efficiency policies relevant for the non-ETS sectors. 

1.2.  The Effort Sharing Decision 

1.2.1. Background  

The objective of the Effort Sharing Decision (ESD) is to reduce GHG emissions in the 
EU  by  10%  by  2020  compared  to  2005  by  setting  national  targets  and  to  promote 
reductions of GHG emissions within its scope in a fair and cost-effective manner.  

The current ESD entered into force in June 2009. It covers all GHG emissions excluding 
those  from  sectors  covered  in  the  ETS  and  excluding  emissions  and  removals  from 
LULUCF9.  The  ESD  covers  mainly  emissions  in  the  transport,  buildings,  agriculture, 
small industry and waste sectors. These sectors accounted for more than 55% of total EU 
GHG  emissions  in  2013.  The  ESD  does  not  set  specific  emission  targets  for  these 
individual sectors covered by the ESD, but leaves it to Member States to choose where 
and how to achieve the necessary reductions.  

National targets for 2020 are set for Member States according to economic capacity on 
the basis of their relative wealth (measured by 2005 Gross Domestic Product per capita). 
They range from a 20% emissions reduction by 2020 (from 2005 levels) for the richest 
Member States to a 20% increase for the least wealthy one (See Figure 1).  

Figure 1: Member State greenhouse gas emission limits in 2020 under the ESD 

Source: Decision 406/2009/EC 

The ESD not only sets 2020 targets, but also defines a linear trajectory of corresponding 
binding emission limits (annual emission allocations, AEAs) for each year from 2013 to 

9 The current ESD covers the same greenhouse gases as the Kyoto Protocol, with the exception of nitrogen 
trifluoride NF3. GHG emissions from international shipping are not covered by the ESD, nor by the ETS. 

11 

 
 
                                                 
2020. Progress towards the 2020 targets is ensured through  annual reporting obligations 
and compliance checks.  

Member  States  are  responsible  for  implementing  policies  and  measures  to  meet  their 
obligations  under  the  ESD  and  are  supported  by  a  number  of  EU  measures10,  some  of 
which also are expected to help achieving the EU’s 2020 renewable energy and energy 
efficiency  targets.  These  supporting  EU  policies  are  important  to  stimulate  emission 
reductions in the sectors under the ESD, but also here there are often important elements 
of  subsidiarity  when  implementing  these  policies,  for  instance  in  sectors  such  as 
transport, buildings and agriculture. 

In order to provide for flexibility for Member States in implementing their commitments 
and as a means to enhance the overall cost-effectiveness of reaching the EU-wide 2020 
target,  the  ESD  provides  a  range  of  flexibility  instruments.  These  concern  Member 
States’  possibilities  to  manage  their  own  AEAs  within  the  compliance  period  (“inter-
temporal” flexibility) and engage in transfers of AEAs among each other (“inter-Member 
State“ flexibility). Should a Member State’s GHG emissions exceed its AEAs for a given 
year,  then  it  can  borrow  5%  of  its  AEAs  from  the  next  year  or  buy  AEAs  from  other 
Member  States  or  use  international  project  credits  in  order  to  meet  its  annual  limits. 
Should a Member State reduce its emissions by more than needed, thus overachieving its 
target for a given year, it can keep the surplus AEAs for later use within the commitment 
period or transfer it to other Member States. For more details of the existing flexibility 
instruments, see annex 8.10. 

The  ESD  has  an  annual  reporting  and  compliance  cycle  consisting  of  Member  States 
reporting  their  GHG  emissions,  emissions  inventory  reviews  to  validate  the  emissions 
and compliance checks (i.e., comparing the actual emission of Member States with their 
annual emission allocations for a given year). If a Member State's emissions exceed its 
annual emission allocation, even after accounting for flexibility instruments, they will be 
subject to certain penalties and have to take corrective measures. 

1.2.2. Progress made and lessons learnt  

The  ESD  is  still  in  an  early  stage:  the  compliance  check  for  the  first  two  years  of  the 
compliance  period  (2013-2014)  is  due  in  2016. However,  thanks  to  the existing  annual 
reporting of emissions it is possible to discern the main emission trends in Member States 
and on EU level.  

Emission  reductions  have  so  far  been  much  deeper  than  expected  in  2007  when  the 
European Council agreed on the overall EU climate targets for 2020 and the Commission 
performed the impact assessment of the Climate and Energy  Package. According to the 
business as usual scenario in that assessment, EU-wide ESD emissions were expected to 
increase by 2.4% between 2005 and 2020. Even for 2020 it was not projected that ESD 
emissions  would  be  at  the  level  of  the  -10%  target  given  that  the  use  of  international 
credits was permitted in the period 2013-2020. 

10 Examples of relevant EU legislation are the regulation of CO2 emissions from passenger cars and vans, 
the Landfill Directive, the Energy Performance of Buildings Directive, the Energy Efficiency Directive, the 
Renewable  Energy  Directive,  the  F-gas  Regulation  and  Mobile  Air-Conditioning  Systems  Directive,  the 
eco-design framework, the Nitrates Directive, and the greening of the Common Agricultural Policy.  

12 

 
                                                 
Instead, total 2013 emissions covered by the ESD at EU level were 9.7% lower than the 
2005  emissions,  basically  reaching  the  EU  target  for  2020.  In  2014  EU  emissions 
covered  by  the  ESD  further  decreased  to  a  level  12.9%  below  2005  levels,  already 
overachieving the target11. 

Preliminary estimates indicate that all Member States appear to be meeting their annual 
emission limits for the years 2013 and 2014. This means that the EU is on track to meet 
its  ESD  target  in  2020  and  that  all Member  States  have  contributed to  the  reduction  in 
GHG  emissions.  The  achieved  emission  reduction  represents  a  large  improvement  in 
performance  relative  to  the  business-as-usual  scenario  when  the  2020  targets  were  first 
agreed.  

Emission reductions between 2005 and 2013 were achieved in all sectors, ranging from -
3 % in agriculture to -25 % in the waste sector. See also Figure 2 below. In this period 
there  was  also  a  convergence  of  GHG  emission  intensities  across  Member  States,  both 
per capita and per GDP.  

Figure 2: Achieved EU-wide ESD emission reductions 2005-2013 

Source: EEA 

11 2014 inventory figures are pending review and thus preliminary. Reviewed emission figures for the years 
2013 and 2014 will be available by September 2016. 

13 

 
 
                                                 
Emissions per Member State in sectors under the ESD have also decreased significantly 
since 2005 (see Figure 3). As shown in Figure 39 presented in annex 8.11 in practically 
all  Member  States  estimated  ESD  emissions  were  below  their  annual  limit  in  2014. 
Overachievements were typically larger in those countries that were allowed to increase 
emissions compared to 2005. Countries that experienced a particularly severe economic 
recession (e.g., Greece, Portugal and Spain) also had emissions significantly below their 
2014 limits.  

According to Member State projections submitted in 2015, ESD emissions are expected 
to keep decreasing until 2020 (Figure 3), continuously being below target at the EU level. 
24  Member  States  are  projected  to  meet  their  national  targets  domestically,  while  four 
Member  States  are  expected  to  need  additional  measures  or  use  flexibility  instruments 
within the ESD to reach their targets12. 

Figure 3: Actual and projected total ESD emissions 2005-2020 

Source: EEA (2015) Trends and projections in Europe 2015, updated with March 2016 emission inventory figures.  

Article 14 of the ESD requires the European Commission to evaluate the implementation 
of the ESD by 31 October 2016. The evaluation was undertaken in 2015 to allow for the 
results to be reflected in this impact assessment13.  

The ESD is still in the early stages of implementation. Nevertheless, it seems clear from 
the  evidence  gathered  so  far  that  ESD  targets  have  been  effective  in  stimulating  new 
national policies and measures promoting effective reductions of GHG emissions within 
the  ESD  scope.  Most  emission  reductions  have  come  from  technological  changes  and 
policies  which  have  resulted  in  increased  uptake  of  less  carbon-intensive  technologies. 
Overall  the  achievement  of  the  targets  has  thus  clearly  happened  faster  than  expected 
when developing the 2020 climate and energy framework in 2007 and 2008. 

12 Climate action progress report, COM(2015) 576 final. 
13  Report  from  the  Commission  to  the  European  Parliament  and  the  Council  on  evaluating  the 
implementation of Decision No. 406/2009/EC pursuant to its Article 14, COM(2016) 483 and Evaluation 
of the implementation of Decision 406/2009/EC - 'the Effort Sharing Decision', Commission SWD(2016) 
251 

14 

 
 
                                                 
Effects on the ESD GHG emissions have been reinforced by the fact that the ESD was 
launched together with a number of other EU climate and energy policies as part of the 
2020 package, in particular on energy efficiency and renewable energy. For several of the 
ESD  sectors,  including  buildings,  transport,  agriculture  and  waste,  a  significant  part  of 
the emissions reductions to date can be attributed to factors that are influenced by policy 
interventions  related  to  the  2020  package.  Overall  it  seems  clear  that  policies 
implemented in the field of climate and energy have contributed significantly to the take-
up of clean technologies. 

A decomposition analysis14 carried out for the 2005-2012 period covered CO2 emissions 
from fossil fuel combustion, which account for about 80 % of total GHG emissions, in 
both  ETS  and  ESD  sectors.  The  results  provide  insights  why  CO2  emissions  decreased 
overall by 11.5 % between 2005 and 2012.  

Technological  changes  had  the  most  significant  effect  on  driving  down  emissions, 
leading  to  an  18.5  %  decrease  and  by  far  outweighing  the  contribution  of  the  shift 
between economic sectors. The policies implemented in the field of climate and energy 
contributed  significantly  to  the  take-up  of  less  carbon-intensive  technologies,  including 
renewable  energy.  Growth  in  economic  activity  (GDP)  caused  a  6.8  %  increase  in 
emissions.  Structural  changes  in  the  economy  caused  a  small  increase  in  emissions,  by 
1.7  %.  In  other  words  the  shift  between  economic  sectors  (at  constant  GDP  and  CO2 
intensity in every economic sector) only had a relatively small effect on emissions15. The 
analysis concluded that technological changes contributed most to drive down emissions, 
by  far  outweighing  the  contribution  of  the  shift  within  and  between  economic  sectors, 
and by far overcompensating GDP related emission drivers in times of economic crisis. 

Based on the evaluation and comments from stakeholders in Member States, a number of 
lessons can be learned from the implementation of the ESD so far.  

The ESD was recognised by Member State stakeholders as having an important role in 
supporting  wider  policy  developments,  for  example  improving  coordination  on  GHG 
mitigation  across  the  ESD  sectors  and  between  national  and  regional  or  local 
governments.  Stakeholders  highlighted  that  another  important  outcome  of  the  ESD  to 
date  has  been  the  improvement  in  the  quality  of  the  emissions  data  and  projections 
relating  to  ESD  sectors  at  a  national  level,  which  has  helped  improving  policy 
preparation. The annual reporting of emissions, combined with biennial requirements for 
reporting of policies and measures, and projections, keep Member State better informed 
about the progress  not  only  of GHG  emissions  but  also of climate and energy policies. 
The  reporting  obligations  also  give  them  and  other  EU  stakeholders  a  tool  to  compare 
their performance with that of other countries in the EU.  

The  evaluation  of  the  ESD  showed  an  apparent  acceleration  in  the  implementation  of 
national policies in the ESD sectors in most years starting from 2007, when the European 
Council agreed on the overall EU climate targets for 2020. Without the ESD, actions to 
mitigate emissions in the ESD sectors at Member States level may not have been taken, 
or  may  have  been  taken  at  a  slower  pace.  Annual  emission  limits  with  strict  rules  on 
reporting and monitoring thus have contributed to Member States efforts to reduce their 
emissions in sectors under the ESD, but it is difficult to quantify the effects.  

14 Decomposition analysis of the changes in GHG emissions in the EU and Member States. Final report by 
ICF International in association with ZEW, Umweltbundesamt GmbH and Eclareon, 22 April 2016 
15 Climate action progress report, COM(2015) 576 final, p. 9 

15 

 
                                                 
So far, no Member State has used any of the flexibility instruments provided in the ESD 
as all countries appear to be meeting their annual emission limits for the first two years of 
the compliance period. In the future it can be expected that flexibility instruments, such 
as  trade  with  other  Member  States,  will  be  used  by  some  Member  States  that  are 
projected to emit above their limits by 2020. Although the flexibility instruments under 
the  ESD  are  untested  they  remain  widely  supported  and  were  further  endorsed  by 
Member States in the stakeholder consultation. 

The  ESD  was  found  to  have  resulted  in  limited  additional  administrative  burden  on 
Member  State  level,  although  there  may  be  opportunities  for  reducing  administrative 
costs at EU level, for example by simplified or less frequent compliance controls. 

1.3.  What is the problem that should be addressed? 

The  general  problem  is  that  with  current  targets  implemented  by  2020  and  existing 
policies,  GHG  emissions  in  ESD  sectors  are  not  expected  to  sufficiently  decrease  by 
2030  to  achieve  the  EU's  domestic  contribution  to  the  Paris  Agreement  (see  Figure  4 
the  EU  Reference  scenario  201616,  reflecting  current 
below).  In 
trends  and 
implementation  of  adopted  policies,  emissions  covered  by  the  ESD  are  projected  to 
decrease by around 16% in 2020 and 24% in 2030 compared to 200517.  

Achieving  such  reduction  levels  in  practice  will  be  facilitated  by  ongoing  trends  e.g. 
towards the circular economy and towards sustainable mobility. 

In  view  of  reported  emissions  for  2013,  with  already  a  reduction  of  -13%  in  the  ESD 
compared to 2005, projecting a 16% reduction by 2020 seems well in line with observed 
trends.  

See box below on main assumptions underlying the 2030 projection results.  

Box 1: What drives the 2030 emission results of the EU Reference scenario 2016?  

The EU Reference scenario 2016 projects EU and Member States energy, transport and 
GHG  emission-related  developments  up  to  2050,  given  current  global  and  EU  market 
trends and adopted EU and Member States' energy, transport, climate and related relevant 
policies. It has been developed building on an economic modelling framework including 
as core models PRIMES, GAINS and GLOBIOM-G4M and as supporting models GEM-
E3, PROMETHEUS and CAPRI.  

Member States were consulted for its development through a specific Reference scenario 
expert group. The projections are based on a set of assumptions, including on population 
growth,  macroeconomic  and  oil  price  developments,  technology  improvements  and 
policies.  

16 European Commission: EU Reference Scenario 2016 - Energy, Transport and GHG Emissions - Trends 
to 2050. Directorate-General for Energy, Directorate-General for Climate Action and Directorate-General 
for Mobility and Transport, July 2016. See also annex 8.4.2 for a summary. 
17  All  sectors  are  projected  to  contribute  under  current  trends  to  the  continued  emission  reductions  post 
2020, with above average contributions of the buildings sector, mainly thanks to the continued impact of 
energy efficiency improvements, and of the waste sector. 

16 

 
                                                 
The  population  projections  draw  on  the  European  Population  Projections  (EUROPOP 
2013)  by  Eurostat.  The  EU28  population  is  expected  to  grow  by  0.2%  per  year  during 
2010-2030, a similar trend as assumed for the Reference scenario 2013.  

GDP  projections  mirror  the  joint  work  of  DG  ECFIN  and  the  Economic  Policy 
Committee, presented in the 2015 Ageing Report. The average EU GDP growth rate is 
projected to remain relatively low at 1.2% per year for 2010-2020. In the medium to long 
term, higher expected growth rates (1.4% per year for 2020-2030) are taking account of 
the growth potential  of countries with  relatively low GDP per capita.  EU28 2030  GDP 
levels  are  around  5%  lower  than  assumed  for  Reference  scenario  2013,  taking  into 
account the economic developments in recent years. 

For  oil  prices  it  starts  with  the  current  low  price  levels  and  considers  a  gradual 
adjustment process. The oil price is projected to reach 87 $/barrel in 2020 (in year 2013-
prices).  Beyond  2020,  as  a  result  of  persistent  demand  growth  in  non-OECD  countries 
the oil price would rise to 113 $/barrel by 2030, around 10% lower than in the Reference 
scenario 2013.  

Technology  assumptions  are  based  on  extensive  literature  review  and  have  been 
reviewed by the Joint Research Centre, with notably changes related to the power sector 
and  battery  cost  developments  compared  to  assumptions  taken  for  Reference  scenario 
2013.  

"Adopted  policies"  refer  to  those  that  have  been  cast  in  legislation  in  the  EU  or  in 
Member  States  (with  a  general  cut-off  date  end  of  2014).  Therefore  the  binding  2020 
targets  are  assumed  to  be  reached  in  the  projection.  This  concerns  EU  GHG  emission 
reduction  targets  (both  for  the  EU  ETS  as  well  as  ESD  sectors)  as  well  as  Renewable 
Energy targets, including in transport. The Reference scenario 2016 shows the continued 
impact  also  post  2020  of  the  full  implementation  of  policies  such  as  the  Energy 
Efficiency Directive, the Energy Performance of Buildings Directive, CO2 and cars, the 
Landfill Directive and the recent F-gas regulation, that also impact the stock of buildings 
and cars and the emissions of methane and fluorinated gases post 2020.  

Compared with the Reference scenario 2013, while most policy assumptions are similar, 
the newly adopted F-gas regulation is expected to shave off in 2030 the equivalent of 2% 
of  the  effort  sharing  sector  emissions.  Furthermore  there  is  also  an  impact  of  the  new 
GHG  emission  inventory  guidelines  applied  since  last  year,  leading  to  more  historic 
emissions in the waste sector and subsequent more reductions in the future due to waste 
policies.  

For more details and an overview of results see annex 8.4.2. 

Following the 2016 Reference projection, this leaves a gap of 6 percentage points to the 
30%  reduction  in  2030,  requiring  cumulatively  still  around  1  billion  ton  additional 
reductions in the period 2021-2030. This is a marked improvement compared to the 2013 
Reference  scenario  which  projected  a  -20%  reduction  in  2030  and  would  still  have 
required  1.5  billion  tonnes  additional  reductions  over  the  period  2021-2030  (see  box 
above for more information on differences between the two Reference scenarios). 

The  EU  Reference  scenario  2016  is  the  most  recent,  consistent  projection  of  current 
trends and existing EU and national policies. Its projected 2030 trends see overall higher 
reductions than Member States projections. Member States themselves in aggregate see 
emissions only reduce by 18% in their GHG projections submitted in 2015 that look at 

17 

 
the impact of existing measures18. This would result in an aggregate gap in 2030 as large 
as 12 percentage points. Achieving the target would then require almost 2 billion tonnes 
of additional reductions over the period 2021-2030.  

Box  2:  Explaining  differences  between  EU  and  national  GHG  projections  with 
existing measures 

Differences in outcomes of aggregated Member States projections with the EU Reference 
scenario  concern  mainly  the  post  2020  period,  which  is  by  definition  more  uncertain; 
2020 results are of a similar order of magnitude. Main reasons are:  

  A moderately more optimistic outlook on GDP growth in some Member States, with 
aggregated a 6% higher EU GDP in 2030 assumed than in EU Reference 2016, which 
are  based  on  a  coherent  methodology  across  Member  States  used  in  the  ECFIN 
Ageing Report.  

  Non-inclusion  into  national  with  existing  measures  projections  of  some  policies 
adopted at EU level but not yet fully implemented at national level. An example is the 
revised  EU  F-gas  regulation  adopted  in  2014  which  has  not  been  considered  yet  by 
some Member States projections.  

  Modelling  limitations  with  regard  to  post  2020  stock  turnover  effects  of  currently 
adopted policies which are fully captured in the EU Reference scenario. An example 
is the revised Energy Performance in Buildings Directive which mainly has emission 
reduction effects from 2020 onwards due to the near zero emission building standard. 
Another example is the CO2 and cars regulation which includes a decrease of the fleet 
average to be achieved by all new cars to 95 g/km by 2021, of which a major effect on 
transport emissions will occur after 2020 with the continued turnover of the car fleet. 
For  those  national  WEM  projections  that  focus  on  the  2020  time  frame  and  project 
post 2020 emissions through a simplified extrapolation, these post 2020 effects might 
not be covered. 

The expected gap in EU and national projections shows that, while current ESD national 
targets  as  well  as  supporting  climate-related  EU  policies  appear  effective  to  reduce 
emissions up to 2020 and beyond, the policy framework needs to be reinforced to ensure 
the achievement of the EU’s 2030 target19.  

18  Recent  Member  States  projections  with  additional  measures  result  in  a  reduction  of  21%.  For  more 
information see also European Environmental Agency: Trends and projections in Europe 2015. 
19 An exception is the supporting EU F-gas policy for the post 2020 horizon which is consistent with long 
term targets; see Regulation (EU) No 517/2014 on fluorinated greenhouse gases. 

18 

 
                                                 
Figure  4:  Emissions  projected  under  current  trends  and  policies  and  required 
reductions to achieve the 2030 target 

Source: Commission calculations based on PRIMES, GAINS, EEA 2015 

The  European  Council  agreed  to  address  the  general  problem  and  has  requested  to 
continue  the  approach  of  the  Effort  Sharing  Decision  also  after  2020,  setting  national 
targets  while  allowing  for  a  number  of  flexibilities,  but  now  in  line  with  an  overall 
reduction of 30% in the non-ETS compared to 2005 by 2030.  

Therefore the  specific  problem addressed in  this impact assessment is  how the current 
methodology  of  the  ESD  can  be  continued  in  a  manner  that  it  (1)  addresses  fairness 
concerns, (2) takes into account the need for cost-efficiency and (3) avoids problems with 
overall environmental integrity.  

When  setting  targets  equity  remains  an  important  concern.  Member  States  have 
significant  differences  in  economic  strength  and  investment  capacity  as  well  as  in 
emission reduction potentials and costs. As the 2030 framework impact assessment20 has 
shown, applying cost-effectiveness as sole criterion for the distribution of efforts would 
lead  to  considerable  variations  in  the  necessary  national  economic  effort  and  would 
imply (on average) relatively higher efforts and costs per unit of GDP for lower income 
Member  States.  The  current  ESD  addressed  the  differences  in  economic  capacity  by 
differentiating national targets according to relative differences in GDP per capita.  

However, setting targets based solely on GDP per capita may result in large differences 
in the costs per ton reduced emissions between Member States if the reductions have to 
be achieved domestically, and might induce very costly efforts for those higher income 
Member States with more limited remaining mitigation potentials. For instance according 
to the 2030 Impact Assessment, five Member States with GDP per capita above the EU 
average have cost-effective mitigation potentials in effort sharing sectors below 30%, the 
required average total non-ETS reduction, and thus would see high costs per ton reduced 
emissions if targets would go well beyond 30% in 2030. 

The  European  Council  recognised  both  the  need  for  fairness  and  cost  efficiency  in  its 
conclusion in October 2014.  

20 Commission SWD(2014)15 

19 

 
 
 
                                                 
(1) 

How to achieve a fair sharing of efforts? 

The  European  Council  requested  to  continue  the  methodology  to  set  the  national 
reduction targets for the non-ETS based on GDP per capita differentiation, keeping them 
in  a  range  from  0%  to  -40%  compared  to  2005.  But  it  also  stated  that  the  targets  for 
Member  States  with  a  GDP  per  capita  above  the  EU  average  need  to  be  relatively 
adjusted  to  reflect  cost-effectiveness  in  a  fair  and  balanced  manner.  This  impact 
assessment will need to examine how to translate this guidance in concrete 2030 targets 
for the Effort Sharing Regulation (ESR). 

(2) 

How to ensure at the same time cost efficiency? 

In addition, flexibility should allow for overall cost-efficiency in reaching the EU’s GHG 
emission  reduction  target,  while  respecting  environmental  integrity.  As  in  the  current 
Effort Sharing Decision, such flexibilities are particularly important if target setting is to 
a significant extent based on equity considerations, which remains the case also for the 
post 2020 period as described above. 

This  problem  was  recognised  by  the  European  Council,  which  called  for  significantly 
enhancing the availability and use of existing flexibilities within the non-ETS sectors in 
order  to  ensure  cost-effectiveness  of  the  collective  EU  effort  and  convergence  of 
emissions per capita by 2030. This also reflects the fact that the 2030 EU climate target is 
a  domestic  target  which  means  that  international  credits  will  no  longer  be  a  flexibility 
option  for  the  period  after  2020.  Thus  the  perception  among  Member  States  is  that  the 
existing  flexibility  provisions  would  not  be  sufficient  to  ensure  EU-wide  cost-
effectiveness  of  mitigation  efforts  by  2030  without  some  kind  of  enhancement.  A  key 
concern  for  Member  States  with  high  emission  reduction  costs  is  to  get  access  to 
additional AEAs from other Member States with lower reduction costs in the period in 
2021-2030. 

It is therefore important to examine the extent to which existing flexibilities in the ESD 
allow the achievement of cost-effective abatement across the EU. An important question 
is  to  what  extent  the  existing  set  of  rules  could  be  enhanced  without  limiting  Member 
States’ freedom of choice with respect to using the flexibilities.  

Another  important  area  for  ensuring  cost  efficiency  is  related  to  the  potential 
administrative burden both at the level of the EU and in Member States to implement the 
Commission proposal. Therefore, it needs to be considered whether the current reporting 
and  compliance  system  under  the  ESD  should  be  changed  in  light  of  any  enhanced 
flexibility instruments and whether the administrative burden could be further reduced. 

Flexibility  instruments  should  be  transparent,  predictable  and  easy  to  operate.  A  key 
element would be to improve the transparency regarding Member States' willingness to 
engage in such transfers and at what price. 

Next  to  enhancing  the  existing  flexibilities,  the  European  Council  also  suggested  to 
establish a new flexibility in achieving targets for Member States with national reduction 
targets  significantly  above  both  the  EU  average  and  their  cost  effective  reduction 
potential  (as  well  as  for  Member  States  that  did  not  have  free  allocation  for  industrial 
installations  in  2013),  through  a  limited,  one-off,  reduction  of  ETS  allowances,  to  be 
decided  before  2020.  It  needs  to  be  assessed  which  higher income  Member  States  thus 
could be eligible to make use of this reduction of ETS allowances allowing for increased 
emissions in the sectors covered by the current ESD. The European Council stressed also 

20 

 
the need to preserve predictability and environmental integrity of both the ETS and the 
non-ETS sectors.  

(3) 

How to maintain overall environmental integrity? 

The  design of  the  one-off  flexibility  and  the  2030  target  setting  are  not  the  only  issues 
where maintaining environmentally integrity is key. Also binding emission limits for the 
period 2021 to 2030 need to be defined, in line with the approach under the current Effort 
Sharing  Decision  expressed  as  annual  emission  allocations,  AEAs.  The  method  for 
setting  emission  limit  trajectories  must  preserve  environmental  integrity,  i.e.,  it  must 
ensure  that  the  required  2030  emission  levels  are  reached  and  that  timely  emission 
reductions take place over the whole period 2021-2030.  

The  instrument  itself  does  not  per  definition  deliver  this  2030  reduction.  If  large 
surpluses of unused AEAs build up early in the period 2021-2030, that are not associated 
with  real  additional  emission  reductions,  this  could  lead  to  deviations  from  the  target 
trajectory  towards  the  end  of  the  period  and  put  the  domestic  achievement  of  the  2030 
target  at  risk.  Achieving  the  2030  target  is  also  important in  view  of  enabling Member 
States to take necessary action in time to meet the EU’s climate objectives beyond 2030. 

The ESD does not foresee that any overachievements under the current period could be 
used  for  meeting  national  targets  during  the  next  commitment  period  2021-2030,  and 
neither do the European Council conclusions. Estimates  by the EEA  based on Member 
State projections show that the expected surplus in the period 2013-2020 is about 1.5 to 
1.7 billion AEAs21, amounting to  much more than the total emission  reductions  needed 
over  the  period  2021-2030  additional  to  the  latest  Reference  projection.  Any  transfer 
between the periods would remove incentives for long-term mitigation action and would 
seriously  undermine  environmental  integrity  notably  by  putting  the  achievement  of  the 
2030  domestic  target  at  risk,  not  requiring  any  real  additional  action  after  2020.  In  the 
same manner, the cumulative impact of additional flexibilities will have to be examined 
carefully in relation to the total emission reductions required for meeting the 2030 target.  

When providing greater flexibility within the period it will also be essential to do it in a 
way that ensures environmental integrity. The non-availability of international credits is 
also  important  for  maintaining  the  environmental  integrity  of  the  EU  system.  Sound 
emission  reporting,  monitoring  and  compliance  checks  continue  to  be  crucial  in  this 
respect. 

1.4.  LULUCF policies and its integration into the 2030 framework 

Emissions  and  removals  from  LULUCF  are  currently  accounted  towards  the  Kyoto 
Protocol obligations of Member States applying the so-called "no debit rule". This means 
that  internationally,  the  EU  and  each  of  its  Member  States  need  to  ensure  that  GHG 
emissions  in  this  sector  do  not  result  in  debits,  and  hence  additional  emissions.  Any 
increase  in  emissions  would  need  to  be  compensated  by  emission  reductions  in  other 
sectors22.  International  Kyoto  Protocol  rules  for  Land  Use,  Land  Use  Change  and 

21 For more information see also European Environmental Agency: Trends and projections in Europe 2015. 
This  estimate  does  not  even  include  the  potential  impact  of  the  use  of  international  credits  in  the  period 
2013-2020. 
22 Essentially, an ESD unit can be converted back to an assigned amount unit which then may be used for 
compliance under the Kyoto Protocol. See Council Decision 2015/1339 of 13 July 2015 on the conclusion, 
on  behalf  of  the  European  Union,  of  the  Doha  Amendment  to  the  Kyoto  Protocol  to  the  United  Nations 

21 

 
                                                 
 
Forestry  (LULUCF)  adopted  in  Durban  have  been  incorporated  into  EU  legislation  by 
Decision  529/2013/EU  ("LULUCF  Decision"),  and  focus  on  setting  minimum 
requirements  for  monitoring  and  reporting  and  accounting,  including  for  cropland  and 
grazing  land  management.  The  Kyoto  Protocol  regime,  however,  will  not  continue 
beyond 2020. 

Within  current  EU  internal  legislation,  however,  emission  reductions  in  the  LULUCF 
sector cannot be used to compensate for increased emissions in other sectors; emissions 
from  LULUCF  are  not  part  of  the  current  ESD.  Striving  for  using  cost-effective 
mitigation potentials also justifies considerations in this direction, i.e. to allow Member 
States to overachieve their target in the LULUCF sector and to use it to a certain extent to 
comply with their national emission limits for the sectors covered under the current ESD, 
so long as overall environmental integrity of the compliance framework and additionality 
of LULUCF actions can be ensured.  

The  European  Council  encouraged  the  European  Commission  to  put  forward  a  policy 
proposal  to  include  LULUCF  into  the  EU's  2030  climate  and  energy  framework.  The 
European Council explicitly mentioned and linked this to "the lower mitigation potential" 
of  the  agriculture  sector  and  requested  to  examine  how  to  "optimise  the  sector's 
contribution  to  greenhouse  gas  mitigation  and  sequestration,  including  through 
afforestation."  As  a  consequence,  additional  impacts  to  consider  emerge  from  the 
possible implications of the integration of Agriculture and LULUCF into the 2030 non-
ETS  framework,  including  related  cross-sectoral  cost-efficiency  considerations,  notably 
between  agriculture  and  land  use.  The  question  of  this  integration  is  analysed  in  a 
separate  impact  assessment  (referred  to  as  Impact  Assessment  for  agriculture  and 
LULUCF). Implications for the ESR arise once explicit policy links between both sectors 
are considered. 

1.5.  Who will be affected and how? 

The proposal is addressed at Member States as institutional actors. The proposed policy 
is  to  be  implemented  at  national  level  and  thus  mostly  affects  their  national 
administrations.  Depending  on  the  nature  and  scope  of  national  measures  implemented 
by  Member  States  they  will  affect  various  stakeholders  in  the  sectors  concerned, 
including consumers. 

For an overview of stakeholder positions, see annex 8.2 with a summary of the results of 
the stakeholder consultation. 

Practical and economic consequences for businesses might arise from the implementation 
of  such  national  policies  but  not  as  a  direct  effect  or  obligation  of  this  initiative  itself. 
Any effects on enterprises will depend on the specific measures chosen on national level. 
With respect to businesses in general and SMEs in particular there are no direct reporting 
obligations for SMEs or other enterprises under the current ESD and the proposal would 
not change this situation (see also annex 8.3). 

Framework  Convention  on  Climate  Change  and  the  joint  fulfilment  of  commitments  thereunder; 
Commission Delegated Regulation 2015/1844 of 13 July 2015 amending Regulation (EU) No 389/2013 as 
regards the technical implementation of the Kyoto Protocol after 2012. 

22 

 
                                                                                                                                                 
2.  WHY SHOULD THE EU ACT?  

Climate change is a trans-boundary problem which cannot be solved by national or local 
action  alone.  Coordination  of  climate  action  both  at  global  and  European  level  is 
therefore necessary and EU action is justified on grounds of subsidiarity. Since 1992 the 
EU has worked together to develop joint solutions and drive forward a global agreement 
to fight climate change. Articles 191 to 193 of the TFEU confirm and further specify EU 
competencies in the area of climate change.  

Ahead  of  the  21st  Conference  of  the  Parties  to  the  United  Nations  Framework 
Convention  on  Climate  Change  (UNFCCC),  parties  to  the  UNFCCC  presented  their 
intended  nationally  determined  contributions  (INDCs)  to  the  Paris  Agreement  of 
December 2015. The EU and its Member States communicated their INDC on 6 March 
2015,  which  provides  for  the  commitment  to  a  target  of  at  least  -40%  domestic  GHG 
reductions  below  1990  levels.  The  Paris  Agreement  of  December  2015  foresees  that 
Parties, including regional economic integration organizations and their member States, 
may ‘act jointly’ (Article 4, paragraphs 16 to 18). As under the Kyoto Protocol, the EU 
and its Member States intend to participate in the Paris Agreement by acting jointly. The 
current  2020  GHG  targets  and  existing  Member  State  policies  would  not  lead  to  the 
necessary  2030  emission  reductions.  Few  Member  States  have  set  post  2020  GHG 
emission targets and no Member State has specified a 2030 target for sectors under the 
current  ESD.  Also  equity  issues  cannot  be  sufficiently  addressed  if  Member  States  act 
alone.  However,  the  role  of  Member  State  action  will  remain  crucial  and  the 
responsibility for continued progress up to 2030 will have to be shared, as is already the 
case  in  current  climate  and  energy  package,  which  lays  down  EU  and  Member  State 
obligations  until  2020.  The  initiative  sets  binding  national  targets,  but  leaves  it  to 
Member  States  to  decide  how  to  achieve  them,  fully  respecting  the  principle  of 
subsidiarity.  

Co-ordinated EU action is therefore needed to achieve the EU-wide 30% non-ETS GHG 
reductions  for  2030  endorsed  by  the  European  Council,  in  particular  to  ensure  a  cost-
effective  and  fair  distribution  of  efforts  across  the  EU  and  its  Member  States.  Also 
Norway  and  Iceland  have  committed  to  the  same  GHG  ambition  levels  as  the  EU  and 
signalled in their INDCs the intention to join the EU's effort sharing.  

3.  WHAT SHOULD BE ACHIEVED?  

3.1.  General objective 

The general objective is to contribute to achieving the Paris Agreement climate goal of 
holding the increase in the global average temperature increase to well below 2 degrees 
Celsius above pre-industrial levels in order to reduce significantly the risks and impacts 
of climate change. In line with scientific findings reported by the International Panel on 
Climate Change, the EU's long term climate objective is to reduce GHG emissions by 80-
95%  in  2050  compared  to  1990,  in  the  context  of  necessary  reductions  by  developed 
countries as a group23. The Commission has proposed that the EU prepares for a domestic 
reduction of 80% by 205024. A GHG target of at least 40% domestic reductions in 2030 
compared to 1990 as agreed by the European Council ensures that the EU is on the cost-

23 http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/119175.pdf 
24 COM(2011) 112 final 

23 

 
                                                 
effective path of a corresponding transition to a sustainable and competitive low carbon 
economy.  

3.2.  Specific objective 

The specific policy objective is to achieve a 30% reduction in GHG emissions in the non-
ETS sectors compared to 2005 in way that is 

  fair, taking into account different economic capacities of Member States, 

  cost-efficient,  taking  into  account  differences  in  cost-effective  mitigation  potentials 
between Member States, providing predictability and certainty for Member States and 
investors and increasing flexibilities to ensure cost efficiency, 

  and that ensures environmental integrity by promoting timely and sufficient action to 

ensure that the EU 2030 GHG reduction target is achieved. 

3.3.  Operational objective 

The operational objective is to design appropriate means to achieve an overall fair, cost-
effective and environmentally sound outcome by appropriately: 

  Defining national emission reduction targets for Member States for 2030;  

  defining corresponding target trajectories for the period 2021-30; 

  defining the modalities of a limited one-off flexibility between ETS and non-ETS;  

  integrating LULUCF in the 2030 framework contributing to the 30% non-ETS target;  

  enhancing the availability and use of existing domestic flexibility instruments within 

the ESR; 

  ensuring appropriate compliance mechanisms.  

An  appropriate  combination  of  these  elements  allows  that  the  three  specific  objectives 
can be achieved and potential tensions between them can be mitigated.  

3.4.  Consistency with other policies and the Charter for fundamental rights 

A legal proposal for continuing an EU effort sharing mechanism until 2030 in order to 
ensure  achieving  the  binding  EU  climate  target  is  an  integral  part  of  the  2030  Climate 
and  Energy  Framework  as  well  as  the  Commission  framework  strategy  for  a  resilient 
Energy Union with a forward looking climate change policy. In particular, it contributes 
to  delivering  the  Energy  Union's  fourth  dimension  to  decarbonise  the  economy.  As 
outlined in the 2030 framework impact assessment, the policy aim has been to set climate 
and energy targets up to 2030, which are consistent and mutually reinforcing.  

Therefore  it  is  important  to  ensure  that  the  methodology  to  assess  the  policy  proposal 
implementing the non-ETS targets and related flexibilities looks at interactions with other 
EU-wide targets and policies on renewables and energy efficiency under development.  

24 

 
Therefore this impact assessment complements the analysis conducted in the 2014 impact 
assessments  supporting  the  2030  climate  and  energy  framework25  based  on  a  set  of 
consistent new scenarios, building upon the 2016 Reference. These new scenarios have 
been  jointly  developed  in  preparation  of  this  initiative  as  well  as  other  closely  related 
initiatives  in  2016  within  the  Energy  Union  Package26,  such  as  the  energy  efficiency 
package,  which  has  a  strong  focus  on  energy  efficiency  in  buildings,  the  renewable 
energy package, as well as the initiative on decarbonisation of the transport sector.  

The  new  policy  scenarios  used  in  all  these  impact  assessments  reflect  the  2030  targets 
agreed  by  the  European  Council  (at  least  -40%  GHG  reduction  target,  at  least  a  27% 
share of renewables, at least 27% with a  view to 30% energy efficiency improvements, 
for a detailed description of the scenarios used, see sections 8.4.2 and 8.4.3).  

The  scenarios  reflect  current  EU  policy  design  when  modelling  the  achievement  of 
different  sets  of  GHG,  EE  and  RES  targets.  In  doing  so  they  provide  for  a  coherent 
analysis  of  the  energy  efficiency  targets,  including  potential  energy  efficiency  policies, 
and  their  impact  on  non-ETS  targets  at  Member  State  level  and  the  potential  need  and 
availability of related flexibilities in the ESR, and thus corresponding impact on fairness.  

The assessment of the merits of different efficiency targets and policies will take place in 
their  respective  impacts  assessments.  But  by  using  these  scenarios  in  both  impact 
assessments,  it  allows  to  assess  to  what  extent  different  levels  of  energy  efficiency 
ambition  would  impact  the  achievement  of  the  non-ETS  target  and  the  distributional 
impacts between Member States, which is of importance for this impact assessment. 

The  proposal  respects  the  fundamental  rights  and  observes  the  principles  recognised  in 
the Charter of Fundamental Rights of the European Union. In particular, it contributes to 
the objective of a high level of environmental protection in accordance with the principle 
of sustainable development as laid down in Article 3727.  

4.  WHAT ARE THE VARIOUS OPTIONS TO ACHIEVE THE OBJECTIVES? 

The "no additional policy" baseline scenario is represented by the Reference Projection. 
With no additional policies put in place beyond 2020, the EU is not projected to achieve 
its -30% GHG reduction target in the non-ETS sectors.  

The Commission 2014 proposal for the 2030 framework for climate and energy policies 
was to achieve exactly this -30% reduction level in the non-ETS sectors and suggested to 
share  this  equitably  among  the  Member  States  in  the  form  of  setting  binding  national 
targets.  Subsequently  the  European  Council  adopted  this  ambition  level  and  requested 
explicitly  to  continue  until  2030  with  'the  methodology  to  set  the  national  reduction 
targets  for  the  non-ETS  sectors,  with  all  the  elements  as  applied  in  the  Effort  Sharing 
Decision for 2020'. 

As such from a policy perspective this impact assessment is not about assessing the need 
or  not  to  go  to  -30%  GHG  reductions  in  the  non-ETS,  but  about  what  the  options 
regarding  the targets set per Member  State are and the flexibilities available to  achieve 
this, assuming a continuation of the current ESD. 

25 SWD(2014)15, SWD(2014) 255 final  
26 COM(2015) 610 final, ANNEX 1 
27 OJ C 326, 26.10.2012 

25 

 
                                                 
Therefore  the  policy  baseline  is  one  that  sees  continuation  of  the  ESD  with  all  its 
features, but translated to the period 2021-2030, and assuming a target in 2030 equal to -
30% compared to 2005.  

The  policy  options  assessed  build  strongly  on  the  guidance  given  by  the  European 
Council, foremost related to the setting of the 2030 target, the introduction of a new and 
limited one-off  flexibility from the ETS into the ESR, the integration of LULUCF  into 
the EU legal framework and any related flexibilities between the LULUCF sector and the 
ESR and the improvement of existing flexibilities.  

See also Figure 5 for an overview on the problem that is being addressed, the objectives 
of the intervention and the policy options assessed. 

26 

 
Figure 5: Intervention logic Impact Assessment  

Context: politically agreed 2030 framework for climate and energy policies, including a -30% GHG reduction target for non-ETS sectors 

Problem: 

-30% GHG reduction by 
2030 in non-ETS sectors 
is not achieved under 
current trends and 
policies  

How can the current 
methodology of the ESD 
be continued in a manner 
that it (1) addresses 
fairness concerns, (2) 
takes into account the 
need for cost-efficiency 
and (3) avoids problems 
with overall 
environmental integrity? 

Specific objectives: 

Set national targets and 
foresee flexibilities that are: 

-  Fair, taking into account 
different capacities in 
Member States 

-  Allow for cost-efficient 
achievement of targets. 

-  Ensure environmental 
integrity by reducing 
emissions effectively 
with -30% by 2030  

Operational objectives and corresponding policy options assessed: 

-  Set 2030 targets based on GDP per capita (see section 5.1.1) 

-  Adjustment 2030 targets for high income Member States taking into 

account cost efficiency (see sections 5.1.2 up to 5.1.6) 

-  Define starting point 2021-2030 target trajectory (see section 5.2) 

- 

- 

- 

- 

Introduce limited new one-off flexibility from ETS to ESD (see 
section 5.3) 

Integrate LULUCF into the legal framework, including flexibilities 
with the ESD (see section 5.4).  

Improve existing flexibilities in the ESD (see section 5.5).  

Improve monitoring, reporting and compliance in the ESD (see 
section 5.6). 

27 

 
 
 
 
 
 
 
 
4.1.  Policy options for setting national 2030 targets 

  Policy  baseline  option  T1:  Target  setting  for  all  Member  States  based  on  GDP  per 

capita 

The baseline option is to apply the principles of the current ESD for setting the 2030 
target  which  is  to  base  them  on  GDP  per  capita  data,  but  overall  with  an  increased 
effort of around 20% for all compared to the 2020 targets, leading to Member States 
targets within a range of 0 to -40% compared to 2005, instead of the range of +20% to 
-20% currently for the 2020 targets.  

As the European Council in its conclusion in October 2014 recognised, continuing the 
current methodology would take into account considerations of fairness and solidarity. 
They also suggested using for this 2013 GDP per capita data, the latest year for which 
data was available at the time of the European Council made its conclusions. 

  Policy options T2-T4: Target adjustments in the group of high income Member States 

However,  in  some  high  income  Member  States  reduction  potentials  differ  strongly 
from targets based on GDP per capita thus potentially resulting in very costly efforts 
for these Member States if targets would be achieved domestically. Within the group 
of high income Member States there are also clear differences, with some having more 
outspoken challenges than others. The European Council recognised this and asked to 
look at adjustments regarding the target to take this into account.  

These  policy  options  thus  look  into  adjusting  targets  within  the  group  of  Member 
States with a GDP per capita above the EU average to reflect cost-efficiency in a fair 
and balanced manner within this group. Adjustments within the group of high income 
Member  States  need  to  be  balanced  against  each  other  so  that  the  EU  wide  -30% 
reduction target is maintained.  

Based on assessing which high income Member States have a greater concern related 
to cost efficiency compared to others with targets set purely on the basis of GDP per 
capita,  a  group  based  approach  to  target  adjustments  is  proposed.  High  income 
Member States are ranked in groups in a manner that is robust over a set of scenarios 
and  avoids  hence  to  base  target  setting  on  specific  modelling  results.  Second  the 
impact of any adjustments in targets between these groups needs to be assessed. Two 
options  are  assessed,  one  with  only  small  adjustments  (T2),  and  one  with  large 
adjustments within this group (T3). This is done in section 5.1.5.  

In  addition,  section  5.1.6  assesses  an  option  T4  where  2030  targets  for  high  income 
Member States are based for 50% on the target using GDP per capita and 50% on a 
target  based  on  a  cost-effective  emission  reduction  projection.  This  option  was 
suggested by Belgium and supported by five of eight high income Member States that 
participated in the public consultation. 

4.2.  Policy options for setting the starting point for target trajectories 

The European Council concluded that the existing methodology under the ESD for target 
setting should be continued. This includes defining a linear trajectory to the 2030 target. 
This will also require setting a starting point that allows calculating an annual target for 
each year in the period 2021 – 2030. 

28 

 
 
Under  the  current  ESD,  the  starting  point  for  the  2013-2020  target  trajectory  has  been 
defined in 2012 before the compliance period started. It uses the most recent inventory 
available,  which  in  2012  meant  data  up  to  2010.  It  uses  the  available  last  3  inventory 
years  (2008,  2009  and  2010)  to  smooth  out  any  ad  hoc  variability,  for  instance  due  to 
exceptional  weather  patterns.  However,  the  starting  points  are  defined  differently 
depending if a Member State is allowed to increase emissions or not compared to 200528.  

With  the  shift  to  a  2030  target  where  all  Member  States  see  a  reduction  of  emissions 
(with a range from 0 to -40%), a continuation of this differentiated baseline option loses 
its purpose and all should receive the same approach to set the starting point of the 2020.  

The  European  Council  guidance  is  less  specific  on  this  issue.  Section  5.2  assesses  the 
impact of a continuation of the approach similar to the current methodology for Member 
States which by 2020 need to reduce emissions compared to 2005. For all Member States 
the target trajectory would be defined in the same way. As starting point the most recent 
available emissions by 2020 would be used, i.e. 2016-2018 emissions. This level would 
be  applied  in  2020  to  define  a  linear  trajectory  up  to  the  2030  target.  This  section  will 
also provide a sensitivity analysis on alternative approaches as requested by a number of 
stakeholders and Member States. 

4.3.  Policy options for a one-off flexibility between ETS and non-ETS 

  Policy baseline option O1: No flexibility from the ETS towards the ESR 

Currently there is no flexibility to use emission reductions under the ETS for compliance 
in the non-ETS.  

But  the  European  Council  concluded  to  establish  a  new  flexibility  mechanism  for 
Member States with national emission reduction targets significantly above both the EU 
average target and their cost effective reduction potential, as well as for Member States 
that  did  not  have  free  allocation  for  industrial  installations  in  201329,  to  facilitate  the 
achievement of their ESR targets.  

These allowances are transferred from the auctioning amounts of the ETS of a Member 
States and can be used for compliance purposes in the ESR by that Member State. The 
guidance  from  the  European  Council  makes  it  clear  that  predictability  for  the  carbon 
market and  environmental integrity of both the ETS and the ESR must be preserved in 
the establishment of such a mechanism. The new flexibility mechanism that is foreseen is 
a  limited,  one-off  reduction  in  ETS  allowances  to  be  decided  before  2020.  Also  many 
stakeholders confirmed that the one-off flexibility mechanism should not compromise the 
functioning of the ETS as well as the environmental integrity of the ESR and the ETS.  

28 For Member States that have a 2020 emission reduction target compared to 2005, the 2013 starting point 
for the target trajectory is set as equal to the average 2008-2010 emissions. For Member States that have a 
2020 target that allows for an emission increase compared to 2005, the 2013 starting point is set as equal to 
the value for 2013 of a linear trajectory from 2009 to 2020, with the 2009 value being equal to the average 
emissions 2008-2010 and the 2020 value being equal to the 2020 target. 
29  The  only  country  to  which  this  criterion  applies  is  Malta.  The  main  concern  for  Malta  was  that  they 
already  have  the  lowest  per  capita  emissions  in  the  ESD  in  the  EU,  less  than  half  of  the  EU  level,  with 
transport emissions being the largest source. This led to concerns about the achievability of the 2030 ESD 
targets similar to the concerns of some high income Member States related to cost efficiency that also have 
access to the one-off flexibility. 

29 

 
                                                 
Taking  this  into  account,  certain  design  parameters  for  such  a  mechanism  are  defined 
from the outset:  

One  crucial  aspect  to  ensure  predictability  for  the  carbon  market  is  certainty  about  the 
volume of allowances concerned. This can be ensured by requiring that the choice to use 
the mechanism is irreversible and for the volume to be determined at a date that is fixed 
in advance of the trading period concerned, i.e. before 2021. Therefore, this is assumed to 
be the case for all options.  

Another  aspect  that  can  be  of  importance  is  clarity  about  the  timing  of  the  transfer  of 
these allowances and when they can be used for compliance in the ESR.  

Two design parameters are analysed in detail in section 5.3:  

  Eligibility: which Member States can use this one-off mechanism 

  Limit  of  access:  maximum  amount  of  ETS  allowances  which  each  eligible 

Member State can transfer to the ESR.  

These two choices determine the maximum volume of allowances to be transferred from 
the ETS to the ESR through the one-off flexibility. 

Related  to  eligibility,  the  European  Council  has  given  clear  guidance.  Section  5.3  first 
assesses who has a target that is significantly above EU average target and significantly 
above the cost effective reduction potential. Subsequently it assesses the impact of two 
options for a limit of access: 

  Policy  options  O2:  For  Member  States  eligible  a  small  amount  of  allowances  is 

available for the one-off flexibility. 

  Policy  options  O3:  For  Member  States  eligible  a  large  amount  of  allowances  is 

available for the one-off flexibility. 

4.4.  Options to include a limited LULUCF flexibility into the Effort Sharing  

At  present,  credits  generated  in  the  LULUCF  sector  cannot  be  used  in  the  ESD  for 
compliance. 

The  European  Council  encouraged  the  European  Commission  to  put  forward  a  policy 
proposal  to  include  the  LULUCF  sector  into  the  EU's  2030  climate  and  energy 
framework. The European Council explicitly mentioned and expressed concern about the 
lower  mitigation  potential  of  the  agriculture  and  land  use  sector  and  the  need  to 
optimising  this  sector's  contribution  to  greenhouse  gas  mitigation  and  sequestration, 
including through afforestation. 

The options for and implications of the integration  of LULUCF into the 2030 non-ETS 
framework, and notably how they interact with the agriculture sector, are explored in the 
parallel impact assessment on addressing GHG emissions in agriculture and LULUCF, in 
the context of the 2030 climate and energy framework (Impact Assessment on agriculture 
and LULUCF).  

A policy option  that came  forward from that  assessment is  to  allow a limited extent of 
LULUCF  credits  from  activities  with  sound  accounting  and  overall  environmental 

30 

 
integrity  for  compliance  in  the  ESR,  corresponding  to  the  lower  mitigation  potential  in 
the  agriculture  sector.  The  aim  would  be  to  stimulate  real  additional  action  in  the  land 
based sector, including agriculture, while respecting these conditions. 

The total amount coming into the ESR is to be limited over the period 2021 to 2030. Any 
distribution in the right to use LULUCF credits in the ESR would have to relate to the 
fact that the emissions in agriculture are seen as very challenging to reduce.  

The higher the share of agricultural non-CO2 emissions in the effort sharing sectors, the 
more challenging it may be to achieve a certain amount of reductions in the ESR as it is 
difficult to reduce emissions from agriculture.  

To assess this, section 5.4 looks at the impacts of distributing this maximum limit of the 
use of LULUCF credits looking at the following two options: 

  Policy baseline option L1: No use of LULUCF credits for compliance; 

  Policy option L2: Use of up to 280 million tons LULUCF credits for compliance.  

4.5.  Policy options for enhancing existing flexibility instruments 

The  options  presented  below  reflect  possible  solutions  that  were  considered  in  the 
stakeholder consultation.  

  Policy baseline option F1 

It should be noted that the existing rules already provide for a high degree of flexibility. 
The policy baseline option for flexibility instruments is to maintain the current provisions 
in the Effort Sharing Decision without any changes or additional rules. As described in 
section  1.2,  Member  States  can  manage  their  own  AEAs  within  the  compliance  period 
(“inter-temporal flexibility”) and engage in transfers of AEAs among each other (“inter-
Member State flexibility“). Member States can set up their own transfer mechanisms on a 
voluntary  basis  and  decide  themselves  how  many  AEAs  to  sell  and  at  what  price.  A 
Member State can also fund a project in another Member State in return for AEAs on an 
agreed  basis  reflecting  the  emissions  reductions  delivered  by  the  project.  This  can  take 
place bilaterally without any EU-level mechanism to facilitate such agreements. It is also 
possible  for  Member  States  to  establish  and  fund  a  project  mechanism  as  part  of  its 
policy portfolio to achieve additional mitigation to deliver its own targets or to sell it in 
the form of AEAs to other Member States.  

The baseline option and other policy options need to reflect that there are certain limits to 
flexibility after 2020. There is no use of international credits as the EU has set a domestic 
target, and there should be no carry-over of any surplus AEAs from the 2013-2020 period 
to  the  2021-2030  period  as  this  would  seriously  jeopardise  environmental  integrity, 
notably  the  achievement  of  the  2030  target.  It  is  neither  foreseen  under  existing 
legislation  nor  in  the  European  Council  conclusions  and  would  also  erode  the  strong 
incentive to use the existing flexibility instruments in the ESD.  

  Policy option F2: Increased permitted borrowing within the commitment period 

With  respect  to  inter-temporal  flexibility,  full  banking  of  any  surplus  within  the 
commitment period is already allowed in the policy baseline option. Therefore the only 
remaining enhancement option for inter-temporal flexibility is to allow a higher level of 

31 

 
borrowing of AEAs from subsequent years. Alternative options screened for borrowing 
are  (i)  an  increase  in  permitted  borrowing  to  a  rate  of  10%  throughout  the  compliance 
period  2021-2030  and  (ii)  an  increase  in  permitted  borrowing  to  10%  from  the 
subsequent year in 2021-2025, reduced to 5% from 2026 onwards. These options are in 
line with responses received in the stakeholder consultation, where many Member States 
wanted  a  higher  rate  of  borrowing  within  the  commitment  period.  Their  argument  was 
that  a  higher  rate  would  make  it  easier  to  manage  their  emission  allocations  over  the 
period  and  ensure  compliance  with  their  annual  obligations.  There  are  linkages  with 
policy options for administering compliance checks described in section 4.6. 

Only  the  second  alternative  is  retained  for  further  assessment.  The  first  alternative, 
increasing  permitted  borrowing  to  10%  for  all  years  in  the  compliance  period,  was 
discarded. It would provide greater flexibility to Member States, but increases the risk for 
non-compliance by creating incentives to delay the introduction of new policies. It also 
creates a greater risk that Member States will not be able to cover any deficit created for 
future years either from domestic mitigation, or by securing AEAs from other countries. 

The  following  policy  options  concern  enhancement  of  inter-Member  State  flexibility. 
They  are  listed  according  to  the  degree  of  EU-level  interference  and  concern  both 
transfers and project-based alternatives. They are not mutually exclusive. 

  Policy option F3: Central information site  

Creation of a central site where all offers and requests for AEA transfers would have to 
be  notified  by  Member  States  selling  or  buying  AEAs.  The  information  submitted  by 
participating Member States could include the amount of AEAs, the requested price and 
other conditions requested for the transfers. Similarly, offers and expression of interest as 
well as information on potential projects in Member States would be notified here.  

The site would be open only to Member States and would be used only for sharing this 
information,  not  for  concluding  actual  transfers.  Member  States  would  be  expected  to 
organise  their  own  public  tenders  for  hosting  or  investing  in  any  emission  reduction 
projects.  The  site  could  be  hosted  by  the  European  Commission  or  by  an  organisation 
contracted  by  it.  The  information  submitted  by  participating  Member  States  would 
include the amount of AEAs, the price and other conditions requested for the transfers. 

In  addition  to  the  information  made  available  to  Member  States  at  the  central  site,  the 
European  Commission  would  annually  publish  all  offers  and  requests,  including  price, 
volumes and other relevant information, to increase transparency. 

  Policy option F4: Central market place for AEA transfers 

This option involves establishing a central market place for inter-Member State transfers 
of  AEAs.  The  market  place  would  enable  Member  States  to  offer  AEAs  for  sale  and 
submit requests to purchase allowing for full price transparency. The market place would 
act as a broker matching sellers with buyers. It could be hosted by a European Institution 
or  contracted  to  an  external  organisation.  The  market  place  could  also  be  used  as  a 
match-making  facility  for  projects.  The  facility  could  be  voluntary  or  mandatory  for 
Member  States  that  would  want  to  engage  in  transfers.  In  the  latter  case,  bilateral 
Member State transfers outside the central market place would not be allowed. 

32 

 
  Policy option F5: Mandatory auctioning30 

This option would constitute a central initial auction at the beginning of the 2021-2030 
commitment  period  based  on  a  limited  set-aside  (e.g.,  1%)  of  the  AEAs  in  the  first 
year(s) of the period31. It could possibly be combined with later auctions held on a regular 
basis, with Member States required to contribute a share of any surplus AEAs established 
after compliance checks (i.e., any positive difference between their allocations for each 
year and their actual emissions in that year) to the auctioning pool.  

In  the  stakeholder  consultation  the  majority  of  Member  States  and  other  stakeholders 
were open to different solutions with respect to the policy options F2 to F4. There were 
also  different  views  regarding  to  what  degree  the  existing  flexibilities  should  be 
enhanced.  For  example,  although  Member  States  in  general  support  enhancing  AEA 
transfers,  most  would  oppose  mandatory  trading32.  Thus,  no  clear  preference  emerged 
from the consultation. 

4.6.  Policy options for administering compliance 

Transparent  and  regular  reporting  and  compliance  checks  of  Member  States  are  two 
fundamental elements to ensure progress towards delivering the EU long-term emission 
reduction commitments.  

Firstly, annual emissions reporting is the very basis of monitoring the European Union’s 
internal  and  international  climate  mitigation  obligations  and  therefore  needs  to  be 
maintained  as  a  main  provision  for  the  non-ETS  sectors.  It  is  widely  supported  by 
Member States and other stakeholders. Another fundamental element of the ESD is that 
it, like the EU ETS, is based on a linear trajectory with annual limits to ensure delivery of 
the  EU’s  emission  reduction  targets.  It  is  therefore  assumed  that  annual  emissions 
reporting would be maintained in the ESR also after 2020. Continuing with the present 
practice, the Commission would, every autumn, report on annual progress as part of the 
Annual State of the Energy Union report and the European Semester. 

Secondly,  the  current  compliance  cycle  is  based  on  annual  compliance  checks:  an  EU-
internal GHG emission inventory review is performed by the European Commission and 
the  European  Environment  Agency,  based  on  which  the  actual  emissions  of  Member 
States  are  compared  with  their  annual  emission  allocations  for  a  given  year33.  The 
experience from the first two years of the annual compliance cycle under the current ESD 
suggests that it is difficult to complete the whole compliance cycle from the submission 

30 Voluntary auctioning is already possible under the current ESD and part of the policy baseline option. 
For example, a Member State can sell any surplus AEAs to other countries by organising an auction. It is 
therefore not assessed as an alternative option. 
31  This  type  of  solution  was  supported  by  Belgium,  Denmark,  Luxembourg  and  Netherlands  in  the 
stakeholder consultation. 
32 While four high-income Member States supported mandatory mechanisms such as described in policy 
option F5 that would ensure supply of AEAs to create a more liquid market, at least four other Member 
States opposed them. 
33 In the current ESD, the annual inventory review is performed in two steps with a first general check of 
all Member State inventories, followed by a second step where Member State inventories with significant 
technical  issues  undergo  a  comprehensive  review.  This  approach  reduces  the  workload  for  the  Member 
States  and  the  Commission  as  most  Member  States  are  not  expected  to  complete  the  second  step.  Two 
times during the compliance period (in 2016 and in 2022 after the inventories for the final year 2020 have 
been submitted) a comprehensive review is performed where all Member State inventories undergo more 
extensive checks. In these years the comprehensive review replaces the annual review. 

33 

 
                                                 
of  emission  inventories  to  the  final  compliance  check  in  the Union  Registry  within  the 
same year.  

In  the  stakeholder  consultation,  several  Member  States  expressed  a  preference  for  less 
frequent compliance checks for the sectors under the current ESD after 2020. For these 
reasons  the  policy  options  will  consider  different  ways  to  make  the  compliance  checks 
less frequent, while maintaining annual reporting and compliance: 

  Policy baseline option C1 

The  policy  baseline  option  is  to  continue  the  system  under  the  current  ESD  with 
annual compliance checks.  

  Policy option C2: Biennial compliance checks 

A second option is to  check  compliance with annual AEA limits every second year, 
i.e.  the  first  compliance  check  of  reported  annual  emissions  for  the  years  2021  and 
2022 would be performed in 2024.  

  Policy option C3: Compliance checks every fifth year  

A  third  option  is  to  perform  compliance  checks  after  every  5  years,  i.e.  the  first 
compliance check of reported annual emissions for the years 2021, 2022, 2023, 2024 
and 2025 would be performed in 2027.  

5.  WHAT ARE THE IMPACTS OF THE DIFFERENT POLICY OPTIONS AND WHO WILL BE 

AFFECTED? 

The 2014 impact assessment for the 2030 framework for climate and energy has provided 
a comprehensive assessment of environmental, economic and social impacts of the 2030 
impacts  on 
targets, 
competitiveness.  

level34.  It  has  also  assessed 

including  at  Member  State 

The following assessment focuses on the detailed design elements of the Effort Sharing 
policy  proposal  and  related  national  binding  targets  and  flexibilities,  with  as  policy 
baseline the continuation of the ESD for the period 2021-2030 with unchanged principles 
and main provisions. The assessment of the policy options will in general use this policy 
baseline  to  compare  the  relevant  advantages  and  disadvantages  of  policy  options,  as 
required by the Better Regulation Guidelines. Where relevant, also the baseline without 
additional policies, as represented in the Reference projection, will be taken into account.  

The policy options will be assessed with a view on meeting the specific objectives (see 
section 3.2), i.e. to ensure EU wide environmental integrity with respect to achieving the 
at  least  40%  domestic  reduction  target  in  2030,  to  achieve  fairness  between  Member 
States with different economic capacities as the social dimension, and to ensure EU wide 
cost efficiency as key economic dimension.  

The initiative sets targets for Member States and covers mainly the buildings, transport, 
agriculture  and  waste  sectors.  Impacts  on  competitiveness  of  industrial  manufacturing 
plants  and  SMEs  are  difficult  to  be  quantified  and  are  not  expected  to  be  significant. 

34 Commission SWD(2014) 15 

34 

 
                                                 
Impacts  on  the  agriculture  sector  are  also  assessed  in  the  Impact  Assessment  for 
agriculture and LULUCF. 

A  number  of  modelling  scenarios  are  used  to  assess  the  impact  of  different  options  as 
described in section 4:  

  The EU 2016 Reference scenario  produced  with  the PRIMES and GAINS  models35 
covers recently adopted EU and national policies and overachieves on this basis the 
2020  EU  level  ESD  targets,  but  no  additional  policies.  As  such  it  represents  a 
baseline with no new policies after 2020.  

In addition, where relevant reference is made to two other projections which also achieve 
in 2020 the EU level ESD targets but do not assume additional policies beyond 2020: 

  Aggregated  national  projections  "With  Existing  Measures",  here  referred  to  as  MS 

WEM as included in the EEA (2015) Trends and projections Report 201536;  

  the EU Reference scenario 2013 used for the 2030 framework impact assessment37.  

The assessment of policy options builds foremost on a set of newly developed scenarios 
based on the recent 2016 Reference scenario. The two central policy scenarios reflect the 
2030 targets agreed by the European Council but recognising that for energy efficiency a 
review  will  still  be  undertaken  if  the  target  should  be  set  at  30%  rather  than  27% 
(referred to as EUCO27 and EUCO30)38:  

  EUCO27: A scenario that achieves the at least -40% GHG reduction target (with the 
split ETS/non-ETS reducing by -43%/-30% in 2030 compared to 2005), a 27% share 
of renewables and 27% energy efficiency improvements. 

  EUCO30: A scenario that achieves the at least -40% GHG reduction target (with the 
split ETS/non-ETS reducing by -43%/-30% in 2030 compared to 2005), a 27% share 
of renewables and an increase of the energy efficiency target to 30%. 

The  approach  followed  for  the  definition  of  the  scenarios  is  to  use  a  combination  of 
policy instruments including carbon pricing to reduce emissions in the ETS and non-CO2 
emissions in effort sharing sectors, standards, reduction of market barriers, incentives and 
obligations  related  to  energy  efficiency  and  renewables  policies  in  a  coherent  manner 
across Member States, taking into account the current policy framework (as developed in 
the Reference scenario). These policies are varied in stringency and intensity to meet the 

35  PRIMES  covers  the  energy  system  and  CO2  emissions  from  energy  and  processes,  while  the  GAINS 
model  covers  the  mitigation  potentials  for  non-CO2  GHG  emissions,  mainly  from  activities  outside  the 
energy  system.  These  models  ensure  for  a  comprehensive  and  coherent  modelling  framework  across 
sectors, gasses and Member States. When assessing impacts in the form of achieved reductions compared 
to  the  2005  base  year,  it  has  to  be  noted  that  these  models  have  to  assume  over  time  (2005-2030)  a 
consistent  sectoral  coverage  in  the  ESD  and  ETS,  and  thus  its  2005  emission  estimate  are  calibrated  to 
include already any change in sectoral coverage in the ESD that occurred afterwards. For more detail on 
the models used in this IA see annex 8.4.1.  
36 EEA (2015): Trends and projections in Europe 2015 — Tracking progress towards Europe's climate and 
energy targets. Copenhagen. 
37  European  Commission  (2013):  Energy,  Transport  and  GHG  emission  trends  to  2050  –  EU  Reference 
scenario 2013. Brussels. 
38  These  scenarios  also  aim  to  provide  consistency  across  a  number  of  impact  assessments  underpinning 
2016 Energy Union policy proposals. 

35 

 
                                                 
GHG,  energy  efficiency  and  renewables  targets  of  the  scenarios  for  2030  but  applied 
equally across the EU Member States. Overall this reflects a cost efficient achievement 
of  GHG  reductions  in  the  context  of  different  sets  of  EE  and  RES  targets  and  existing 
policies. While informative about the achieved additional emission reductions in case of 
coherent  cost  efficient  actions  across  the  EU  in  all  policy  areas  to  achieve  all  targets, 
these  scenarios  outcomes  cannot  be  attributed  to  the  effort  sharing  mechanism  itself, 
which will sets targets  differently  from the cost effective outcome to  allow for fairness 
between Member States. These scenarios also achieve the long term milestone to reduce 
GHG  emissions  domestically  in  the  EU  by  80%.  For  more  detail  of  incentives  and 
policies simulated, see annex 8.4.3. 

In  addition  a  scenario,  referred  to  as  WEM-EXTRA,  is  developed  based  on  Member 
States' own projections as reported in 2015 under the Monitoring Mechanism Regulation 
reflecting  existing  policies  ('With  Existing  Measures',  referred  to  in  this  assessment  as 
MS-WEM39). The MS-WEM projections when aggregated do not achieve the -30% ESR 
GHG target and thus need to be extrapolated to meet the -30% target using estimates for 
additional  reduction  potential  from  the  PRIMES-GAINS  model  (see  also  annex  8.4.3). 
This scenario aims at capturing major differences in projections regarding the impact of 
the existing policy framework between Member States and the modelling tools used by 
the Commission. 

Finally  for  further  check  of  the  robustness  of  the  differences  in  impacts,  notably 
regarding the 2030 target on high income Member States, two scenarios as developed for 
the 2014 Impact Assessments of the 2030 framework are revisited. These scenarios are 
based on the old 2013 Reference scenario and can serve as robustness with regard to the 
impact  of  changes  in  data  and  changes  in  assumptions  of  existing  and  new  policies40. 
These  scenarios  can  also  be  informative  given  that  high  income  Member  States  have 
shaped  up  their  expectations  about  ESR  target  setting,  notably  on  how  to  take  into 
account cost efficiency, based on these existing scenarios: 

  The GHG40 scenario included in the 2030 framework impact assessment41 projecting 
the ETS/ESR split of -43%/-30% in 2030 compared to 2005 achieving only the -40% 
GHG target (compared to 1990), but only achieving 25% energy efficiency .  

  The  EE30  scenario  included  in  the  impact  assessment  supporting  the  Energy 
Efficiency communication42 respecting the agreed ETS/ESR split and achieving 30% 
energy efficiency improvements, resulting in energy efficiency being the primary tool 
to reduce emissions beyond the Reference to achieve the ESR target.  

5.1.  Assessing policy options for setting national 2030 targets 

5.1.1. Calculating Effort Sharing Targets based on fairness (policy baseline option)  

The  Effort  Sharing  Decision  targets  for  2020  were  based  on  differentiation  of  efforts 
depending on relative GDP per capita for 2005 with GDP measured at market prices, as 

39  With  Existing  Measures  projections  ("WEM")  as  reported  in  EEA  (2015)  Trends  and  projections  in 
Europe 2015. 
40 These scenarios are built on the old EU Reference scenario 2013. 
41 SWD(2014)15 
42 SWD(2014) 255 final 

36 

 
 
                                                 
shown in Figure 6. Member States with a GDP/Capita above and below the EU average 
GDP/Capita  were  allocated  a  corresponding  target  ranging  from  +20%  to  -20%.  The 
slope  of  the  function  is  steeper  for  Member  States  with  a  GDP/Capita  below  the  EU 
average, leading to a faster decrease in ambition for lower income levels. The slope for 
higher  income  Member  States  is  less  steep  and  thus  leads  to  less  rapid  increases  in 
ambition  for  the  highest  income  Member  States,  in  part  already  limiting  economic 
impacts and recognising different capacities for all these countries. The 2020 targets for 
Greece,  Latvia  and  Slovenia  were  adjusted  for  specific  Member  State  concerns.  The 
results meet the overall ambition within the ESD sectors of close to -10% GHG reduction 
by 2020 compared to 200543.  

The  starting  point  for  calculating  the  2030  targets  is  to  apply  all  elements  of  the  2020 
methodology with the same differentiation in efforts depending on relative differences in 
GDP per capita. The lower and upper limits will have to be reduced by 20%, to 0% and -
40%  as  the  average  target  changes  from  close  to  -10%  to  -30%.  Furthermore,  data  for 
GDP  per  capita  needs  to  be  updated  from  2005  to  2013  data  as  well  as  emission 
inventory data. The figure below shows the 2020 ESD targets and resulting 2030 targets 
if the 2020 ESD methodology based on GDP per capita is applied but updated: i.e. the 
graph shifts lower due to increased ambition and to the right as a result of an increase in 
EU average GDP/Capita.  

Figure  6:  National  effort  sharing  targets  for  2020  and  2030  resulting  from  the 
current methodology in relation to GDP per capita  

Source: Commission calculations based on Eurostat and reported GHG emissions 

43 The ESD targets in 2020 were originally set at a level that meets overall  -10% compared to 2005, but 
when  applied  on  actual  GHG  inventory  data,  which  is  recalculated  every  year  for  the  whole  time  series 
(incl.  2005)  due  to  improvements  in  inventory  methodologies,  the  resulting  EU  wide  reduction  effort 
oscillates between 9 and 10%. 

37 

 
 
                                                 
Table  1  shows  the  2030  rounded  non-ETS  target  resulting  from  applying  the 
methodology. Some Member States are affected by the limitation on the range of targets 
between 0 and -40%. This is shown in the brackets in the right column. If there would be 
no limitation, DK, SE and LU would receive targets going beyond 40%, with notably LU 
a target as high as -61%.  

Table 1: Targets for the non-ETS sectors based on GDP/Capita alone 

2030 Target  
(Target if there would be no target 
range of 0 to -40%) 
-40% (-61%) 
-40% (-42%) 
-40% (-42%) 
-39% 
-39% 
-39% 
-39% 
-38% 
-37% 
-36% 
-36% 
-33% 
-26% 
-24% 
-19% 
-17% 
-16% 
-15% 
-14% 
-13% 
-12% 
-9% 
-7% 
-7% 
-7% 
-6% 
-2% 
0% (+1%) 

LU 
DK 
SE 
IE 
NL 
AT 
FI 
BE 
DE 
FR 
UK 
IT 
ES 
CY 
MT 
PT 
EL 
SI 
CZ 
EE 
SK 
LT 
PL 
HR 
HU 
LV 
RO 
BG 

Source:  Commission  calculations,  data  GDP  per  capita:  Eurostat,  Gross  Domestic  Product  at  market  prices,  nama_10_pc,  as  of  19 
April 2016, see also annex 8.5 for overview GDP per capita data 

As the 2030 framework impact assessment44 already showed, applying cost-effectiveness 
as the principle for target setting would lead to higher costs per GDP for lower income 
Member  States.  Overall  the  distribution  based  on  GDP  per  capita  improves  fairness 
towards lower income Member States.  

44 Commission SWD(2014)15 

38 

 
 
                                                 
 
5.1.2. Methodology  for  assessing  policy  options  related  to  adjustment  to  targets  within 

the group of higher income Member States  

The  European  Council  concluded  that  targets  for  the  Member  States  with  a  GDP  per 
capita above the EU average should be relatively adjusted to reflect cost-effectiveness in 
a fair and balanced manner. 11 Member States fulfil the criterion of having a GDP above 
EU average in 2013. LU, DK, SE, IE, NL, AT, FI, BE, DE, FR, UK, referred to as high 
income Member States, are together responsible for around 60% of ESD GHG emissions.  

The  economic  analysis  used  focusses  on  a  gap  analysis  between  the  cost  effective 
reduction potential of high income Member States i.e. the difference between what they 
would reduce if the EU were to achieve its GHG target cost effectively in a context that 
achieves also the renewables and energy efficiency targets, and what their target would 
be using the policy baseline of a pure GDP per capita approach as described in section 
5.1.1.  

For  high  income  Member  States,  a  target  set  on  the  basis  of  GDP  per  capita  typically 
would  mean  higher  reductions  than  their  reduction  potential  in  case  of  cost  efficient 
target achievement across the EU.  

As a group this is no surprise, given that the GDP per capita approach is one based on 
fairness,  and  thus  exactly  aims  at  giving  high  income  Member  States  a  relatively  more 
ambitious target than what they would get based on pure cost minimisation. The extent of 
the gap, however, varies considerably across high income Member States.  

The  table  below  gives  an  example  of  the  average  gap  for  the  group  of  high  income 
Member States, as well as the highest and the lowest gap of the individual Member States 
(comparing the targets as set in Table 1 with the cost efficient reductions as projected in 
the scenario that achieves all agreed 2030 targets with energy efficiency at a level of 30% 
in 2030). On average the group is only 4 percentage points away from their target based 
on GDP per capita in case of cost efficient achievement (with the EUCO27 run this gap 
is around 5%). But one high income Member States has a gap of rather 30%, while on the 
other  extreme,  one  high  income  Member  State  would  actually  reduce  more  in  the  cost 
efficient projection at EU level than its target based on GDP per capita. 

Table 2: Example of Gap analysis between cost-efficiency and GDP per capita 

EU 
All High Income MS 
MS with large gap 
MS with smallest gap 

EU targets 
achieved cost-
effectively  
-30% 
-33% 
-10% 
-41% 

MS target based 
on GDP per cap. 

Gap (as a % of 
2005 emissions) 

-30% 
-37% 
-40% 
-36% 

0% 
4% 
30% 
-5% 

Source: Commission calculations based on PRIMES and GAINS, EUCO30 scenario 

The assessment carried out focuses on the size of the gap taking into account that a fair 
and  balanced  reflection  of  cost-efficiency  would  require  the  differences  between  high 
income Member States gaps to reduce.  

Most affected Member States seem to recognise merits in an approach based on reducing 
the gap between cost efficient projections and targets based on GDP per capita, either by 

39 

 
 
 
supporting  to  set  the  2030  target  for  50%  based  on  the  target  determined  by  GDP  per 
capita  and  for  50%  based  on  a  cost-effective  emission  reduction  projection  or  by 
indicating  that  limited  cost  efficient  mitigation  potential  should  be  taken  into  account 
when reflecting cost efficiency.  

It  needs  to  be  assessed  to  what  extent  these  differences  in  gap  between  high  income 
Member  States  is  robust  across  multiple  sources  of  information.  For  this  a  number  of 
relevant projections are used as described in the introduction of section 5.  

5.1.3. Divergence of cost efficient projection and targets, using updated projections with 

various levels of energy efficiency based on the 2016 Reference  

Two  policy  scenarios  reflecting  the  2030  targets  agreed  by  the  European  Council  have 
been developed (EUCO27, EUCO30) based on the updated EU Reference scenario 2016 
and produced with the PRIMES and GAINS models.  

Based on these projections, the below graph shows the gap, or basically deficit, between 
the projected cost efficient emission reductions at an EU level, and the target based on 
GDP per capita for each higher income Member State (as included in Table 1).  

Figure  7:  Gap  in  2030  between  GDP-based  targets  and  cost-effective  EU  emission 
reductions for high income Member States (as a % of 2005 emissions) 

Source: Commission calculations based on PRIMES and GAINS  

The EUCO27 scenario has an average gap of 5% for the group of high income Member 
States, while in the EUCO30 scenario this gap is on average 4%. 5 Member States are at 
levels below or around to the 5% average gap (UK, SE, DE, FI and FR), while the others 
have a higher gap. Two Member States stand out due to a very large gap above 20% (IE, 
LU). This picture does not change between the EUCO27 and EUCO30 projection.  

But  there  is  sectoral  variation  between  these  projections  which  impacts  Member  States 
differently. The EUCO30 scenario achieves higher reductions in energy related emissions 
in for instance building heating and transport due to increased energy efficiency. In the 
EUCO30 scenario, typically sectors with non-CO2 emissions such as agriculture need to 
reduce  less  to  achieve  the  same  emission  target  compared  to  the  EUCO27  scenario. 
Therefore  the  EUCO30  scenario  shows  typically  higher  reductions  than  the  EUCO27 

40 

 
 
scenario  in  Member  States  with  the  highest  shares  of  energy  emissions  in  the  ESR, 
resulting  in  a  decrease  in  the  gap  for  those  Member  States  in  the  EUCO30  scenario 
compared to the EUCO27 scenario (e.g. LU, AT and BE). The opposite is the case for 
Member States with a low share of energy emissions in the effort sharing sectors (e.g. IE 
and  DK).  These  see  less  reductions  in  the  EUCO30  compared  to  the  EUCO27  and  an 
increase in the gap.  

Conclusion:  There  are  significant  differences  in  the  size  of  the  gap  between  Member 
States in the scenarios achieving in a coherent manner across the EU all the targets of the 
2030  climate  and  energy  framework.  Having  27%  or  30%  energy  efficiency  does  not 
materially  affect  the  relative  achieved  emissions  reductions  between  Member  States  in 
the non-ETS sectors, and thus would not change materially which high income Member 
States  would  be  categorised  as  having  more  or  less  of  a  challenge  with  cost  efficiency 
when targets are determined on the basis of GDP per capita.  

5.1.4. Divergence of cost efficient projection and targets, using additional projections to 

confirm robustness  

All scenarios in section 5.1.3 are based on the 2016 Reference scenario.  

This  section  expands  this  to  other  projections  to  check  robustness  of  the  differences  in 
gap  between  high  income  Member  States,  the  WEM-EXTRA,  GHG40  and  EE30 
scenarios  as  described  in  the  introduction  of  this  chapter.  Also  these  projections  all 
achieve the GHG targets, including the split ETS, ESR as agreed.  

The  scenarios  based  on  the  2013  Reference  (GHG40,  EE30)  can  serve  as  robustness 
check compared to the new scenarios  with  regard  to the impact  of changes in  data and 
changes  in  assumptions  of  existing  and  new  policies  in  the  underlying  Reference 
scenarios.  These  scenarios  are  also  informative  given  that  high  income  Member  States 
have shaped up their expectations about ESR target setting around these scenarios. 

The WEM-EXTRA scenario based on Member States own projections aims at capturing 
any  major  differences  in  projections  regarding  the  impact  of  the  existing  policy 
framework between Member States and the modelling tools used by the Commission45 

No other projections were used for the robustness check46.  

45 An important caveat of this approach is that the assumptions regarding which policies are included into 
the  WEM  projections  are  different  between  Member  States.  For  example  some  Member  States  include 
national  targets  and  thus  go  beyond  existing  implemented  policies,  or  consider  EU  policies  as  fully 
implemented, while other Member States are more conservative and have a WEM projection that does not 
seem to assume full implementation of already decided EU policies. 
46 A number of Member States, notably the UK, France and Poland have conducted studies related to the 
2030  framework,  but none  includes  achievement  of  all agreed  targets  and/or  ESD  specific  results  for  all 
Member States and were published in the relevant level of detail (see Enerdata (2014) Costs and Benefits 
to  EU  Member  States  of  2030  Climate  and  Energy  Targets  and  CENTER  FOR  CLIMATE  POLICY 
ANALYSIS (2015):  Sharing the burden of the  EU  climate  and  energy policy 2030: an  economic  impact 
assessment for the EU Member States, Warsaw 2015).  

41 

 
                                                 
Figure  8:  Gap  between  GDP-based  2030  targets  and  cost-efficient  emission 
reductions for high income Member States (as a % of 2005 emissions) 

Source: Commission calculations based on PRIMES, GAINS, Eurostat and EEA 2015 

Overall  the  three  additional  scenarios  do  not  alter  significantly  the  differentiation  of 
groups  of  Member  States  when  it  comes  down  to  the  gap.  Notably  IE  and  LU 
consistently show the highest gaps, above 15%. The three large Member States UK, DE 
and  FR  consistently  show  a  gap  which  is  below  or  at  worst  around  the  average  of  the 
group  of  higher  income  Member  States.  AT,  DK,  BE  and  NL  are  part  of  the  middle 
category having a gap above the EU average, but not as wide as LU and IE. DK, and to a 
lesser  extent  BE  and  the  NL  see  a  larger  reduction  in  the  WEM-EXTRA  scenario. 
However, the Danish national WEM projections 2015 include a national target, with the 
resulting 
in  relative  terms 
overestimating the cost effective additional reductions.  

'simple'  extrapolation  to  WEM  EXTRA  potentially 

For SE and to  a lesser extent  FI more recent national  projections as  well as the EUCO 
projections  see  a  significant  shift  compared  to  the  older  scenarios  based  on  the  2013 
Reference, resulting in a smaller gap47.  

The GHG40 and EE30 also confirm that higher levels of energy efficiency, in line with 
an  overall  30%  GHG  reduction,  have  some  distributional  impact,  but  not  sufficient  to 
change the ranking or grouping of Member States according to their gap. 

Conclusion: The following four groups of Member States can be defined:  

47 It is due to a combination of elements that the projections based on the more recent 2016 Reference show 
in particular stronger reductions for Sweden and Finland. In Sweden projections see increased efficiency, 
stronger decarbonisation of the energy sources used in the service sector, more biofuel use in transport, the 
impact of the revised F-gas regulation and reductions in non-CO2 emissions from energy use. For Finland, 
key  country  specific  explanations  are  recent  less  dynamic  economic  developments,  which  impact  in 
particular industry, and a stronger decarbonisation of the fuels used in residential and tertiary sectors, the 
revised F-gas regulation and waste related inventory methodology changes. 

42 

 
 
 
 
                                                 
  Group 1: DE, UK and FR, the group with a low gap below or around 5% across all 
scenarios.  These  Member  States  represent  75%  of  the  2005  ESD  emissions  of  the 
group of higher income Member States. 

  Group 2: SE and FI, a group with a low gap below 5% across the EUCO27, EUCO30 
and WEM-EXTRA scenarios, but clearly a significantly higher gap in scenarios based 
on  the  2013  Reference.  These  two  Member  States  represent  5%  of  the  2005  ESD 
emissions of the group of higher income Member States. 

  Group  3:  A  group  of  small  rich  Member  States  ranging  above  the  average  gap  of 
higher  income  Member  States  and  below  15%  across  most  scenarios  (AT,  DK,  BE, 
NL). These Member States represent 17% of 2005 ESD emissions of higher income 
Member States. 

  Group  4:  A  small  group  with  a  very  high  gap  of  above  15%  across  all  scenarios, 
comprising  two  smaller  Member  States  (LU,  IE).  These  two  Member  States  only 
represent  3%  of  higher  income  Member  State  emissions  and  the  highest  ESD  per 
capita emissions in the EU. 

5.1.5. Assessment of target adjustment options based on grouping of Member States 

If  targets  based  on  GDP  per  capita  would  need  to  be  adjusted,  then  it  is  logic  that  the 
Member States with a more challenging target based on cost effectiveness (e.g. Groups 3 
and  4)  would  see  a  decrease  in  ambition  compared  to  a  target  based  only  on  GDP  per 
capita,  more  outspoken  for  group  4  than  for  group  3,  compensated  by  an  increase  in 
ambition  for  groups  1  and  2,  with  for  group  2  a  more  prudent  approach  given  that  the 
robustness of classification is not consistent over all projections. This adjustment has to 
result  in  the  same  reduction  (and  thus  gap)  by  all  higher  income  Member  States  but  a 
reduction of the variance of the individual gaps. 

Moreover,  it  is  worth  noting  that  Groups  1  and  2  represent  nearly  80%  of  all  ESD 
emissions of Member States with GDP above EU average. This implies that an increase 
of the targets for members of Group 1 with 1% allows decreasing targets for all members 
of Groups 3 and 4 by roughly 4%.  

These results lead to the following specification of further options T2 and T3 in addition 
to  the  policy  baseline  option  (T1)  which  is  based  on  the  update  of  the  GDP  per  capita 
methodology (see Table 1). T2 sees limited adjustments and T3 high adjustments.  

The adjustment starts from the targets based on GDP per capita before being constrained 
by the maximum range of targets from 0% to -40%, in order to continue to recognise the 
significant differences in income levels for some high income Member States, and thus 
the capacity to pay: 

 

 

Option T2: An upward adjustment in ambition of 1 percentage point for group 1, 
no  adjustments  for  group  2  and  a  downward  adjustment  in  ambition  of  3 
percentage points for group 3 and 9 percentage points for group 4.  

 Option  T3:  A  doubling  of  the  upward  adjustment  in  ambition  to  2  percentage 
point  for  group  1  and  also  an  upward  adjustment  in  ambition  of  1  percentage 
point for group 2, and a downward adjustment in ambition of 7 percentage points 
for group 2 and 13 percentage points for group 3. 

43 

 
See  Table  3  for  the  resulting  targets  per  Member  States  for  the  three  options.  In  all  3 
options LU would remain at the highest level, recognising it already gets a major benefit 
from the fact that the overall range of targets are limited to -40% (LU would receive a -
61% target otherwise under option T1). Similarly SE has in all 3 options an equal target, 
given that targets cannot increase beyond -40%. All other high income Member states see 
variation in their targets. In options T1 and T2, Ireland would see the lowest target (-30% 
and -26%). Typically DE, FR with and UK would see a slightly higher target in T2 than 
NL, AT, BE. In T3 this would be much more outspoken with also DK seeing its target 
reduce below DE, FR and UK. 

Table 3: Target adjustments for groupings of high income Member States 

Optio
n 
LU 
SE 
DK 
FI 
NL 
AT 
IE 
BE 
DE 
FR 
UK 

T1: No target 
adjustment 
-40% 
-40% 
-40% 
-39% 
-39% 
-39% 
-39% 
-38% 
-37% 
-36% 
-36% 

T2: Limited 
target adjustment 
-40% 
-40% 
-39% 
-39% 
-36% 
-36% 
-30% 
-35% 
-38% 
-37% 
-37% 

T3: High target 
adjustment 
-40% 
-40% 
-35% 
-40% 
-32% 
-32% 
-26% 
-31% 
-39% 
-38% 
-38% 

Figure 9 below shows the impact of the 3 target options on the gap in 2030 for the EUCO 
projections. 

44 

 
 
Figure  9:  Gap  between  GDP-based  2030  targets  and  EUCO27  and  EUCO30 
projections  for  different  target  adjustments  between  groupings  (as  a  %  of  2005 
emissions) 

Source: Commission calculations based on PRIMES and GAINS 

Distributional impacts 

Significant  differences  exist  between  Member  States'  gaps  making  them  more 
challenging to be achieved domestically for groups 3 and 4 or requiring higher need for 
access to flexibility mechanisms. If these Member States would opt to achieve the targets 
domestically,  this  would  certainly  require  higher  efforts  and  thus  more  economic  and 
potentially also social strain. On the other hand, these Member States, even in the group 
of  high  income  Member  States  tend  to  be  those  with  the  highest  incomes,  and  thus 
highest potential to take action. 

A  group  based  target  adjustment  can  lessen  distributional  impacts  considerably,  except 
for Luxembourg that due to its high GDP per capita level would keep the same target and 
thus gap, already benefitting strongly from the maximum range up to -40% of the target. 
The moderate adjustment option T2 already reduces the gap. For DK, BE, NL in group 3 
the  gap  reduces  and  putting  this  grouping  already  on  a  more  equal  footing  from  a 
distributional perspective.  

45 

 
 
 
 
  
In the large adjustment option T3 the differences in gaps clearly reduce strongly, for all 
except LU bringing gaps down well below 15% across all scenarios and Member States 
except LU. The correction is so large that the gaps between group 1, 2 and 3 are starting 
to become similar and notably for FR and FI the gap could even be higher than for some 
of the Member States in group 3 which raises new distributional concerns.  

This  is  also  illustrated  in  Table  3  above,  with  option  T3  translating  into  considerably 
higher targets for DE, FR and UK, compared to the DK, NL, AT, BE, and IE, while DE, 
FR and UK have relatively the lowest GDP per capita levels in the group of high income 
Member States.  

Environmental impacts 

In  itself,  the  distribution  of  targets  between  Member  States  should  be  without  climate 
impacts as long as the overall -30% target is maintained and achieved, with flexibilities 
and  enforcement  mechanisms  in  place.  In  this  context  the  overall  starting  point  for  the 
target trajectory is of more important concern (see also section 5.2).  

But  an  additional  element  of  environmental  integrity  is  the  notion  that  achieving  low 
emissions would require over time convergence of per capita emissions to levels overall 
lower  than  today.  The  European  Council  referred  explicitly  to  the  need  to  ensure  such 
convergence.  

The  figure  below  represents  the  GHG  emissions  per  capita  in  2005  and  what  the 
allocation  in  2030  per  capita  would  translate  into  when  applying  the  option  T2.  Of 
course,  real  emissions  per  capita  can  deviate  by  2030  and  will  depend  on  the  extent  to 
which flexibilities are used.  

Compared  to  2005,  option  T2  (as  well  as  options  T1  and  T3)  achieves  a  considerable 
degree of convergence by 2030 of allocation per capita between the Member States. 16 
Member  States  have  an  allocated  emissions  level  per  capita  within  a  range  of  1  ton 
around  EU  average.  Only  two  higher  income  Member  States  (LU,  IE)  and  8  lower 
income Member States have allocated emissions per capita above this range. Instead SE 
and MT have allocated emissions per capita below this range. 

46 

 
Figure 10: Towards convergence of ESR GHG per capita in 2030: T2 

Source: Commission calculations based on PRIMES, and GAINS. For 2005, LU and IE emissions per capita are 21.5 and 11.6ton per 
capita respectively. 

IE  allocated  emissions  per  capita  are  higher  in  T3  and  T2  than  in  T1  due  to  the  target 
adjustments, with for instance IE per capita emissions at around 6 tonnes in T1 but above 
7 tonnes in T3.  

Group 3 countries similarly  have  higher level of emissions in  T2 and T3, with  none of 
them having emissions below EU average in case of option T3, and the NL even having 
emissions just outside the range of 1 ton around EU average. 

Economic impacts 

Option T1 with targets set based only on GDP per capita basis would lead a gap for the 
whole group of high income Member States of around 5%.  

47 

 
 
 
High  income  Member  States  could  opt  to  reduce  more  than  what  typical  cost  efficient 
projections  at  the  EU  level  might  imply,  or  they  could  acquire  AEAs  from  other 
countries.  However,  the  size  of  the  gaps  to  be  filled  with  reductions  going  beyond 
domestically  cost-efficient  target  levels  in  group  3  and  in  particular  group  4  is  clearly 
much  larger  than  for  groups  1  and  2,  making  for  groups  3  and  4  the  need  for  well 
functioning flexibility mechanisms within the ESR much more important.  

A target adjustment (options T2 and T3) would lower the divergences between the gaps 
and  thus  also  lower  the  concerns  of  Member  States  in  group  3  and  4  for  the  need  on 
higher  availability  of  AEAs  through  the  flexibility  mechanisms.  This  would  be  more 
outspoken in case of option T3 than option T2. 

Conclusion:  A  target  adjustment  clearly  lowers  the  divergences  between  high  income 
Member States in the gap they have between EU wide cost efficient emission reduction 
projections  and  the  target  they  would  receive.  Option  T2,  a  limited  adjustment,  would 
still see the richest Member States take the highest targets, but differences in gaps would 
decrease for all with the exception of LU, that majorly benefits from the fact that targets 
can't  go  beyond  -40%.  Overall  a  target  adjustment  as  proposed  has  no  impact  on  the 
environmental  integrity  because  it  does  not  lead  to  increases  of  overall  surplus  in  the 
sectors covered by the current ESD. 

5.1.6. Assessment of 50/50 target adjustment options based on Member States proposals  

Belgium in its reply to the public consultation suggested setting 50% of the 2030 target 
based  on  the  target  determined  by  GDP  per  capita  and  50%  based  on  a  cost-effective 
emission reduction projection (proposing for the latter to use the 2030 framework impact 
assessment), and recalibrating all targets upwards if the group as a whole doesn't meet its 
required reduction. 

Table  4  below  includes  what  the  targets  would  be  under  the  approach  proposed  by 
Belgium if as cost effective emission reduction projections one would use the EUCO30 
or GHG40 scenarios.  

Table  4:  Comparing  the  group  based  approach  to  targets  set  following  the  50/50 
proposal 

Option 

T1: No target 
adjustment 

LU 
SE 
DK 
FI 
NL 
AT 
IE 
BE 
DE 
FR 
UK 

-40% 
-40% 
-40% 
-39% 
-39% 
-39% 
-39% 
-38% 
-37% 
-36% 
-36% 

T2: Limited 
target 
adjustment 
-40% 
-40% 
-39% 
-39% 
-36% 
-36% 
-30% 
-35% 
-38% 
-37% 
-37% 

T3: High 
target 
adjustment 
-40% 
-40% 
-35% 
-40% 
-32% 
-32% 
-26% 
-31% 
-39% 
-38% 
-38% 

48 

T4 50/50 approach using as 
cost efficient projection  
GHG40 
EUCO30 
-32% 
-27% 
-36% 
-40% 
-37% 
-36% 
-36% 
-40% 
-35% 
-34% 
-35% 
-38% 
-32% 
-29% 
-33% 
-34% 
-40% 
-38% 
-36% 
-35% 
-37% 
-40% 

 
 
Strong difference in the approaches is the outcome for Luxembourg, where in options T2 
and T3 they do not benefit from the target redistribution because of their high GDP per 
capita levels, while they do in T4.  

For the other Member States differences are smaller between all the approaches, be it that 
option  T3  is  on  average  more  divergent  from  the  approach  proposed  by  Belgium  than 
option T2.  

Option  T2  typically  leads  to  somewhat  higher  targets  than  T4  for  the  highest  income 
Member States with DK, NL, BE and FR having equal or higher targets in T2 than both 
the scenarios assessed in T4 for the approach proposed by Belgium.  

Option T4 sees significant differences between target setting depending on the scenarios 
used. 6 Member States see a difference in target of 3 to 5% depending on which scenario 
is used. This raises questions to which scenario would need to be selected which might in 
itself be controversial. This is also clear when looking at the Member States that need to 
contribute to a target distribution, with T4 seeing DE take on a target of -40% when using 
the GHG40 projection, and UK having to do so when using the EUCO30 projection.  

5.2.  Assessing the trajectory starting point  

The policy baseline of this impact assessment is to continue with an approach that uses 
the most  recent inventory data available in the year before the start of the commitment 
period  to  define  the  total  annual  emission  allocations  for  Member  States  over  the 
upcoming  commitment  period,  in  the  form  of  a  linear  trajectory  with  using  these  most 
recent emissions as the starting point.  

For  the  commitment  period  2021-2030  this  would  mean  defining  in  2020  the  annual 
emission allocations based on linear trajectory that uses the most recent  inventory. The 
most recent inventory in 2020 will cover emissions up to 2018. To take into account any 
unexpected annual variability, the average of 3 years, 2016 to 2018, would be used.  

The current approach to set targets for 2013-2020 further differentiates the exact starting 
date  of  the  linear  trajectory,  depending  if  a  Member  State  has  a  target  that  allow  it  to 
increase or decrease emissions compared to 2005 by 2020.  

An approach similar to the current one for Member States with a 2020 target that requires 
emissions to be reduced compared to 2005 is used, given that for 2030 all Member States 
have  target between 0% and  -40%  compared to  2005. This  method uses average  2016-
2018 emissions as a starting point in 2020 to extrapolate the target linearly to the 2030 
end  point  and  as  such  define  the  total  annual emission  allocations  for  the  period 2021-
2030.  See  also  annex  8.8  for  more  details  on  how  this  compares  to  the  methodology 
applied  in  the  current  commitment  period  2013-2020,  as  well  as  other  methodologies 
proposed by stakeholders.  

Figure 11 below represents the EU target trajectory using this approach and how it would 
relates to an emission profile that starts from the EU Reference 2016 projection in 2020 
and achieves in 2030 a reduction of -30%. 

If emissions decrease as in the Reference scenario until 2020 and continue to do so up to 
2030 to achieve the target of -30%, as in Figure 11, then this results in 2021 in a situation 
that  emissions  are  lower  than  the  actual  target,  generating  at  the  EU  level  a  surplus  of 

49 

 
AEAs.  This  annual  surplus  would  reduce  over  time,  with  emissions  being  on  target  in 
2030. 

Figure 11: 2021-2030 target trajectory 

Source: Commission calculations based on EU Reference scenario 2016  

This  method  ensures  Member  States  know  before  the  start  of  the  period  their  target.  It 
also gives incentives to continue to take action in the period 2016-2021 and it in principle 
ensures that a buffer is created, which is of use in a system that sees annual compliance. 
But  if  the  surplus  gets  too  large  too  early  in  the  period  2021-2030,  this  actually  might 
also create a risk, reducing incentives on Member States to take action during the period 
and  potentially resulting  in  a  situation  that later  in  the  period  emissions  become  higher 
than target. This could endanger the effective achievement of the -30% target in 2030. 

A  number  of  stakeholders  pointed  out  in  the  public  consultation  that  there  could  be 
variations on this starting point, such as using the 2020 target or 2020 emissions to define 
the starting point.  

This  section  assesses  the  methodology  as  presented  in  Figure  11  that  is  similar  to  the 
existing method used for the period 2013-2020, but also does a sensitivity analysis on the 
impact of the approaches as listed by stakeholders, using 2020 emission or existing 2020 
targets as starting point. See Figure 12 for an overview. 

50 

 
 
Figure 12: Comparing 2021-2030 target trajectories using different starting points 

Source: Commission calculations based on EU Reference scenario 2016  

Environmental impacts 

Starting  from  recent  2016-2018  emissions  (S1,  dark  blue  circle  line)  is  more  stringent 
than sensitivity S3 but less than S2. Average emissions in 2016-2018 are already below 
the  2020  target  thus  this  starting  point  would  be  more  stringent  than  S3,  which  starts 
from 2020 target in 2020. Recent inventory data seem to confirm this order of magnitude 
of reductions. Emission reductions in 2014 were already at -13%, below the 2020 target, 
and might be expected to further reduce by 2020.  

The least ambitious target trajectory would thus be sensitivity S3 (red triangle line) which 
starts in 2020 from the existing aggregated 2020 national targets of almost -10% in 2020, 
as such recognising over-achievement of the target in the period up to 2020.  

On the opposite, sensitivity S2 (green quadratic line) with 2020 emissions as its starting 
point in 2020, has the most stringent target trajectory, given that emissions are projected 
to  continue  to  decrease  between  2015  and  2020  to  -16%  in  the  EU  Reference  scenario 
(and to -13% in aggregated MS WEM projections), well below the 2020 target levels. 

Table  5  gives  an  overview  of  how  the  choice  of  a  different  starting  point  impacts  the 
build-up of a potential deficit or surplus of cumulated emissions compared to the target 
trajectory  over  the  period  2021-2030  for  a  number  of  different  emission  scenarios 
different emission scenarios. 

51 

 
 
 
Table  5:  Impact  on  the  build-up  of  a  surplus  or  deficit  in  sectors  covered  by  the 
current  ESD  over  the  period  2021-2030  of  different  starting  points  for  target 
trajectory 

Option 

Starting point 

MS WEM 
2013 Reference 
2016 Reference 
EUCO27  
EUCO30  

2020 emissions 

Sensitivity S3 

Sensitivity S2 

2020 targets 

S1 
2016-2018 
emissions 
EU Mt surplus (+) or deficit (-) over the period 2021-2030 
-1739 
-1090 
-491 
512 
511 

-1918 
-1500 
-972 
31 
26 

-1326 
-758 
-74 
928 
929 

Source: Commission calculations based on EEA, PRIMES and GAINS 

The 2016 Reference scenario as well as the 2013 Reference and the MS-WEM scenario 
represent the baseline situations of no additional policies beyond current ones. This type 
of  emission  profiles  should  typically  result  in  deficits  compared  to  the  assessed  target 
trajectories, indicating that current policies are not sufficient to achieve the targets. 

If the starting point is defined using 2020 emissions (S2), the most stringent one, then an 
emission profile such as the 2016 Reference projections would result in a deficit over the 
period 2021-2030 equal to 972 million. This deficit would be even higher if the emission 
profile would correspond to the MS WEM projections which would result in a deficit of 
1.9 billion tonnes with S2 as starting point.  

Instead the scenarios that effectively achieve -30% target in 2030, such as EUCO27 and 
EUCO30,  would  see  the  opposite  with  no  deficit  building  up  over  the  commitment 
period.  Instead  surpluses  could  arise,  most  notably  associated  with  overachievement  of 
the target early in the period, due to the choice in starting point. 

This  can  be  clearly  seen  in  the  policy  baseline  option  S1  (starting  point  2016-2018 
emissions)  and  the  sensitivity  S3  (starting  point  2020  targets),  which  see  a  build-up  of 
surplus  in  the  early  years  of  the  period  with  emissions  profiles  similar  to  the  EUCO27 
and EUCO30 scenarios. This is particularly large with sensitivity S3, leading to a surplus 
by 2030 as high as 929 million. 

But if the starting point is defined by using 2020 emissions (S2), the most stringent one, 
then emissions profiles similar to the EUCO27 and EUCO30 are roughly in line with the 
trajectory, and no significant surplus builds up over the commitment period. 

Of  course  in  scenarios  EUCO27  and  EUCO30  it  is  assumed  actions  are  taken  to 
effectively achieve the -30% target in 2030. But notably the build-up of large surpluses 
early  on  can  increase  the  risk  that  this  is  not  the  case,  and  that  there  are  not  enough 
reductions  later  in  the  period.  Emissions  might  actually  increase  above  target,  with 
surpluses  from  early  in  the  period  being  used  for  compliance  later  in  the  period.  This 
would mean that the 2030 target of -30% would be missed and of course this risk is 
larger with a large build up early on in the period of large surpluses. 

Figure  13  gives  a stylised  example  of  such  a  situation.  The  target  trajectory  starts  with 
2020  targets  (sensitivity  S3),  the  least  stringent  target  trajectory.  In  2020  there  is  an 
overachievement  equal  to  the  2016  Reference  scenario,  reaching  -16%  emission 

52 

 
  
 
reductions or more than 6% better than the 2020 target. This allows to build-up a surplus 
in the beginning of the decade, and as a result, this could allow underachievement in later 
years,  resulting  in  achieving  only  around  -24.5%  reductions  (instead  of  -30%)  by  2030 
with the system overall still in compliance over the period.  

Figure 13: Sensitivity S3 sees overachievement in 2021 but risks underachievement 
in 2030 

Source: Commission calculations  

The 2016 Reference scenario fits very closely to such an emission profile, with emissions 
in 2030 being at -24% and with overall only a deficit of 39 million over the period (or 
roughly 4 million a year) if starting point would be set equal to 2020 targets (sensitivity 
S3).  

It  is  hence  clear  that  sensitivity  S3  poses  a  big  environmental  risk  for  the  system  as  a 
whole, in the worst case resulting in an emission profile similar to the baseline with no 
additional  action  (Reference  2016),  and  thus  not  achieving  the  required  reduction  by 
2030. 

Instead,  the  risk  not  to  be  on  target  in  2030  would  be  lower  for  the  methodology  that 
continues to use recent 2016-2018 emission inventories (S1).  

But it is sensitivity S2 that from an environmental perspective would have the least risk 
not being on target in 2030 and would normally ensure the EU as a whole will meet its 
2030 target of -30% emission reductions in the ESR.  

While  sensitivity  S2  ensures  environmental  integrity  at  the  EU  level,  it  also  has  an 
environmental  disadvantage.  It  rewards  those  Member  States  that  do  not  achieve  their 
2020 targets and gives them a less stringent starting point in 2021 than their 2020 target 
In the new 2016 EU Reference scenario five high income Member States would be in this 
situation (BE, DK, IE, LU and NL).  

Option S1 has a similar disadvantage, but at least it gives incentives to take action all the 
way to 2020, with Member States benefiting to be below 2016-2018 emissions already in 
2021. 

53 

 
 
If  high  energy  efficiency  improvements  of  30%  or  more  are  effectively  achieved  by 
2030,  then  it  is  more  likely  that  the  ESR  will  meet  its  2030  target  of  -30%  reductions. 
This would lower the risk of not achieving the GHG objective even with a large surplus 
building up early in the commitment period.  

Some  stakeholders  suggested  defining  the  starting  point  at  Member  States  level  on 
whatever  is  most  stringent:  2016-2018  emissions,  2020  emissions  or  2020  targets.  Of 
course  this  would  make  the  target  trajectory  overall  at  EU  level  more  stringent.  If 
Member States targets starting points where defined for instance on the basis of the most 
stringent outcome of sensitivities S2 or S3, the deficit over the period would increase to 
around  -60  Mt.  This  actually  would  mean  that  the  target  would  be  set  at  even  more 
stringent levels than a linear reduction from 2020 emissions to the 2030 target. If these 
additional  reductions  would  be  achieved  towards  the  end  of  the  period  this  could 
potentially lead to a limited overachievement in 2030 of the target.  

Table 6: Impact on the build-up of a surplus or deficit in the ESR over the period 
2021-2030 of a combination of starting points for target trajectory 

Option 

Sensitivity S2 

S1 

Sensitivity S3 

MS targets based on 
most stringent of 2 
options 

Starting point 

Scenario  
EUCO27  
EUCO30  

2020 
emissions 

2016-2018 
emissions 

2020 targets 

S2 and S3 

EU Mt surplus (+) or deficit (-) over the period 2021-2030 
31 
26 

512 
511 

928 
929 

-58 
-62 

Source: Commission calculations based on PRIMES and GAINS 

Economic impacts 

Table 7 below represents how over time the cumulative surplus or deficit evolves under 
the  EUCO30  target  scenario,  splitting  it  also  between  those  Member  States  that  have  a 
surplus (and thus may potentially be sellers of Annual Emission Allocations, AEAs), and 
those Member States that have a deficit (and thus need to acquire AEAs). It is important 
to  note  that  such  calculations  of  surpluses  and  deficits  over  time  are  sensitive  to  the 
underpinning  emission  projections  and  interpolations.  Therefore  the  concrete  figures 
should be seen as illustrating orders of magnitude.  

Table 7: Development of surplus and deficit and potential to buy and sell AEAs 

Option S1, starting point 2016-2018 emissions (EUCO30 scenario) 

Cumulative surplus (+) or deficit (-), 
million ton 
EU total  
MS with net deficit (potential buyers) 
MS with net surplus (potential sellers) 

2021 – 2023  2021 - 2026  2021 – 2030 

256 
-11 
267 

414 
-75 
489 

511 
-282 
793 

Sensitivity S2, starting point 2020 emissions (EUCO30 scenario) 

Cumulative surplus (+) or deficit (-), 
million ton 
EU total  
MS with net deficit (potential buyers) 
MS with net surplus (potential sellers) 

2021 – 2023  2021 - 2026  2021 – 2030 

-3 
-58 
56 

54 

-6 
-203 
197 

26 
-523 
550 

 
Sensitivity S3, starting point 2020 targets (EUCO30 scenario) 

Cumulative surplus (+) or deficit (-), 
million ton 
EU total  
MS with net deficit (potential buyers) 
MS with net surplus (potential sellers) 

2021 – 2023  2021 - 2026  2021 – 2030 

479 
-77 
556 

776 
-205 
982 

929 
-482 
1411 

S1 sees relatively low demand for AEAs, with overall demand over the period just at 284 
million  tons.  This  is  most  outspoken  in  the  beginning  of  the  period,  which  of  course 
relates  to  the  fact  that  S1,  using  average  2016-2018  emissions  generates  an  initial  EU-
wide surplus early in the period and very little demand. This makes certainly the need for 
flexibility  in  the  beginning  less  outspoken  a  problem,  even  in  a  system  with  annual 
compliance cycles.  

With 2020 emissions as starting point as more stringent sensitivity (S2) overall the total 
supply and demand in the system are finely in balance, with all Member States achieving 
the  reductions  associated  with  a  cost  efficient  reduction  at  the  EU  level  and  with  full 
demand for any supply in the system.  

This  may  however  exactly  make  the  use  of  flexibility  mechanisms  more  contentious. 
Given that demand and supply are so tightly matched, more Member States will need to 
use flexibilities and less Member States might be willing to sell early in the period given 
that any surpluses will only build up gradually. Instead, those Member States that expect 
to become early buyers of AEAs, even with S2 as starting point will want to be sure that 
the supply is available and they might experience S2 as too restrictive (or ask for instance 
for mandatory auctioning of any surpluses).  

Using  2020  emissions  as  starting  point  (S2)  also  has  a  practical  disadvantage.  2020 
emissions will only be known when the inventory in 2022 is released, and thus any 2021-
2030 target trajectory will only be known late 2022, which increases policy uncertainty 
and may delay the necessary investments early on.  

Sensitivity S3 is less stringent than S1 overall but would see a slightly higher demand in 
the first years as option S2, and only a marginal lower demand than option S2 over the 
whole period, but has foremost a much bigger supply in the system, and has this already 
early  on.  This  will  for  certain  increase  willingness  to  sell  and  thus  make  supply  easy 
available.  On  the  other  hand  it  is  exactly  this  abundance  that  increases  the  risk  of  too 
little  emission  reduction  action  and  thus  not  achieving  the  2030  target  in  the  end  (see 
discussion section above on environmental integrity).  

One  additional  important  difference  between  S2  and  S3  is  who  the  buyers  are.  In 
sensitivity S3 it are those Member States that are off target in 2020 that are the biggest 
buyers  already  early  on  in  the  period,  with  NL,  IE  and  BE  representing  85%  of  the 
demand in the first three years and DK and LU representing the remainder. Instead in S2 
more  high  income  Member  States  develop  some  demand  already  early  on,  with  the 
biggest buyers in absolute terms actually being DE and FR. 

By  and  large  the  EUCO27  projection  would  give  similar  impacts  on  the  demand  for 
AEAs as EUCO30, for instance in case of S1 resulting in a net demand of 319 million 
AEAs instead of 282 million in case of EUCO30. This is of course because overall both 

55 

 
 
EUCO27  and  EUCO30  are  projected  to  reduce  emissions  in-line  with  a  30%  emission 
reduction in the ESR.  

Distributional impacts 

Table 8 shows the deficits or surpluses generated by each Member State for each of the 
three starting points over the whole period. This analysis uses the EUCO30 scenario to 
assess the impacts. As 2030 target the national targets based on GDP per capita are used 
as included in Table 1 (Option T1).  

The surpluses and deficits in  Table 8 look at the annual average surplus or deficit over 
the  whole  period  (expressed  as  a  %  of  2005  emissions)  as  well  as  the  total  surplus  or 
deficit in million tonnes over the period 2021-2030.  

Table  8: Impact of  starting  point  options on Member State surplus or deficit over 
the period 2021-2030 using the EUCO30 projection 

Scenario 
Option 
Starting 
point 

Sensitivity S2 

EUCO30 
S1 

Sensitivity S3 

2020 emissions 

2016-2018 emissions 

2020 targets 

annual 
average,  
2021-
2030, 
% 2005 
emissions 
0.1% 

5.0% 

-3.0% 

-16% 
0% 
-6% 
-14% 
-9% 
-4% 
-1% 
-7% 
-1% 
-3% 
2% 
-1% 
4% 
0% 
3% 
5% 
15% 
9% 

Million 
tonnes 
2021-
2030 

26 

550 

-523 

-16 
1 
-24 
-68 
-101 
-25 
-3 
-57 
-62 
-121 
87 
-37 
87 
0 
0 
6 
93 
47 

EU 
MS with 
net surplus 
MS with 
net deficit 
LU 
SE 
DK 
IE 
NL 
AT 
FI 
BE 
DE 
FR 
UK 
IT 
ES 
CY 
MT 
SI 
EL 
PT 

Surplus (+) or deficit (-) 

annual 
average,  
2021-
2030, 
% 2005 
emissions 
1.8% 

3.7% 

Million 
tonnes 
2021-
2030 

511 

793 

annual 
average,  
2021-
2030, 
% 2005 
emissions 
3.3% 

8.6% 

-3.9% 

-282 

-4.0% 

-16 
9 
-20 
-65 
-85 
-19 
5 
-41 
36 
-36 
167 
2 
126 
1 
0 
7 
106 
56 

-22% 
3% 
-8% 
-19% 
-12% 
-3% 
1% 
-9% 
0% 
-2% 
6% 
1% 
8% 
4% 
6% 
13% 
27% 
21% 

-16% 
2% 
-5% 
-14% 
-7% 
-3% 
2% 
-5% 
1% 
-1% 
4% 
0% 
5% 
2% 
4% 
6% 
17% 
11% 

56 

Million 
tonnes 
2021-
2030 

929 

1411 

-482 

-22 
14 
-31 
-92 
-140 
-19 
4 
-70 
-19 
-90 
250 
43 
196 
2 
1 
15 
166 
106 

 
  
  
CZ 
EE 
SK 
LT 
LV 
HR 
HU 
PL 
RO 
BG 

6% 
6% 
4% 
4% 
6% 
11% 
14% 
-1% 
6% 
14% 

37 
3 
9 
6 
5 
19 
64 
-11 
48 
38 

8% 
8% 
5% 
6% 
8% 
12% 
16% 
0% 
7% 
17% 

48 
4 
12 
8 
6 
21 
73 
3 
54 
46 

15% 
14% 
13% 
13% 
16% 
23% 
28% 
3% 
19% 
31% 

98 
7 
33 
18 
14 
42 
130 
45 
144 
85 

Source: Commission calculations based on PRIMES and GAINS 

Assuming all Member States would achieve emissions reductions similar to an emission 
profile as projected in EUCO30, Option S1 has 18 Member States with a surplus of 1% 
or more, 3 Member States in balance and 7 Member States with a deficit of 1% or more. 

Sensitivity S2 has 15 Member States with a surplus of 1% or more, 4 Member States in 
balance and 9 Member States with a deficit of 1% or more. 

Sensitivity S3 has 20 Member States with a surplus of 1% or more, 1 Member States in 
balance and 7 Member States with a deficit of 1% or more. 

Most of the lower income Member States are in all options in surplus, which is in line 
with the spirit of the fairness based approach to 2030 target setting.  

Overall  the  surpluses  are  biggest  in  case  of  sensitivity  S3,  with  surpluses  representing 
8.6% of 2005 emissions on average for those Member States having surpluses. S3 clearly 
strongly  advantages  those  Member  States  that  overachieve  their  2020  target  while  it 
results in higher gaps for typically those high income Member that are projected not to 
achieve their 2020 targets. 

For  S1  and  S2,  which  are  based  on  an  emissions-based  starting  point,  this  strong 
advantage  due  to  starting  point  and  the  distributional  advantage  towards  low  income 
Member  States  clearly  decreases.  However,  it  should  be  noted  that  even  with  S2,  the 
most stringent case, most low income Member States will be able to achieve their target 
trajectory and even generate surpluses.  

This  is  because  they  receive  in  relative  terms  more  lenient  2030  targets  based  on  GDP 
per capita.  

This can most strongly be seen when comparing a target trajectory that uses starting point 
S1 (policy baseline) with the baseline projection without additional policies. 

In case of the 2016 Reference projection 14 Member States with GDP per capita below 
EU average would be compliant over the whole period (BG, CZ, EE, EL, ES, HR, HU, 
LT,  LV,  MT,  PT,  RO,  SI,  SK).  This  would  mean  that  typically  the  lowest  income 
Member  States  could  be  compliant  with  the  target  trajectory  over  the  period  with  no 
additional action beyond full implementation of current policies.  

57 

 
In case of the 2013 Reference scenario 8 Member States with GDP per capita below EU 
average  would  be  compliant  over  the  whole  period  (BG,  EL,  HR,  HU,  LT,  MT,  PT, 
RO)48.  

Finally,  if  the  Member  States  own  with  existing  measures  projections  are  used  to 
represent the no additional policy baseline, only 5 Member States (BG, CZ, EL, HU, PT) 
achieve compliance over the commitment period. 

Overall this underlines that the target distribution based on GDP per capita, together with 
a  starting  point  as  in  baseline  policy  option  S1  (which  allows  in  principle  to  generate 
some  surplus  early  in  the  period),  are  very  strong  regarding  fairness  towards  the  low 
income Member States.  

Instead most high income Member States, with the exception of the UK, clearly need to 
take  additional  action  in  line  with  or  well  above  the  cost  efficient  projections,  such  as 
EUCO30, to achieve the overall -30% target at EU level.  

It  should  also  be  noted  that  Member  States  that  have  a  deficit  in  2030  (typically  high 
income  Member  States,  see  also  section  5.1.3),  typically  have  a  significantly  smaller 
deficit if looked at over the full 10 year period. This is for option S1 as well as for both 
sensitivities. This is because of course any divergence between target and cost efficient 
potential  tends  to  increase  over  time.  This  is  important  when  assessing  impacts  and 
challenges  related  to  target,  which  are  not  purely  a  2030  point  target,  but  have  to  be 
achieved over the period.  

For instance Luxembourg had a gap of 30% in 2030 the EUCO30 projection with a target 
based purely on GDP per capita. But if looked at over the period, this is rather on average 
annual gap of 22% in case of sensitivity S3, smaller in the early years of the period 2021-
2030 and increasing towards 30% towards the end. This gap reduces to 16% in case of 
option S1.  

Similarly  for  all  other  Member  States  with  a  deficit  in  2030  projected  in  the  EUCO30 
scenario in 2030, this  reduce by around half or  more when looking at the gap over the 
period, rather than only in the year 2030.  

See annex 8.6 for a table similar as Table 8 with Member States results but then assessed 
using the EUCO27 projections, showing by and large the same impacts. 

A  final  consideration  regarding  distributional  impacts  concerns  those  Member  States 
which  were  allowed  to  increase  emissions  in  2020  compared  to  2005,  and  received 
accordingly an increasing target trajectory from 2013 to 202049.  

With  option  S1  that  uses  as  starting  point  average  emissions  of  2016-2018,  if  these 
Member States were in a situation of increasing emissions between today and 2020, they 

48 See also Box 1 and Box 2 in section  1.3 for further information on why different scenarios projecting 
existing measures may differ.  
49 Countries with an increasing Annual Emission Allocation for the period 2013-2020 are BG, CZ, EE, HR, 
HU, LT, LV, PL, PT, RO, SI, SK. While also the MT target allows for emission increases between 2005 
and  2020,  its  actual  Annual  Emission  Allocation  2013-20  is  decreasing,  due  to  emission  growth  in  the 
period 2005-2010. 

58 

 
                                                 
would immediately experience a shortage in 2021, even though their target trajectory up 
to 2020 would allow emission increases. 

This  can  be  perceived  as  a  particular  distributional  impact.  The  WEM  projections 
indicate  that  eight  of  the  MS  with  positive  target  in  2020  expect  without  additional 
measures to be in a situation that emissions in 2020 will be above 2015 (in the 2016 EU 
Reference scenario no Member State is projected to be in this situation). 

If such a distributional impact is to be mitigated, one could create a buffer by increasing 
for the Member States concerned the ESR allocation for the period starting in 2021, with 
an amount equal to the increase in ESD allocations over the period 2017-2020 compared 
to their average allocation in the period 2016-2018. This represents the allowed increase 
in emissions these MS had over the period from where the starting point is defined, until 
2020. Even if emissions of these Member States in this period would increase at a rate 
equal  to  their  target  trajectory  increase,  they  would  not  immediately  have  a  negative 
impact  in  2021.  They  would  have  a  buffer  early  in  the  period  that  allows  them  to  put 
policies  in  place  to  catch  up  with  the  target  trajectory  resulting  from  option  1  for  the 
period after 2020 that uses 2016-2018 as a starting point. 

Table 9: Impact of an additional buffer under option S1 recognising that for some 
Member States Annual Emission Allocations increase up to 2020  

2020 target vs 2005 

MS with an increasing AEA in 
the period up to 2020 

BG 
RO 
LV 
LT 
PL 
SK 
HR 
EE 
HU 
CZ 
SI 
PT 

20% 
19% 
17% 
15% 
14% 
13% 
11% 
11% 
10% 
9% 
4% 
1% 

Increase allocation 2021-2030 equal to allocation 
increase period 2017-2020 compared to average 
allocation 2016-2018 

Million AEAs 

% of 2005 emissions, 
annually over the period 
2021-2030 

39.1 

1.6 
10.9 
0.5 
2.2 
7.5 
2.2 
1.1 
0.1 
6.7 
4.4 
0.2 
1.7 

0.7% 

0.6% 
1.4% 
0.7% 
1.6% 
0.4% 
0.8% 
0.6% 
0.3% 
1.4% 
0.7% 
0.2% 
0.3% 

Taking into account the current Annual Emission Allocations50, this buffer would be 39 
million,  as  such  not  majorly  impacting  the  overall  surplus.  Under  the  EUCO30 
projection, assuming 2030 targets are met, it would increase the surplus from 511 to 550. 
For the Member States involved, it would increase allocation on average over the 10 year 

50 According to Decisions 2013/162/EU and 2013/634/EU. 

59 

 
 
 
 
                                                 
period  2021-2030  by  an  equivalent  equal  to  0.7%  of  their  2005  emissions,  but  with 
differences  between  Member  States  depending  of  their  original  target  trajectory  up  to 
2020. 

With sensitivities S2 or S3, Member States with an increasing target up to 2020 would in 
principle not experience an immediate negative impact if they would increase emission in 
the period from now up to 2020. Of course the more emissions would increase by 2020, 
the more efforts would need to be done later on to get to target in 2030.  

Conclusion: The analysis of the option S1 to start from recent 2016-2018 emissions and 
the sensitivity analysis confirm that continuation of a similar methodology as the existing 
one using recent historic emissions to set the starting point would be appropriate.  

Using as starting point the 2020 emissions (sensitivity S2) would in principle ensure best 
that the target in 2030 is met. Under a normal reduction trajectory towards 2030 no net 
surplus will build up in the sectors covered by the current ESD at the EU level. But this 
would  also  create  a  very  tight  market  with  a  need  for  almost  all  surpluses  at  Member 
State level to be transferred directly to those Member States that are developing deficits. 
This would require a perfect market with all willing to sell any surplus at any time. This 
is an unlikely situation in reality and thus probably difficult to accept for those Member 
States that need to acquire AESs over the period to be in compliance.  

Using 2020 targets as starting point (sensitivity S3) would flood the market with a large 
surplus  of  AEAs  early  on  in  the  period.  This  in  particular  reduces  the  incentives  to 
actually take action over the period and increase the risk of not achieving the 2030 target 
of  -30%.  In  the  worst  case  result  no  additional  action  would  be  taken  beyond  the 
Reference projections, reducing the surplus back to zero 2030.  

While constraining the allocation of those Member States that achieved over-compliance 
in the period 2013-2020, it would not lead to an unfair allocation, given that low income 
Member States clearly benefit majorly from the continuation of the target approach that 
sets targets based on GDP per capita.  

On  the  other  hand,  if  Member  States  with  increasing  targets  up  to  2020  are  concerned 
that  their  emissions  may  start  increasing  up  to  2020  before  they  succeed  in  putting 
policies  in  place  to  reduce  emissions  in  line  with  their  2030  target,  a  buffer  could  be 
introduced  that  recognises  that  they  have  an  increasing  target  trajectory  between  2016 
and 2020. This buffer would see total allocation increase by 39 million. 

The annual gap between target and emissions, for those Member States that are projected 
not to achieve their target in 2030 in a cost efficient projection, is typically significantly 
smaller  over  the  period,  than  in  2030,  with  deficits  gradually  building  up  over  time. 
Therefore  the  challenge  to  achieve  the  target  should  also  be  looked  at  over  the  period, 
rather than only in 2030. 

5.3.  Assessing options for the one-off ETS/non-ETS flexibility 

Following  guidance  by  the  European  Council,  the  new  flexibility  mechanism  from  the 
ETS towards the non-ETS, has  to  be devised as a one-off, limited  mechanism, decided 
before 2020, that preserves predictability and environmental integrity.  

To ensure predictability for the carbon market there has to be certainty about the volume 
of  allowances  concerned  that  will be  transferred  from  the  ETS  ,  sufficiently  in  time  so 

60 

 
that  market  participants  in  the  ETS  can  take  this  into  account  sufficiently  beforehand. 
Therefore it is important to do so before 2020. 

It is a flexibility available for eligible Member States but with a limit. It is them who will 
need  to  decide  before  2020  if  and  how  much  they  want  to  make  use  of  this  limited 
flexibility. But once the choice is made it is in principle an irreversible, one-off transfer 
that  will  reduce  the  allocation  with  certainty  in  the  ETS  over  the  period  2021-2030.  It 
will  reduce  the  amount  of  allowances  available  in  the  ETS  for  auctioning  for  those 
Member States that make use of it, and increase the amount of allocation in the sectors 
covered by the current ESD for these same Member States.  

At the same time the mechanism has to preserve environmental integrity. In principle the 
transfer from the ETS has no impact on the total amount of allowed emissions in the EU 
and  should  thus  ensure  environmental  integrity.  But  it  may  impact  the  timing  of  such 
emissions and interact with the Market Stability Reserve in the ETS51.  

Under the MSR, each year 12% of the surplus of allowances is transferred in the MSR 
provided  the  surplus  is  higher  than  833  million  allowances.  If  the  surplus  in  the  ETS 
would  drop  below  400  million  allowances,  then  the  MSR  would  start  releasing 
allowances to the ETS market. 

Normally any transfer of allowances from the ETS to the sectors under the current ESD 
will lower the amount of allowances available for the ETS. These transferred allowances 
would  be  deducted  directly  from  the  number  of  allowances  which  would  otherwise  be 
auctioned  and  thus  reduce  the  auctioning  revenues  for  those  Member  States  using  the 
one-off flexibility. It would reduce the surplus in the ETS, thus reducing the amount of 
allowances being transferred to the MSR (as long as the MSR is building up). This lower 
amount  of  allowances  in  the  MSR  subsequently  lowers  the  total  supply  of  allowances 
that  can  be  returned  to  the  ETS  when  the  MSR  may  release  allowances  back  into  the 
ETS, making it thus more stringent in the mid to longer term once this return to market 
would occur.  

Instead it increases the supply of AEAs for the period 2021 – 2030, and thus reduces the 
incentives to reduce emissions in the ESR up to 2030. This could adversely  impact the 
achievement of the -30% target by 2030 . Therefore the one-off flexibility will need to be 
limited if the concern is to achieve the required reductions in the ESR by 2030. 

This  section  will  focus  on  assessing  this  limit.  The  total  limit  will  be  a  result  of  the 
number of Member States that are eligible as well as the maximum amount of access to 
allowances that can be transferred.  

5.3.1.  Determining limits for eligibility and amount of access 

Eligibility 

With regard to eligibility the European Council gave clear guidance that the new one-off 
flexibility mechanism between the ETS and sectors under the current ESD should only be 
available to those Member States with a reduction target significantly above both the EU 
average and their cost effective reduction potential.  

51 Decision EU) 2015/1814 concerning the establishment and operation of a market stability reserve for the 
Union greenhouse gas emission trading scheme and amending Directive 2003/87/EC 

61 

 
                                                 
Furthermore it states that this flexibility can also be applied on Member States that did 
not  have  free  allocation  for  industrial  installations  in  2013.  Malta  is  the  only  country 
which  qualifies  for  this.  Malta already  has  the  lowest  per  capita emissions  in  the  ESD, 
and  its  2030  target  based  on  GDP  per  capita  would  result  in  emissions  per  capita  of 
around or below 2 tonnes. This is roughly half of the EU average by then (see also Figure 
10).  Together  with  the  fact  that  it  is  the  most  densely  populated  Member  State,  Malta 
sees  its  mitigation  target  as  potentially  challenging.  Allowing  access  to  this  one-off 
mechanism takes account of this specific circumstance. 

To establish which other Member States are eligible, the assessment needs to see which 
Member  States  have  a  target  significantly  above  EU  average  as  well  as  a  target  that  is 
significantly above their cost effective reduction potential. This is in principle a similar 
exercise than done for the discussion on any adjustments on 2030 targets based on cost 
efficiency concerns as assessed in section 5.1.  

On this basis DE, FR and UK would not be in a position that they have a significant cost 
efficiency challenge and thus they would not have access to the one-off flexibility.  

Instead certainly IE and LU would have a large gap and they clearly should have access 
to the one-off flexibility with targets set at GDP per capita.  

For NL, BE,  AT, DK eligibility can be considered, but  access  to  it should  probably be 
put at a level below that of IE and LU (see below the section on the amount of access).  

For  FI  and  SE  eligibility  could  be  considered  for  the  same  reasons  they  were 
differentiated as group in section 5.1.2, e.g. as a matter of precaution for the situation that 
the  relatively  high  emission  reductions  of  the  most  recent  scenarios  would  not 
materialise.  

For the remainder of this section it is assumed allowing also SE and FI access to the one-
off flexibility, but just as NL, BE, AT and DK at a level below that of IE and LU. 

There  is  one  Member  State,  IT,  with  a  target  above  EU  average,  but  which  was  not 
included in the assessment in section 5.1.2 because it is not a Member State with a GDP 
per capita above EU average. Italy's target at -33% (see Table 1) is 3 percentage points 
above the average EU target. Figure 14 below expands the assessment of section 5.1.2 to 
include  IT.  From  this  it  can  be  seen  that  if  emission  reductions  are  projected  cost 
efficiently across the EU, Italy rather falls under the category of Member States that has a 
limited  gap,  like  DE,  FR  and  UK,  and  thus  would  not  have  access  to  the  one-off 
flexibility. 

Overall achievement of higher energy savings would not alter this picture.  

62 

 
Figure  14:  Gap  in  2030  between  GDP-based  targets  and  cost-efficient  emission 
reductions for all Member States with a target above -30% 

Source: Commission calculations based on PRIMES, GAINS, Eurostat and EEA 2015 

Amount of access 

The  one-off  flexibility  is  foreseen  to  address  cost-efficiency  concerns  with  regard  to 
emission reductions in the sectors under the ESR. This is also the case for the option to 
adjust 2030 targets for high income Member States, as discussed in section 5.1.5.  

So the level of access to the one-off cannot be seen in isolation from other policy choices 
that will also impact cost efficiency concerns.  

To assess what level of access can be appropriate, Table 10 below looks into the gap over 
period  for  eligible  Member  States,  using  as  target  trajectory  starting  point  2016-2018 
emissions  while  differentiating  the  target  trajectory  end  point  in  2030  between  the  two 
options  that  see  target  adjustment  within  the  group  of  high  income  Member  States 
(options T2 and T3).  

Table 10: Access to the one-off flexibility, assessing who has a considerable gap over 
the period after target adjustment in 2030, using the EUCO30 projection  

% of 
2005 
emission
s 

LU 
SE 
DK 
IE 
NL 
AT 
FI 
BE 

Average annual gap/deficit (-) or surplus (+)over the period 2021-2030 
(emissions as in EUCO30 projections) 

T2: Limited target adjustment in the 
group of high income Member 
States  
-15.7% 
2.1% 
-4.9% 
-8.7% 
-5.5% 
-1.5% 
1.5% 
-3.6% 

T3: high target adjustment in the 
group of high income Member 
States 
-15.7% 
2.1% 
-2.7% 
-6.5% 
-3.3% 
0.7% 
1.0% 
-1.4% 

63 

 
 
 
What  is  clear  is  that  the  LU  and  IE  gaps  over  the  period  stand  out,  even  after  a  2030 
target adjustment. For NL, BE, and DK the gap remains at around 4% and more on an 
annual  basis  over  the  period,  in  case  of  option  T2.  This  still  represents  a  large  gap  in 
2030 itself, with the deficit building up gradually over the period. It becomes smaller in 
option T3 but remains a deficit over the period for these countries. The exceptions are FI 
and SE who for both target trajectories, and assuming the more recent projections, would 
see no deficits and also AT would potentially in option T3 see no more deficit. 

See  annex  8.6  for  a  table  similar  as  Table  10  with  Member  States  results,  but  then 
assessed using the EUCO27 projections, showing by and large the same impacts. 

5.3.2.  Assessment of impacts  

Two options will be assessed with in each case IE and LU having more access to the one-
off flexibility than the other eligible Member States. One option has limited access and 
one  has  large  access.  The  option  with  large  access  will  allow  a  level  of  access  that  in 
principle closes to a large  extent the remaining gaps in combination with a large target 
adjustment equal to T3 and the options with limited access would see half of these levels:  

  Baseline option O1, no one-off flexibility 

  Policy option O2, one-off flexibility for those eligible with low access limits:  

- LU, IE have a limit equivalent to 4% of 2005 emission per annum 

- NL, BE, AT, DK, FI, SE, MT have a limit equivalent to 2% of 2005 emission per 
annum 

  Policy option O3, one-off flexibility for those eligible with high access limits:  

-LU, IE have a limit equivalent to 8% of 2005 emission per annum 

- NL, BE, AT, DK, FI, SI, MT have a limit equivalent to 4% of 2005 emission per 
annum 

For  Malta,  which  in  all  five  cost  efficient  GHG  reduction  projections  shows  a  surplus, 
and not a gap, it is assumed that access is limited in a similar manner as for FI and SE, as 
a precautionary measure for any challenges it may see due to its particular situation. 

64 

 
 
 
 
 
 
 
Table  11:  Options  for  limits  on  access  for  the  one-off  flexibility  from  ETS  for 
eligible Member States 

Maximum amount of one-off 
flexibility for the whole period 
2021-2030, million tonnes 
O3 
O2 
O1 
8 
4 
0 
38 
19 
0 
47 
24 
0 
31 
16 
0 
23 
12 
0 
15 
7 
0 
14 
7 
0 
17 
9 
0 
0.4 
0.2 
0 
194 
97 
0 

Option 
LU 
IE 
NL 
BE 
AT 
DK 
FI 
SE 
MT 
Total 

Environmental impacts 

For effort sharing sectors 

The impact of the one-off flexibility on environmental integrity in the sectors covered by 
the  current  ESD  relates  to  the  additional  emission  allocations  in  these  sectors  over  the 
period 2021-2030.  

Under option O2, which would only give a relative small access to those countries which 
are  deemed  eligible  for  this  mechanism,  the  maximum  amount  entering  these  sectors 
would  be  limited  to  97  million  tonnes  over  the  period  2021-2030  (see  Table  11).  This 
represents over a 10 year period on average the equivalent of around 0.35% of 2005 ESD 
emissions  annually.  This  would  still  increase  the  surplus  in  the  system  by  19%  to  609 
million (see Table 12). 

This amount would double to 194 million in option O3, starting to have a more serious 
impact on the surplus, increasing by almost 40% to 707 million. This would already start 
to cause a more considerable risk to achieve the target in 2030.  

As a sensitivity it was also assessed what would happen if other Member States with a 
target  above  EU  average  but  not  found  eligible  to  the  one-off,  would  have  access  (FR, 
DE, UK and IT). This is done by adding two sensitivities to the assessment in Table 12. 
Even if limited on an annual basis to the equivalent of 2% of 2005 emissions, this would 
have  major  impacts  on  the  potential  available  surplus,  increasing  it  to  almost  a  billion 
AEAs. Clearly this is incompatible with environmental integrity of the system and leads 
in  theory  to  a  situation  that  an  emission  profile  as  in  Reference,  i.e.  without  additional 
policies, would be compliant with the 2021-2030 target. 

65 

 
 
 
 
 
Table 12: Impact on the build-up of a surplus or deficit in the sectors in the current 
ESD over the period 2021-2030 of different options for limits to access to the one-off 
flexibility 

Options for limit access 
one-off flexibility 
O1 
O2 
O3 

O2 but also FR, DE, UK 
and IT 2% access limit 
O3 but also FR, DE, UK 
and IT 4% access limit 

In the ETS 

EU surplus (+) or deficit (-) over the period 2021-2030 
with the EUCO30 projection (million tonnes) 
511 
608 
705 
Additional sensitivities 

927 

1343 

The one-off transfer in principle impacts both the surplus and the number of allowances 
placed  in  the  Market  Stability  Reserve  over  the  period  2021  to  2030.  The  design 
modalities  of  the  one-off  transfer  determine  the  balance  between  these  impacts.  A  late 
transfer from the ETS into the ESR, i.e. beyond the time the MSR rules result in annual 
feeds of allowances into the MSR, mainly results in a higher reduction of the surplus. A 
front-loaded transfer of the ETS into the ESR conversely would have the opposite effect, 
leading to fewer allowances being placed in the MSR and a smaller impact on the surplus 
(for more detailed information on how the one-off flexibility interacts with the MSR, see 
annex 8.9). 

Whatever  the  timing  of  the  transfer  from  the  ETS  to  the  ESR,  the  total  change  to  the 
overall number of ETS allowances is the same, but the inter-temporal impacts on surplus 
in the ETS and MSR can differ. Front-loading of the one-off transfer may have an impact 
on  the  functioning  of  the  MSR,  possibly  cutting  the  period  of  MSR  feeding  short  by  a 
year.  Alternatively,  if  it  is  required  that  the  one-off  transfer  is  deducted  from  the  ETS 
surplus  in  the  year  when  it  is  used  for  compliance  with  national  ESR  targets52,  it  is 
expected to be more neutral with regard to the functioning of the MSR, i.e. not to reduce 
the  amount  of  allowances  to  be  fed  into  the  MSR.  This  is  due  to  the  expectation  that 
Member  States  benefitting  from  the  one-off  transfer  will  effectively  experience  more 
significant shortages in effort sharing sectors only in later years. 

Distributional impacts 

For effort sharing sectors 

The  one-off  flexibility  mechanism  is  aimed  at  Member  States  with  a  target  well  above 
EU average that is particularly challenging, as well as MT. If these Member States would 
decide to  use  it fully, it would in  principle reduce any possible deficit and increase the 
overall surplus in the system (assuming of course that all Member States would continue 
to take all actions in-line with a cost efficient achievement of targets across the EU).  

52  According  to  MSR  rules  allowances  are  taken  into  account  for  the  surplus  indicator  until  they  are 
surrendered for emissions. 

66 

 
 
 
                                                 
Table  8  represents  the  maximum  impact  of  the  one-off  flexibility  on  the  gap  over  the 
period if used to the full by Member States.  

While  Luxembourg  could  not  benefit  from  the  target  distribution,  it  clearly  can  benefit 
from this flexibility, even though it would require them to forego a considerable share of 
the auctioning revenues. 

Option O3 would of course have the biggest impact but would clearly over-compensate 
the eligible countries in case of a high 2030 adjustment T3, with only LU still in a deficit. 

Option  O2  would  close  most  of  the  remaining  gaps  when  used  in  combination  with  a 
high 2030 adjustment, but not if done in combination with a limited 2030 adjustment T2.  

What is  clear  is that any redistribution impacts in  the ESR cannot be looked at only in 
isolation and need also to be assessed in conjunction with the other options, which will 
be done in section 6. 

Table  13:  Impact  of  the  one-off  flexibility  for  those  that  have  a  considerable  gap 
over the period, using the EUCO30 projection 

% of 
2005 
emission
s 
Options 
LU 
IE 
NL 
DK 
BE 
AT 
FI 
SE 

EU surplus (+) or deficit (-) over the period 2021-2030  
with the EUCO30 projection (million tonnes) 

T2 

O2 
-11.7% 
-4.7% 
-3.5% 
-2.9% 
-1.6% 
0.5% 
3.5% 
4.1% 

O1 
-15.7% 
-8.7% 
-5.5% 
-4.9% 
-3.6% 
-1.5% 
1.5% 
2.1% 

O3 
-7.7% 
-0.7% 
-1.5% 
-0.9% 
0.4% 
2.5% 
5.5% 
6.1% 

O1 
-15.7% 
-6.5% 
-3.3% 
-2.7% 
-1.4% 
0.7% 
1.0% 
2.1% 

T3 

O2 
-11.7% 
-2.5% 
-1.3% 
-0.7% 
0.6% 
2.7% 
3.0% 
4.1% 

O3 
-7.7% 
1.5% 
0.7% 
1.3% 
2.6% 
4.7% 
5.0% 
6.1% 

See annex 8.6 for a table similar as Table 13 with Member State results but then assessed 
using the EUCO27 projections, showing by and large the same impacts. 

In the ETS 

Under the ETS, the distributional impacts are proportional to the number of allowances 
that are transferred. For those Member States making use of the flexibility the amount of 
allowances they auction is reduced. The impact of the use of the one-off flexibility on the 
auctioning amounts also depends on the relative size of the ETS and ESR, as well as on 
the redistribution of allowances for auctioning in the ETS.  

This can be seen in Table 14, with Malta only losing a bit less than 3% of its auctioning 
volume if it would use to the maximum its one-off flexibility equivalent to annually 2% 
of 2005 ESD emissions. This is because Malta has in relative terms an ETS sector that 
takes a much larger share of total emissions than for the EU average, and Malta benefits 
from  the  redistribution  in  the  ETS  and  does  not  contribute  to  it  like  the  other  Member 
States eligible for the one-off flexibility. On the opposite side there is LU, where the ETS 

67 

 
 
sector  covers  less  than  20%  of  overall  emissions,  and  thus  where  maximum  use  of  the 
one-off flexibility would consume a large portion of auctioning volumes. 

Table  14:  Estimated  size  of  one-off  flexibility  expressed  as  share  of  auctioning 
volumes over period 2021-2030 with maximum use of one-off flexibility 

Share of auctioning volumes over period 2021-
2030 with maximum use one-off flexibility 

Options 
LU 
IE 
NL 
BE 
AT 
DK 
FI 
SE 
MT 

O2 
>40% 
20-40% 
<10% 
<10% 
<10% 
<10% 
<5% 
10-20% 
<5% 

O3 
>80% 
>40% 
10-20% 
10-20% 
10-20% 
10-20% 
<10% 
20-40% 
<5% 

It  should  be  noted  that  the  numbers  shown  in  Table  14  do  not  take  into  account  any 
additional reduction in auction volumes as a result of the placement of allowances in the 
Market Stability Reserve, reducing further the amounts available for auctioning.  

For Member States not (eligible for) using the one-off transfer it would be beneficial if 
lower  amounts  are  placed  in  the  reserve,  because  this  would  lead  to  an  increase  in  the 
number of allowances for auctioning. 

Economic impacts 

For effort sharing sectors 

The one-off flexibility basically can increase supply for AEA transfers if Member States 
that  don't  need  it  would  still  opt  to  use  it  because  they  need  to  decide  on  it  before  the 
period starts, but it is unlikely that these high income Member States will be typical AEA 
sellers. On the other hand it can actually decrease supply if those Member States willing 
to  sell  decide  to  reduce  their  emissions  less  as  in  the  cost  efficient  projections  because 
they see fewer opportunities for transfers, as such increasing the risk that the EU overall 
will not achieve the -30% reduction. 

But it certainly  does  reduce  the shortages  for those  with  an expected gap and thus will 
reduce demand for trading.  

The impact on reduction of demand is highest of course with option O3. In combination 
with  option  T2  demand  reduces  more  than  in  combination  with  option  T3,  because  in 
option  T2  most  of  the  demand  comes  from  Member  States  eligible  for  the  one-off 
flexibility,  while  with  option  T3  this  demand  decreases  and  actually  the  demand 
increases  from  DE  and  FR,  two  countries  contributing  to  the  target  adjustment  and 
having no access to the one of flexibility.  

68 

 
 
Table  15:  Development  of  Member  States  with  a  deficit  and  potential  demand  for 
AEAs, taking into account different options for starting point and one-off flexibility 

MS with a deficit (potential buyers) over the 
period 2021 -2030 (million tonnes) (EUCO30 
projection) 
Options one-off flexibility 
O1 
O2 
O3 

Options 2030 target adjustment 

T2 

-235 
-156 
-89 

T3 

-201 
-135 
-101 

In the ETS 

Use of the transfer from the ETS is likely to decrease the amount of auction revenues in 
the  EU  ETS  for  those  eligible  Member  States  that  choose  to  make  use  of  the  one-off 
flexibility.  This  can  lead  to  lower  auction  revenues  being  available  for  climate  and 
energy  measures.  It  could  also  reduce  funds  available  for  the  compensation  of  indirect 
carbon costs of industry as a result of increased electricity prices.  

There may be an impact due to changes in the carbon price, even though this is expected 
to  be  proportional  to  the  overall  reduction  in  the  available  supply  of  allowances.  The 
overall  cap  or  limit  on  the  number  of  allowances  in  the  ETS  is  some  15.5  billion 
allowances  in  2021-2030.  This  means  that  while  the  flexibility  would  result  in  a 
reduction of auctioned allowances; this is limited in scale when compared to the overall 
number of allowances on the market.  

Depending on the eligibility and amount of access, the allowances to be taken out of the 
EU  ETS  will  have  a  differing  impact  on  the  power  sector  and  on  energy  intensive 
industry  which  fall  under  the  ETS.  Installations  in  the  power  sector  have  to  buy  all 
allowances needed for compliance on the carbon market, and a decrease of the available 
supply  would  impact  the  carbon  price.  Any  such  impact  will  depend  on  the  volume  of 
allowances  and  the  interaction  with  the  Market  Stability  Reserve.  A  smaller  impact  on 
industry  is  expected,  since  the  proposal  for  revision  of  the  EU  ETS  foresees  the 
continuation  of  free  allocation  to  industry.  Any  potential  price  impact  would  therefore 
affect mainly those allowances which are purchased on the market while at the same time 
being offset by a higher value of free allocation.  

Finally, lower auction volumes by those Member States opting to make use of the one-
off transfer could be partially counterbalanced by any increase in the carbon price which 
could  lead  to  more  revenues  from  auctioning  being  available  for  climate  and  energy 
measures in other Member States. 

Conclusion: The one-off transfer could in theory reduce mitigation costs for eligible MS, 
but would lead to diverse impacts both in ETS and in effort sharing sectors. For the latter 
sectors,  access  to  the  one-off  flexibility  needs  to  be  based  on  the  need  for  AEAs  for 
compliance looking at the potential deficits over the whole period and taking into account 
the 2030 target adjustment. For instance if this 2030 target adjustment is high, it is not 
necessary  to  also  give  access  to  a  high  level  of  the  one-off  flexibility.  Overall  it  will 
increase the risk of not achieving the -30% target because it will increase the surplus and 
thus at the same time increase the risk that Member States don't take the necessary action 
to achieve the 2030 targets (and thus reduce the surplus towards the end of the period). 

69 

 
 
Therefore a limited access to the one-off seems more appropriate than a large access to 
the one-off.  

In  the  ETS,  it  can  lead  to  either  a  decrease  in  the  number  of  allowances  placed  in  the 
MSR or a reduction of the surplus. 

5.4.  Assessing options for the integration of LULUCF 

The  Impact  Assessment  on  agriculture  and  LULUCF  assessed  the  limited  mitigation 
potential for the agriculture sector as well as the potential for LULUCF to contribute to 
the mitigation effort, ensuring such actions are truly additional and benefit the overall net 
LULUCF sink in the EU.  

Agriculture is expected to reduce emissions less than other sectors by 2030. For the 2030 
framework  impact  assessment53  projections  with  higher  levels  of  energy  efficiency 
typically  saw  agricultural  non-CO2  emissions  be  reduced  by  less  than  30%,  with  the 
lowest reduction projected at -19% compared to 2005. The projections for the 2050 low 
carbon economy roadmap saw these emissions go down by around 20% by 203054. The 
Impact Assessment for agriculture and LULUCF indicated that the impacts on agriculture 
production even at levels of -20% may be considerable though impacts are significantly 
abated with lower reduction levels of -15% as well as in cases in which public resources 
are specifically channelled to meet the mitigation effort in the sector. 

The more recent EUCO27 scenario sees a lower need for reductions in agriculture than 
the scenarios used for the 2030 framework impact assessments. It sees agriculture non-
CO2  reductions  by  2030  in  the  order  of  only  10%  below  2005  emissions  and  the 
EUCO30 scenario sees limited need for additional action for non-CO2 emissions beyond 
the baseline (EU Reference scenario 2016)55 if also an energy savings level of 30% can 
be achieved while overall reduction in the ESR are kept at 30%.  

If  agriculture  and  other  non-CO2  emissions  would  reduce  more  than  in  the  Reference 
scenario, and at the same time 30% energy savings would be achieved, then there could 
potentially  be  overachievement  of  the  target  in  the  ESR,  and  thus  also  of  the  at  least  -
40% economy wide target compared to 1990. 

Thus, depending on the Member State, i.e. the relative size of its sectors in the ESR and 
the ambition of its  overall ESR target, reducing emissions  can  be more  challenging for 
those countries that have a large share of agriculture emissions. Similar to the assessment 
in section 5.1.2, Figure 7, if larger amounts of reductions need to come from the energy 
sector, then typically less overall emission reductions will be achieved in those countries 
with the largest share of agriculture sectors in the ESR emissions. 

To  enable  the  land  sector  to  contribute,  it  is  proposed  to  allow  a  limited  amount  of 
LULUCF  credits  for  compliance  in  the  ESR.  This  access  has  to  be  limited,  because 
potentially the  supply in the LULUCF sector can  still turn out  to  be large, even  bigger 
than the around 972 million of additional reductions needed over the period 2021-2030 

53 SWD(2014)15 
54 SEC(2011) 288 final 
55  The  non-CO2  emissions  in  the  ESD  in  the  2016  Reference  scenario  decrease  already  by  26%,  much 
higher  than  in  the  2013  Reference  where  they  only  decreased  by  15%.  The  main  reasons  are  updated 
inventory  guidelines  that  result  in  larger  reductions  in  historic  emissions  in  the  waste  sector  and  the 
implementation of the F-gas regulation that is already consistent with long term decarbonisation objectives. 

70 

 
                                                 
compared  to  the  Reference  (see  Table  5).  In  order  not  end  up  in  a  situation  that  no 
additional  effort  is  needed  within  the  ESR  beyond  the  EU  2016  Reference  scenario,  a 
clear limit needs to be placed on the amount of LULUCF credits entering the ESR.  

The level of access will be linked to the size of the agriculture sector in the ESD. This 
recognises that countries with a large agriculture sector potentially face a much stronger 
constraint  in  achieving  their  reduction  target,  with  certainly  less  impact  on  overall 
reductions  of  actions  undertaken  to  reduce  energy  emissions  in  the  ESR.  Still,  all 
Member States should have access in order to stimulate the preparation of an integrated 
strategy for reducing emissions for all sectors using land.  

The impact assessment for Agriculture and LULUCF looks in more detail into the rules 
necessary to ensure LULUCF mitigation action is real and additional, as well as what the 
specific impacts are in the agriculture and land use sectors. The impact assessment also 
examines  the  degree  to  which  action  may  be  used  to  provide  flexibility,  i.e.  the 
conversion  of  mitigation  in  the  LULUCF  sector  into  credits  that  can  be  used  for  any 
shortfall in the ESR, notably to compensate for any challenges related to mitigation in the 
agriculture  sector.  This  section  will  analyse  what  the  utilisation  of  such  credits  would 
mean for the ESR at large. 

If all LULUCF mitigation would be able to enter the ESR, even if a Member State would 
not need it for its own compliance, it would increase the total supply in the market and 
thus  increase  the  supply  for  AEA  transfers.  This  would  further  reduce  any  incentives 
coming  from  the  transfer  flexibility  itself  for  additional  emission  reductions  to  create 
AEAs available for transfers. 

Therefore  LULUCF  credits  are  assumed  to  enter  the  ESR  to  the  extent  that  a  Member 
State would need it to achieve their own ESR target, but not beyond that. Such credits are 
intended to stimulate real and additional action in the LULUCF sector for those Member 
States  that  have  challenges  related  to  the  achievement  of  its  overall  non-ETS  target, 
closely linked to the size of its agriculture sector in the ESR.  

This  approach  should  ensure  sufficient  incentives  remain  to  decarbonise  the  sectors 
within  the  ESR,  while  taking  into  account  specific  concerns  related  to  the  lower 
mitigation potential in the agriculture sector. LULUCF credits generated in the LULUCF 
sector that are not needed for compliance in the ESR by a Member State can remain in 
the LULUCF sector and can be traded in the LULUCF sector. 

The table below presents the option assessed in relation to the distribution, Member State 
by Member State, of the limits on LULUCF credits entering the ESR, which is in total 
equivalent  to  280  million  tons  over  the  period  2021-2030  (see  also  Impact  Assessment 
for agriculture and LULUCF on a further assessment on the level of this flexibility).  

In  this  option  a  Member  States  is  granted  a  level  of  access  to  LULUCF  credits  for 
possible use in the ESR that corresponds to its share of agriculture non-CO2 emissions in 
the ESD. The limit is expressed as percentage of agriculture non-CO2 emissions. 

71 

 
Table  16:  Distribution  of  LULUCF  credit  limit  on  the  basis  of  the  share  of 
agriculture non-CO2 in the ESD 

Share of 
agriculture non-
CO2 emissions in 
ESD 2008-2012* 

EU 
IE 
LT 
DK 
LV 
RO 
BG 
FR 
EE 
FI 
ES 
SE 
CY 
EL 
PT 
NL 
SI 
PL 
HU 
SK 
UK 
HR 
AT 
BE 
DE 
CZ 
IT 
MT 
LU 

16% 
40% 
28% 
27% 
25% 
24% 
21% 
20% 
20% 
18% 
18% 
16% 
16% 
16% 
16% 
15% 
15% 
15% 
14% 
14% 
13% 
13% 
13% 
13% 
13% 
11% 
10% 
8% 
7% 
* Rounded to the nearest percentage 
** Calibrated to match 280 million tonnes 

Average annual 
limit of LULUCF 
credits as a % of 
annual 2008-
2012 agriculture 
emissions 
6% 
15% 
15% 
15% 
15% 
7.5% 
7.5% 
7.5% 
7.5% 
7.5% 
7.5% 
7.5% 
7.5% 
7.5% 
7.5% 
7.5% 
7.5% 
7.5% 
3.75% 
3.75% 
3.75% 
3.75% 
3.75% 
3.75% 
3.75% 
3.75% 
3.75% 
3.75% 
3.75% 

Total limit of 
LULUCF credits 
over the period 
2021-2030 in 
million tonnes** 

Average annual 
limit of LULUCF 
credits as a % of 
annual 2005 ESD 
emissions) 

-280 
-26.8 
-6.5 
-14.6 
-3.1 
-13.2 
-4.1 
-58.2 
-0.9 
-4.5 
-29.1 
-4.9 
-0.6 
-6.7 
-5.2 
-13.4 
-1.3 
-21.7 
-2.1 
-1.2 
-17.8 
-0.9 
-2.5 
-3.8 
-22.3 
-2.6 
-11.5 
-0.03 
-0.25 

1.0% 
5.6% 
5.0% 
4.0% 
3.8% 
1.7% 
1.5% 
1.5% 
1.7% 
1.3% 
1.3% 
1.1% 
1.3% 
1.1% 
1.0% 
1.1% 
1.1% 
1.2% 
0.5% 
0.5% 
0.4% 
0.5% 
0.4% 
0.5% 
0.5% 
0.4% 
0.3% 
0.3% 
0.2% 

Source: Table based upon distribution key of proportion of ESD using National inventories (Mar 2016) 

Beneficiaries with the highest relative access to LULUCF credits are IE, LT, DK and LV 
because  of  their  high  shares  of  agriculture  emissions.  These  Member  States  potentially 
are allowed to use per annum on average the equivalent of around 4% or more of its 2005 
ESD emissions, with IE having a limit the equivalent of 5.6% of 2005 ESD emissions. 
The group of Member States with low agriculture shares would potentially be allowed to 
use per annum on average the equivalent of less than 0.5% of its ESD emissions. 

72 

 
 
 
Environmental impacts 

If a Member State decides to compensate any shortfall in its ESR target with LULUCF 
credits,  assuming  that  the  Member  States  can  effectively  generate  these  credits  in  the 
LULUCF sector, then the reduction in the ESR itself will be below the reduction target.  

Taking  into  account  that  the  use  of  LULUCF  credits  can  be  banked  within  the  period, 
and assuming maximum use of LULUCF credits up to the full 280 million credits, then 
this could potentially cover an underachievement of the ESR target in 2030 of roughly 2 
percentage points56. 

This  should  not  pose  an  environmental concern  for  the  non-ETS  as  a whole  as  long  as 
linking  the  two  sectors  leads  to  real  additional  action  in  the  LULUCF  sector  and 
generates corresponding increases in the net LULUCF sink. As LULUCF credits will be 
generated by efforts made primarily in agriculture, this flexibility will also drive a more 
integrated development of the agricultural sector in response to climate obligation, with 
larger environmental co-benefits.  

Moreover, in the longer term it does allow to gradually develop the path to balancing of 
emissions (post-2050) as foreseen in the Paris Agreement 

But a clear limit to LULUCF credits will also be needed to prevent undermining overall 
efforts in the ESR sectors.  

This flexibility option should be mainly directed towards those Member States that have 
real  difficulty  to  achieve  the  ESR  targets  domestically,  recognising  in  this  context  the 
specific situation of the agriculture sector.  

The actual amount of LULUCF credits eventually being used in the ESR will depend on 
many factors, such as: 

  Would Member States prefer to achieve their target in the ESR or will they rather 
want to invest or even step up LULUCF activities and generate credits that they 
can use in the ESR? 
If Member States would have a deficit, to what extent would Member States rely 
on existing flexibilities between Member States when they cannot achieve their 
target in the ESR?  

 

  To what extent will those that are entitled to use the one-off flexibility from the 

ETS to the ESR effectively use it? 

As  Member  States  have  different  options  at  their  disposal  to  accomplish  ESR 
compliance, it is not  possible to predict with full accuracy how many LULUCF credits 
will be used in the ESR. 

If  in  the  extreme  case,  emissions  in  all  Member  States  fell  short  of  their  target,  and 
assuming that none used the one-off flexibility, then up to 280 million LULUCF credits 
would be used fully.  

56  See  Table  16,  on  average  over  the  period  option  L2  allows  the  equivalent  per  annum  of  1%  of  2005 
emissions. Assuming that in 2021 nothing would be used of this credit limit and that then gradually in a 
linear increasing manner all LULUCF credits would be used for compliance by 2030, resulting in 2030 in a 
LULUCF credit use equivalent to maximum 2%. 

73 

 
                                                 
On  the  other  extreme,  if  emissions  in  all  countries  were  reduced  as  modelled  in  the 
EUCO30 scenario and thus achieved the -30% target already in the ESR (at least at the 
overall  EU  level),  if  a  large  target  adjustment  was  foreseen  for  high  income  Member 
States (T3) and access to the one-off would be used to the maximum (O3), then the need 
for  LULUCF  to  compensate  for  potential  deficits  in  the  ESR  would  be  as  low  as  74 
million. 

Nevertheless, even in this scenario, maintaining national ceilings of LULUCF credits that 
would sum up to 280 million LULUCF at EU28 level would ensure Member States an 
appropriate  level  of  choice  on  how  to  combine  different  flexibilities.  This  would  in 
particular be of importance if baseline emission reductions don't materialise as modelled 
in the EUCO30 scenario. 

Distributional impacts 

Actual use of the LULUCF flexibility in the ESR will be highly dependent on what the 
eventual real reductions will be in each Member State and to what extent they would use 
other flexibilities.  

The  table  below  looks  at  the  use  by  high  income  Member  States  only  and  what  the 
impact  is  of  the  use  of  LULUCF  credits  and  the  potential  target  adjustments  and  new 
flexibilities introduced.  

If  high  Income  Member  States  will  not  reduce  emissions  beyond  Reference,  and  use 
LULUCF credits in part to comply with their target, next to the use of transfers between 
Member  States,  than  we  see  an  inflow  of  151  million  LULUCF  credits  into  the  ESR, 
with only UK not needing to use it.  

Instead, if high income Member States will not reduce emissions in the ESR in line with 
the EUCO30 projections then they only use 98 million LULUCF credits, with also DE, 
FI,  FR,  SE,  UK  not  using  their  LULUCF  credits  while  LU,  DK,  IE,  NL,  AT  and  BE 
would potentially use it to the maximum limit.  

If a large target adjustment would be agreed (T3), then the use of LULUCF credits might 
increase,  because  notably  FR  and  DE  would  see  a  deficit  that  is  increasing  in  the  ESR 
and thus potentially an increased use of LULUCF credits by them (assuming they do not 
use existing flexibilities between Member States), while such a target adjustment would 
still see deficits in LU, IE, NL and BE that would potentially be covered by a maximal 
use of their LULUCF credits. 

When these countries have access to a high amount of one-off flexibility and decide to 
use it to the maximum (O3), then the potential use of LULUCF credits would decrease in 
these  high  income  Member  States  below  their  limit,  with  the  exception  of  LU  and  the 
NL.  

74 

 
 
 
 
Table  17:  Use  of  LULUCF  credits  by  high  income  Member  States,  impact  on 
distribution of use depending on choice of flexibilities using the EUCO30 projection 

Million 
ton 

All High 
Income 
Member 
States 
LU 
SE 
DK 
IE 
NL 
AT 
FI 
BE 
DE 
FR 
UK 

Reference 
T1 
O1 

EUCO30 
T1 
O1 

EUCO30 
T3 
O1 

EUCO30 
T3 
O3 

151 

0.2 
5 
15 
27 
13 
2 
5 
4 
22 
58 
0 

98 

0.2 
0 
15 
27 
13 
2 
0 
4 
0 
36 
0 

128 

0.2 
0 
10 
27 
13 
0 
0 
4 
16 
58 
0 

74 

0.2 
0 
0 
0 
0 
0 
0 
0 
16 
58 
0 

See  annex  8.6  for  a  table  similar  as  Table  17  with  Member  States  results  but  then 
assessed using the EUCO27 projections, showing by and large the same impacts. 

When  looking  at  the  EUCO27  and  EUCO30  scenarios  almost  no  low  income  Member 
State makes use of LULUCF credits for compliance in the ESR. But the WEM-EXTRA 
scenario  is  more  conservative,  with  CY,  ES,  IT,  LV,  MT,  RO  and  SK  also  using 
LULUCF credits to achieve compliance in the ESR. 

Economic impacts 

The use of LULUCF credits, as well as the use of the one-off flexibility typically reduces 
the need for any other transfers between Member States. If high income Member States 
would  reduce  emissions  in-line  with  the  EUCO30  scenario,  then  demand  for  credits  or 
transfers could be as high as 282 million units (in case of the EUCO27 scenario this is 
319  million  units).  Instead  with  the  adjustment  of  targets  and  the  maximum  use  of  the 
one-off  flexibility,  the  maximum  use  of  LULUCF  credits  by  these  countries  would 
decrease to levels below 100 million.  

Of course this also assumes that ESR emissions are effectively reduced to -30% as in the 
EUCO27  and  EUCO30  projections.  In  real  life  emissions  might  reduce  less  if  for 
instance Member States with LULUCF credits for use in the ESR for compliance decide 
to reduce emissions in the ESR itself less.  

Conclusion:  Access  to  LULUCF  credits  can  help  to  face  any  challenges  seen  with 
achievement of ESR targets, in particular for those Member States with a higher share of 
agriculture emissions. Overall it is expected that especially high income Member States 
with the highest overall targets will make most use of it, but also lower income Member 
States can benefit from it if emissions are not reduced as projected. 

75 

 
 
5.5.  Assessing policy options for enhanced flexibilities 

The  assessment  is  divided  into  two  parts:  inter-temporal  flexibility  and  inter-Member 
State flexibility. 

5.5.1. Inter-temporal flexibility 

In the policy baseline option F1, unused AEAs may be banked and used in subsequent 
years within the ESR compliance period57; AEA allocations from the following year may 
be  “borrowed”  to  cover  the  current  year’s  emissions  up  to  a  limit  of  5%.  Additional 
flexibility is available to Member States for the years 2013-2014 under the current ESD 
in the event of “extreme meteorological conditions”; in such cases a Member State can 
request an increased borrowing limit which may be granted by the European Commission 
on  a  case-by-case  basis.  Banking  and  borrowing  activities  within  the  period  are 
accounted for in the Union Registry where compliance is monitored and checked by the 
European Commission.  

Policy option F2 would consist of an increase in permitted borrowing to 10%, reduced to 
5% from 2026 and onwards (i.e., a limit of 5% for borrowing from the subsequent year to 
cover any deficit in 2026 and onwards).  

Environmental impacts 

Option  F2  would  allow  time  for  Member  States  to  respond  to  any  unexpected  lack  of 
availability  of  either  domestic  abatement  or  AEAs  from  other  Member  States  by 
introducing additional policies to secure further abatement in the later years of the period 
and thus compliance with the 2030 target. On the other hand, compared to the baseline, 
this  option  could  increase  the  risk  of  non-compliance  for  individual  Member  States  in 
later  years  of  the  commitment  period  if  substantial  borrowing  takes  place  early  in  the 
period.  

Distributional impacts 

Because of a higher level of allowed borrowing in the first part of the compliance period, 
option F2 might delay or reduce any demand for AEA transfers from Member States that 
are expected to have a shortage of AEAs over the period and could thus lead to lower or 
delayed stimulus for transfers compared to the baseline option F1. 

Economic impacts 

Option  F2  would  enhance  the  flexibility  for  Member  States  compared  to  the  baseline 
option F1 in managing the use of AEAs over the whole commitment period to cover any 
shortage  in  specific  years.  It  may  enable  Member  States  greater  time  to  introduce  new 
mitigation  policies  with  a  longer  lead-in  time  but  with  long-term  cost-efficiency.  This 
option  could  thus  help  alleviate  compliance  costs  over  the  whole  period  for  some 
Member States. However, allowing Member States to borrow at higher levels, rather than 
make  up  a  shortfall  in  allocations  through  purchases  from  other  Member  States,  could 
lead to less use of cost-effective abatement potentials in other countries.  

57 Member States can also cancel any surplus AEAs after the annual compliance check if they want. 

76 

 
                                                 
Option  F2  would  also  remove  the  need  for  any  administrative  procedures  related  to 
additional requests from Member States for increased borrowing in the case of extreme 
weather events and therefore reduces the administrative burden.  

In  conclusion,  both  option  F1  and  F2  imply  quite  a  high  degree  of  inter-temporal 
flexibility, so both of them will be included in the option packages in section 6.2. 

5.5.2. Inter-Member State flexibility 

When  assessing  policy  options  for  inter-Member  State  flexibility,  it  needs  to  be 
considered to what extent existing flexibility instruments should be enhanced in order to 
stimulate further transfers of AEAs between potential “seller” and buyer” countries. As 
the  analysis  in  the  previous  sections  demonstrate,  this  will  to  a  large  extent  depend  on 
what  would  be  the  expected  demand  from  a  limited  number  of  high-income  Member 
States after applying the policy options for targets and new flexibilities described. 

There are two types of enhancement that could be considered for AEA transfers. The first 
approach  would  consist  of  the  facilitation  of  AEA  transfers  between  potential  “seller” 
and  "buyer”  countries,  for  example  by  using  a  central  place.  Issues  of  particular 
relevance  in  designing  this  type  of  flexibility  include  the  timing  of  transfers,  whether 
participation is voluntary or mandatory, and the nature of the trading place. 

The second type of enhancement is to link AEA transfers to additional mitigation action 
in  Member  States.  Such  action  could  be  project-based  (e.g.,  similar  to  joint 
implementation  under  the  Kyoto  Protocol)  or  programme-based  (such  as  green 
investment  schemes58).  Project-based  and  programme-based59  mechanisms  are  based  on 
the  same  principle  as  AEA  transfers  but  involve  some  means  of  identifying  and 
monitoring  specific  mitigation  activities  in  a  “host  Member  State”,  from  which  part  of 
the emission reductions would be transferred in the form of AEAs to a “buyer Member 
State”, in return for funding to provide the activities with an incentive to proceed. 

The policy baseline option F1 is to keep in the ESR the existing “hands-off” approach for 
AEA transfers in the ESD as described in Section 4.5 with no further enhancement. As 
under  current  rules  it  would  be  up  to  Member  States  to  decide  if,  when  and  how  they 
should transfer any AEAs. Transfers of up to 5% of national annual emission allocations 
(before  the  annual  compliance  checks)  and  any  volume  of  surplus  allocation  (after 
compliance checks)60 between Member States are possible, with no required interference 
or facilitation by the European Commission or any other third parties.  

The other options are described in section 4.5 and include:  

  Option F3: Central information site 

  Option F4: Central market place for AEA transfers  

58  Green  investment  schemes  (GIS)  were  used  by  some  Member  States  under  the  Kyoto  Protocol’s  first 
commitment  period.  Set  up  by  the  host  countries,  GIS  earmarked  funds  from  the  sale  of  emission 
allocations  under  the  Kyoto  Protocol  for  use  in  climate  mitigation  activities  to  ensure  environmental 
integrity of international emission trading. 
59 In a programme-based approach a Member State would promote emission reductions in certain sectors or 
through  specific  actions  under  the  ESD  rather  than  through  individual  projects.  Parts  of  any  emission 
reductions would be transferred in the form of AEAs to a buyer or investor Member State. 
60 Any resulting AEA transfers have to be reported to the Commission by 15 January of the following year. 

77 

 
                                                 
  Option F5: Mandatory auctioning 

For  all  AEA  transfer  options  considered  here  the  quantitative  limit  for  selling  AEAs 
before the compliance check would be the same as for borrowing61.  

Environmental impacts 

Key criteria for environmental impacts is to what extent the policy option contributes to 
environmental  effectiveness  by  achieving  Member  State  and  EU  emission  reduction 
targets, and whether it provides incentives for additional emission reductions. 

The  policy  baseline  option  F1  with  bilateral  transfers  allowed  at  any  time  provides 
sufficient  flexibility  to  a  Member  State  willing  to  resort  to  this  option  to  ensure  its 
compliance with the ESR targets in a timely manner.  

Options F3 and F4 are similar to the baseline option in this respect.  

Option F5 could help individual Member States to close any compliance gap but it would 
also  restrict  the  compliance  options  for  those  Member  States  that  would  have  to  make 
part of their surplus AEAs available to others through auctioning.  

Environmental integrity will also depend on what the revenues from such transfers will 
be spent on in Member States. Earmarking of the revenues from the sales of AEAs for 
investments  in  further  emission  reductions,  sustainable  energy  or  other  environmental 
protection would help reaching EU climate and energy policy objectives.  

Distributional impacts 

The policy baseline option F1 could have distributional impacts depending on the extent 
to  which  Member  States  would  engage  in  AEA  transfers,  where  those  Member  States 
selling AEAs would gain additional revenue. 

Options F3 and F4 are similar to the baseline in this respect. 

With respect to  project-based activities (which could occur in  any of options F1, F3 or 
F4), in theory, projects would be most attractive in those countries where reduction costs 
are the lowest and so investments in additional emission reductions would be directed to 
them. There would be a flow from countries with high abatement costs to countries with 
lower  abatement  costs,  which  also  tend  to  be  Member  States  with  lower-than-average 
GDP per capita. This is in line with the objective to enhance cost-efficiency and fairness 
across  the  EU.  Additional  emission  reduction  projects  could  also  provide  benefits  in 
terms of increased local employment and income.  

It should be noted that potential investor countries might be influenced by other factors 
than  short-term  cost-efficiency  when  considering  whether  to  invest  in  additional 
mitigation action and might therefore chose to do  it at home or in a country with other 
incentives  or  favourable  conditions  (i.e.,  not  necessarily  where  mitigation  costs  are 
lowest) for engaging in emission reduction projects. The actual distribution of any such 
projects across the EU in terms of countries and sectors is therefore difficult to predict.  

61 In the current ESD a 5% limit applies for both borrowing and AEA transfers before compliance has been 
checked. 

78 

 
                                                 
Option  F5  would  have  distributional  impacts  as  Member  States  would  have  to  make 
some of their surplus AEAs available for transfers through auctions. This could benefit 
those Member States in need of additional AEAs if they could purchase AEAs at a lower 
cost  than  additional  reductions  at  home,  but  would  limit  the  choice  for  Member  States 
generating surplus AEAs. 

Economic impacts 

The  main  criteria  are  the  cost-effectiveness  (including  transaction  and  administrative 
costs)  of  meeting  EU-wide  and  individual  Member  State  targets  and  the  potential  for 
developing a liquid market for AEAs, including transparency of AEA transfers.  

The policy baseline option F1 gives full flexibility to Member States in choosing when 
and  how  to  engage  in  AEA  transfers  and  time  to  assess  the  costs  and  benefits  of  other 
flexibility  options  and  compliance  strategies.  However,  it  is  not  fully  transparent  or 
satisfactory in providing price information as transfers are only reported and made public 
ex-post.  This  makes  the  market  less  predictable.  While  this  approach  would  avoid  the 
need for costs to fall on the EU level, it may lead to inefficient results. 

Also  in  option  F3  Member  States  would  have  flexibility  in  using  AEA  transfers  but 
would  have  to  choose  a  central  place  for  sharing  information  on  their  willingness  to 
engage  in  transfers.  This  option  could  contribute  to  more  efficient  transfers  thanks  to 
more transparent and timely information. The information place could be a simple web-
based  tool  with  access  to  Member  States  operated  by  the  Commission  or  another 
European  institution.  The  costs  of  setting  up  and  running  such  a  facility  would  be 
relatively modest. 

An even lower administrative cost would be an arrangement where Member States would 
report  regularly  to  the  Commission  over  the  period,  thus  not  allowing  for  real  life 
information  updates  but  nevertheless  providing  useful  information  on  the  intentions  to 
engage  in  transfers  per  Member  State  and  thus  also  paving  the  way  for  subsequent 
transfers.  

Option  F4  creates  greater  incentives  for  trading  and  would  provide  a  stronger  price-
setting function compared to the baseline. Even if this would be a voluntary market place 
it could potentially be attractive for selling Member States to get  an early indication of 
price for AEAs and could be used as benchmark for other bilateral transfers. It could also 
offer  a  more  effective  way  of  identifying  cost-efficient  abatement  potentials  identified 
across the EU.  

For option F5 the regulatory and administrative burden related to the establishment of a 
central  auctioning  place  would  be  considerably  higher  compared  to  the  baseline  where 
there is no designated trading place for AEA bilateral transfers. It is difficult to assess the 
costs and procedures that would be needed, but taking the ETS auction platform which is 
jointly procured between the Commission and most Member States as a benchmark, it is 
clear that setting up a parallel auction platform for AEAs would imply very considerable 
costs,  legislative  risks  and  administrative  burden.  It  should  also  be  noted  that  the  ETS 
platform,  thanks  to  very  large  volumes  generates  substantial  revenues  for  the  auction 
platform  that  finances  its  operation.  That  would  not  be  the  case  for  an  AEA  trading 
platform as it would have much lower volumes. 

A  benefit  of  option  F5,  if  it  would  function,  is  that  it  could  create  a  price-setting 
mechanism.  The  auction  price  could  then  be  used  as  benchmark  for  other  (bilateral) 

79 

 
transfers and provide some certainty for Member States engaging in transfers. It would 
also  address  the  issue  of  market  liquidity  through  making  a  part  of  surplus  AEAs 
available  to  Member  States  at  auctions.  However,  a  significant  disadvantage  of  this 
option  is  that  creating  auctions  with  so  few  market  actors  risks  generating  very  small 
volumes  and  unstable  price  outcomes.  It also  creates  high  risks  for  gaming  as  Member 
States would be both buyers and sellers on the same market. Forcing Member States to 
sell off AEAs they think they may need later in the period will impact on Member States' 
own  planning  and  is  expected  to  lead  to  strong  negative  reactions  from  the  concerned 
Member  States.  The  utility  of  such  a  compulsory  auctioning  for  the  buying  Member 
States  would  also  depend  on  the  compliance  option  chosen.  For  example,  compliance 
checks every five years would only allow for ex-post auctioning after five and ten years 
and would therefore make the idea of a central auction place less attractive, since setting 
up  such  a  system  to  be  used  twice  over  a  ten  year  period  would  lead  to  high 
administrative  costs  and  difficulty  to  maintain  knowledge.  Overall,  the  practical  and 
political drawbacks with mandatory auctioning overweigh any positive impact. 

Conclusion: All  three  policy options F3, F4, and F5 could enhance inter-Member State 
flexibility, but it is deemed that F5 too much infringes Member States' right to plan and 
manage  their  own  resources,  and  therefore  will  not  be  included  in  the  possible  option 
packages.  F4  would  be  feasible,  but  it  would  imply  quite  significant  regulatory  and 
administrative costs, for a limited and very uncertain benefit. It is therefore not included 
in the assessment of option packages. 

5.6.  Assessing policy options for administering compliance  

The three policy options for compliance presented in section 4.6 are assessed below. 

Environmental impacts 

Thanks to the continued annual reporting and publishing of GHG emissions, feedback on 
Member State and EU progress towards their targets would be ensured for all options and 
a Member State will have sufficient information on emissions to design and implement 
any additional mitigation action in time for meeting their obligations under the non-ETS.  

With  continued  annual  emission  limits  and  compliance  requirements  a  strong  incentive 
for  being  on  track  with  the  linear  trajectory  towards  the  2030  targets  will  remain  for 
Member States. This is important in order to ensure that Member States are not tempted 
to postpone actions that may be necessary but politically more challenging to implement. 

For  these  reasons  option  C2  with  biennial  compliance  checks  would  not  or  only 
marginally  change  the  environmental  effectiveness  compared  to  the  policy  baseline 
option C1 with annual checks. 

For  option  C3  the  risk  of  Member  States  not  complying  could  be  somewhat  higher 
compared  with  annual checks as the control will be performed for five years at a time. 
However,  thanks  to  annual  emissions  reporting,  and  a  close  follow-up  by  the 
Commission  on  Member  States'  progress  towards  their  targets,  this  risk  should  be 
manageable  as  incentives  for  compliance  similar  to  the  existing  system  will  be 
maintained.  Member  States’  progress  towards  their  2030  targets  would  be  monitored 
every year  as  part  of the progress report  published by the Commission.  This  procedure 
complements the compliance checks by providing early warning in case Member States 
are lagging behind with their obligations. 

80 

 
Distributional impacts 

Less frequent compliance checks could in theory delay and reduce the frequency of AEA 
transfers.  This  could  lead  to  weaker  incentives  for  making  AEAs  available  through 
additional mitigation action in Member States with lower emission reduction costs as any 
surplus  AEAs  would  be  available  later  (and  less  frequently)  compared  to  the  baseline 
option. Although option C2 is not likely to influence this much relative to the baseline, 
option  C3  could  have  such  an  effect.  However,  as  discussed  below,  this  impact  is 
uncertain. 

Economic impacts 

Regular compliance checks are needed to confirm with certainty whether surplus AEAs 
are  available  for  transfers  and  to  stimulate  a  liquid  market  for  AEAs.  However,  AEAs 
can  be  traded  at  any  point  in  time  (even  if  the  actual  transaction  of  AEAs  would  take 
place later), and thus also before compliance checks have been performed.  

Policy option C2 is not likely to lead to any significant economic impacts with respect to 
AEA trades compared to the policy baseline, in terms of overall cost-efficiency.  

At first sight it may appear that option C3 with two compliance checks in the compliance 
period  would  be  less  efficient  from  an  EU  perspective  compared to  the  policy  baseline 
option  because  it  could  reduce  the  incentive  for  early  AEA  trading.  However,  as 
explained above, it is not likely to have this effect, because trade can take place anytime.  

Continued  annual  reporting  of  emissions  will  help  Member  States  identifying  any 
demand for additional AEAs and make transfer agreements in advance of the compliance 
check,  also  in  the  case  of  option  C2  and  C3  with  checks  every  2  and  5  years, 
respectively. Member State can decide on any need to buy or possibility to sell AEAs on 
the  basis  of  their  annual  reporting  and  regular  updates  of  emission  projections.  It  is 
therefore  difficult  to  assess  the  actual  impact  of  less  frequent  compliance  checks  on 
liquidity as they would not necessarily have a significant effect on the timing of transfers, 
provided annual reporting will continue as proposed.  

It should also be considered that the compliance checks also incur administrative costs, 
mainly because of the requirements of the inventory review, especially on EU-level for 
the Commission and the European Environment Agency (EEA).  

The policy baseline option C1 continuing with annual checks and inventory reviews has 
the highest administrative costs for Member States and the Commission. The cost for the 
Commission  (including  the  EEA)  of  the  current  system  for  reviewing  emission 
inventories and checking compliance is in the order of 650.000 EUR per year, while the 
annual  costs  for  all  28  Member  States  taken  together is  estimated  to  be  in  the  order  of 
500.000 EUR per year. These costs include administration of other reporting obligations 
under the ESD, which are separate from the emissions reporting and compliance check62. 

Policy option C2 would alleviate the administrative burden on both the Commission and 
the Member States of organizing the review every year as emission inventories for two 
years  can  be  easily  reviewed  at  the  same  time.  The  total  administrative  costs  over  the 

62  Source:  Supporting  study  for  the  Evaluation  of  Decision  No.  406/2009/EC  (Effort  Sharing  Decision), 
Ricardo Energy & Environment with Trinomics and Vito, December 2015  

81 

 
                                                 
whole commitment period would be lower compared to the policy baseline. Some of the 
reduced  costs  would  be  offset  by  the  fact  that  the  checks  would  be  performed  for  two 
years  (instead  of  one  year)  each  time,  which  would  require  more  effort  in  terms  of 
person-days needed per check. All things considered, a reasonable estimate of the  total 
costs  over  the  whole  commitment  period,  including  for  the  Commission,  the  EEA  and 
Member States, for this option would be 60-70% of the total costs for the policy baseline 
option or in the order of 690.000 to 800.000 euro per year.  

The  costs  for  option  C3  would  be  lower  than  for  the  policy  baseline  option,  and  also 
lower than for option C2. However, some of the reduced costs would be offset by the fact 
that the inventory reviews every 5 years would have to be more extensive with respect to 
the checks and controls than the annual inventory reviews under the current system in the 
policy  baseline  option.  The  inventory  reviews  and  compliance  checks  would  also  be 
more work-intensive as they would cover five years of activity (instead of one year) and 
would be more demanding in terms of quality assessment and control63. Overall the total 
costs for this option over the whole commitment period are estimated to be in the order 
of 40-50% of those for the policy baseline option.  

Other impacts 

Policy option C3 would in effect synchronise the current ESD compliance cycle with the 
foreseen  LULUCF  5-year  accounting  and  compliance  cycle  when  the  amount  of  any 
LULUCF  credits  available  for  compliance  as  described  in  section  5.4  would  be 
determined.  Furthermore,  it  would  also  align  the  EU  compliance  cycle  with  the 
international  Paris  implementation  cycle  which  foresees  a  global  stocktake  every  five 
years,  starting  in  2023.  For  example,  results  from  the  EU  compliance  check  in  2027 
would be available in time for the global stocktake 2028. 

As  mentioned  earlier,  the  experience  so  far  from  administering  an  annual  compliance 
cycle under the current ESD suggests that it is difficult to complete the whole cycle from 
the  submission  of  emission  inventories  to  the  final  compliance  check  in  the  Union 
Registry  within  the  same  year.  This  makes  the  current  system  unpractical.  The  policy 
baseline option C1 has also the highest administrative burden of the alternatives assessed 
here. Therefore, this option is not considered for the comparison of options in Chapter 6.  

With  respect  to  businesses  in  general  and  SMEs  in  particular  there  are  no  reporting 
obligations  for  enterprises  under  the  ESD  and  the  proposal  would  not  change  this 
situation (see also annex 8.3). 

Conclusion: The current system of  annual reporting  of emission  under the ESD is  well 
established  and  widely  supported.  Annual  reporting  with  continued  annual  emission 
limits  and  compliance  requirements  are  important  to  ensure  Member  States’  progress 
towards  their  2030  obligations.  Less  frequent  compliance  checks  would  reduce  the 
administrative burden and align the ESR compliance cycle with that of the LULUCF and 
also  with  the  international  cycle  under  the  Paris  Agreement.  Maintaining  the  current 
reporting  system  but  switching  to  compliance  checks  every  5  years  would  reduce  total 
administrative costs by 50-60 percent or in the order of 5.750.000 to 6.900.000 EUR for 
the period 2021-2030. 

63 Because the longer time between the inventory reviews in option C3 (five years instead of one or two 
years), the results of previous reviews would be less useful when checking the consistency and quality of 
the submitted emission inventories. For these reasons an inventory review every 5 years is estimated to cost 
two to three times more than an inventory review performed every year. 

82 

 
                                                 
6.  HOW DO THE OPTIONS COMPARE? 

The  main  policy  options  assessed  relate  to  the  potential  methods  for  setting  national 
targets  in  line  with  an  overall  reduction  of  30%  in  the  non-ETS  compared  to  2005  by 
2030  and  to  allow  for  flexibility  in  a  manner  that  is  fair,  takes  into  account  cost-
efficiency  concerns  and  ensures  environmental  integrity.  On  the  basis  of  the  extensive 
analysis  of  the  individual  options  in  Section  5,  section  6  provides  a  comparison  of  the 
options  and  a  summary  analysis  covering  all  elements  through  the  combination  of 
options  and  the  trade-offs  presented  therein  in  terms  of  effectiveness,  efficiency  and 
coherence.  It  does  this  separately  for  targets  and  target  level  related  flexibilities  which 
cannot be considered in isolation (section 6.1) and for other flexibilities and compliance 
which are options relevant regardless of the target related choices (section 6.2). 

6.1.  Comparing  and  combining  the  approaches  to  2030  target  setting,  starting 

point, one-off flexibility and access to LULUCF credits 

The European Council confirmed that the EU has to reduce emissions by 30% in 2030 
compared to 1990 in the non-ETS sectors to contribute to the at least 40% economy wide 
by 2030 GHG target compared to 1990. 

The  European  Council  also  gave  guidance  for  effort  sharing,  i.e.  how  to  distribute  the 
targets among EU Member States, confirming a distribution based on GDP per capita as 
the appropriate method to address fairness, while asking to look into additional options to 
address  cost  efficiency  concerns  for  high  income  Member  States.  As  the  assessment  in 
section 5 points out, indeed a number of high income Member States would see a big gap 
between 2030 targets based only on GDP per capita, and reductions typically associated 
with EU wide cost-efficient reduction projections. 

To address this the European Council asked to look at redistributing the GDP per capita 
based  2030  targets  within  the  group  of  high  income  Member  States  to  reflect  cost 
efficiency in this group, to use to a limited extent a newly created one-off flexibility from 
the  ETS  for  those  countries  with  particularly  high  and  challenging  targets,  and  to 
integrate  LULUCF  into  the  2030  framework,  recognising  in  particular  the  lower 
mitigation potential of the agriculture and land use sector. 

The impact of these options cannot only be assessed in isolation. This section looks at the 
impact  of  combinations  of  these  options.  Combination  1  represent  a  combination  of 
options that does not take into account these cost efficiency concerns, while combination 
2 and 3 do take it into account: 

Combination 1 (T1, O1, L1): This combination represents the baseline options and does 
not  specifically  address  cost  efficiency  concerns  for  those  countries  that  are  typically 
projected to have a large gap between targets based on GDP per capita and cost efficient 
emission  reduction  projections.  The  2030  target  is  simply  based  on  GDP  per  capita 
(option  T1),  there is  no one-off  flexibility  from  the  ETS  into  the  ESR  (option  O1) and 
there  is  no  access  to  LULUCF  credits  for  compliance  in  the  ESR  (option  L1).  All 
remaining deficits and surpluses would need to be balanced by intra-MS flexibilities.  

Combination 2 (T2, O2, L2): This combination addresses cost efficiency concerns for 
those countries that are typically projected to have a large gap, but does so in a moderate 
way.  

83 

 
The 2030 targets are adjusted64 by increasing the target for DE, FR, and UK by 1%, while 
reducing it for AT, BE, DK and NL by 3% and for IE and LU by 9% (option T2). The 
one-off flexibility would be available for all high income Member States except DE, FR 
and UK and limited to a total amount just below 100 million tonnes (option O2).  

Access  to  LULUCF  credits  is  allowed.  Overall  the  amount  is  assumed  to  be  limited  to 
maximum  280  million  credits  over  the  period  2021-2030  (option  L2).  This  access  is 
distributed  to  Member  States  on  the  basis  of  their  share  of  agriculture  non-CO2 
emissions in the ESD.  

Combination  3  (T3,  O3,  L2):  Similar  to  Combination  2,  but  addresses  cost  efficiency 
concerns for a number of high income Member States in a more maximalist way.  

2030 targets are adjusted65 by increasing the target for DE, FR, and UK by 2% and for FI 
and SE by 1%, while reducing it for AT, BE, DK and NL by 7% and for IE and LU by 
13%  (option  T3).  The  one-off  flexibility  is  available  as  in  combination  2  but  with  an 
increased amount to just below 200 million (option O3). Access to LULUCF credits for 
compliance in the ESR is as in combination 2 (option L2). 

Comparing combinations at Member State level 

Table 18: Member State impacts of Combinations 1 and 2  

Projection used 
2030 Target Adjustment 
One off flexibility 
LULUCF credits (if needed)  
Combination 
LU 
SE 
DK 
IE 
NL 
AT 
FI 
BE 
DE 
FR 
UK 

Annual average deficit (-) or surplus (+) over the period 
2021-2030 (as % 2005 emissions)  
EUCO30 

No 

No 

Yes, T2 

Yes, O2 

Comb. 1 
-15.7% 
2.1% 
-5.5% 
-13.6% 
-7.2% 
-3.2% 
1.5% 
-5.3% 
0.8% 
-1.0% 
4.0% 

No  

-15.7% 
2.1% 
-4.9% 
-8.7% 
-5.5% 
-1.5% 
1.5% 
-3.6% 
0.2% 
-1.5% 
3.5% 

Yes, L2 
Comb. 2 
-11.4% 
4.1% 
0.0% 
0.0% 
-2.4% 
0.5% 
3.5% 
-1.1% 
0.2% 
0.0% 
3.5% 

-11.7% 
4.1% 
-2.9% 
-4.7% 
-3.5% 
0.5% 
3.5% 
-1.6% 
0.2% 
-1.5% 
3.5% 

In Combination 1 (see second column Table 18), where no specific measures are taken to 
address  cost  efficiency  concerns,  LU  and  IE  would  have  particular  large  gaps  over  the 
period  between  cost  efficient  projections  and  their  targets.  Their  average  annual  deficit 
over  the  period  would  be  larger  than  10%  of  2005  emissions,  with  increasing  amounts 

64 Before application of the maximal range of targets from 0 to -40% compared to 2005. 
65 Before application of the maximal range of targets from 0 to -40% compared to 2005. 

84 

 
  
 
 
 
                                                 
towards  2030.  This  is  very  large.  Also  DK,  NL,  AT  and  BE  would  have  considerable 
average annual deficits over the period.  

Combination  1  is  hence  not  consistent  with  the  objectives  of  this  initiative  and  not 
coherent with the 2030 framework agreed by the European Council. It is presented only 
as baseline option for comparative purposes. 

With the introduction of a redistribution of the 2030 target according to option T2 (see 
third column Table 18), the gap reduces for all Member States except LU.  

For LU, the benefit from target redistribution is small compared to the benefit it receives 
from the fact that targets are capped at maximal -40%, due to its particularly high GDP 
per capita. Similarly also Denmark benefits only in a limited way, with its target being 
reduced from -40% to -39%66.  

But in the other concerned Member States, AT, BE, IE and NL the target correction of 
3% would have a substantial impact on the deficit over the period. It would reduce by a 
quarter to half for all of them.  

Instead for those Member States seeing increases in their target by 1% (DE, FR, and UK) 
impacts remain limited. 

The  one-off  flexibility  further  reduces  cost  efficiency  concerns  in  the  group  of  high 
income  Member  States.  Assuming  eligible  Member  States  use  the  one-off  flexibility  to 
the  maximum  and  assuming  they  achieve  the  same  cost  efficient  reductions  as  in  the 
EUCO30 projections, then the deficits over the period could already reduce to very low 
levels for AT (see fourth column Table 18). Even for Ireland the deficit could reduce to 
levels one third of the deficit compared to option T1.  

Of  course,  making  use  of  this  one-off  flexibility  to  the  maximum  limit  has  also  a  cost 
attached in the form of foregone ETS auctioning revenues for these Member States. 

Finally the use of LULUCF credits can further reduce the pressure on the remaining gap 
(see fifth column Table 18). In principle the LULUCF limit, defined as a % of 2008-2012 
agriculture  non-CO2  emissions  is  big  enough  for  IE  and  DK  to  eliminate  domestically 
any remaining gap. Of course this outcome would depend on them effectively mobilising 
sufficient additional actions that really enhance the sink in their country sufficiently (see 
also LULUCF and agriculture Impact Assessment). 

Also  FR,  which  does  not  benefit  directly  from  any  of  the  measures  to  address  cost 
efficiency can use LULUCF to compensate its gap (be it a limited one). Instead BE and 
NL, even if the LULUCF credits limit is used to the fullest, would still see a gap, be it a 
significantly reduced one in relative term. Of course this gap can be further closed by the 
use of transfers between Member States.  

The only country that sees a remaining large gap is Luxembourg, mainly due to it very 
high  GDP  per  capita  level,  as  well  as  the  fact  that  it  benefits  potentially  less  from  the 
LULUCF credits given its small agriculture sector in relative terms. But in principle there 
should be sufficient supply available for transfer in the ESR to cover LU needs. 

66 Without the application of a maximum range, DK would have received a target equal to -42%. In option 
T2  this  is  reduced  with  3%  resulting  in  a  target  of  -39%  for  DK.  But  of  course  after  application  of  the 
maximum range, it only results in a reduction of 1% for DK, from -40% to -39%. 

85 

 
                                                 
In the above assessment of Combination 2, Member States that are eligible for the one-
off  flexibility,  are  assumed  to  use  this  to  the maximum  limit.  In  reality  Member  States 
might choose to use other combinations of flexibilities, with for instance less use of the 
one-off  flexibility  and  more  use  of  LULUCF  credits  or  more  use  of  the  existing 
flexibilities.  

But  this  would  overall  not  change  the  assessment  that  the  target  adjustment  and  the 
foreseen flexibilities in Combination 2 address cost efficiency concerns for the group of 
high income Member States.  

Table 19 below gives the impact for the high income Member States of Combination 3, 
which  caters  much  more  explicitly  for  cost  efficiency  concerns  for  some  in  this  group. 
Already the introduction of a high redistribution of targets (option T3) together a higher 
one-off flexibility (O3) would reverse in all beneficiary countries, with the exception of 
LU, the gap over the period 2021-2030 into a surplus (assuming of course they would all 
achieve reductions as in the EUCO30 projections and if they use the one-off flexibility to 
the maximum).  

MS contributing to the target adjustment (FR, DE) come now out worse than all Member 
States benefiting from the adjustments except LU, of course assuming all adjustments are 
used  to  the  maximum.  DE,  FR  and  UK  would  actually  end  up  with  2030  targets  more 
ambitious  than  IE,  NL,  AT,  and  BE,  even  though  they  have  lower  levels  of  GDP  per 
capita than these Member States benefiting from the adjustments.  

Table 19: Member State impacts of Combinations 1 and 3  

Projection used 
2030 Target Adjustment 
One off flexibility 
LULUCF credits (if needed)  
Combination 
LU 
SE 
DK 
IE 
NL 
AT 
FI 
BE 
DE 
FR 
UK 

Annual average deficit (-) or surplus (+) over the period 
2021-2030 (as % 2005 emissions)  
EUCO30 

No 

No 

Yes, T3 

Yes. O3 

Comb. 1 
-15.7% 
2.1% 
-5.5% 
-13.6% 
-7.2% 
-3.2% 
1.5% 
-5.3% 
0.8% 
-1.0% 
4.0% 

No  

-15.7% 
2.1% 
-2.7% 
-6.5% 
-3.3% 
0.7% 
1.0% 
-1.4% 
-0.3% 
-2.1% 
2.9% 

Yes, L2 
Comb.3  
-7.4% 
6.1% 
1.3% 
1.5% 
0.7% 
4.7% 
5.0% 
2.6% 
0.0% 
-0.5% 
2.9% 

-7.7% 
6.1% 
1.3% 
1.5% 
0.7% 
4.7% 
5.0% 
2.6% 
-0.3% 
-2.1% 
2.9% 

Overall  it  is  unlikely  that  Combination  3  will  be  seen  as  overall  fair  and  balanced 
approach  to  address  cost  efficiency,  which  puts  a  question  mark  on  its  effectiveness. 
Instead Combination 2 may be seen as more balanced. 

86 

 
  
 
 
 
For similar level of detail as in Table 18 and Table 19 for all Member States, see annex 
8.7,  including  the  impacts  when  using  the  EUCO27  scenarios  which  give  by  and  large 
the same impacts. 

Comparing combinations at EU level 

Table  20  below  gives  an  overview  of  the  impacts  on  the  need  for  inter  Member  State 
AEA  transfers  in  case  of  combination  2.  Without  any  measures  that  address  cost 
efficiency  concerns  in  the  non-ETS,  overall  demand  of  higher  income  Member  States 
would be the equivalent of 282 million AEAs. With the introduction of the adjustment of 
the  2030  targets,  impacts  on  demand  are  limited.  It  rather  leads  to  a  shift  in  which 
Member State has demand, making it more balanced in relative terms between Member 
States.  

With the introduction of the one-off flexibility and the use of potential LULUCF credits 
net demand decreases to low levels of 49 million. This assumes of course that Member 
States with a gap at least achieve the projected cost efficient reductions and that there is 
availability in Member States where needed of LULUCF credits up to the allowed limits 
for compliance in the ESR by the Member State.  

In real life certain Member States may select to use less of the one-off flexibility or not 
be able to generate sufficient LULUCF credits, or simply not be able to reduce emissions 
as  projected  in  the  cost  efficient  projections.  This  may  mean  more  transfers  will  be 
needed as estimated in Table 20.  

Table 20: Impacts of combination 2 on AEA transfer demand 

Projection used 
2030 Target Adjustment 
One off flexibility 

LULUCF Credits 

Overall net demand for 
AEA transfers 

No 

Moderate target adjustment 

EUCO30 

Moderate one-off flexibility 
Limited LULUCF 
credits 

-282 

-235 

-156 

-49 

The above table only looks at combination 2. Combination 3 further reduces demand and 
shifts  any  remaining  demand  towards  DE  and  FR  and  not  anymore  from  other  high 
income Member States. 

With  demand  for  transfers  by  higher  income  Member  States  potentially  decreasing,  it 
increases  the  risk  that  the  -30%  reductions  target  in  2030  will  actually  not  be  met.  It 
might give the wrong incentives to typically lower income Member States, not willing to 
invest to overachieve their target, knowing that there is anyway potentially less demand 
for this supply, and thus indirectly resulting in the EU not meeting its -30% target.  

This is expressed in the build-up of a surplus which is actually a risk for the achievement 
of  the  -30%  target  in  2030,  if  it  gets  too  large,  and  hence  the  effectiveness  of  the 
approach. Member States might decide to use some of this surplus to achieve targets later 
in the period, thus actually not meeting overall the -30% reduction target. 

For  LULUCF  credits  this  does  not  matter,  as  long  as  any  credit  entering  the  ESR  is 
associated with real additional actions in the LULUCF sector. But this does matter for the 

87 

 
 
 
 
 
 
 
impact of the starting point and the one-off flexibility. For the starting point it is seen as 
appropriate  to  start  from  average  2016-2018  emissions.  For  the  one-off  flexibility  it  is 
important to limit it in size. 

Overall Combination 2 is somewhat more prudent option compared to Combination 3. If 
emissions effectively are reduced to -30% by 2030 it would still see a surplus building up 
(excluding LULUCF credits) of around half a billion allowances by 2030 (see Table 21).  

It  is  difficult  to  assess  if  this  is  too  high  a  surplus  and  resulting  in  a  real  risk  not  to 
achieve  the  -30%  target.  It  is  important  to  note  that  Member  States  also  need  some 
margin  in  the  ESR.  Just  as  the  ETS,  they  cannot  function  without  a  surplus.  It  allows 
Member  States  to  feel  comfortable  about  achieving  their  target  and  it  allows  them  to 
offer  any  surplus  as  AEA  transfers  to  other  Member  States,  while  not  being  worried 
about  their  own  target  achievement  is  subsequent  years.  A  system  with  annual 
compliance cannot function if constantly on the verge of being in non-compliance.  

Furthermore  this  surplus  is  in  relative  terms  well  within  the  range  envisaged  as 
acceptable for the good functioning of the ETS market where the Market Stability reserve 
aims on a surplus in the ETS market within a range for 400 to 833 million allowances.  

Finally it is also important to note that the proposal is coherent with both a 27% and a 
30%  energy efficiency target. The higher  the energy efficiency improvements achieved 
are, the lower is the risk of not achieving the ESR reduction target.  

Table 21: EU wide impacts of combination 2 on overall scarcity 

Projection used 
2030 Target Adjustment 
One off flexibility 

LULUCF Credits 

Impact on build-up of a 
possible surplus  
over the period 2021-2030 

No 

Moderate target adjustment 

EUCO30 

Moderate one-off flexibility 
Limited LULUCF 
credits 

511 

509 

606 

714 

6.2.  Comparing and combining the approaches related to existing flexibilities and 

compliance  

In  this  section  two  different  combinations  of  the  policy  options  assessed  for  enhancing 
existing flexibility instruments  (section 5.5) and administering compliance (section 5.6) 
are compared. 

The analysis in the previous section of Combinations 2 and 3 shows the net demand for 
additional AEAs after adjusting targets for cost-efficiency concerns and applying the new 
flexibilities (one-off flexibility  and limited  use  of LULUCF credits) could  be relatively 
small over the period 2021-2030 (Table 20) and would come mostly from a small group 
of high-income Member States. At the same time the potential surplus of AEAs could be 
expected  to  be  sufficient  to  meet  this  demand  (Table  21).  This  is  certainly  the  case  if 
overall the EU would achieve an energy efficiency target of 30%. Member States could 

88 

 
 
 
 
 
 
 
 
therefore  use  AEA  transfers  as  a  complementary  option  to  the  new  flexibilities  for 
achieving their targets under the non-ETS. 

As  pointed  out  earlier,  the  system  for  AEA  transfers  in  the  current  ESD  already  has  a 
high  degree  of  flexibility  for  Member  States.  Nevertheless,  it  remains  important  to 
improve  the  availability  of  and  access  to  information  to  increase  the  efficiency  of 
transfers. 

Against  this  backdrop,  the  appropriate  solution  would  be  a  limited  enhancement  of  the 
existing  instruments  and  rules  while  increasing  transparency  regarding  Member  States' 
intentions  to  engage  in  AEA  transfers.  More  transparency  was  also  mentioned  as  an 
important issue by many Member States in the stakeholder consultation. Therefore policy 
option  F3  is  the  preferred  option  chosen  for  both  combinations  as  it  would  enhance 
information  on  planned  and  concluded  AEA  transfers  to  the  Member  States  and  to  the 
public. 

Combination 4 (F2, F3, C2): This combination enhances Member States flexibility with 
respect to managing their AEAs over the compliance period by increasing the limit for 
borrowing (option F2) and increases transparency of AEA transfers (option F3). It also 
simplifies  and  reduces  the  costs  of  administering  compliance  by  introducing  biennial 
checks instead of annual ones (option C2).  

Combination 5 (F1, F3, C3): This combination enhances transparency of AEA transfers 
(option  F3),  but  further  simplifies  and  reduces  the  costs  of  administering  compliance 
with  checks  every  5  year  (option  C3).  However,  it  maintains  the  current  5%  limit  for 
borrowing (option F1).  

For  both  combinations  annual  reporting  and  compliance  with  annual  limits  would  be 
maintained.  As  explained  in  section  5.6,  this  should  ensure environmental  effectiveness 
by  providing  a  strong  incentive  for  Member  States  to  be  on  track  with  the  linear 
trajectory  towards  the  2030  targets.  With  annual  reporting  and  publishing  of  Member 
States’  emission  trends  and  projections,  the  Commission  would  have  the  necessary 
instruments for warning any Member State lagging behind its reduction target trajectory. 
Both  combinations  would  be  compatible  with  international  reporting  obligations  under 
the Paris Agreement.  

With  respect  to  efficiency,  in  both  combination  of  options  the  annual  reporting  of 
emissions annual reporting and regular updates of emission projections will help Member 
States  identifying  any  demand  for  additional  AEAs  and  make  any  necessary  transfer 
agreements in advance of the compliance check.  

An important point to consider with respect to coherence is the interaction of LULUCF 
and  the  ESR  and  the  possibility  to  use  LULUCF  credits  for  ESR  compliance.  An 
advantage of combination 5 is that it makes the ESR compliance system more consistent 
with LULUCF. For LULUCF a five-year period for checking compliance would be more 
appropriate  with  respect  to  its  accounting  system  and  how  LULUCF  credits  for  ESR 
compliance  would  be  generated.  For  these  reasons,  combination  4  with  compliance 
checks every second year would be difficult to implement.  

Another advantage of combination 5 is that it could more easily be synchronised with the 
five-year stock-taking cycle set out in the Paris Agreement. 

89 

 
 
In  conclusion,  combination  5  is  considered  a  well-balanced  solution  with  respect  to 
efficiency,  environmental  effectiveness  and  coherence  with  other  parts  of  the  2030 
framework,  in  particular  LULUCF  policies,  and  would  therefore  be  suggested  as  the 
preferred combination. 

7.  HOW WOULD ACTUAL IMPACTS BE MONITORED AND EVALUATED?  

As  concluded  in  section  5.6  and  6.2  on  administering  compliance,  the  monitoring  and 
evaluation  of  this  initiative  in  2021-2030  would  in  principle  follow  the  same  rules  and 
procedures already established in the current ESD for the commitment period 2013-2020. 

Monitoring  of  progress  and  assessing  compliance  is  based  on  a  comprehensive 
framework of monitoring, reporting and verification (MRV) laid down partly in the ESD 
itself and partly in the Monitoring Mechanism Regulation67 (MMR) and its implementing 
provisions. Member States are obliged to annually report their greenhouse gas emissions 
to the European Commission. The MMR and ESD also require Member States to report 
every  second  year  on  national  policies  and  measures  implemented  in  order  to  achieve 
their targets under the ESD and on their emission projections.  

To ensure that the compliance assessment relies on accurate and verified data, the GHG 
emissions inventories submitted by Member States are reviewed by the Commission with 
support  by  the  European  Environment  Agency  as  laid  down  in  the  MMR.  The  review 
includes the annual quality assurance and quality control of Member States greenhouse 
gas  emissions  inventories.  A  team  of  technical  review  experts  co-ordinated  by  the 
Agency checks the transparency, accuracy, consistency, comparability and completeness 
of the submitted inventories.  

The  annual  compliance  assessment  is  performed  by  the  Commission  by  comparing  the 
reported and reviewed emissions with the annual emission limits under the ESD. Before 
the compliance check, Member States can make use of the flexibility instruments (e.g., 
banking  and  borrowing,  AEA  transfers  from  other  countries)  to  close  any  gap  between 
their actual emission and emission limits for a particular year. 

If  a  Member  State  would  still  not  be  in  compliance  after  applying  the  flexibility 
instruments, a deduction from its emission allocation of the following year equal to the 
excess  emissions  (in  tonnes  of  carbon  dioxide  equivalent)  multiplied  by  an  abatement 
factor of 1.08 is applied. 

In  order  to  align  the  GHG  emissions  inventory  review  cycle  in  the  2021-2030 
commitment  period  with  the  ambition  cycle  agreed  under  the  Paris  Agreement,  the 
review and compliance check with annual limits could be organised every 5 years. The 
Commission would organise two compliance controls of Member states' GHG emissions 
inventories, in 2027 (to check annual compliance for the years 2021-2025) and in 2032 
(for  the  years  2026-2030).  This  procedure  would  also  ensure  that  the  compliance 
assessment is aligned with accounting and compliance under the proposed regulation on 
the inclusion of LULUCF in the 2030 climate and energy framework, and would allow 
for using any LULUCF credit for compliance with the non-ETS target. 

67 Regulation (EU) 525/2013 of the European Parliament and the Council of 21 May 2013 on a mechanism 
for monitoring and reporting greenhouse gas emissions and for reporting other information at national and 
Union level relevant to climate change and repealing Decision No 280/2004/EC. 

90 

 
                                                 
To  ensure  strict  monitoring  of  Member  States’  progress  towards  their  2030  targets,  in 
addition  to  the  compliance  checks  with  legally  binding  consequences,  Member  States’ 
progress towards their 2030 targets will be monitored every year as part of the progress 
report published by the Commission under Article 21 of the MMR and integrated in the 
Energy  Union  Report.68  This  procedure  will  complement  the  compliance  checks  by 
providing early warning in case Member States are lagging behind with their obligations 
and  provides  a  means  of  naming  and  shaming.  Should  the  progress  report  show  that  a 
Member State is not on track for a specific year during the compliance period, it will be 
obliged to submit to the Commission a corrective action plan including the actions to be 
taken  by  the  Member  State  in  order  to  ensure  compliance  with  its  obligations  together 
with  the  timetable  for  implementation.  The  Commission  may  issue  an  opinion  on  the 
corrective action plan. 

In  conclusion,  the  strict  MRV  and  compliance  cycle  as  defined  under  the  current  ESD 
will be maintained in the proposal for the period 2021-2030 with the only difference that 
the organisation of the review of emissions inventories and the compliance check will be 
made  every  5  years  instead  of  annually.  In  the  stakeholder  consultation  some 
environmental  NGOs  were  concerned  that  moving  from  annual  to  less  frequent 
compliance checks would weaken compliance. However, the fact that annual compliance 
is  maintained,  together  with  the  strengthened  monitoring  provisions  and  the  annual 
progress reports, will provide a robust early warning system. Overall this should ensure 
that Member States take the necessary action to meet their obligations. 

A review of the level of ambition is recommended to be performed in 2023 in order to 
enable the EU to effectively participate in the stocktaking process laid down in Article 14 
of  the  Paris  Agreement.  The  review  will  allow  considering  also  experience  from  the 
current  ESD  legislation,  including  the  use  and  effectiveness  of  the  existing  flexibility 
instruments. This will be important given that the ESD still is at a relatively early stage 
of its implementation. 

68 The report will present Member States’ progress towards their obligations under the Energy Union and 
its governance system.  

91 

 
 
                                                 
8.  ANNEXES 

8.1.  Annex 8.1: Procedural information 

8.1.1. Organisation and timing 

The  Directorate-General  (DG)  for  Climate  Action  was  leading  the  preparation  of  this 
initiative and the work on the impact assessment in the European Commission.  

An  inter-service  steering  group  (ISG),  jointly  chaired  by  DG  Climate  Action  and  the 
Secretariat-General  was  established  in  January  2015  for  preparing  this  initiative, 
following  the  2014  October  conclusions  of  the  European  Council  on  the  2030  climate 
and  energy  policy  framework  for  the  European  Union  and  the  adoption  of  the 
Commission Work Programme for 2015.69 The ISG met 7 times in the period from March 
2015 to July 2016. 

An  indicative  roadmap  for  the  initiative  Effort  Sharing  Decision  in  2030  Climate  and 
Energy Policy Framework was adopted in March 2015. 

8.1.2. Consultation of the Regulatory Scrutiny Board 

The Regulatory Scrutiny Board received the draft impact assessment report on 29 April 
2016 and following the Board meeting on 31 May 2016 issued a positive opinion on 2 
June  201670. It gave  five recommendations  how to  adjust  the  impact assessment report, 
which have been addressed as follows:  

In  response  to  the  first  recommendation  to  better  assess  the performance  of  the current 
framework,  a  clearer  explanation  of  the  current  framework  has  been  provided  and 
comparisons with initial projections and a breakdown of current performance per sector 
and Member State has been added (section 1.2.2 and annex 8.11).  

In  response to  the  second  recommendation,  the  scope  of  the  initiative  and  its  link  with 
subsequent initiatives has been clarified (sections 1.1, 1.3, and 3.4). 

In response to the third recommendation, the guidance given by the European Council in 
its  October  2014  conclusions  and  its  links  to  objectives  and  the  choice  of  options  has 
been  further  explained  and  made  more  explicit  in  general  in  the  text,  notably  in  the 
introduction of section 4. Also the role and meaning of environmental integrity has been 
clarified (e.g. in sections 1.3 and 3.2).  

In response to the fourth recommendation, it is explicitly indicated that the "no additional 
policy" baseline is basically the situation as projected in the EU Reference scenario 2016 
(as  well  as  the  2013  Reference  and  the  Member  States'  own  With  Existing  Measures 
Scenarios).  The  expected  impact  of  no  additional  policy  (the  non-achievement  of  the 

69  The  following  DGs  and  services  were  invited  to  the  Steering  Group:  Secretariat  General  (SG),  Legal 
Service (SJ), Agriculture and Rural Development (AGRI), Competition (COMP), Economic and Financial 
Affairs  (ECFIN),  Energy  (ENER),  Environment  (ENV),  Internal  Market,  Industry,  Entrepreneurship  and 
SMEs  (GROW),  Joint  Research  Centre  (JRC),  Mobility  and  Transport  (MOVE),  Regional  and  Urban 
Policy  (REGIO),  Research  and  Innovation  (RTD),  Taxation  and  Customs  Union  (TAXUD),  Trade 
(TRADE). 
70 SEC(2016) 339 

92 

 
                                                 
GHG reduction goal) as well as key assumptions of the Reference scenario and relevant 
differences  with  the  EU  Reference  scenario  2013  which  was  used  for  the  2030 
framework  impact  assessment  and  with  national  GHG  emission  projections  have  been 
explained in the main text.  

With the European Council confirming to continue after 2020 'the methodology to set the 
national reduction targets for the non-ETS sectors, with all the elements as applied in the 
Effort Sharing Decision for 2020', this impact assessment primary aims to look at policy 
options  that  start  from  continuing  the  current  ESD  and  on  this  basis  to  look  at 
determining  targets  and  the  related  flexibilities  in  the  ESR.  Therefore  to  make 
meaningful  comparisons  of  policy  options,  the  "policy  baseline"  is  assumed  to  be  a 
continuation of the ESD with all its features, but translated to the period 2021-2030, and 
assuming  a  target  in  2030  equal  to  -30%  compared  to  2005  (section  1.3,  box  1  and  2, 
section 4, section 5). 

In response to the fifth recommendation to clarify the impact of the targets for individual 
Member States, additional Member State detail has been added in section 5.1.4 and 5.2, 
notably  on  how  different  baseline  projections  which  represent  existing  measures  only, 
impact the outcomes.  

With regard to presentation, Figure 5 has been added to illustrate the intervention logic, 
i.e. the chain of problems, objectives and options. The presentation of impacts has been 
reviewed  with  regard to  shortening  options.  Given  that  the modelling  outputs  are  often 
important  to  understand  the  concrete  policy  options  assessed,  they  continue  to  be 
presented in the main text where this is the case.  

The relevant stakeholder views with regard to the Effort Sharing Decision are presented 
in the report, notably in section 4. 

8.1.3. Evidence and external expertise used  

The  quantitative  assessment  of  future  impacts  in  the  EU  is  consistent  with  the  analysis 
undertaken  for  the  2030  framework  proposal.  The  Commission  contracted  the  National 
Technical University of Athens, IIASA and EuroCare to model EU scenarios. The energy 
system and CO2 emission modelling is based on the PRIMES model. The non-CO2 GHG 
emission modelling is based on the GAINS model. Agricultural non-CO2 emissions are 
assessed  with  the  CAPRI  modelling  framework.  For  model-based  evidence  see  also 
section 8.4. 

A  supporting  study  for  the  evaluation  of  the  implementation  of  the  Effort  Sharing 
Decision (see section 1.2.2) was carried out in 2015 for the Commission by a group of 
external consultants led by Ricardo Energy & Environment.71  

71  Supporting  study  for  the  Evaluation  of  Decision  No.  406/2009/EC  (Effort  Sharing  Decision),  Ricardo 
Energy and Environment with Trinomic and Vito. 

93 

 
                                                 
8.2.  Annex 8.2: Stakeholder consultation 

8.2.1. Introduction 

8.2.1.1. 

Process and quantitative results of the public consultation 

The European Commission  organized a  public consultation72 on the continuation  of the 
current Effort Sharing Decision (ESD)73 in the period 2021-2030. The public consultation 
focused on: 

  enhancing the existing flexibility mechanisms to ensure overall cost efficiency; 
  monitoring, reporting and compliance; 
 

the approach to setting the national greenhouse gas reduction (GHG) targets in 
the ESD; 

  complementary EU-wide action to achieve the reduction targets; 
  capacity building and other support to implementation at national, regional and 

local level.  

It also asked for further evidence and studies on implementation of the ESD until 2020 at 
Member-State level and at regional level (see at the end of this document the complete 
questionnaire and a list of studies and references received from stakeholders).  

The  consultation  was  open  to  everyone,  but  received  responses  in  particular  from 
national  governments74,  regional  and  local  authorities,  EU-wide  trade  associations  and 
NGOs.  It  complemented  the  earlier  Consultation  on  the  Green  Paper  on  a  2030 
framework  for  climate  and  energy  policies  in  2013.  The  latter  had  highlighted  that  the 
key  challenge  for  the  ESD  is  how  to  share  the  efforts  and  how  to  strengthen  it 
(conclusions  of  this  consultation  relevant  to  the  2030  ESD  are  summarized  in  section 
8.2.7).  The  public  consultation  consisted  of  a  questionnaire  in  English  with  six  main 
questions  that  combined  multiple  choices  with  space  limited  to  4  000  characters  to 
explain the choices made.  

The  European  Commission  also  consulted  Member  States  in  four  meetings  of  the 
Climate Change Committee Working Groups held in 2015. At a consultation workshop 
in April experts from different Member States discussed different options for enhancing 
the existing domestic flexibility mechanisms in the Effort Sharing Decision in the period 
after 2020 (banking and borrowing, trading between Member States, auctioning, project-
based  mechanisms).  At  a  meeting  in  late  June  the  Commission  gave  an  overview  of 
Member  States  contributions  to  the  public  consultation  on  this  topic.  And  at  two 
meetings  in  September  further  discussions  were  held  on  enhancing  existing  flexibility 
instruments and on reporting and compliance, respectively.  

from  26  March  until  18  June  2015,  on 

72  Open  12  weeks, 
the  EU  Survey  website 
(http://ec.europa.eu/clima/consultations/articles/0025_en.htm ). The consultation on the future design of the 
ESD  was  carried  out  in  parallel  with  the  consultation  "Addressing  greenhouse  gas  emissions  from 
agriculture and land use, land use change and forestry in the context of the 2030 EU climate and energy 
framework" (http://ec.europa.eu/clima/consultations/articles/0026_en.htm).  
73  Decision  406/2009/EC  on  the  effort  of  Member  States  to  reduce  their  GHG  emissions  to  meet  the 
Community's GHG emission reduction commitments up to 2020 (Effort Sharing Decision, ESD).  
74 Many Member States stressed the preliminary nature of the views expressed.  

94 

 
                                                 
This  report  follows  the  structure  of  the  six  main  questions  in  the  consultation 
questionnaire.  The  individual  stakeholder  submissions  can  be  downloaded  on  the 
consultation website75. 

Figure 15: Stakeholders profiles – Based on 114 replies 

Figure 16: Number of responses per question by stakeholder group76 

75 http://ec.europa.eu/clima/consultations/articles/0025_en.htm  
76 The Norwegian stakeholders are not included, "Private sector stakeholders" comprise trade associations, 
and enterprises of all sizes. 

95 

 
 
 
 
 
 
                                                 
8.2.1.2. 

Stakeholders' participation in the public consultation 

The  Commission  received  114  formal  replies  from  a  broad  spectrum  of  stakeholders 
from  28  Member  States  (see  Figure  15).77  Apart  from  Member  State  governments,  the 
consultation  had  a  strong  participation  from  the  private  sector,  with  41%  of  overall 
replies  from  European  and  national  industry  associations  and  around  11%  from 
individual  enterprises.  16%  of  the  replies  came  from  non-governmental  organizations 
(NGOs) mostly European environmental organizations. Local and regional governments 
or  associations  representing  them  accounted  for  6%  of  the  replies.  Private  citizens  and 
research  institutions  represented  5%  and  2%,  respectively78.  Figure  15  illustrates  the 
distribution  of  respondents  by  sector  and  type  of  organisation.  Figure  16  shows  how 
many of each stakeholder group responded to the different questions.  

8.2.2. Enhancing existing flexibility mechanisms 

Member States, regional and local governments79 

22 Member States, all three regional governments, one local government association and 
one local government responded to this question. Though many Member States signalled 
that it is difficult to form a firm position on future flexibility mechanisms due to limited 
experience  with  the  current  ESD,  there  was  a  strong  request  for  enhanced  flexibility 
(enhancing  transfer  of  Annual  Emission  Allocations  (AEA)  between  Member  States 
(requested  by  16  Member  States),  higher  rate  of  borrowing  (requested  by  10  Member 
States). A majority of Member States, as well as the three regional governments and the 
local governments that responded, requested more transparency with regard to transfer of 
AEA  among  Member  States  and  a  mechanism  for  setting  AEA  reference  prices  in  a 
transparent manner. However, two Member States did not want to disclose the prices of 
bilateral transactions.  

Banking and borrowing. Three Member States were in favour of continuing the current 
provisions for borrowing (up to 5% from the following year). 10 Member States were in 
favour of permitting a higher rate of borrowing than the current 5%. Their main argument 
was that to reach the more ambitious 2030 targets in a cost-efficient way more flexibility 
is needed, in particular for borrowing in the early phase of the 2021-2030 period, to give 
Member  States  the  time  they  need  to  prepare  AEA  transfers  among  Member  States. 
However, reflecting the risk that higher borrowing may lead to an "AEA-debt crisis", six 
Member States proposed a higher borrowing limit in the beginning of the period, and a 
lower limit towards the end. Sweden opposed higher borrowing, highlighting the need for 
implementing  strict  long-term  EU  mitigation  policies  in  the  ESD  sectors.  Estonia  and 
Latvia proposed to permit borrowing not only from the following, but from any year of 
the period. 

AEA  transfers  among  Member  States.  Member  States  stressed  that  a  mechanism  for 
enhanced  transfer  of  AEA  among  Member  States  must  serve  cost-effectiveness,  be 
simple, provide transparent information on the AEA market, not have high administrative 
costs,  ensure  a  liquid  AEA  market,  provide  additional  and  certain  GHG  reduction 
investment  for  sellers  and  reliable  GHG  reductions  for  buyers,  and  not  compromise 

77 Also the government of Norway and two Norwegian stakeholders responded to the public consultation. 
Except for being included in Figure 15, they are not covered in this report.  
78 8% of all respondents expressly requested their contribution to be treated confidentially.  
79  As  several  Member  States  have  submitted  their  contributions  confidentially  it  is  not  possible  for  all 
statements to list the supporting Member States.  

96 

 
                                                 
environmental  integrity  and  achieving  individual  and  EU  ESD  targets.  Though  many 
Member  States  signalled  that  it  was  difficult  to  form  a  firm  position  on  AEA  transfers 
due to limited experience with the current ESD, 16 Member States wanted to enhance the 
transfer  of  AEAs  between  Member  States.  One  Member  State  stated  that  it  does  not 
expect to engage in transfers of AEAs. 

The  majority  of  participating  Member  States  were  open  to  different  options,  such  as 
auctioning,  trading  platforms  and  project-based  mechanisms  (PBM),  which  could  even 
be established in parallel or sequentially. Several Member States with GDP/capita above 
average were concerned that Member States with a large potential for cheaper reductions 
will  not  exploit  this  potential,  or  not  transfer  their  surplus  AEA,  leaving  others  with 
expensive  domestic  reductions.  Four  high-income  Member  States  asked  for  mandatory 
mechanisms that ensure supply of AEAs to create a liquid market. Other Member States 
opposed  mandatory  mechanism,  and  a  minority  even  raised  doubts  if  an  AEA  market 
would work, as it would have only few participants (the Member States). Four Member 
States were against mandatory auctioning, and two were against a trading platform.  

The  following  table  gives  an  overview  of  the  Member  States  positions  on  the  different 
options for AEA transfers among Member States:  

Table 22: Synopsis of Member State responses to question 1 on flexibility options  

Options 
Member States 

proposed 

by 

Nr of MS in favour or open to it  Nr  of  MS  doubtful  or 

against it 

Annual auctioning, including  16, of which: 

- mandatory auctioning of 
surpluses 

-voluntary auctioning of 
surpluses 

Trading platform 

EU-wide project-based 
mechanisms, of which 

- extended to programmes 

-  AEAs  also  to  be  owned  by 
private actors 

4 

4 

10 

11 

2 

2 

Private sector stakeholders80  

4 

2 

3 

2 

20 out of 45 trade associations responded to the questions on flexibility mechanisms, out 
of the 17 EU-wide trade associations, six responded. Across the board they stressed the 
need for transparency with regard to prices, timing and volume on any such exchange, as 
this would permit private actors to engage in GHG reduction actions, and to know how 

80 EU-wide trade associations, national trade associations, companies and SMEs. 

97 

 
 
 
 
 
 
 
                                                 
national  governments  balance  domestic  action  with  financing  action  in  other  Member 
States.  

Banking and borrowing. Reasoning that borrowing may be "used as a licence to postpone 
action" and not to make the necessary investment in low-carbon technologies, three trade 
associations  linked  to  the  energy  efficiency  and  renewable  energy  sectors  requested  to 
forbid  borrowing.  In  contrast,  four  other  associations  representing  SMEs,  conventional 
small-scale agriculture, and conventional energy sectors, were in favour of permitting a 
higher  than  5%  level  of  borrowing,  as  this  would  favour  cost-effective  mitigation  and 
account  for  emissions  from  agriculture  that  are  highly  dependent  on  unpredictable 
weather conditions. 

AEA transfers among Member States.  Trade associations  were  divided. Those active  in 
energy  efficiency  and  renewables  in  high-GDP  per  capita  Member  States  feared  that 
AEA  exchange  among  Member  States  could  channel  potential  investment  in  domestic 
GHG  reductions  to  other  countries,  leaving  the  huge  potential  for  increasing  energy 
efficiency buildings, transport and industry in "rich" Member States untapped. Instead of 
AEA transfers they requested ambitious domestic GHG reduction and energy efficiency 
targets.  Others  encouraged  enhanced  AEA  transfers  to  avoid  high  mitigation  costs.  An 
Irish  trade  organisation  requested  mandatory  auctioning  of  surpluses  to  feed  the  AEA 
market. 

NGO and research organizations 

18  (out  of  19)  NGO  and  research  organizations  responded  to  this  question.  All  that 
responded were generally supportive of the concept of cost-effective action, but differed 
on the implications for flexibility mechanisms. Among the positive aspects of flexibility 
mechanisms stressed were that they can serve as a tool to minimize overall opportunity 
costs for mitigation; stimulate EU Member States to exceed their targets to save or sell 
AEAs;  drive  decarbonisation  in  lower  income  Member  States;  and  may  involve  the 
private sector (as project developers) leading to more mitigation actions.  

However,  many  NGOs  expressed  doubts  about  the  need  for  additional  flexibility 
mechanisms  and  about  the  proposed  framing  of  "cost-effectiveness".  They  argued  that 
potentials for additional, cost-efficient actions exist across the non-ETS sectors, that the 
EU's  2030  target  does  not  present  a  sufficiently  ambitious  pathway  to  2030,  and  that  a 
higher target (at least 41% end-use energy savings, a share of 45 % renewable energy and 
60 % GHG reductions compared to 1990) can be reached in a cost efficient way. They 
also stressed that the understanding of cost-effectiveness must take into account the EU's 
long  term  climate  goals:  the  most  cost-effective  way  of  delivering  the  transformational 
change needed to cut emissions by 80-95% by 2050 is likely to differ from the least cost 
way  of  meeting  the  2030  target.  Furthermore,  the  pursuit  of  the  latter  may  have  a 
negative impact on the former. Other key concerns were that flexibility mechanism must 
not  delay  mitigation  action  and  increase  the  risk  of  non-compliance,  and  endanger 
environmental integrity.  

NGO and research organisations strongly supported banking, stressing that it encourages 
early action. They worried that extensive borrowing rules open a loophole for countries 
to  avoid  action  and  delay  the  necessary  investments.  Accordingly,  several  requested  to 
restrict  borrowing.  Though  mostly  against  enhanced  flexibility  mechanisms,  all  NGOs 
agreed  that  there  should  be  transparent  reporting  on  AEA  transfers,  accessible  to  the 
public. Several NGOs questioned whether the existing flexibility mechanisms (other than 
banking) should continue. They argued that the existing option of AEA transfers among 

98 

 
Member  States  has  not  been  used  and  has  thus  proven  to  be  irrelevant  for  the  current 
period  (2013  -  2020).  They  also  argued  that  enhanced  flexibility  could  make  Member 
States  avoid  investing  in  domestic  mitigation  measures,  which  may  trap  them  into 
pathways which are inconsistent with the long-term energy and climate objectives of the 
EU. Eleven NGOs were in favour of a project based mechanism as it could involve the 
private  sector  (project  developers)  and  may  therefore  lead  to  more  mitigation  actions  - 
e.g. in the building sector – and build capacity in less prosperous Member States with a 
big  cost-effective  mitigation  potential.  The  NGOs  stressed  the  need  to  ensure  the 
environmental integrity of such projects.  

Citizens81 

3 (out of 6) citizens/citizens groups responded to this question. They expressed the need 
for urgent action. Most responses also displayed a lack of understanding and mistrust of 
the concept flexibility mechanisms.  

8.2.3. Monitoring, reporting and compliance 

22  out  of  22  Member  States  responded  to  this  question.  Eight  Member  States  were  in 
favour of annual reporting with biennial compliance checks. Seven preferred to keep the 
current system of annual reporting and annual compliance checks. Three Member States 
preferred  biennial  reporting  and  biennial  compliance  checks.  Five  Member  States 
preferred  other  options,  and  two  did  only  make  general  comments.  Thus  16  Member 
States  were  in  favour  of  annual  reporting,  and  18  in  favour  of  at  least  biennial 
compliance checks. Two Member States proposed only one compliance check at the end 
of the period (thus in 2030).  

Table 23: Synopsis of Member States responses to question 2 on compliance: 

Options: 

of 

Nr 
supporti
ng MS 

a) Keep it as it 
is: Annual 
reporting and 
annual 
compliance 
checks with 
existing 
corrective 
action 

5 (7) 

(2 more MS 
were 
supportive but 
with 
reservations)  

b) Annual 
reporting 
with biennial 
compliance 
checks with 
existing 
corrective 
action  

c) Biennial 
reporting with 
biennial 
compliance 
checks and 
enhanced 
corrective 
action  

d) Other (with 
explanation). 

No option 
selected, 
but 
comments 
made 

8  
(1 also open 
to c, 1 also 
open to "less 
frequent 
compliance 
checks" in 
general) 

3  

5  

2  

(1 also open to 
b) 

(2 supporting 
annual reporting 
cycle with some 
additions; 

2 proposing 
compliance 
check only in 
2030) 

81 The few citizens that participated in the consultation did not respond to all questions. As a consequence, 
their views are only included in this report when they made clear statements on the respective questions.  

99 

 
                                                 
General  comments  were  that  there  is  limited  experience  with  the  current  reporting  and 
compliance  checks;  there  was  uncertainty  regarding  LULUCF,  which  is  by  nature 
strongly  affected  by  external  factors  such  as  extreme  weather  events  and  thus  requires 
longer  compliance  cycles;  and  how  the  Paris  Agreement  will  affect  ESD  monitoring, 
reporting  and  verification  (MRV).  Luxembourg  and  Malta  requested  that  a  common 
approach and monitoring, reporting and verification system should be put in place for the 
two work streams, GHG emissions and energy policies, aiming at reducing fossil energy 
consumption. 

Arguments  of  Member  States  in  favour  of  option  a)  were  that  annual  accounting  and 
reporting  have  worked  well  under  the  Kyoto  Protocol;  that  they  are  best  to  guarantee 
environmental integrity and helps planning for when to react with measures to deviations 
from  the  target  trajectory,  in  particular  if  flexibility  mechanisms  are  enhanced.  Other 
arguments  in  favour  were  that  they  prevent  inconsistencies  as  reporting,  compliance 
checks  and  corrective  actions  all  occur  on  an  annual  basis;  that  they  offer  the  best 
opportunity  to  develop  a  functioning  AEA  market  (while  biennial  compliance  checks 
would limit the frequency of AEA exchanges).  

Arguments of Member States in favour of option b) were that annual reporting permits 
Member  States  to  assess  themselves  if  they  are  "on  target"  and  is  demanded  by  the 
UNFCCC  anyway,  but  that  biennial  compliance  checks  would  significantly  reduce  the 
administrative burden and would still allow for an adequate preparation of the measures. 
Other arguments in favour were that they could be done in the same year as the requested 
reporting  on  policies  and  measures  and  on  projections,  thus  better  accounting  for  these 
policies, measures and projections; would still safeguard compliance and environmental 
integrity (in contrast to less frequent compliance checks); could smoothen the variability 
of emissions due to specific economic or meteorological circumstances. 

Member  States  in  favour  of  option  c)  argued  that  biennial  reporting  with  biennial 
compliance  checks  and  enhanced  corrective  action  reduces  the  administrative  burden. 
They did not make concrete proposals, though, what enhanced corrective action should 
look  like.  Member  States  that  had  selected  d)  “Other"  explained  that  "an  intermediate 
scenario  with  2  or  3  checks  in  the  whole  period"  could  be  an  option;  less  frequent 
compliance  checks  should  be  discussed,  depending  on  what  kind  of  flexibilities  are 
included in the 2030 framework and how LULUCF is dealt with.82  

Private sector stakeholders  

25  private  sector  stakeholders  responded  to  this  question,  including  six  out  of  17  EU-
wide trade associations, and three (out of 13) companies. Among those that did respond, 
option  a)  clearly  emerged  as  the  preferred  option  (selected  by  four  EU-wide  trade 
associations,  six  national  trade  associations,  and  two  companies).  Two  EU-wide  trade 
associations selected option b. None selected option c. The trade associations in favour of 
option  a)  argued  that  annual  reporting  aids  transparency  and  liquidity  of  trading  and 
complements annual reporting under the ETS. Laxer rules may result in Member States 
not taking the necessary measures and lose sight of investments needed. In particular for 
buildings, delaying action to cut emissions in the existing building stock risks locking in 
and limiting the reduction potentials and jeopardizing the chance for this sector to reach 

82  Sweden  requested  "Robust  compliance  measures  [that]  ensure  all  member  states  reach  their  national 
targets, also in a situation where the EU collectively reaches its common target.", while France was against 
enhancing corrective measures. 

100 

 
                                                 
the  need  for  a  88%-91%  GHG  reduction  by  2050;  with  biennial  compliance  checks, 
possible  non-compliance  would  only  be  exposed  and  corrected  too  late.  The  trade 
associations in favour of option b) argued that "excessive" reporting & monitoring should 
be avoided. The trade associations in favour of option d) "Other" stated that a one-year 
delay in reporting – as in the EU ETS – would be ideal.  

NGOs 

18 out of 19 NGOs and research organisations responded to this question. Eight out of 11 
EU-level NGOs and five out of six national NGOs requested option a "Annual reporting 
and annual compliance checks with existing corrective action". The NGOs in favour of 
option a) argued that it ensures that countries are on track with meeting their target, and 
that it is necessary to bring all Member States on the path of a low carbon economy in 
2050  and  to  avoid  stranded  investments  in  infrastructures  that  are  not  in  line  with  the 
2050  objectives.  The  NGOs  that  had  selected  d)  "Other"  were  also  in  favour  of  annual 
reporting  and  compliance  checks,  but  stressed  that  there should  be  enhanced  corrective 
action  and  biennial  reporting  of  greenhouse  gas  emission  projections  and  policies  and 
measures  in  the  2021-2030  period,  in  line  with  the  current  rules  as  set  out  by  the 
Monitoring Mechanism Regulation.  

8.2.4. How  to  reflect  cost-effectiveness  in  a  fair  and  balanced  manner  when  setting 

national greenhouse gas reduction targets 

21  out  of  22  Member  States  responded  to  this  question.  Member  States  broadly 
confirmed  the  Council  Conclusions  of  October  2014  that  the  new  ESD  targets  should 
continue to be set based on GDP per capita and adjusted for the Member States with  a 
GDP per capita above the EU average, to reflect cost-effectiveness. Six of eight Member 
States with a GDP per capita above EU average declared that the projections in the EC 
impact assessment concerning the 2030 framework for climate and energy policies83 are a 
good starting point to assess cost-effectiveness. A group of six Member States explicitly 
endorsed  a  Belgian  proposal  to  determine  50%  of  the  target  using  GDP  per  capita  and 
50%  using  cost-effectiveness  figures  from  the  EC  impact  assessment.  Finland  stressed 
that  the  adjustment  of  GDP  per  capita  based  reduction  targets  for  Member  States  with 
above  EU  average  should  not  raise  reduction  targets  for  Member  States  with  cost–
efficiency  potential  below  the  GDP  per  capita  based  target.  Italy  pointed  out  that  it 
expects  to  be  only  just  below  average  EU  GDP  per  capita  and  thus  would  regard  as 
unfair,  if  it  were  to  be  completely  cut  off  from  the  adjusted  targets  option  for  above-
average  GDP  per  capita  Member  States.  A  few  more  Member  States  asked  for  sector-
specific  concerns  to  be  reflected  in  their  target.  These  concerns  were  mainly  related  to 
transport, agriculture and the integration of LULUCF into the ESD.  

Regarding  the  limited  one-off  flexibility  between  the  European  Emissions  Trading 
System (ETS) and ESD responses remained general. A number of potential beneficiaries 
explicitly  support  this  option  while  another  group  emphasized  its  limits.  There  was 
consensus  that  a  one-off  flexibility  option  should  not  compromise  the  functioning  and 
environmental  integrity  of  the  ETS.  With  regard  to  the  potential  beneficiaries  in  the 
group of high-income Member States, Austria, Finland, and the Netherlands did not want 
it  to  be  seen  as  the  primary  instrument  to  address  cost-effectiveness  concerns.  Malta 
would  rather  see  this  not  as  a  one-off,  but  ‘two  step’  tool  with  a  revision  half-way 

83  Commission  Staff  Working  Document  SWD  2014/15,  section  5.9,  http://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX:52014SC0015 

101 

 
                                                 
through the trading period. Lithuania asked for the one-off flexibility to be accessible to 
all  Member  States  (which  was  not  part  of  the  European  Council  Conclusions).  France 
and Hungary asked for a two-way flexibility between the ETS and ESD. Latvia rejected 
the idea of a one-off flexibility.  

Five out of six regional governments and local government associations responded to 
this question. All five were sceptical about using ETS allowances to achieve ESD targets 
– this should not be the primary tool to ensure cost-effectiveness.  

42  (out  of  58)  private  sector  stakeholders  responded  to  this  question.  Most  of  them 
agreed  with  the  GDP  per  capita  approach  and  a  cost-effectiveness  adjustment  for 
countries with a GDP per capita above EU average. EUROCHAMBRES and its national 
member associations, however, preferred to only use cost-effectiveness and not GDP per 
capita  as  dominant  criterion.  Also  the  European  Association  of  Crafts  and  SMEs 
(UEAPME)  highlighted  cost-effectiveness  and  suggested  that  the  national  ESD  targets 
should  take  into  account  the  marginal  costs  of  the  additional  emission  reductions 
compared to a lower level target. The European Farmers and Agri-Cooperatives (Copa-
Cogeca) suggest a new policy regime used for agricultural emissions based on intensity- 
or efficiency-targets rather than national ESD-targets.  

Concerning the proposed one-off flexibility mechanism between the ETS and ESD, the 
numbers of advocates and opponents were fairly balanced. Both groups agreed that this 
flexibility  must  not  distort  the  ETS  in  its  current  functioning;  it  should  only  be  a  last 
resort.  Many  organizations  confirmed  the  wording  stipulated  in  the  European  Council 
Conclusions  that  predictability  and  transparency  have  to  be  ensured,  and  cost-
effectiveness  and  environmental  integrity  to  be  guaranteed.  Several  stakeholders 
proposed more concrete ideas how these conditions can be met. 

All NGOs and research organisations responded to this question. Concerning the cost-
effectiveness  criterion  for  the  above-average  GDP  per  capita  countries,  Climate  Action 
Network asked it to be based on the additional costs-effective potentials of those Member 
States necessary for reaching the target based on the EC’s Impact Assessment. A larger 
group  of  NGOs  agreed  that  to  set  the  right  incentives,  the  2021  starting  point  for  each 
Member  State  should  be  the  lowest of  1)  the  2020  target,  2)  the  average  of  2016-2018 
emissions,  or  3)  the  projected  2020  emissions  for  each  Member  State.  A  starting  point 
solely  based  on  the  average  2016-2018  ESD  emissions  would  favour  Member  States 
whose emissions are above their 2020 target and would penalize so-called early movers.  

The  majority  of  NGOs  and  think-tanks  were  opposed  to  a  limited  one-off  flexibility 
mechanism  for  environmental  integrity  and  fairness  reasons.  They  feared  a  delay  of 
action in ESD sectors both in higher and lower income Member States while additional 
abatement in the ETS would be uncertain. Instead governments should rather spend their 
resources on mitigation in the ESD sectors with many co-benefits such as jobs, cleaner 
air,  and  improved  public  transport.  In  case  ETS  allowances  would  be  allowed  for 
achieving  national  ESD  targets,  it  should  only  be  used  as  a  last-resort  option.  Many 
NGOs proposed concrete restrictions on scope, volume, and timing of transfers. Sandbag 
recommended a single economy-wide burden-sharing system for distributing allowances 
to Member States under both the EU ETS and the ESD. Most stakeholders in this group 
also stressed the need for transparency to allow for public understanding and scrutiny. 

102 

 
8.2.5. Complementary EU-wide action 

21 out of 22 Member States responded to this question. 17 Member States asked for the 
scope of EU action to be enhanced. Four said the current scope is sufficient. However, a 
few Member States interpreted "EU-wide action" not as new EU legislation and policies, 
but  as  improving  and  better  implementing  existing  policies  and  measures.  Also  the 
regional governments and local governments requested that the scope of EU action be 
enhanced.  Member  States  in  favour  of  additional  EU-wide  action  stressed  that  the 
ambitious 2030 and 2050 climate policy targets necessitate more radical changes than the 
2020  targets,  as  well  as  early  investment.  This  again  necessitates  EU-wide  action 
complementing  the  ESD.  They  stated  that  measures  applied  collectively  are  not  only 
more effective, but also avoid distortions of competition within Europe.  

These  Member  States  argued  for  additional  EU-wide  action  in  several  policy  areas, 
including transport, financing, energy and agriculture. 

Eight  Member  States  stressed  the  need  for  strong  EU  policies  to  promote  energy 
efficiency and reduce energy demand in the transport sector; to promote the use of low-
carbon fuels and propulsion systems, to facilitate a modal shift, and to reduce the demand 
for  transport  overall.  Member  States  argued  that  EU  regulations  for  CO2  emission 
standards for cars and vans have proven to be a highly effective way of improving fuel 
efficiency  and  encouraging  vehicle  manufacturers  to  bringing  low-emission  vehicles  to 
the market. Tighter EU-regulation in the period to 2030 will be crucial also for reaching 
ambitious national transport emission targets.  

Seven Member States also emphasized the need for action with respect to financing and 
taxation, including: 

  making climate-friendly choices easier and cheaper, by assuring finance and tax 
system  underpin  the  efforts  and  not  act  counterproductively,  through  a 
comprehensive  set  of  tax  measures  for  a  green  budget  reform,  for  level  playing 
field across the EU (or Eurozone); 

  assessing the effectiveness of Energy Taxation Directive and State Aid rules;  
  ensuring  all  EU  and  European  funds,  as  well  as  indirect  funds  such  as 
environmentally harmful subsidies are steered towards making long term climate 
targets possible to reach.  

Czechia and Sweden also requested a price on carbon also in the non-ETS sectors.84  

Five  Member  States  underlined  that  EU  policies  and  instruments  are  needed  as  a  cost-
effective way to tap into the large potential for increased, profitable energy efficiency in 
buildings,  products,  industrial  processes,  heating  and  cooling.  Among  their  arguments 
were that following the "energy saving first"– principle reduces the pressure on Member 
States  to  invest  in  further  electricity  generation  infrastructure  and  plants,  freeing 
investment  in  decarbonizing  other  areas  of  the  economy.  Belgium  requested  a 
harmonized quality framework to assess energy saving investments. Apart from a general 
request  to  support  the  promotion  of  renewable  energy,  several  Member  States  focused 
their comments on biofuels and biomass, asking to review the appropriateness of existing 
criteria to address sustainability criteria from crop biomass to biomass from the forestry 

84 Sweden noted that "An important part of the Swedish climate strategy is to put a price on carbon dioxide 
emissions. Without this possibility our work becomes severely more difficult." 

103 

 
                                                 
or waste sectors and propose new or dedicated criteria if required. These criteria should 
apply across all relevant parts of EU legislation, including ESD. 

Four  Member  States  requested  to  better  align  the  Common  agricultural  policy  with 
climate policy. Member States also requested that the Commission and public institutions 
follow  highest  standards  in  their  functioning  with  regard  to  following  green  public 
procurement and reducing their own carbon footprint.  

Member States cautious about additional EU-wide action stressed that measures must not 
affect  the  competitiveness  of  Member  States  and  their  economies  vis-à-vis  non-EU 
countries  without  equivalent  climate  change  mitigation  commitment.  They  emphasized 
their right to choose their own energy mix and the best policies and measures to address 
local needs.  

The local government associations stressed that the role of the local level as "key actors 
in implementing climate actions in the non-ETS sector" should be supported.  

Private  sector  stakeholders  (Trade  associations,  business,  SME)  disagreed  about  this 
question and responded as illustrated in the table below:  

Table 24: Synopsis of private stakeholder responses on the ESD scope 

Stakeholder group 

a) The current scope is 
sufficient 

b)  The  current 
scope  should  be 
enhanced. 

No response 

European Associations 

5 

National trade associations   13 

Companies and SME 

0 

8 

10 

9 

4 

2 

1 

Stakeholders  in  favour  of  additional  EU-wide  action  and  legislation  stressed  that  a 
mandatory  EU  target  for  energy  efficiency,  with  clear  national  targets,  would  support 
Member States' emission reduction in ESD sectors and would generate jobs, growth and 
GHG emissions reductions in one stroke, as well as provide certainty for the concerned 
sectors.  They  also  asked  for  removal  of  harmful  subsidies,  and  a  CO2-price  signal  in 
non-ETS-sectors to create a level playing field with the ETS sectors. In the absence of an 
EU-wide  carbon  tax,  Member  States  should  at  least  be  given  clear  design  rules  for 
national  carbon  taxes,  so  that  tax  regimes  are  converging  rather  than  diverging.  Also 
stronger  monitoring  and  control  for  vehicle  efficiency  and  building  performance 
standards were requested. Stakeholders against additional EU-wide action argued that the 
main  EU-tools  for  the  2020  energy  and  climate  policy  (ETS  Directive,  the  Energy 
Efficiency  Directive,  and  the  Renewables  Directive)  are  overlapping,  a  lack  of 
coordination  between  Member  States  creates  additional  overlaps  and  distortions.  The 
Commission should thus focus on monitoring the implementation by Member States of 
existing legislation, to better harvest their potential.  

All  NGOs  and  research  organisations  responded  to  this  question.  All  demanded  that 
the current scope of EU-wide action and legislation be enhanced. They stressed that the 
ESD  for  2020  has  shown  that  in  many  Member  States  ESD  targets  alone  were  not 
sufficient  to  drive  energy  efficiency  improvements.  They  requested  EU  legislation  and 
measures  to  strengthen  the  Member  States'  long-term  strategies  in  the  key  sectors 

104 

 
 
 
building, transport, agriculture and waste, providing planning certainty, lower low-carbon 
technology-costs as well as jobs, economic growth, energy security, better air quality and 
reduced environmental damage. The EU's 2030 energy savings target should be increased 
to  40%85,  and  a  binding  GHG  reduction  target  for  the  transport  sector  be  introduced86. 
The EED's 3% renovation rate should be extended to all public buildings, and financial 
policies  be  adapted,  including  removal  of  environmentally  harmful  subsidies,  and 
introduction of carbon taxes.87   

8.2.6. Need for  EU-organised capacity building  and other  support to  implementation  at 

national, regional and local level  

18  out  of  22  Member  States  responded  to  this  question.  They  stressed  that  the  EU 
should  further  facilitate  a  better  sharing  of  best  practices  among  Member  States  in  the 
2021-2030 period, with a focus on the regional and local level, as emissions covered by 
the  ESD  were  mostly  influenced  at these  administrative  levels.  The  current  support  for 
Member States when applying for EU funding should continue after 2020. Most of them 
found  past  ESD  capacity  building  very  useful,  such  as  a  series  of  regional  workshops 
facilitating  the  exchange  of  experiences  and  good  practice  organised  by  the  European 
Commission. Member States also suggested capacity building support for monitoring and 
reporting  at  a  sector  level,  for  example  for  transport  and  agriculture;  an  EU 
communication  strategy  for  energy  efficiency  of  buildings,  renewable  energies,  better 
land use, as climate-friendly agriculture; and modelling with high geographical resolution 
the effects of inaction in Member States. Hungary asked for more capacity building for 
establishing  an  AEA  greening  system  as  part  of  the  flexibility  mechanisms.  The  UK 
expressed that any additional action could and should be implemented within agreed EU 
budgets,  as  European  Structural  and  Investment  Funds  (ESIF)  uptake  for  energy 
efficiency  remains  low,  more  guidance  should  be  provided  on  Low  Carbon  Plans  and 
successful application.  

Five  Regional  governments  and  local  government  associations  responded  to  this 
question:  Climate  Alliance  and  Energy  Cities  stressed  that  the  local  level  is  crucial  for 
reaching the 2030 targets and that cities and local authorities should be better integrated 
in  policy  making  from  the  outset.  They  demanded  that  Horizon  2020  and  technical 
assistance  facilities  continue  to  support  the  developing  of  Sustainable  Energy  Action 
Plans  for  Covenant  of  Mayors  cities.,  including  their  energy  and  ambition  in  Europe's 
climate and energy policies.  

Seven  private  sector  stakeholders  responded  to  this  question.  They  underlined  the 
importance  of  the  exchange  in  the  context  of  ESIF  and  Covenant  of  Mayors  activities. 
The  European  Insulation  Manufacturers  Association  (EURIMA)  asks  for  support  to 
governments  in  understanding  the  interactions  between  related  directives,  e.g.  between 
the Energy Efficiency Directive and Energy Performance for Buildings Directive, which 
would facilitate the implementation of more effective national polices and measures, and 
avoid lock-in effects. The Commission's country reports in the European Semester should 
elaborate  guidance  on  cost-effective  energy  efficiency  potentials.  The  European 

85 A co-ordinated response by NGO-networks and umbrella-NGOs.  
86  NGOs  stressed  that  25%  of  all  transport  is  of  the  urban  variety  and  also  the  most  conveniently 
substitutable with cycling and public transport. 
87 Although land use, land use change and forestry (LULUCF) was addressed in a separate, parallel public 
consultation, NGOs expressed views on LULUCF also in the 2030 ESD consultation. 

105 

 
                                                 
Association of Crafts and SMEs asks for capacity building for local SME organisations 
on how to develop ESD implementation measures with public authorities.  

20 out of 22 NGOs and research institutions responded to this question. They agreed 
that awareness needs to be increased about the benefits of national policies and measures 
to  reduce emissions  in  the transport, buildings, agriculture and waste sector after 2020; 
that the European Semester reports should also recommend policies for meeting the 2030 
climate  goals,  e.g.  requiring  the  phasing-out  of  environmentally  harmful  subsidies,  e.g. 
for company cars. Some demanded that there should be an annex to the ESD, listing best 
practices per sector, for Member States to include them in their national plans. Member 
States also saw a need for mobilizing public and private funding for technical assistance 
in energy efficiency. They stressed that GHG-reduction projects at community-level can 
facilitate capacity- and governance-building in low-GDP-per-capita Member States with 
a big cost-effective mitigation potential.  

8.2.7. Appendix  1:  Consultation  on  the  Green  Paper  on  a  2030  framework  for  climate 

and energy policies relevant - key conclusions relevant to the 2030 ESD 

On  27  March  2013,  the  European  Commission  adopted  a  Green  Paper  on  "A  2030 
framework  for  climate  and  energy  policies".  Key  points  made  by  stakeholders  in  the 
Green Paper's public consultation relevant for the 2030 ESD were that  

 

 

to  decarbonize  in  the  most  cost-efficient  way  a  balance  between  EU  wide 
instruments needs to be reached.  
the ETS allows for the fair distribution of efforts, so the focus should be on how 
to share the efforts for the Effort Sharing Decision (ESD) and how to strengthen 
it. 

Member States 

  generally  agreed  that  the  distribution  of  efforts  should  be  decided  based  on 
national  specificities  and  potential  to  incorporate  certain technologies,  including 
financial  capabilities.  A  certain  degree  of  flexibility  should  be  persevered  at 
national  level  to  ensure  the  most  cost-efficient  decarbonisation  path.  Some 
proposed the introduction of flexibility measures for GHG emission reduction in 
different sectors.  

  noted that it would be important also to consider past efforts to lower emissions. 
Generally,  Member  States  and  NGOs  agreed  that  financing  could  be  better 
provided through EU-wide instruments.  

Stakeholders  from  the  private  sector  and  some  local  authorities  argued  for  a  target-
sharing based on efforts by all Member States and the consideration of national GDP per 
capita  to  help  ensure  a  fair  distribution  of  efforts.  A  few  utility  companies  proposed  to 
distribute the efforts based on the share of absolute emissions expected in 2030. NGOs 
called for the setting of an ambitious legally binding target for the ESD and the provision 
of  financing  for  Member  States  less  able  to  act.  NGOs  also  stressed  that  the  highest 
potential countries also often have the least ability to act; hence the effort sharing should 
take  into  account  ability  to  pay,  and  low  marginal  abatement  costs.  Trade  unions 
emphasised the need for a reinforced ESD as an integral part of efforts until 2030. NGOs 
together with many trade unions, called for the cancellation of international credits under 
the  ETS  and  the  ESD  (governing  the  non-ETS  sectors)  to  instead  focus  on  domestic 
action. 

106 

 
On  future  capacity  building  and  financing  instruments  stakeholders  agreed  that  the  EU 
should  facilitate  climate-  and  energy-related  investments.  While  some  stakeholder 
requested  innovative  financial  instruments,  others  noted  that  the  existing  ones  are 
sufficient. There was an overall agreement that leveraging private investments is crucial. 
Several stakeholders noted that financing for economically weaker Member States should 
be  provided.  NGOs  noted  the  need  to  address  investments  in  areas  that  have  smaller 
financial  capabilities,  such  as  Central  and  Eastern  Europe.  NGOs  generally  said  that 
innovative financial instruments are needed to harvest the reduction potential under the 
ESD. Some suggested that the EIB introduces an NER-300-type instrument for the ESD. 
For energy efficiency, they proposed bundling different small projects to a large project 
to make them more attractive to investors. They also supported, together with non-energy 
intensive companies, the development of risk-sharing facilities, equity, loans and project 
bonds. Local authorities requested better information on how to combine various sources 
of funding.  

8.2.8. Appendix  2:  Geographical  distribution  of  the  2015  ESD  public  consultation's 

respondents:  

Figure  17  shows  the  geographical  distribution  of  respondents  by  their  country  of 
residence or activity. Stakeholders could select more than one country.  

Figure 17 Stakeholders by country 

107 

 
 
 
8.3.  Annex 8.3: Who is affected by the initiative and how 

The proposed policy primarily addresses Member States as institutional actors and thus 
mostly affects their national administrations. The practical implications of this initiative 
are  related  to  two  areas:  reporting  and  monitoring  compliance  under  the  ESR,  and, 
indirectly,  implementation  of  national  policies  and  measures  for  GHG  emission 
reductions or other mitigation action. 

As explained in section 7 of this impact  assessment, reporting by Member States under 
the  ESR  in  2021-2030  would  in  principle  follow  the  same  well  established  rules  and 
procedures  as  in  the  current  commitment  period.  The  only  significant  change  resulting 
from the preferred combination of policy option in section 6.2 is that compliance checks 
and  related  GHG  inventory  reviews  would  be  carried  out  every  fifth  year  instead  of 
annually. This means that the associated administrative burden and costs for monitoring 
compliance would be reduced both for Member States and the European Commission.  

Another  practical  implication  of  the  preferred  option  is  the  creation  of  a  central  site 
where offers and requests for AEA transfers would have to be notified by Member States 
selling  or  buying  AEAs.  This  is  similar  to  existing  reporting  obligations  for  Member 
States  under  the  current  ESD,  and  would  not  considerably  increase  their  administrative 
burden  compared  to  the  policy  baseline  option,  although  reporting  might  become  more 
frequent for those Member States engaged in such transfers. The information site would 
be  web-based  could  be  hosted  by  the  European  Commission  or  by  an  organisation 
contracted by it. The costs for hosting the site would be modest. 

With respect to businesses in general and SMEs in particular there are no direct reporting 
obligations for SMEs or other enterprises under the ESD and the ESR proposal would not 
change this situation. 

The practical implications for the Member States due to the implementation of national 
policies  and  measures  in  ESR  sectors  are  difficult  to  assess  and  will  depend  on  the 
measures chosen in each specific country. The experience of the implementation of the 
ESD until now is that national climate policies and measures affecting ESD sectors have 
been  influenced  by  several  factors,  including  EU  and  national  measures  for  promoting 
energy efficiency and renewable energy. The concrete consequences of the ESR in terms 
of Member State action is therefore difficult to establish at this stage. 

Possible costs for the private sector might arise from the implementation of such national 
policies but not as a direct effect of the ESR itself. Any effects on enterprises will depend 
on  the  specific  measures  chosen  on  national  level.  With  respect  to  energy  efficiency 
measures, which are expected to be an important part of such measures, see the impact 
assessment of the review of the Energy Efficiency Directive for further information. With 
respect  to  potential  measures  in  agriculture  and  land  use  sectors,  see  the  Impact 
Assessment for agriculture and LULUCF for further information. 

108 

 
 
8.4.  Annex  8.4:  Analytical  models  and  model-based  scenarios  used  in  preparing 

the impact assessment. 

8.4.1. Description of analytical models used 

The  model  suite  used  for  this  impact  assessment  has  a  successful  record  of  use  in  the 
Commission's climate and energy policy impact assessments – it is the same model suite 
as  used  for  the  2020  climate  and  energy  package  as  well  as  for  the  2030  climate  and 
energy  policy  framework.  The  models  and  their  linkages  are  briefly  described  in  the 
following  subsections.  Detailed  model  descriptions  can  be  found  on  the  DG  CLIMA 
website88. Assumptions relevant for this impact assessment are described in section 8.4.2 
on the EU Reference scenario and section 8.4.3 on policy scenarios. 

The  model  suite  covers  the  entire  energy  system  (energy  demand,  supply,  prices  and 
investments to the future) and all GHG emissions and removals: 

  Emissions:  CO2  emissions  from  energy  and  processes  (PRIMES),  CH4,  N2O, 
fluorinated  greenhouse  gases  (GAINS),  CO2  emissions from  LULUCF  (GLOBIOM-
G4M),  air  pollution  SO2,  NOx,  PM2.5-PM10,  ground  level  ozone,  VOC,  NH3 
(GAINS) 

  Emission reduction and removals: structural changes and technologies in the energy 
system and industrial processes (PRIMES), technological non-CO2 emission reduction 
measures (GAINS), changes in land use (GLOBIOM-G4M-CAPRI) 

  Time horizon: 1990 to 2050 (5-year time steps) 

  Geography: individually all EU Member States, EU candidate countries and, where 

relevant Norway, Switzerland and Bosnia and Herzegovina 

  Impacts:  on  energy,  transport  and  industry  (PRIMES),  agriculture,  forestry  and  land 
use (GLOBIOM-G4M), atmospheric dispersion, health and ecosystems (acidification, 
eutrophication)  (GAINS),  macro-economy  with  multiple  sectors,  employment  and 
social welfare 

  Split  ETS-ESD/ESR:  the  split  is  calibrated  on  the  basis  of  the  existing  ETS-ESD 

scope for the period 2005-2050.  

Related to this last element, to ensure modelling consistency over time, the scope of the 
ESD  and  ETS  is  kept  constant  over  the  time  horizon  2005-2050  which  means  that 
historic ESD emission estimates need to be updated to reflect changes in the coverage in 
the  ESD  since  2005.  These  stem  from  the  expansions  in  scope  of  the  ETS,  notably  in 
2013 the inclusion of some industrial process CO2, N2O and PFC emissions as well as the 
inclusion  of  RO,  BG  and  HR  in  the  ETS  after  2005  (with  no  monitored  ETS  data 
available for 2005 to estimate the exact split ETS-ESD).  

This recalibration of the historic split in 2005 ESD-ETS emissions, to take into account 
these  scope  changes  afterwards,  is  based  on  an  estimation  method  developed  by  the 
EEA89,  also  taking  into  account  most  recent  UNFCCC  inventory  submissions  (for  the 

88 http://ec.europa.eu/clima/policies/strategies/analysis/models/index_en.htm  
89  See  the  EEA  ETS  data  viewer  (http://www.eea.europa.eu/data-and-maps/data/data-viewers/emissions-
trading-viewer) and accompanying documentation. The underpinning methodology is described in Verena 

109 

 
                                                 
 
2016  Reference  this  was  the  inventory  as  submitted  in  2015).  This  allows  presenting  a 
meaningful emission trend over time within the ETS and ESD sectors.  

It can be noted that this approach is different from the approach in the ESD legislation 
for instance in relation to how the Member States AEAs were reduced due to extension 
of scope of the ETS in 2013, or how to cover for the impact of recent inventory changes. 
This  leads  to  some  differences  in  2005  emissions  between  those  used  in  the  modelling 
exercise, and those resulting from using the 2020 AEAs and ESD targets set to calculate 
2005  base  year  emissions.  As  a  consequence,  in  the  projections  there  is  a  slight 
overachievement of the -40% overall GHG reduction target compared to 1990 when the 
model projects fulfilment of the targets in the ESR of -30% compared to 2005 and ETS 
of -43% compared to 2005.  

8.4.1.1. Overview of model inter-linkages 

The models are linked with each other in formally-defined ways to ensure consistency in 
the building of scenarios, as shown graphically in Figure 18.  

Figure 18: Inter-linkages between models 

Source: E3MLab/ICCS 

8.4.1.2.PRIMES 

The PRIMES model is an EU energy system model which simulates energy consumption 
and the energy supply system. It is a partial equilibrium modelling system that simulates 
an energy market equilibrium in the European Union and each of its Member States. This 
includes consistent EU carbon price trajectories. 

Graichen,  Johanna  Cludius,  Sabine  Gores:  Estimate  of  historical  emissions  for  stationary  installations  to 
reflect the current scope of the EU ETS (2013-20), ETC/ACM Technical Paper 2016/1, May 2016. 

110 

 
 
 
                                                                                                                                                 
Decision making behaviour is forward looking and grounded in micro economic theory. 
The  model  also  represents  in  an  explicit  and  detailed  way  energy  demand,  supply  and 
emission abatement technologies, and includes technology vintages. 

The core model is complemented by a set of sub-modules, of which the transport sector 
module  and  the  biomass  supply  module  are  described  below  separately  in  more  detail. 
Industrial  non-energy related  CO2  emissions  are  covered  by  a  sub-module  so that  total 
CO2  emissions  can  be  projected.  The  model  proceeds  in  five  year  steps  and  is  for  the 
years 2000 to 2010 calibrated to Eurostat data. 

The  PRIMES  model  is  suitable  for  analysing  the  impacts  of  different  sets  of  climate, 
energy and transport policies on the energy system as a whole, notably on the fuel mix, 
CO2 emissions, investment needs and energy purchases as well as overall system costs. It 
is  also  suitable  for  analysing  the  interaction  of  policies  on  combating  climate  change, 
promotion  of  energy  efficiency  and  renewables.  Through  the  formalised  linkages  with 
GAINS  non-CO2  emission  results  and  cost  curves,  it  also  covers  total  GHG  emissions 
and total ESD sector emissions. It provides details on the Member State level, showing 
differential impacts across Member States. 

PRIMES has been used for the analysis underpinning the Commission's proposal on the 
EU  2020  targets  (including  energy  efficiency),  the  Low  Carbon  Economy  and  Energy 
2050 Roadmaps as well as the 2030 policy framework for climate and energy.  

PRIMES is a private model and has been developed and is maintained by E3MLab/ICCS 
of  National  Technical  University  of  Athens90  in  the  context  of  a  series  of  research 
programmes co-financed by the European Commission. 

The model has been successfully peer reviewed91, most recently in 201192  

8.4.1.3.PRIMES-TREMOVE 

The  PRIMES-TREMOVE  Transport  Model  projects  the  evolution  of  demand  for 
passengers and freight transport by transport mode and transport mean. It is essentially a 
dynamic  system  of  multi-agent  choices  under  several  constraints,  which  are  not 
necessarily  binding  simultaneously.  The  model  consists  of  two  main  modules,  the 
transport demand allocation module and the technology choice and equipment operation 
module. The two modules interact with each other and are solved simultaneously.  

The projection includes details for a large number of transport means, technologies and 
fuels,  including  conventional  and  alternative  types,  and  their  penetration  in  various 
transport market segments. It also includes details about greenhouse gas and air pollution 
emissions, as well as impacts on external costs of congestion, noise and accidents. 

PRIMES-TREMOVE has been used for the 2011 White Paper on Transport, Low Carbon 
Economy and Energy 2050 Roadmaps as well as the 2030 policy framework for climate 
and energy.93 

90 http://www.e3mlab.National Technical University of Athens.gr/e3mlab/  
91 http://ec.europa.eu/clima/policies/strategies/analysis/models/docs/primes_model_2013-2014_en.pdf. 
92 https://ec.europa.eu/energy/sites/ener/files/documents/sec_2011_1569_2.pdf  
93 The model can be run either as a stand-alone tool (e.g. for the 2011 White Paper on Transport) or fully 
integrated in the rest of the PRIMES energy systems model (e.g. for the Low Carbon Economy and Energy 

111 

 
                                                 
 
The PRIMES-TREMOVE is a private model that has been developed and is maintained 
by E3MLab/ICCS of National Technical University of Athens 94, based on, but extending 
features of the open source TREMOVE model developed by the TREMOVE95 modelling 
community.  Part  of  the  model  (e.g.  the  utility  nested  tree)  was  built  following  the 
TREMOVE model.96 Other parts, like the component on fuel consumption and emissions, 
follow the COPERT model.  

In the transport field, PRIMES-TREMOVE is suitable for modelling soft measures (e.g. 
eco-driving, deployment of Intelligent Transport Systems, labelling), economic measures 
(e.g.  subsidies  and  taxes  on  fuels,  vehicles,  emissions;  ETS  for  transport  when  linked 
with  PRIMES;  pricing  of  congestion  and  other  externalities  such  as  air  pollution, 
accidents and noise; measures supporting R&D), regulatory measures (e.g. CO2 emission 
performance standards for new passenger cars and new light commercial vehicles; EURO 
standards  on  road  transport  vehicles;  technology  standards  for  non-road  transport 
technologies), 
fuels  (e.g.  deployment  of 
refuelling/recharging  infrastructure  for  electricity,  hydrogen,  LNG,  CNG).  Used  as  a 
module which contributes to a broader PRIMES scenario, it can show how policies and 
trends  in  the  field  of  transport  contribute  to  economy  wide  trends  in  energy  use  and 
emissions. Using data disaggregated per Member State, it can show differentiated trends 
across Member States.  

infrastructure  policies 

for  alternative 

8.4.1.4.PRIMES Biomass Supply 

The biomass system model is linked with the PRIMES energy system model for Europe 
and can be either solved as a satellite model through a closed-loop process or as a stand-
alone model. 

It  is  an  economic  supply  model  that  computes  the  optimal  use  of  biomass/waste 
resources  and  investment  in  secondary  and  final  transformation,  so  as  to  meet  a  given 
demand of final biomass/waste energy products, projected to the future by the rest of the 
PRIMES model. The biomass supply model determines the consumer prices of the final 
biomass/waste  products  used  for  energy  purposes  and  also  the  consumption  of  other 
energy  products  in  the  production,  transportation  and  processing  of  the  biomass/waste 
products. The model also reflects the sustainability criteria currently in place and can be 
used for reflecting policies facilitating the use of renewable energy sources. After cross 
check  of  input  data  and  draft  results,  results  of  the  biomass  supply  model  are  used  to 
ensure consistency between PRIMES, CAPRI and GLOBIOM bioenergy modelling.  

2050 Roadmaps, and for the 2030 policy framework for climate and energy). When coupled with PRIMES, 
interaction with the energy sector is taken into account in an iterative way. 
94 http://www.e3mlab.National Technical University of Athens.gr/e3mlab/  
95 http://www.tmleuven.be/methode/tremove/home.htm  
96 Several model enhancements were made compared to the standard TREMOVE model, as for example: 
for the number of vintages (allowing representation of the choice of second-hand cars); for the technology 
categories  which  include  vehicle  types  using  electricity  from  the  grid  and  fuel  cells.  The  model  also 
incorporates  additional  fuel  types,  such  as  biofuels  (when  they  differ  from  standard  fossil  fuel 
technologies),  LPG  and  methane  fuels.  In  addition,  representation  of  infrastructure  for  refuelling  and 
recharging  are  among  the  model  refinements,  influencing  fuel  choices.  A  major  model  enhancement 
concerns the inclusion of heterogeneity in the distance of stylised trips; the model considers that the trip 
distances  follow  a  distribution  function  with  different  distances  and  frequencies.  The  inclusion  of 
heterogeneity was found to be of significant influence in the choice of vehicle-fuels especially for vehicles-
fuels with range limitations. 

112 

 
  
                                                                                                                                                 
The PRIMES biomass supply model is private and has been developed and is maintained 
by E3MLab/ICCS of National Technical University of Athens97. 

8.4.1.5.GAINS 

The GAINS (Greenhouse gas and Air Pollution Information and Simulation) model is an 
integrated  assessment  model  of  air  pollutant  and  greenhouse  gas  emissions  and  their 
interactions.  GAINS  brings  together  data  on  economic  development,  the  structure, 
control  potential  and  costs  of  emission  sources  and  the  formation  and  dispersion  of 
pollutants in the atmosphere. 

In addition to the projection and mitigation of greenhouse gas emissions at detailed sub-
sectorial  level,  GAINS  assesses  air  pollution  impacts  on  human  health  from  fine 
particulate  matter  and  ground-level  ozone,  vegetation  damage  caused  by  ground-level 
ozone,  the  acidification  of  terrestrial  and  aquatic  ecosystems  and  excess  nitrogen 
deposition of soils. 

Model  uses  include  the  projection  of  non-CO2  GHG  emissions  and  air  pollutant 
emissions  for  EU  Reference  scenario  and  policy  scenarios,  calibrated  to  UNFCCC 
emission data as historical data source. This allows for an assessment, per Member State, 
of  the  (technical)  options  and  emission  potential  for  non-CO2  emissions.  Health  and 
environmental co-benefits  of climate and energy policies  such  as  energy efficiency  can 
also be assessed. 

The GAINS model is accessible for expert users through a model interface98 and has been 
developed and is maintained by the International Institute of Applied Systems Analysis99. 
The underlying algorithms are described in publicly available literature. The source code 
is  not  disclosed.  GAINS  and  its  predecessor  RAINS  have  been  peer  reviewed  multiple 
times, in 2004, 2009 and 2011.  

8.4.1.6.GLOBIOM-G4M 

The  Global  Biosphere  Management  Model  (GLOBIOM)  is  a  global  recursive  dynamic 
partial equilibrium model integrating the agricultural, bioenergy and forestry sectors with 
the  aim  to  provide  policy  analysis  on  global  issues  concerning  land  use  competition 
between the major land-based production sectors. Agricultural and forestry production as 
well  as  bioenergy  production  are  modelled  in  a  detailed  way  accounting  for  about  20 
globally  most  important  crops,  a  range  of  livestock  production  activities,  forestry 
commodities as well as different energy transformation pathways. 

GLOBIOM  covers  28  (or  50)  world  regions.  The  disaggregation  of  the  EU  into 
individual countries has been performed only recently. 

Model  uses  include  the  projection  of  emissions  from  land  use,  land  use  change  and 
forestry  (LULUCF)  for  EU  Reference  scenario  and  policy  scenarios.  For  the  forestry 
sector,  emissions  and  removals  are  projected  by  the  Global  Forestry  Model  (G4M),  a 
geographically explicit agent-based model that assesses afforestation-deforestation-forest 
management  decisions.  GLOBIOM-G4M  is  also  used  in  the  Impact  Assessment  for 
agriculture  and  LULUCF  to  assess  the  options  (afforestation,  deforestation,  forest 

97 http://www.e3mlab.National Technical University of Athens.gr/e3mlab/ 
98 http://gains.iiasa.ac.at/models/  
99 http://www.iiasa.ac.at/  

113 

 
                                                 
management, cropland and grassland management) and costs of enhancing the LULUCF 
sink for each Member State. 

The GLOBIOM-G4M is a private model and has  been  developed and is maintained by 
the International Institute of Applied Systems Analysis100.  

8.4.1.7.GEM-E3 

The  GEM-E3  (World  and  Europe)  model  is  an  applied  general  equilibrium  model, 
simultaneously representing the whole world economy, its major regions and the 28 EU 
Member  States,  linked  through  endogenous  bilateral  trade  flows  and  environmental 
flows. 

GEM-E3 aims at covering the interactions between the economy, the energy system and 
the  environment.  It  is  a  comprehensive  model  of  the  economy,  the  productive  sectors, 
consumption,  price  formation  of  commodities,  labour  and  capital,  investment  and 
dynamic growth. The model is dynamic, recursive over time, driven by accumulation of 
capital  and  equipment.  Technology  progress  is  explicitly  represented  in  the  production 
function.  It  is  updated  regularly  using  the  latest  revisions  of  the  GTAP  database  and 
Eurostat statistics for the EU Member States. 

It  is  updated  regularly  using  the  latest  revisions  of  the  GTAP  database  and  Eurostat 
statistics for the EU Member States. 

The  GEM-E3  model  has  been  developed  and  is  maintained  by  E3MLab/ICCS  of 
National Technical University of Athens101, JRC-IPTS102 and others. It is documented in 
detail but the specific versions are private.  

The  model  has  been  used  by  E3MLab/ICCS  to  provide  the  macro  assumptions  for  the 
Reference  scenario  and  for  the  policy  scenarios.  It  has  also  been  used  by  JRC-IPTS  to 
assess macroeconomic impacts of target setting based on GDP per capita.  

8.4.1.8.PROMETHEUS 

PROMETHEUS is a fully stochastic world energy model used for assessing uncertainties 
and risks associated with the main energy aggregates including  uncertainties associated 
with economic growth and resource endowment as well as the impact of policy actions. 
The model projects endogenously to the future the world energy prices, supply, demand 
and emissions for ten world regions. 

World  fossil  fuel  price  trajectories  are  used  as  import  price  assumptions  for  EU 
Reference scenario and for policy scenario modelling . 

The  Prometheus  model  is  private  and  has  been  developed  and  is  maintained  by 
E3MLab/ICCS of National Technical University of Athens103 

100 http://www.iiasa.ac.at/  
101 http://www.e3mlab.National Technical University of Athens.gr/e3mlab/ 
102 https://ec.europa.eu/jrc/en/institutes/ipts  
103 http://www.e3mlab.National Technical University of Athens.gr/e3mlab/ 

114 

 
                                                 
8.4.1.9.CAPRI 

CAPRI  is  an  open  source  economic  partial  equilibrium  model  developed  by  European 
Commission research funds. Operational since more than a decade, it supports decision 
making related to the Common Agricultural Policy and Environmental policy related to 
agriculture based on sound scientific quantitative analysis.  

CAPRI is only viable due to its pan-European network of researchers which based on an 
open source approach tender together for projects, develop and maintain the model, apply 
it for policy impact assessment, write scientific publications and consult clients based on 
its results. It has been the basis of numerous peer reviewed publications. 

The  model  has  been  used  to  provide  consistent  agricultural  activity  projections  for  the 
EU Reference scenario 2016s. It is also used in the LULUCF impact assessment. 

The CAPRI model is an open source model which has been developed and is maintained 
by Eurocare GmbH104, JRC, and other partners of the CAPRI network.  

8.4.2. The EU Reference scenario 2016 

8.4.2.1. Scenario design, consultation process and quality assurance 

Building  an  EU  Reference  scenario  is  a  regular  exercise  by  the  Commission.  It  is 
coordinated  by  DGs  ENER,  CLIMA  and  MOVE  in  association  with  the  JRC,  and  the 
involvement of other services via a specific inter-service group.  

The  Reference  scenario  2016  (REF2016)  has  been  developed  building  on  a  modelling 
framework  including  as  core  models  PRIMES  (PRIMES-TREMOVE  for  transport), 
GAINS  and  GLOBIOM-G4M  and  as  supporting  models  GEM-E3,  PROMETHEUS, 
PRIMES Biomass supply and CAPRI (see prior section for details).  

For the REF2016, the model was calibrated on energy data up to year 2013 from Eurostat 
and other sources, and for agriculture and non-CO2 emission data up to the year 2015. 

Member  States  were  consulted  throughout  the  development  process  through  a  specific 
Reference  scenario  expert  group  which  met  three  times  during  the  development  of 
REF2016.  Member  States  provided  information  about  adopted  national  policies  via  a 
specific questionnaire, key assumptions have been discussed and in each modelling step, 
draft  Member  State  specific  results  were  sent  for  consultation.  Comments  of  Member 
States  were  addressed  to  the  extent  possible,  keeping  in  mind  the  need  for  overall 
comparability and consistency of the results. 

Quality  of  modelling  results  was  assured  by  using  state  of  the  art  modelling  tools, 
detailed checks of assumptions and results by the coordinating Commission services as 
well as by the country specific comments by Member States.  

REF2016  projects  EU  and  Member  States  energy,  transport  and  GHG  emission-related 
developments  up  to  2050,  given  current  global  and  EU  market  trends  and  adopted  EU 
and Member States' energy, transport, climate and related relevant policies.  

104 http://www.eurocare-bonn.de/  

115 

 
 
                                                 
"Adopted  policies"  refer  to  those  that  have  been  cast  in  legislation  in  the  EU  or  in 
Member  States  (with  a  cut-off  date  end  of  2014105).  Therefore  the  binding  2020  targets 
are  assumed  to  be  reached  in  the  projection.  This  concerns  GHG  emission  reduction 
targets (both for the EU ETS as well as ESD sectors) as well as RES targets, including 
RES in transport.  

However,  policies  which  are  not  yet  legally  implemented,  e.g.  those  necessary  to 
implement the 2030 energy and climate framework, are not part of REF2016106. On this 
basis, REF2016 can help identify areas where the current policy framework falls short of 
reaching the EU's climate and energy objectives107. Notably, REF2016 shows that current 
policy and market conditions will deliver neither the 2030 targets nor the long-term 2050 
80-95% GHG emission reduction objective.  

REF2016 provides projections, not forecasts. Unlike forecasts, projections do not make 
predictions about what the future will be. They rather indicate what would happen if the 
assumptions which underpin the projection actually occur. Still, the scenario allows for a 
consistent approach in the assessment of energy and climate trends across the EU and its 
Member States.  

The  report  "EU  Reference  Scenario  2016  -  Energy,  Transport  and  GHG  Emissions  - 
Trends to 2050"108 describes the inputs and results in detail. This section summarises the 
main assumptions and results, especially those relevant for the Energy Union framework.  

8.4.2.2. Main assumptions 

The  projections  are  based  on  a  set  of  assumptions,  including  on  population  growth, 
macroeconomic and oil price developments, technology improvements and policies. 

Macroeconomic assumptions 
In  REF2016,  the  population  projections  draw  on  the  European  Population  Projections 
(EUROPOP 2013) by Eurostat. The key drivers for demographic change are: higher life 
expectancy, convergence in the fertility rates across Member States in the long term, and 
inward  migration.  The  EU28  population  is  expected  to  grow  by  0.2%  per  year  during 
2010-2030 (0.1% for 2010-2050), to 516 million in 2030 (522 million by 2050). Elderly 
people, aged 65 or more, would account for 24% of the total population by 2030 (28% by 
2050) as opposed to 18% today.  

105 In addition, amendments to two Directives only adopted in the beginning of 2015 were also considered. 
This  concerns  notably  the  ILUC  amendment  to  the  RES  directive  and  the  Market  Stability  Reserve 
Decision amending the ETS Directive. 
106  For  the  period  after  2020,  policies  are  included  that  are  part  of  the  EU  acquis,  as  well  as  important 
investments  that  are  part  of  Member  States'  national  energy  plans.  For  instance,  ETS  with  the  Market 
Stability  Reserve  is  included  in  REF16,  but  not  the  Commission's  proposal  for  a  change  in  the  linear 
reduction  factor  post-2020.  New  near-zero  energy  buildings  after  2020  -  as  defined  in  the  Energy 
Performance of Buildings Directive - continue to be built, as well as energy labelling continues. Member 
States also gave input on planned energy investments, particularly in nuclear energy.  
107  Each  new  update  of  the  Reference  scenario  models  the  projected  impact  of  policy  adopted  up  to  the 
relevant cut-off date. Therefore, differences between two consecutive Reference scenarios, e.g. between the 
one from 2013 and REF2016, can be explained by the implications of policies adopted in the meantime as 
well as by changed economic and technological trends. 
108 European Commission: EU Reference Scenario 2016 - Energy, Transport and GHG Emissions - Trends 
to 2050. Directorate-General for Energy, Directorate-General for Climate Action and Directorate-General 
for Mobility and Transport, July 2016 . 

116 

 
                                                 
GDP  projections  mirror  the  joint  work  of  DG  ECFIN  and  the  Economic  Policy 
Committee, presented in the 2015 Ageing Report109. The average EU GDP growth rate is 
projected to remain relatively low at 1.2% per year for 2010-2020, down from 1.9% per 
year during 1995-2010. In the medium to long term, higher expected growth rates (1.4% 
per  year  for  2020-2030  and  1.5%  per  year  for  2030-2050)  are  taking  account  of  the 
catching  up  potential  of  countries  with  relatively  low  GDP  per  capita,  assuming 
convergence to a total factor productivity growth rate of 1% in the long run. 

Sectoral activity projections are derived in a consistent way from these macroeconomic 
assumptions, using the macro-economic modelling tool GEM-E3 as well as econometric 
estimates for global demand for energy intensive industries.  

Fossil fuel price assumptions 
Oil  prices  have  fallen  by  more  than  60%  since  mid-2014,  to  an  average  of  around  40 
$/barrel for Brent crude oil in the first four months of 2016. The collapse of oil prices has 
been driven by low demand and sustained oversupply, due in particular to tight oil from 
North America and to the decision of the Organization of Petroleum Exporting Countries 
(OPEC) countries not to cut their output to rebalance the market. REF2016 considers a 
gradual adjustment process with  reduced  investments in  upstream productive capacities 
by non-OPEC countries. Quota discipline is assumed to gradually improve among OPEC 
members. Thus, oil price is projected to reach 87 $/barrel in 2020 (in year 2013-prices). 
Beyond 2020, as a result of persistent demand growth in non-OECD countries driven by 
economic  growth  and  the  increasing  number  of  passenger  cars,  oil  price  would  rise  to 
113  $/barrel  by  2030  and  130  $/barrel  by  2050.  This  price  trend  resulting  from 
PROMETHEUS modelling is in line with other reference sources such as the 2015 IEA 
World Energy Outlook. 

No  specific  sensitivities  were  prepared  with  respect  to  oil  and  gas  price  developments. 
Still,  it  can  be  recalled  that  lower  fossil  fuel  price  assumptions  tend  to  increase  energy 
consumption and CO2 emissions not covered by the ETS. The magnitude of the change 
would depend on the price elasticities and on the share of taxation, like excise duties, in 
consumer prices. For instance, for transport, the changes would be limited (depending on 
the magnitude of the change in the oil price) due to the high share of excise duties in the 
consumer  prices  but  they  are  still  expected  to  lead  to  some  higher  energy  consumption 
and CO2 emissions. They also tend to lead to lower overall energy system costs,  as the 
increase in consumption is more than compensated by lower prices. Conversely, costs for 
emission  mitigation  could  slightly  increase.  Different  fossil  price  assumptions  are 
unlikely to lead to significantly different impacts across Member States. 

Techno-economic assumptions 
In terms of technological developments, input assumptions are based on a wide range of 
sources110, with estimates on technological costs across main types of energy equipment, 
from  power  generation  to  heating  systems  and  appliances.  In  addition,  it  should  be 

109  European  Commission/  DG-ECFIN  (2015)  "The  2015  Ageing  Report  Economic  and  budgetary 
projections for the 28 EU Member States (2013-2060)", European Economy 3/2015.  
110  Those  include,  among  others,  the  European  Commission  Joint  Research  Centre,  notably  for  power 
generation costs or identification of Best Available Technologies, or MURE, ICARUS or ODYSSEE for 
the demand sectors.  

117 

 
                                                 
recalled  that  the  PRIMES  model  (and  other  models  where  relevant)  take  into  account 
technological progress.  

In terms of technological developments relevant to the transport sector, battery costs for 
electric vehicles and plug-in hybrids are assumed to go down to 320-360 $/kWh by 2030 
and  270-295  $/kWh  by  2050;  further  improvements  in  the  efficiency  of  both  spark 
ignition gasoline and compression ignition diesel are assumed to take place. In addition, 
the  market  share  of  internal  combustion  engine  (ICE)  electric  hybrids  is  expected  to 
increase due to their lower fuel consumption compared to conventional ICE vehicles.111 

For the techno-economic assumptions in the projection of non-CO2 GHG emissions, see 
the detailed technical documentation112. In general, technological progress in this domain 
is strongly linked to regulation; hence Reference scenario assumptions are conservative. 

Technology  assumptions  are  based  on  extensive  literature  review  and  have  been  peer-
reviewed by the Commission services, notably the Joint Research Centre of the European 
Commission.  

Specific policy assumptions 
Following  the  above  described  policy  modelling  approach,  the  key  policies  included  in 
the REF2016 are113:  

  The  EU  Emissions  Trading  System  (Directive  2003/87/EC  and  its  amendments)  is 
fully  reflected  in  the  modelling,  including  the  linear  reduction  factor  of  1.74%  for 
stationary installations and the recently adopted Market Stability Reserve.114 

  The Effort Sharing Decision (406/2009/EC) is assumed to be implemented, i.e. ESD 
GHG emission reductions at EU level in 2020 need to reach at least -10% compared to 
2005 levels. It turned out that no specific policy incentives in addition to adopted EU 
and national policies were needed to achieve the EU level target. National ESD targets 
need  not  be  achieved  domestically  given  the  existing  flexibilities  (e.g.  transfers 
between Member States). 

  The  Energy  Efficiency  Directive  (EED)  and  the  Energy  Performance  of  Buildings 
Directive  (EPBD)  are  reflected,  including  Member  States'  specific  obligations  as 
regards energy savings obligation and buildings codes. 

  Ecodesign and Energy Labelling Directives and Regulations are also reflected.  

111 The Reference scenario, by design, assumes the continuation of the current trends and policies without 
the implementation of additional measures. Hence, due to the absence of further policies, car manufacturers 
and industry are not expected to devote additional effort in marketing advanced vehicle technologies. The 
relatively  low  production  of  advanced  vehicles,  in  the  Reference  scenario,  is  not  expected  to  yield 
economies  of  scale  which  could  potentially  imply  high  reduction  in  battery  costs  as  suggested  by  other 
sources. Such assumptions change in a decarbonisation policy scenario context. 
112 Höglund-Isaksson, L., W. Winiwarter, P. Purohit, A. Gomez-Sanabria (2016): Non-CO2 greenhouse gas 
emissions  in  the  EU-28  from  2005  to  2050:  GAINS  2016  Reference  scenario,  International  Institute  for 
Applied Systems Analysis (IIASA). 
113  For  a  comprehensive  discussion  see  European  Commission:  EU  Reference  Scenario  2016  -  Energy, 
Transport and GHG Emissions - Trends to 2050. Directorate-General for Energy, Directorate-General for 
Climate Action and Directorate-General for Mobility and Transport, July 2016. 
114 Decision EU) 2015/1814 concerning the establishment and operation of a  market stability reserve for 
the Union greenhouse gas emission trading scheme and amending Directive 2003/87/EC 

118 

 
                                                 
  CO2 standards for cars and vans regulations (Regulation (EC) No 443/2009, amended 
by  Regulation  EU  No  333/2014  and  Regulation  (EU)  No  510/2011,  amended  by 
Regulation EU 253/2014); CO2 standards for cars are assumed to be 95gCO2/km as 
of  2021  and  for  vans  147gCO2/km  in  line  with  current  legislation.  Standards  are 
assumed constant after 2020/2021. 

  The Renewable Energy Directive (Directive 2009/28/EC) and Fuel Quality Directive 
(Directive  2009/30/EC)  including  ILUC  amendment  (Directive  (EU)  2015/1513): 
achievement  of  the  legally  binding  RES  target  for  2020  (including  10%  RES  in 
transport  target)  for  each  Member  State,  taking  into  account  the  use  of  flexibility 
mechanisms when relevant as well as of the cap on the amount of food or feed based 
biofuels (7%). Member States' specific renewable energy policies for the heating and 
cooling sector are also reflected where relevant.  

  Directive  on 
2009/30/EC). 

the  deployment  of  alternative 

fuels 

infrastructure 

(Directive 

  The  Waste  Management  Framework  Directive  (Directive  2008/98/EC)  and  in 
particular  the  Landfill  Directive  (Directive  1999/31/EC)  which  contribute  to  a 
significant reduction of emissions from waste. 

  The  revised  F-gas  Regulation  (Regulation  517/2014)  strengthens  existing  measures 
and introduces a number of far-reaching changes, notably limiting the total amount of 
the most important F-gases that can be sold in the EU from 2015 onwards and phasing 
them down in steps to one-fifth of 2014 sales in 2030, and banning the use of F-gases 
in many new types of equipment where less harmful alternatives are widely available.  

  The  impacts  of  the  Reforms  of  the  Common  Agricultural  Policy  are  taken  into 

account, e.g. the milk quota abolition. 

  Energy Efficiency Design Index (EEDI) and the Ship Energy Efficiency Management 

Plan (SEEMP) for maritime transport.115 

  Relevant national policies, for instance on the promotion of renewable energy, on fuel 

and vehicle taxation or national building codes, are taken into account.  

8.4.2.3. Summary of main results of the 2016 Reference scenario 

Figure  19  below  presents  the  projected  evolution  of  EU  Gross  Inland  Energy 
Consumption. After the 2005 peak, energy consumption is projected to steadily decline 
until  2040,  where  it  stabilises.  Oil  still  represents  the  largest  share  in  the  energy  mix, 
mostly because of transport demand. Solid fuels see a significant reduction in their share 
of  the  energy  mix,  while  the  biggest  increase  is  for  renewable  energy.  Natural  gas  and 
nuclear energy keep relatively stable shares in the energy mix.  

Figure 19: EU28 Gross Inland Consumption (Mtoe, left; shares (%), right) 

115 IMO Resolution MEPC.203(62) 

119 

 
 
                                                 
Source: PRIMES 

Energy security 
EU energy production (Figure 20) is projected to continue to decrease from around 760 
Mtoe in 2015 to around 660 Mtoe in 2050. The projected strong decline in EU domestic 
production for all fossil fuels (coal, oil and gas) coupled with a limited decline in nuclear 
energy  production  is  partly  compensated  by  an  increase  in  domestic  production  of 
renewables.  Biomass  and  biowaste  will  continue  to  dominate  the  fuel  mix  of  EU 
domestic  renewable  production,  although  the  share  of  solar  and  wind  in  the  renewable 
mix will gradually increase from around 17% in 2015 to 36% in 2050.  

Figure 20: EU28 energy production (Mtoe) 

Source: PRIMES 

EU's import dependency shows a slowly increasing trend over the projected period, from 
53% in 2010 to 58% in 2050. Again RES deployment, energy efficiency improvements 
and nuclear production (which remains stable) counteracts the strong projected decrease 
in EU's fossil-fuel production. 

Solid  imports  as  well  as  crude  oil  and  (refinery)  feedstock  decline  throughout  the 
projection  period,  while  oil  products  imports  slightly  increase.  Natural  gas  imports 

120 

 
 
 
increase slightly in the long term reaching approximately 370 bcm116 net imports in 2050. 
Biomass  remains  mostly  supplied  domestically,  although  the  combination  of  increased 
bioenergy demand and limited potential for additional EU domestic supply leads to some 
increases in biomass imports post-2020 (from 11% of biomass demand in 2020 to about 
15% in 2030 and beyond).  

Up  to  2020,  the  consumption  of  gas  (The  imported  volumes  of  gas  are  projected  to 
increase  between  2015  and  2040  and  then  to  stabilise  in  the  long  term,  15%  above  the 
2010 net import level (from 309 bcm to 369 bcm, Figure 21) is expected to remain stable 
(at around 430bcm in gross inland terms). Net import dependency of natural gas registers 
an increase as domestic gas production continues its downward trend. Post 2020, a slight 
decrease in gross inland consumption of gas (412 bcm in 2030) is projected, as well as 
further  reductions  in  indigenous  production  of  gas.  The  imported  volumes  of  gas  are 
projected to increase between 2015 and 2040 and then to stabilise in the long term, 15% 
above the 2010 net import level (from 309 bcm to 369 bcm).  

Figure 21: Gas - production, net imports and demand (volumes expressed in bcm) 

Source: PRIMES 

Internal energy market and investments 
The EU power generation mix changes considerably over the projected period in favour 
of renewables (Figure 22). Before 2020, this occurs to the detriment of gas, driven by a 
strong RES policy to meet 2020 targets, very low coal prices compared to gas prices, and 
low CO2 prices. After 2020, the change is characterised by further RES deployment, but 
also a larger coal to gas shift, driven mainly in anticipation of increasing CO2 prices117.  

Gas  therefore  maintains  its  presence  in  the  power  generation  mix  in  2030  (at  slightly 
higher  levels  in  the  long  term  compared  to  2015).  The  share  of  solids/coal  in  power 
generation significantly declines, but not before 2020, to 15% in 2030.  

116  The  conversion  rate  of  1  Mtoe  =  1.11  bcm  was  used  for  natural  gas,  based  on  the  BP  conversion 
calculator. 
117 Carbon prices increase gradually from around 8€/tCO2 in 2015 to reach 34€/tCO2 in 2030. This takes 
into  account  the  adopted  Market  Stability  Reserve,  but  not  a  potential  increase  in  the  linear  reduction 
factor, see footnote 1. 

121 

 
 
                                                 
Figure 22: EU power generation (net) by fuel  

Source: PRIMES, Mtoe – left, shares – right 

Variable  RES  (solar  and  wind)  reach  around  19%  of  total  net  electricity  generation  in 
2020, 25% in 2030 and 36% in 2050, demonstrating the growing need for flexibility in 
the power system. Wind onshore is expected to provide the largest contribution. Solar PV 
and  biomass  also  increase  over  time.  Hydro  and  geothermal  remain  roughly  constant. 
The share of nuclear decreases gradually over the projected period despite some life time 
extensions and new built, from 27% in 2015 to 22% in 2030. 

Investment  expenditures  for  power  supply  (Figure  23)  increase  substantially  until  2020 
driven  by  RES  targets  and  developments,  but  slow  down  thereafter,  until  2030,  before 
increasing  again  from  2030  onwards  notably  due  to  increasing  ETS  carbon  prices 
reflecting the combination of reinstated scarcity in the carbon market with the help of the 
Market  Stability  Reserve  and  a  continuously  decreasing  ETS  cap  based  on  the  current 
linear  factor.  New  power  plant  investment  is  dominated  by  RES,  notably  solar  PV  and 
wind onshore. Nuclear investment mostly takes place via lifetime extensions until 2030 
and in the longer term via new built, such as projected in, for instance, the UK, Finland, 
Sweden, France, Poland, and other Central European Member States. New thermal plant 
investment is mainly taking place in gas-fired plants. 

122 

 
 
Figure  23:  Net  power  capacity  investments  by  plant  type  (MWh  –  for  five  year 
period) 

Source: PRIMES 

Average electricity prices (Figure 24) steadily increase up to 2030 by about 18% relative 
to 2010 levels, stabilising around 20% in the long-term. The structure of electricity costs 
changes over time, with the capital cost component (generation and grid costs) increasing 
significantly  in  the  short  term.  From  2030,  the  fuel  cost  component  remains  stable 
despite  the  increase  in  fuel  prices,  due  to  a  decreasing  share  of  fossil-fuel  combustion. 
Transmission  and  distribution  costs  increase  significantly  in  the  longer  term  post-2030, 
partly  linked  to  the  need  to  cater  for  the  increased  presence  of  RES  in  the  power 
generation mix.  

As a result of the modelling, the carbon price is projected to increase, reflecting both the 
steadily  decreasing  ETS  cap  and  the  stabilising  effect  of  the  Market  Stability  Reserve. 
However,  the  increase  in  electricity  prices  due  to  ETS  remains  limited  despite  the 
significant  increase  in  CO2  price,  as  the  share  of  carbon-intensive  power  generation 
decreases.  

123 

 
 
Figure 24: Decomposition of electricity generation costs and prices (Euro'13 MWh) 

Source: PRIMES 

Electricity prices for households and services are projected to increase moderately in the 
medium term and to decrease slightly in the long term. Prices for industry on the contrary 
are  stable  or  decrease  over  time  as  energy  intensive  industry  maintains  an  electricity 
demand profile compatible with base-load power generation and bears a small fraction of 
grid costs and taxes. Taxes apply mainly on prices for households and services. 

REF2016  shows  increasing  volumes  of  electricity  trade  over  time.  The  flow  between 
regions increases from 17% in 2015 to 26% in 2020, 29% in 2030 and then stays almost 
stable for the remainder of the projection period reaching 30% in 2050. Main drivers are 
intermittent  RES  power  generation  and  the  resulting  balancing  requirements.  Trade  is 
facilitated by the assumed successful development of the ENTSO-E Ten-Year Network 
Development  Plan  2014118  as  well  as  pan-European  market  coupling  and  sharing  of 
reserves and flexibility across Member States.  

Investment expenditures in demand sectors (Figure 25– left hand side) over the projected 
period  will be higher than in the past.  They notably peak in the short term up to  2020, 
particularly in the residential and tertiary sectors, as a result of energy efficiency polices. 
Post-2020  they  slightly  decline  until  2030,  before  increasing  again  to  2050.  On  the 
supply side (Figure 25– right hand side), investments peak towards 2020, followed by a 
decrease, notably explained by a decrease in power generation investments.  

118 Source https://www.entsoe.eu/major-projects/ten-year-network-development-
plan/ten%20year%20network%20development%20plan%202016/Pages/default.aspx  

124 

 
 
                                                 
Figure  25:  Investment  expenditures  (5-year  period)  -  demand  side  (left,  excluding 
transport) and supply side (right) 

Source: PRIMES  

Transport  investments  (expenditures  related  to  the  turnover  of  rolling  stock)  steadily 
increase over time but maintain a relatively stable share of GDP.  

The relative weight of energy-related spending in households' expenditure119 increases in 
2020  compared  to  2015  (7.5%  compared  to  6.8%),  stabilising  until  2030  before 
decreasing again until 2050 (6.1%). 

Moderation of energy demand  
In 2020, primary energy consumption decreases by 18.4% (relative to the 2007 baseline, 
i.e. how the target is defined), more than the sum of national Member States' indicative 
energy efficiency targets but still falling slightly short of the 2020 indicative EU energy 
efficiency  target  of  20%.  In  2030,  energy  consumption  is  projected  to  decrease  (again 
relative  to  2007  baseline  projections)  by  23.9%.  Primary  energy  demand  and  GDP 
continue  to  decouple  (Figure  26),  which  is  consistent  with  the  trends  observed  since 
2005.  Energy  efficiency  improvements  are  mainly  driven  by  policy  up  to  2020  and  by 
market/technology trends after 2020.  

119 Share of energy system costs for the residential sector (fuel costs and annualised capital costs of energy 
related investment expenditures) in total households' consumption 

125 

 
 
                                                 
Figure 26: Decoupling of EU energy use and intensity from GDP (2005=100) 

Source: Commission calculations based on PRIMES and GEM E3 

The  distribution  of  final  energy  consumption  across  sectors  remains  broadly  similar  to 
the  current  picture,  all  the  way  to  2050,  with  transport  and  the  residential  sector 
comprising  the  lion's  share  of  final  energy  consumption  (32%  and  27%  of  final 
consumption,  respectively,  in  2030).  Industry  sees  its  share  in  final  energy  demand 
slightly decreasing, from 28% in 2005 to 23% in 2050, mostly due to improved energy 
efficiency  in  non-energy  intensive  industries.  The  tertiary  (services  and  agriculture) 
sector keeps a stable share of about 17%.  

Figure 27: Evolution of final energy demand by sector (Mtoe – left, shares – right) 

Source: PRIMES 

With regard to  the  fuel mix  in  final  energy, there is a gradual penetration of electricity 
(from 22% in total final energy use in 2010 to 28% in 2050). This is because of growing 
electricity  demand as  compared to other  final  energy use and to  some electrification of 
heating (heat pumps) and to a limited extent in the transport sector. The potential of gas 
demand developments in, e.g. the transport sector, are not fully reflected in the Reference 
scenario, suggesting that additional policy incentives would be needed to trigger further 
fuel switching in the transport sector. 

126 

 
 
 
Figure 28: Evolution of final energy demand by fuel (Mtoe – left, shares – right) 

Source: PRIMES 

Energy intensity of the industrial sectors remains approximately constant in the medium 
term,  as  additional  energy  demand  is  due  to  the  increase  in  production  activity.  In  the 
long  term  however  energy  demand  decreases,  even  though  activity  in  terms  of  value 
added  progresses.  This  is  due  to  the  energy  efficiency  embedded  in  the  new  capital 
vintages which replace old equipment and structural changes towards higher value added 
and less energy-intensive production processes, such as in iron and steel or non-ferrous 
metals.  

Figure 29: Industrial energy demand versus activity (value added)  

Source: PRIMES 

In  the  residential  sector,  energy  demand  remains  below  2015  levels  throughout  the 
projection  period.  Energy  demand  decouples  from  income  growth  more  than  would  be 
suggested  by  extrapolation  of  trends  as  the  efficiency  policies  drive  energy  intensity 
improvements  fast  in  the  medium  term;  in  the  long  term  however  the  rate  of 
improvements decreases due to the absence of additional policies.  

127 

 
 
 
Figure 30: Final energy demand in the residential sector  

Source: PRIMES 

The  activity  of  the  transport  sector  shows  a  significant  growth  (Figure  31),  with  the 
highest  increase  in  2010  to  2030,  driven  by  developments  in  economic  activity. 
Historically, the growth of final energy demand in the transport sector has shown strong 
correlation  with  the  evolution  of  transport  activity.  However,  a  decoupling  between 
energy  consumption  and  transport  activity  has  been  recorded  in  the  past  years.  The 
decoupling between energy consumption and activity is projected to continue and even to 
intensify in the future. 

Figure 31: Trends in transport activity and energy consumption 

Source: PRIMES and GEM-E3; for aviation, passenger transport activity includes domestic, international intra-EU and international 
extra-EU aviation. 

Decarbonisation: CO2 emission reduction 

128 

 
 
 
 
In REF2016, the binding energy and climate targets for 2020 will be met by assumption. 
However, current policy and market conditions will not deliver achievement of either the 
EU 2030 targets or the EU long-term 2050 decarbonisation goal.  

Total CO2 emissions are projected to be 22% below 1990 levels by 2020. In 2030, CO2 
emissions  reduce  (relative  to  1990  levels)  by  32%.  Most  of these  emissions  are  energy 
related,  and  this  part  also  determines  the  overall  trends.  Non-energy  related  CO2 
emissions mainly relate to industrial processes, and remain rather stable. Land-use related 
CO2 emissions are discussed below in the LULUCF section. 

Emission  reductions  in  the  ETS  sectors  are  larger  than  those  in  sectors  covered  by  the 
Effort  Sharing  Decision  (ESD)  as  current  legislation  implies  a  continuation  of  the 
reduction  of  the  ETS  cap  with  1.74%  per  year  over  the  projected  period  leading  to  a 
carbon  price  driving  long  term  emission  reduction.  In  the  ESD  sectors  there  are  no 
further  drivers  beyond  market  forces  (e.g.  rising  fossil  fuel  prices)  and  the  continued 
impact  of  adopted  policies  such  as  CO2  standards  for  vehicles  or  energy  performance 
standards for new building to further reduce energy and consequently emissions. 

CO2  emissions  can  be  decomposed  in  the  components  GDP,  Energy  Intensity  of  GDP 
and Carbon Intensity of Energy. The Energy Intensity of GDP component declines due to 
structural  changes  in  the  economy  and  increasing  energy  efficiency  in  all  sectors.  The 
decrease  of  carbon  intensity  of  energy  supply  becomes  an  increasingly  significant 
component over the period. This is mainly due to Renewable Energy policies in the short 
term and the ETS in the medium to long term.  

On  a  sectorial  level,  CO2  emissions  decrease  in  all  sectors  between  2010  and  2050. 
Figure 14 shows a steep decrease in power generation, whereas emissions in the field of 
transport  decrease  at  much  slower  pace,  and  the  transport  sector  becomes  the  largest 
source of CO2 emissions after 2030. Non-energy and non-land use related CO2 emissions 
(e.g. industrial processes) reduce only slowly throughout the projection period; however 
they only represent a small share of total CO2 emissions. 

Figure 32: Evolution of CO2 emissions (Mt) by sector  

Source: PRIMES 

129 

343028174444141412111111121466672428314167782005202020302050Shares in %0500100015002000250030003500400045005000199520002005201020152020202520302035204020452050Mt CO2Process CO2emissionsTransportTertiaryResidentialIndustryEnergy BranchPowergeneration/District heatingSource: PRIMES 
 
Decarbonisation: Renewable Energy 
In 2020, the RES share in gross final energy consumption reaches 21% in 2020, while in 
2030, it reaches 24%. 

Renewable electricity is projected to increase (as a share of net power generation) from 
around  28%  in  2015  to  36%  in  2020,  which  implies  an  acceleration  compared  to 
observed  trends  today,  in  particular  in  a  number  of  countries  that  are  currently  facing 
difficulties to meet their target. Further RES share increases are more limited until 2030 
to reach 43%, as RES policies are phased out in the Reference scenario after 2020 and 
only most competitive RES technologies can emerge. 

The  RES  share  in  heating  and  cooling  increases  from  17%  in  2015  to  22%  in  2020, 
reaching  25%  in  2030.  The  use  of  RES  in  final  demand  for  heating  and  cooling  is  the 
main driver of RES-H&C increase in the short term, but its contribution stagnates in the 
long term. In the long-term, RES in CHP and heat plants (e.g. district heating), as well 
some deployment of heat pumps, drive further increase of the RES-H&C share. Energy 
efficiency, implying lower demand for heat in all sectors, is also an important driver in 
the medium and long term.  

The RES-T share reaches 11% in 2020. The development of bio-fuels is the main driver 
in the short term, but its contribution stagnates in the long term. The biofuel penetration 
is mainly driven by the legally binding target of 10% renewable energy in the transport 
sector  (RES-T  target).  Projections  also  take  into  consideration  specific  Member  States' 
mandatory  blending  obligations  and  tax  incentives,  as  well  as  the  ILUC  amendment  of 
the Renewables and Fuel Quality Directives and corresponding changes in RES-T target 
accounting rules. RES in electricity, combined with the relative increase of electricity use 
(albeit modest in share terms), is the main contributor to RES-T in the long term. 

Non-CO2 GHG emission reduction 
Non-CO2 emissions (CH4, N2O and F-Gases) account currently (2013) for 18% of total 
EU  GHG  emissions  (excluding  LULUCF).  They  have  decreased  significantly  (32%) 
between 1990 and 2013. They are expected to further decrease by 29% below 2005 levels 
in  2030  (-46%  compared  to  1990  levels),  and  to  stagnate  later  on  (Figure  33).  CH4 
emissions  –  which  have  the  largest  share  in  this  aggregate  -  are  projected  to  decrease 
above  average  (33%  due  to  declining  trends  in  fossil  fuel  production,  improvements  in 
gas distribution and waste management) and N2O emissions fall less than average (17%) 
until  2030, both  remaining  flat  thereafter.  F-Gases  would  reduce  by  half  between 2005 
and  2030,  largely  driven  by  EU  and  Member  State's  policies  (i.e.  the  2014  F-gas 
regulation  and  Mobile  Air  Conditioning  systems  directive).  Except  for  a  very  minor 
fraction from some specific industries, non-CO2 emissions fall under the ESD. 

130 

 
Figure 33: Non CO2 GHG emissions by sector 

Source: GAINS 

The non-CO2 emission trends and their drivers vary by sector.  

Agriculture is responsible for about half of all non-CO2 GHG emissions and is expected 
to  increase  its  share  in  total  non-CO2  until  2030.  While  the  agricultural  non-CO2 
emissions have reduced by 22% between 1990 and 2013, they are projected to roughly 
stabilize  at  current  levels  as  a  result  of  different  trends  which  compensate  each  other, 
such as decreasing herd sizes (both of dairy cows and of non-dairy cattle) but increasing 
milk yields. Slightly  reduced  use  of  mineral  fertilizer through improved efficiency (2% 
less in 2030 than in 2005) leads to corresponding reductions in N2O emissions from soils. 
Improved  manure  management  (e.g.  through  anaerobic  digestion)  also  delivers  minor 
emission  reductions.  The  Common  Agricultural  Policy  influences,  inter  alia,  livestock 
numbers/intensities  and  the  Nitrogen  Directive  and  the  Water  Framework  Directive 
impact on the use of fertilizer.  

Waste  is  currently  the  second  most  important  sector  emitting  non-CO2.  There,  a 
substantial  reduction  between  2005  and  2030  is  expected  (70%),  strongly  driven  by 
environmental  legislation,  such  as  the  Landfill  directive  and  improvements  in  waste 
management  as  well  as  an  update  in  inventory  methodology  of  historic  landfills  that 
results  in  increased  historic  emissions  and  subsequent  increased  reductions  of  these 
emissions in the near to mid-term future. Also an increasing amount of CH4 is recovered 
and  utilised,  thereby  impacting  on  these  trends  towards  lower  emissions.  After  2030, 
however, a moderate increase is projected, reflecting trends in economic development. 

CH4 and N2O emissions from the energy sector (incl. transport) are expected to decrease 
by  36%  from  2005  to  2030,  and  further  26%  between  2030  and  2050.  The  main 
reductions come from less coal-mining and crude oil production in the EU, together with 
reduced emissions from power generation with fossil fuels. On the other hand, transport 
is  expected  to  generate  an  increasing  share  of  energy  sector  non-CO2  emissions  (N2O 
from road transport being the most important contributor), growing from 12% in 2005 to 
15% in 2030 and 20% in 2050 within the energy aggregate. 

131 

 
 
Emissions  from  air  conditioning  and  refrigeration  decrease  by  half  from  2005  until 
2030,  also  thanks  to  existing  legislation  (i.e.  the  new  2014  F-gas  Regulation  and  the 
Mobile Air Conditioning systems Directive). 

Most  of  the  non-CO2  emissions  from  industry  –  overall  a  minor  non-CO2  sector  -  are 
covered  by  the  EU  ETS  (production  of  adipic  and  nitric  acid,  and  of  aluminium).  The 
resulting  incentive  in  combination  with  relatively  cheap  abatement  options  and 
(previous)  national  legislation  cut  emissions  quite  rapidly,  to,  in  2030,  only  a  fifth  of 
those  in  2005.  For  the  period  after  2030  slight  increases  are  projected  in  line  with 
economic trends.  

Emissions  from  the  wastewater  sector  and  remaining  other  sectors  are  projected  to 
increase moderately in line with economic development over the whole period covered.  

LULUCF emissions and removals  
The EU28 Land Use Land Use Change and Forestry (LULUCF) sector is at present a net 
carbon  sink  which  has  been  sequestering  annually  on  average  more  than  300  Mt  CO2 
over  the  past  decade  according  to  the  UNFCCC  inventory  data120.  In  the  Reference 
scenario 2016, the LULUCF sink is expected to decline in the future to -288 Mt CO2 eq in 
2030  from  -299  Mt  CO2  eq.  in  2005  and  decreases  further  after  2030.  This  decline  is 
driven  partly  by  the  increase  in  timber  demand  (partially  a  result  of  the  increase  in 
bioenergy  demand  that  is  expected  in  order  to  reach  the  Renewable  Energy  targets  in 
2020. It is the result of changes in different land use activities of which changes in the 
forest  sector  are  the  most  important.  Figure  34  shows  the  projection  of  the  total  EU28 
LULUCF  sink  in  the  Reference  scenario  2016  and  the  contribution  from  different  land 
use activities.  

At  present,  the  carbon  sink  in  managed  forests  (-373  Mt  CO2  eq.  in  2010  without 
applying any accounting rules121), is the main contributor to the LULUCF sink. The forest 
management  sink  is  driven  by  the  balance  of  forest  harvest  and  forest  increment  rates 
(accumulation of carbon in forest biomass as a result of growth of the trees with the age). 
Forest  harvest  is  projected  to  increase  over  time  from  516  million  m3  in  2005  to  565 
million  m3  in  2030  due  to  growing  demand  for  wood  for  material  uses  and  energy 
production.  And  the  forest  increment  are  projected  to  decrease  with  the  EU  forest 
becoming  older  from  751  million  m3  in  2005  to  725  million  m3  in  2030.  As  a 
consequence,  the  carbon  sink  in  managed  forests  declines  by  32%  until  2030.  This 
decline  in  the  managed  forests  carbon  sink  is  partially  compensated  by  a  rising  carbon 
sink  from  afforestation  and  decreasing  emissions  from  deforestation  in  line  with  past 
trends. Emissions from deforestation continue to decline from 63 Mt CO2 in 2005 to 20 
Mt CO2 eq. in 2030. Carbon sequestration from afforested areas increases steadily to 99 
Mt  CO2  eq.  by  2030,  as  new  forests  are  continuously,  though  at  slower  rate,  being 
established. In addition, young forests that were established over the last 20 years get into 
a phase of high biomass production. 

120 http://unfccc.int 
121  The  GHG  accounting  approach  for  LULUCF  differs  from  other  emission  sectors.  Notably,  forest 
management  is  not  accounted  compared  to  historic  emissions,  but  against  a  so  called  Forest 
Management Reference Level. This means that the accounted removals from the LULUCF sector are 
much smaller than the reported removals seen by the atmosphere. 

132 

 
                                                 
Activities in the agricultural sector (cropland and grassland) have a smaller impact on 
the  total  LULUCF  sink  compared  to  the  forest  sector.  Still,  net  carbon  emissions  from 
cropland  are  projected  to  decline  by  some  18%  by  2030  compared  to  2005  as  soils 
converge  towards  soil  carbon  equilibrium  over  time.  In  addition,  perennial  crops 
(miscanthus,  switchgrass  and  short  rotation  coppice)  that  typically  sequester  additional 
carbon  in  soil  and  biomass  contribute  to  decreasing  cropland  emissions.  By  2030,  0.9 
Mha  of  perennial  crops  are  expected  to  be  cultivated.  The  grassland  sink  increases  to 
around  -19  Mt  CO2  eq.  in  2030  as  land  continues  to  be  converted  to  grassland  e.g. 
through  cropland  abandonment  while  at  the  same  time  the  total  grassland  area  slightly 
declines over time due to afforestation and the expansion of settlements. 

Figure 34: EU28 emissions/removals in the LULUCF sector in Mt CO2 until 2050122 

Source: GLOBIOM-G4M 

Research, innovation and competitiveness  
REF2016  deals  explicitly  with  the penetration  of  new  technologies.  The  approach  is  in 
two steps. First, assumptions are made on techno-economic characteristics based on latest 
scientific  evidence.  Second,  the  model  endogenously  selects  the  most  economically 
viable  technologies  at  each  point  in  time,  leading  to  further  technology  learning  as 
technologies are deployed.  

The development of PVs starts from lower costs than in the previous Reference scenario 
and  has  a  positive  learning  curve  throughout  the  projection  period.  This  translates  into 
significant deployment of solar PVs in REF2016, especially in Southern Europe.  

There  remains  large  uncertainty  about  the  costs  for  offshore  wind  and  there  have  been 
cost  increases  due  to  previously  unforeseen  difficulties  and  logistics.  Surveys  have 
identified  significant  potential  of  cost  decrease  due  to  economies  of  scale  and 
possibilities of improvement in logistics, but these cost decreases are likely to occur only 

122 Emissions from deforestation and harvested wood products are included in “Forest land” in contrast to 
UNFCCC inventories. 

133 

 
 
                                                 
towards 2030. As such, offshore wind developments in REF2016 are more conservative 
than in past exercises.  

Figure 35: Illustrative levelized cost of electricity (expressed in €'2013/MWh-net) 

Source: NTUA based on PRIMES 

The  share  of  advanced  biofuels  in  total  consumption  of  biofuels  moderately  increases 
Out  of  these,  about  half  are  projected  to  be  related  to  innovative  technologies  and 
methods, such as forestry residues, or bio-waste.  

Compared  to  the  previous  Reference  scenario,  the  costs  of  nuclear  investment  have 
increased  and  also  the  costs  for  nuclear  refurbishments  have  been  revised  upwards. 
Although lifetime extensions of nuclear power plants remain economically viable in most 
cases, investments in new built plants are lower compared to previous projections.  

The  construction  of  power  plants  equipped  with  carbon  capture  technologies  has  been 
developing at  a  very  slow  pace,  and  been  dependent  on  public support  (e.g.  EEPR  and 
NER300).  Geological  restrictions  as  well  as  current  political  restrictions  on  storage  are 
also  reflected.  For  these  reasons,  CCS  costs  are  assumed  higher  than  in  previous 
Reference scenarios.  

On  the  demand  side,  demand  for  electric  appliances  continues  to  increase.  However, 
there  is  an  uncoupling  between  appliance  stock  and  energy  consumption  due  to  the 
technological progress facilitated by eco-design regulations. 

Car manufacturers are expected to comply with the CO2 standards by marketing vehicles 
equipped  with  hybrid  system,  which  are  becoming  more  appealing  to  the  consumers 
thanks to lower costs. Electrically chargeable vehicles emerge around 2020 and are kick-
started  by  existing  EU and  national  policies  as  well  as  by  incentive  schemes  aiming  to 
boost their penetration. The share of activity of total electric vehicles in the total activity 
of  light  duty  vehicles  reaches  15%  in  2050  (Figure  36).  Fuel  cells  would  add  an 
additional  2%  by  2050.  Other  energy  forms  such  as  LPG  and  natural  gas  maintain  a 
rather small share in the final energy demand of the transport sector.  

134 

 
 
Figure 36: Evolution of activity of passenger cars and vans by type and fuel 

Source: PRIMES-TREMOVE 

Energy system costs (Figure 37) increase up to 2020. Large investments are undertaken 
driven by current policies and measures. Overall, in 2020 energy system costs constitute 
12.3%  of  the  GDP,  rising  from  11.4%  in  2010123.  Between  2020  and  2030  the  share 
remains stable and decreases thereafter, as the system reaps benefits from the investments 
undertaken in the previous decade (notably via fuel savings). In this period, the share of 
energy  system  costs  in  GDP  is  gradually  decreasing,  reaching  levels  close  to  2005  in 
2050. 

Figure 37: Projected evolution of energy system costs 

Source: PRIMES, energy system costs exclude ETS auction payments, given that they result in corresponding auction revenues. 

8.4.3. Overview of model based policy scenarios used 

Two central policy scenarios reflecting the 2030 targets and main elements of the 2030 
climate  and  energy  framework  agreed  by  the  European  Council  in  2014124  have  been 
developed, EUCO27 and EUCO30. This recognises that for the energy efficiency target a 
review will still be undertaken to set the level of ambition: These scenarios also aim to 
provide  consistency  across  a  number  of  impact  assessments  underpinning  2016  Energy 

123 Total system costs include total energy system costs, costs related to process-CO2 abatement and non-
CO2 GHG abatement.  
124 http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/145397.pdf.  

135 

 
 
 
 
                                                 
Union  policy  proposals.  Using  two  central  scenarios  increases  the  robustness  of  policy 
conclusions. 

Both  scenarios  start  from  the  EU  Reference  scenario  2016  and  add  the  targets  and 
policies described in detail below. In addition, coordination policies are assumed which 
enable  long  term  decarbonisation  of  the  economy.  Coordination  policies  replace  the 
"enabling conditions" which have been modelled in 2030 framework IA and the 2014 IA 
on 2030 EE targets.  

Coordination  policies  relate  to  ongoing  infrastructure  developments  that  will  enable  a 
larger  exploitation  of  cost-effective  options  after  2020,  such  as  grid  developments,  and 
relate to  R&D and public acceptance  that are expected to be needed to  meet long term 
decarbonisation objectives.  

The table below summarises the assumptions on climate, renewable energy and specific 
energy efficiency policies in the EUCO27 scenario that have been modelled.  

EUCO27  This  scenarios  is  designed  to  meet  all  2030  targets  set  by  the  European 

Council: 

  At least 40% GHG reduction (wrt. 1990) 
  43% GHG emissions reduction in ETS sectors (wrt 2005) 
  30%  GHG  emissions  reduction  in  Effort  Sharing  Decision  sectors 

(wrt 2005) 

  At least 27% share of RES in final energy consumption 
  27%  primary  energy  consumption  reduction  (i.e.  achieving  1369 
Mtoe  in  2030)  compared  to  PRIMES  2007  baseline  (1887  Mtoe  in 
2030).  This  equals  a  reduction  of  primary  energy  consumption  of 
20%  compared  to  historic  2005  primary  energy  consumption  (1713 
Mtoe in 2005). 

Main policies and incentives additional to Reference: 

Revised EU ETS 

Increase of ETS linear factor to 2.2% for 2021-30 

 
  After 2030 cap trajectory to achieve -90% emission reduction in 2050 

in line with Low Carbon Economy Roadmap 

Renewables policies 

  Renewables  policies  necessary  to  achieve  27%  target,  reflected  by 
RES  values  applied  in  electricity,  heating&cooling  and  transport 
sectors. 

Energy efficiency policies: 

Residential and services sector 

 

Increasing  energy  efficiency  of  buildings  via  increasing  the  rate  of 
renovation  and  depth  of 
this  model,  better 
implementation of EPBD and EED, continuation of Art 7 of EED and 
dedicated national policies are  depicted  by the application of energy 
efficiency values (EEVs). 

renovation. 

In 

  Financial instruments and other financing measures on the European 

136 

 
 
 
 
 
level  facilitating  access  to  capital  for  investment  in 
thermal 
renovation of buildings. This, together with further labelling policies 
for  heating  equipment,  is  depicted  by  a  reduction  of  behavioural 
discount rates for households from 12% to 11.5%. 

  More stringent (than in Reference) eco-design standards banning the 

least efficient technologies. 

Industry 

  More stringent (than in Reference) eco-design standards for motors. 

Transport 

  CO2  standard  for  cars:  85g/km  in  2025;  75g/km  in  2030  and  25 

gCO2/km in 2050125. 

  CO2 standards for vans: 135g/km in 2025; 120g/km in 2030; 60g/km 

in 2050126. 

  1.5%  average  annual  energy  efficiency  improvements  for  new 
conventional and hybrid heavy duty vehicles (HDVs) between 2010-
2030 and -0.7% between 2030-2050. 

  Measures on management of transport demand:  

- 

recently  adopted/proposed  measures  for  road  freight,  railways 
and inland navigation127;  

gradual  internalisation  of  transport  local  externalities128  as  of  2025  and  full 
internalisation by 2050 on the inter-urban network. 

Non-CO2 policies 

 

In 2030 carbon values of €0.05 applied to non-CO2 GHG emissions 
in order to trigger cost-effective emissions reductions in these sectors 
including in agriculture. 

  After 2030 carbon values set at EU ETS carbon price level 

In  the  EUCO27  scenario,  energy  efficiency  delivers  a  large  part  of  GHG  emissions 
reduction  in  the  ESD/ESR  sectors.  This  reduction  is  complemented  by  cost-effective 
reductions in non-CO2 emissions – mostly in agriculture. 

The  EUCO30  scenario  is  constructed  similarly  to  the  EUCO27  scenario,  but  raises  the 
ambition  level  of  the  specific  energy  efficiency  policies  in  a  cost  effective  way.  It 
implements the European Council guidance of having in mind 30% for the review of the 
Energy  Efficiency  Target.  A  relevant  implication  is  that  more  ambitious  energy 
efficiency  policies  deliver  all  necessary  reductions  in  ESD/ESR  sectors,  and  no 
reductions in non-CO2 sectors such as agriculture beyond Reference take place.  

EUCO30  This  scenarios  is  designed  to  meet  all  2030  targets  set  by  the  European 

Council: 

  At least 40% GHG reduction (wrt. 1990) 

125 On NEDC test-cycle. 
126 On NEDC test-cycle. 
127 Directive on Weights & Dimensions, Fourth railway package, NAIADES II package, Ports Package. 
128 Costs of infrastructure wear & tear, congestion, air pollution and noise. 

137 

 
 
 
 
 
                                                 
  43% GHG emissions reduction in ETS sectors (wrt 2005) 
  30% GHG emissions in Effort Sharing Decision sectors (wrt 2005) 
  27% share of RES in final energy consumption 
  30%  primary  energy  consumption  reduction  (i.e.  achieving  1322 
Mtoe  in  2030)  compared  to  PRIMES  2007  baseline  (1887  Mtoe  in 
2030).  This  equals  a  reduction  of  primary  energy  consumption  of 
23%  compared  to  historic  2005  primary  energy  consumption  (1713 
Mtoe in 2005). 

Main policies and incentives additional to Reference: 

Revised EU ETS 

Increase of ETS linear factor to 2.2% for 2021-30 

 
  After 2030 cap trajectory to achieve -90% emission reduction in 2050 

in line with Low Carbon Economy Roadmap 

Renewables policies 

  Renewables  policies  necessary  to  achieve  27%  target,  reflected  by 
RES  values  applied  in  electricity,  heating&cooling  and  transport 
sectors. 

Energy efficiency policies: 

Residential and services sector 

  Further  increasing  energy  efficiency  of  buildings  via  increasing  the 
rate  of  renovation  and  depth  of  renovation.  In  this  model,  better 
implementation of EPBD and EED, continuation of Art 7 of EED and 
dedicated national policies are depicted  by the application of energy 
efficiency  values  (EEVs).  EE  values  are  increased  compared  to 
EUCO27. 

  Financial instruments and other financing measures on the European 
level  facilitating  access  to  capital  for  investment  in 
thermal 
renovation of buildings. This, together with further labelling policies 
for  heating  equipment,  is  depicted  by  a  reduction  of  behavioural 
discount rates for households from 12% to 11.5%. 

  More  stringent  (than  in  EUCO27)  eco-design  standards  banning  the 

least efficient technologies. 

  Policies facilitating the uptake of heat pumps 

Industry 

  More  stringent  (compared  to  EUCO27)  eco-design  standards  for 

motors. 

Transport 

  CO2  standard  for  cars:  80g/km  in  2025;  70g/km  in  2030  and  25 

gCO2/km in 2050. 

  CO2 standards for vans: 130g/km in 2025; 110g/km in 2030; 60g/km 

in 2050. 

  1.5%  average  annual  energy  efficiency  improvement  for  new 
conventional and hybrid heavy duty vehicles (HDVs) between 2010-
2030 and -0.7% between 2030-2050 

138 

 
 
 
 
 
 
 
 
  Measures on management of transport demand:  

-  recently  adopted/proposed  measures  for  road  freight,  railways  and 
inland navigation129;  
-  gradual  internalisation  of  transport  local  externalities130  as  of  2025 
and full internalisation by 2050 on the inter-urban network. 
-  modulation  of  infrastructure  charges  for  HDVs  according  to 

CO2 emissions leading to faster fleet renewal. 
eco-driving. 
deployment of Collaborative Intelligent Transport Systems. 

- 
- 

Non-CO2 policies 

  No policy incentive until 2030 
  After 2030 carbon values set at EU ETS carbon price level  

In addition to these scenarios based on the EU Reference scenario 2016, a stylised WEM-
Extra  scenario  is  used  in  order  to  compare  reductions  potentials  in  higher-income 
Member States.  

This scenario replaces the EU Reference scenario by aggregated national "With Existing 
Measures" (WEM) projections for the Effort Sharing Decision (ESD) sectors submitted 
in 2015 under the Monitoring Mechanism Regulation in the form after quality check and 
where  necessary  gap  filled  and  recalibrated  by  the  European  Environmental  Agency  as 
used for the Trends and projections report 2015131:  

As  WEM  extrapolation  it  emphasises  existing  differences  in  MS  WEM  projection 
methodology and content compared to the EU Reference scenario. By this it provides a 
sensitivity analysis of projected current trends and achievement of targets. As explained 
in  section  1.3,  for  2020  ESD  GHG  reduction  results  of  the  aggregated  MS  WEM 
projections  are  relatively  similar,  but  for  2030  the  aggregated  MS  WEM  projection 
shows significantly less emission reductions.  

Additional  reduction  potentials  are  then  added  based  on  the  differences  between  EU 
Reference  scenario  and  EUCO27  results.  The  box  below  provides  more  detail.  The 
scenario  gives  some  insight  into  how  the  different  relative  ambition  levels  of  "WEM" 
projections would extrapolate into a decarbonisation context. It should not be seen as a 
cost-effective scenario. 

WEM-
Extra 

This  is  a  stylised  scenario  constructed  by  first  calibrating  Member  States' 
"With  Existing  Measures"  (WEM)  projections  for  the  Effort  Sharing 
Decision  (ESD)  sectors  to  the  2005  figures  used  in  the  EU  Reference 
scenario  2016.  This  is  done  in  multiple  steps.  Firstly,  EEA  estimates  of 
scope-corrected ESD emissions for 2005-2014 are used as a starting point for 
the emissions pathway. Then, the trend taken from Member States WEM is 
applied  from  the  earliest  data  from  which  the  WEM  provides  an  emissions 
estimate,  generally  between  2010  and  2013.  The  resulting  trend  projection 
from 2005-2030 is calibrated to begin from the EU Reference scenario 2016 
ESD  emissions  for  2005,  thus  calibrating  the  WEM  projections  to  EU 

129 Directive on Weights & Dimensions, Fourth railway package, NAIADES II package, Ports Package. 
130 Costs of infrastructure wear & tear, congestion, air pollution and noise. 
131 EEA (2015) Trends and projections in Europe 2015 

139 

 
 
 
                                                 
Reference scenario 2005 figures. 

Then,  every  Member  State  has  been  assigned  an  additional  effort, 
proportional  to  the  additional  reduction  for  that  Member  State  in  EUCO27 
compared to Reference 2016, in order that the EU reaches a -30% target. In 
the WEM projections, the EU as a whole does not reduce emissions by 30% 
compared  to  2005,  but  by  17%.  An  additional  13%  overall  reduction  is 
needed to attain a -30% target. 

We  calculate  the  difference  between  the  2016  Reference  scenario  non-ETS 
emissions  in  2030  and  the  EUCO30  emissions  in  2030.  This  is  the 
"increment".  The  additional  13%  reduction  required  as  above  is  distributed 
proportionally  to  the  "increment",  i.e.  to  the  additional  potential  EUCO30 
sees  above  the  Reference  scenario.  The  resulting  stylised  scenario  is  the 
"WEM-Extra", or extrapolated WEM scenario. 

A  number  of  further  policy  scenarios  based  on  the  PRIMES  and  GAINS  models  are 
already  available  from  published  impact  assessments,  in  particular  from  the  2030 
framework impact assessment but also from the 2014 Energy Efficiency Communication 
with regard to higher energy efficiency ambitions as agreed under the 2030 framework.  

These  scenarios  were  based  on  the  2013  Reference,  using  the  same  model  suite  as 
EUCO27 and EUCO30.  

The 2013 Reference scenario projected less ESD emission reductions in 2030 as the new 
Reference  scenario  2016,  i.e.  20%  instead  of  the  now  achieved  24%,  mainly  for  the 
following reasons:  

  Projected EU28 GDP in 2030 was around 5% higher, assuming a more rapid recovery 

from the economic crisis as it happened to unfold. 

  For  ESD  CO2  emissions,  this  emission  increasing  trend  is  however  compensated  by 
other  changes,  e.g.  higher  projected  oil  and  in  particular  gas  price  increases  in  the 
2013 Reference scenario. 

  The  2013  Reference  scenario  did  include  only  policies  adopted  until  2012  and 
therefore  notably  did  not  include  the  reviewed  F-gas  regulation  of  2014  which  is 
expected to reduce HFC emissions in 2030 by up to two third to today's levels.  

  Also the change to new IPCC inventory guidelines which materialised in 2014 turned 

out to lead to stronger decreases in non-CO2 emissions  

From  analyses  done  for  the  2030  framework  proposal,  the  following  scenarios  remain 
instructive because they meet the split in ETS-ESD/ESR GHG reduction targets:  

  A  scenario  included  in  the  2030  framework  IA,  projecting  the  ETS/ESR  split  of  -
43%/-30% in 2030 compared to 2005 achieving only the -40% GHG target (compared 
to 1990) (referred to here as GHG40), 

  A  scenario  included  in  the  2014  Energy  Efficiency  communication  respecting  the 
agreed  ETS/ESR  split  and  achieving  a  30%  energy  efficiency  objective,  resulting  in 

140 

 
 
 
 
energy  efficiency  being  the  primary  tool  to  reduce  emissions  beyond  the  2013 
Reference scenario to achieve the ESR target (referred to here as EE30).  

Details  are  given  in  the  Impact  Assessment  of  the  above  Communications  Details  are 
given  in  the  Impact  Assessments  of  the  above  Communications  (SWD  (2014)15  and 
SWD (2014)255).  

GHG40  General description: This scenario presents an ambition in terms of GHG 
emission reduction that meets in 2030 a 40% GHG reduction, and in 2050 a 
80% GHG reduction compared to 1990 levels. It uses the 2013 Reference 
scenario. It is based on the assumption of equalisation of marginal abatement 
cost of GHG emissions across the economy driven by increasing carbon 
prices and simulated carbon values. In addition, as of 2035, more stringent 
CO2 standards for passenger cars apply to simulate electrification. Carbon 
pricing incentivise fuel shifts and GHG emission reductions it has also a pull 
effect on RES penetration and increase of energy efficiency. 

GHG policies: achievement of 40% and 80% reduction targets in respectively 
2030 and 2050 through equalisation of increasing carbon prices and values 

EE policies: There are no additional EE policies compared to the Reference 
scenario. In the long term, the EEVs are higher than in the Reference 
scenario to reflect the energy efficiency effect of the carbon value. 
Stringent CO2 standards for passenger cars: 95gCO2/km in 2030 and 
25gCO2/km in 2050. 

RES policies: There is no pre-set RES target and consequently no dedicated 
policy in support of RES (in addition to the Reference scenario), increased 
RES share of 26.5% is mostly achieved in the ETS sectors. 

EE30 

This scenario meets a primary energy savings target of 30%, a GHG 
reduction target in 2030 (wrt. to 1990) of 40%, a reduction target in the effort 
sharing sectors of -30%, and achieves a RES share in 2030 of 27.7% 

EU ETS  
 

Increase  of  ETS  linear  factor  to  2.2%  for  2021-30  in  line  with 
Commission proposal for 2030 framework 

  After 2030 cap trajectory to achieve -90% emission reduction in 2050 

in line with Low carbon economy Roadmap 

Renewables 

  Renewables values to achieve a RES share of at least 27%  

Energy efficiency policies: 
 

Increasing energy efficiency of houses and buildings leading to 
renovation rates of 1.61% in 2015-2020, 2.21% in 2021-2030 and 1.26% 
in 2031-3050 which will bring average energy savings after renovation of 
22.08% in 2015-2020, 45.82% in 2021-2030 and 48.48% in 2031-3050; 

  Elimination of market failures and imperfections reflected in the 

reduction of behavioural discount rates from 12% in 2020 progressively 
to 9% (by 2050) in the residential sector and from 10% to 8.5% (by 2050) 
in the tertiary sector; 
Increased uptake of advanced technologies (Ecodesign); 

 

141 

 
 
 
 
 
 
Increased uptake of BAT in industry; 

 
  Higher penetration of district heating; assuming that 12% of households 

will be connected to district heating networks in 2030; 

  Measures limiting grid losses; 
  Measures reducing energy consumption in transport and driving the 
  Electrification of transport in the long-run (e.g. CO2 standard of 72 

gCO2/km in 2030 (25 gCO2/km in 2050) for passenger cars and 110 
gCO2/km in 2030 (60 gCO2/km in 2050) for LCVs). 

  Measures leading to improvements in the fuel efficiency of heavy duty 
vehicles, ambitious vehicle taxation reforms to shift to CO2 based 
taxation, internalisation of external costs, wide deployment of intelligent 
transport systems, development of infrastructure for alternative power-
trains and other soft measures like fuel labelling and eco-driving. 

142 

 
 
 
 
8.5.  Annex 8.5: GDP per capita data used  

Table 25 shows the gross domestic product per capita at market prices which is used in 
this Impact Assessment. 

Table 25 Gross Domestic Product at market prices in euro per capita 

Member State 

2013 GDP per capita 

EU28 
BE 
BG 
CZ 
DK 
DE 
EE 
IE 
EL 
ES 
FR 
HR 
IT 
CY 
LV 
LT 
LU 
HU 
MT 
NL 
AT 
PL 
PT 
RO 
SI 
SK 
FI 
SE 
UK 

26700 
35400 
5800 
14900 
45500 
35000 
14400 
39000 
16500 
22100 
32100 
10200 
26500 
21000 
11300 
11800 
85300 
10200 
18100 
38700 
38100 
10200 
16300 
7200 
17400 
13600 
37400 
45400 
31900 

Source: Eurostat, code nama_10_pc, update of 19/04/2016 

143 

 
 
8.6.  Annex 8.6: Assessing impacts on Member States using the EUCO27 projection 

Table 26: Impact of starting point options on Member State surplus or deficit over 
the period 2021-2030 using the EUCO27 projection 

Scenario 
Option 
Starting 
point 

Sensitivity S2 

EUCO27 
S1 

Sensitivity S3 

2020 emissions 

2016-2018 emissions 

2020 targets 

annual 
average,  
2021-
2030, 
% 2005 
emissions 
0.1% 

4.6% 

-3.6% 

-17% 
0% 
-4% 
-14% 
-9% 
-5% 
-1% 
-8% 
-1% 
-4% 
2% 
-1% 
5% 
3% 
5% 
5% 
16% 
10% 
6% 
7% 
3% 
6% 
6% 
11% 
14% 
0% 
7% 
16% 

Million 
tonnes 
2021-
2030 

31 

589 

-558 

-17 
1 
-15 
-65 
-102 
-29 
-3 
-66 
-68 
-145 
64 
-47 
118 
1 
1 
6 
97 
51 
35 
4 
9 
9 
5 
20 
63 
5 
57 
43 

EU 
MS with 
net 
surplus 
MS with 
net deficit 
LU 
SE 
DK 
IE 
NL 
AT 
FI 
BE 
DE 
FR 
UK 
IT 
ES 
CY 
MT 
SI 
EL 
PT 
CZ 
EE 
SK 
LT 
LV 
HR 
HU 
PL 
RO 
BG 

Surplus (+) or deficit (-) 

annual 
average,  
2021-
2030, 
% 2005 
emissions 
1.8% 

4.6% 

Million 
tonnes 
2021-
2030 

512 

831 

annual 
average,  
2021-
2030, 
% 2005 
emissions 
3.3% 

Million 
tonnes 
2021-
2030 

928 

8.8% 

1448 

-3.0% 

-319 

-4.3% 

-17% 
2% 
-3% 
-13% 
-7% 
-4% 
2% 
-6% 
1% 
-2% 
3% 
0% 
7% 
5% 
7% 
6% 
18% 
12% 
7% 
10% 
5% 
8% 
8% 
12% 
16% 
1% 
8% 
18% 

-17 
8 
-12 
-62 
-86 
-23 
5 
-50 
29 
-61 
144 
-8 
157 
2 
1 
7 
110 
60 
47 
5 
12 
11 
7 
22 
72 
19 
63 
51 

-24% 
3% 
-6% 
-19% 
-12% 
-4% 
1% 
-10% 
-1% 
-3% 
5% 
1% 
10% 
7% 
9% 
13% 
27% 
22% 
15% 
16% 
13% 
16% 
17% 
24% 
28% 
3% 
20% 
33% 

-520 

-23 
13 
-22 
-89 
-141 
-24 
4 
-78 
-26 
-116 
226 
32 
227 
3 
1 
15 
170 
110 
96 
8 
33 
21 
14 
42 
129 
61 
153 
90 

Source: Commission calculations based on PRIMES and GAINS 

144 

 
  
  
Table  27:  Access  to  the  one-off  flexibility,  assessing  which  MS  has  a  considerable 
gap over the period after target adjustment in 2030, using the EUCO27 projection  

% of 
2005 
emission
s 
LU 
SE 
DK 
IE 
NL 
AT 
FI 
BE 

Average annual gap/deficit (-) or surplus (+)over the period 2021-2030 
(emissions as in EUCO27 projections) 

T2: Limited target adjustment in the 
group of high income Member States  
-16.8% 
1.9% 
-2.6% 
-8.1% 
-5.6% 
-2.3% 
1.5% 
-4.7% 

T3: high target adjustment in the 
group of high income Member States 
-16.8% 
1.9% 
-0.4% 
-5.9% 
-3.4% 
-0.1% 
1.0% 
-2.5% 

Table  28:  Impact  of  the  one-off  flexibility  for  those  Member  States  that  have  a 
considerable gap over the period, using the EUCO27 projection 

% of 2005 
emissions 

Options 
LU 
IE 
NL 
BE 
DK 
AT 
FI 
SE 

EU surplus (+) or deficit (-) over the period 2021-2030  
with the EUCO27 projection (million tonnes) 

O1 
-16.8% 
-8.1% 
-5.6% 
-4.7% 
-2.6% 
-2.3% 
1.5% 
1.9% 

T2 
O2 
-12.8% 
-4.1% 
-3.6% 
-2.7% 
-0.6% 
-0.3% 
3.5% 
3.9% 

O3 
-8.8% 
-0.1% 
-1.6% 
-0.7% 
1.4% 
1.7% 
5.5% 
5.9% 

O1 
-16.8% 
-5.9% 
-3.4% 
-2.5% 
-0.4% 
-0.1% 
1.0% 
1.9% 

T3 
O2 
-12.8% 
-1.9% 
-1.4% 
-0.5% 
1.6% 
1.9% 
3.0% 
3.9% 

O3 
-8.8% 
2.1% 
0.6% 
1.5% 
3.6% 
3.9% 
5.0% 
5.9% 

Table  29:  Use  of  LULUCF  credits  by  high  income  Member  States,  impact  on 
distribution of use depending on choice of flexibilities using the EUCO27 projection 

Million ton 

High Income 
Member 
States 
LU 
SE 
DK 
IE 
NL 
AT 
FI 
BE 
DE 
FR 
UK 

Reference 
T1 
O1 

EUCO27 
T1 
O1 

EUCO27 
T3 
O1 

EUCO27 
T3 
O3 

151 

117 

127 

0.2 
5 
15 
27 
13 
2 
5 
4 
22 
58 
0 

0.2 
0 
1 
27 
13 
1 
0 
4 
22 
58 
0 

0.2 
0 
12 
27 
13 
2 
0 
4 
0 
58 
0 

145 

81 

0.2 
0 
0 
0 
0 
0 
0 
0 
22 
58 
0 

 
8.7.  Annex  8.7:  Impacts  on  Member  States  of  combinations  of  options  for  target 
distribution, access to the one-off ETS/ESR flexibility and LULUCF flexibility 

Table  30:  Member  State  impacts  of  Combination  2  (T2,  O2,  L2)  with  EUCO27 
projection 

Projection used 
2030 Target Adjustment 
One off flexibility 
LULUCF credits (if needed)  
Combination 
EU Mio surplus (+)           or 
deficit (-) 
MS with net deficit 
 (potential buyers) 
MS with net surplus 
(potential sellers) 
EU 
LU 
SE 
DK 
IE 
NL 
AT 
FI 
BE 
DE 
FR 
UK 
IT 
ES 
CY 
MT 
SI 
EL 
PT 
CZ 
EE 
SK 
LT 
LV 
HR 
HU 
PL 
RO 
BG 

Deficit (-) or Surplus (+) as % 2005 emissions 
EUCO27 

No 

No 

Comb. 1 

512 

-319 

831 

1.8% 
-16.8% 
1.9% 
-3.1% 
-13.1% 
-7.3% 
-3.9% 
1.5% 
-6.4% 
0.6% 
-1.6% 
3.5% 
-0.2% 
6.8% 
5.3% 
7.2% 
6.4% 
17.7% 
11.9% 
7.3% 
9.7% 
4.7% 
8.4% 
8.1% 
12.4% 
15.5% 
1.0% 
8.2% 
18.4% 

No  

510 

-272 

782 

1.8% 
-16.8% 
1.9% 
-2.6% 
-8.1% 
-5.6% 
-2.3% 
1.5% 
-4.7% 
0.1% 
-2.2% 
2.9% 
-0.2% 
6.8% 
5.3% 
7.2% 
6.4% 
17.7% 
11.9% 
7.3% 
9.7% 
4.7% 
8.4% 
8.1% 
12.4% 
15.5% 
1.0% 
8.2% 
18.4% 

146 

Yes, T2 

Yes O2 

Yes L2 
Comb. 2 

607 

-191 

798 

2.1% 
-12.8% 
3.9% 
-0.6% 
-4.1% 
-3.6% 
-0.3% 
3.5% 
-2.7% 
0.1% 
-2.2% 
2.9% 
-0.2% 
6.8% 
5.3% 
9.2% 
6.4% 
17.7% 
11.9% 
7.3% 
9.7% 
4.7% 
8.4% 
8.1% 
12.4% 
15.5% 
1.0% 
8.2% 
18.4% 

714 

-84 

798 

2.5% 
-12.6% 
3.9% 
0.0% 
0.0% 
-2.5% 
0.0% 
3.5% 
-2.3% 
0.1% 
-0.6% 
2.9% 
0.0% 
6.8% 
5.3% 
9.2% 
6.4% 
17.7% 
11.9% 
7.3% 
9.7% 
4.7% 
8.4% 
8.1% 
12.4% 
15.5% 
1.0% 
8.2% 
18.4% 

 
 
  
 
 
 
Table  31:  Member  State  impacts  of  Combination  3  (T3,  O3,  L2),  with  EUCO27 
projection 

Projection used 
2030 Target Adjustment 
One off flexibility 
LULUCF credits (if needed)  
Combination 
EU Mio surplus (+)           or 
deficit (-) 
MS with net deficit 
 (potential buyers) 
MS with net surplus 
(potential sellers) 
EU 
LU 
SE 
DK 
IE 
NL 
AT 
FI 
BE 
DE 
FR 
UK 
IT 
ES 
CY 
MT 
SI 
EL 
PT 
CZ 
EE 
SK 
LT 
LV 
HR 
HU 
PL 
RO 
BG 

Deficit (-) or Surplus (+) as % 2005 emissions 
EUCO27 

Yes, T3 

Yes O3 

Yes L2 
Comb. 3 

707 

-143 

850 

2.5% 
-8.8% 
5.9% 
3.6% 
2.1% 
0.6% 
3.9% 
5.0% 
1.5% 
-0.5% 
-2.7% 
2.4% 
-0.2% 
6.8% 
5.3% 
11.2% 
6.4% 
17.7% 
11.9% 
7.3% 
9.7% 
4.7% 
8.4% 
8.1% 
12.4% 
15.5% 
1.0% 
8.2% 
18.4% 

796 

-54 

850 

2.8% 
-8.6% 
5.9% 
3.6% 
2.1% 
0.6% 
3.9% 
5.0% 
1.5% 
0.0% 
-1.2% 
2.4% 
0.0% 
6.8% 
5.3% 
11.2% 
6.4% 
17.7% 
11.9% 
7.3% 
9.7% 
4.7% 
8.4% 
8.1% 
12.4% 
15.5% 
1.0% 
8.2% 
18.4% 

No 

No 

Comb. 1 

512 

-319 

831 

1.8% 
-16.8% 
1.9% 
-3.1% 
-13.1% 
-7.3% 
-3.9% 
1.5% 
-6.4% 
0.6% 
-1.6% 
3.5% 
-0.2% 
6.8% 
5.3% 
7.2% 
6.4% 
17.7% 
11.9% 
7.3% 
9.7% 
4.7% 
8.4% 
8.1% 
12.4% 
15.5% 
1.0% 
8.2% 
18.4% 

No  

513 

-242 

755 

1.8% 
-16.8% 
1.9% 
-0.4% 
-5.9% 
-3.4% 
-0.1% 
1.0% 
-2.5% 
-0.5% 
-2.7% 
2.4% 
-0.2% 
6.8% 
5.3% 
7.2% 
6.4% 
17.7% 
11.9% 
7.3% 
9.7% 
4.7% 
8.4% 
8.1% 
12.4% 
15.5% 
1.0% 
8.2% 
18.4% 

147 

 
  
 
 
 
 
 
Table  32:  Member  State  impacts  of  Combination  2  (T2,  O2,  L2)  with  EUCO30 
projection 

Projection used 
2030 Target Adjustment 
One off flexibility 
LULUCF credits (if needed)  
Combination 
EU Mio surplus (+)           or 
deficit (-) 
MS with net deficit 
 (potential buyers) 
MS with net surplus 
(potential sellers) 
EU 
LU 
SE 
DK 
IE 
NL 
AT 
FI 
BE 
DE 
FR 
UK 
IT 
ES 
CY 
MT 
SI 
EL 
PT 
CZ 
EE 
SK 
LT 
LV 
HR 
HU 
PL 
RO 
BG 

Deficit (-) or Surplus (+) as % 2005 emissions 
EUCO30 

Yes, T2 

Yes O2 

Yes L2 
Comb. 2 

606 

-156 

762 

2.1% 
-11.7% 
4.1% 
-2.9% 
-4.7% 
-3.5% 
0.5% 
3.5% 
-1.6% 
0.2% 
-1.5% 
3.5% 
0.1% 
5.5% 
2.2% 
6.4% 
6.4% 
17.0% 
11.2% 
7.6% 
7.9% 
4.8% 
6.3% 
7.7% 
11.9% 
15.7% 
0.2% 
7.0% 
16.5% 

714 

-49 

762 

2.5% 
-11.4% 
4.1% 
0.0% 
0.0% 
-2.4% 
0.5% 
3.5% 
-1.1% 
0.2% 
0.0% 
3.5% 
0.1% 
5.5% 
2.2% 
6.4% 
6.4% 
17.0% 
11.2% 
7.6% 
7.9% 
4.8% 
6.3% 
7.7% 
11.9% 
15.7% 
0.2% 
7.0% 
16.5% 

No 

No 

Comb. 1 

511 

-282 

793 

1.8% 
-15.7% 
2.1% 
-5.5% 
-13.6% 
-7.2% 
-3.2% 
1.5% 
-5.3% 
0.8% 
-1.0% 
4.0% 
0.1% 
5.5% 
2.2% 
4.4% 
6.4% 
17.0% 
11.2% 
7.6% 
7.9% 
4.8% 
6.3% 
7.7% 
11.9% 
15.7% 
0.2% 
7.0% 
16.5% 

No  

509 

-235 

744 

1.8% 
-15.7% 
2.1% 
-4.9% 
-8.7% 
-5.5% 
-1.5% 
1.5% 
-3.6% 
0.2% 
-1.5% 
3.5% 
0.1% 
5.5% 
2.2% 
4.4% 
6.4% 
17.0% 
11.2% 
7.6% 
7.9% 
4.8% 
6.3% 
7.7% 
11.9% 
15.7% 
0.2% 
7.0% 
16.5% 

148 

 
  
 
 
 
 
 
 
Table  33:  Member  State  impacts  of  Combination  3  (T3,  O3,  L2),  with  EUCO30 
projection 

Projection used 
2030 Target Adjustment 
One off flexibility 
LULUCF credits (if needed)  
Combination 
EU Mio surplus (+)           or 
deficit (-) 
MS with net deficit 
 (potential buyers) 
MS with net surplus 
(potential sellers) 
EU 
LU 
SE 
DK 
IE 
NL 
AT 
FI 
BE 
DE 
FR 
UK 
IT 
ES 
CY 
MT 
SI 
EL 
PT 
CZ 
EE 
SK 
LT 
LV 
HR 
HU 
PL 
RO 
BG 

Deficit (-) or Surplus (+) as % 2005 emissions 
EUCO30 

Yes, T3 

Yes O3 

Yes L2 
Comb. 3 

707 

-101 

808 

2.5% 
-7.7% 
6.1% 
1.3% 
1.5% 
0.7% 
4.7% 
5.0% 
2.6% 
-0.3% 
-2.1% 
2.9% 
0.1% 
5.5% 
2.2% 
8.4% 
6.4% 
17.0% 
11.2% 
7.6% 
7.9% 
4.8% 
6.3% 
7.7% 
11.9% 
15.7% 
0.2% 
7.0% 
16.5% 

781 

-27 

808 

2.7% 
-7.4% 
6.1% 
1.3% 
1.5% 
0.7% 
4.7% 
5.0% 
2.6% 
0.0% 
-0.5% 
2.9% 
0.1% 
5.5% 
2.2% 
8.4% 
6.4% 
17.0% 
11.2% 
7.6% 
7.9% 
4.8% 
6.3% 
7.7% 
11.9% 
15.7% 
0.2% 
7.0% 
16.5% 

No 

No 

Comb. 1 

511 

-282 

793 

1.8% 
-15.7% 
2.1% 
-5.5% 
-13.6% 
-7.2% 
-3.2% 
1.5% 
-5.3% 
0.8% 
-1.0% 
4.0% 
0.1% 
5.5% 
2.2% 
4.4% 
6.4% 
17.0% 
11.2% 
7.6% 
7.9% 
4.8% 
6.3% 
7.7% 
11.9% 
15.7% 
0.2% 
7.0% 
16.5% 

No  

512 

-201 

713 

1.8% 
-15.7% 
2.1% 
-2.7% 
-6.5% 
-3.3% 
0.7% 
1.0% 
-1.4% 
-0.3% 
-2.1% 
2.9% 
0.1% 
5.5% 
2.2% 
4.4% 
6.4% 
17.0% 
11.2% 
7.6% 
7.9% 
4.8% 
6.3% 
7.7% 
11.9% 
15.7% 
0.2% 
7.0% 
16.5% 

149 

 
  
 
 
 
 
 
8.8.  Annex 8.8: Analysis of the starting point methodology 

The  current  methodology  for  defining  the  target  trajectory  translated  the  percentage 
targets into absolute volumes one year before the start of the trading period, i.e. in 2012. 
To define the starting point of the emissions budget 2013-2020, the most recent inventory 
available  in  2012  was  used  (i.e.  emissions  data  up  to  2010).  To  take  into  account  any 
unexpected  annual  variability,  the  starting  point  was  calculated  based  on  average 
emissions from 2008 to 2010.  

Depending  on  whether  the  difference  between  the  target  level  in  2020  and  the  2005 
emissions  was  positive  or  negative,  two  different  methodologies  were  applied  for  the 
calculation of the target trajectory:  

  For  Member  States  with  a  2020  target  below  their  2005  emissions:  the  starting 
point in 2013 was set at the level of the average emissions from 2008 to 2010 and 
a linear trajectory was extrapolated to the 2020 target.  

If this methodology were to be applied in the same manner for the period 2021-
2030, the starting point in 2021 would have to be set based on the actual average 
2016-2018 emissions, resulting in a target trajectory (for the EU as a whole) equal 
to the light blue trajectory in Figure 38 below. 

  For  Member  States  with  a  2020  target  above  2005  emissions:  the  starting  point 
was moved from 2013 to 2009 but also set at the average emissions from 2008 to 
2010 and extrapolating a linear trajectory towards the 2020 target.  

If this methodology were to be applied for all Member States for the period 2021-
2030, this would result in a significantly more stringent target trajectory (for the 
EU as a whole) equal to the green trajectory in Figure 38 below. 

These two existing methodologies result in target trajectories that are not too dissimilar 
from target trajectories suggested by stakeholders.  

  Some  stakeholders  suggest  defining  the  starting  point  not  in  2021  but  earlier  in 
2020 at the level of the actual 2020 emissions, which would be expected to result 
in  a  target  trajectory  that  is  very  similar  to  the  more  stringent  green  target 
trajectory  in  Figure  38  below),  assuming  an  emission  profile  up  to  2020  in-line 
with the 2016 Reference, reducing emissions to -16% in 2020.  

  Some  stakeholders  suggest  rather  defining  the  starting  point  in  2020  at  levels 
equal to the 2020 target (red target trajectory in Figure 38 below). This would be 
close to the current target methodology for Member States with negative targets 
(light blue target trajectory).  

The  methodology  used  in  this  impact  assessment  is  building  on  the  existing 
methodologies  and  midway  between  the  stakeholder  views  and  the  two  methodologies 
applied currently for Member States with positive and negative target levels in 2020: The 
starting  point  is  set  in  2020  based  on  the  most  recent  emission  inventory  of  average 
2016-2018 emissions. This gives the dotted black line in Figure 38 below that is between 
the more extreme target trajectories as suggested by different stakeholders. It would also 
be  the  starting  point  for  those  Member  States  that  would  have  emissions  in  2016-2017 
that would already be below the 2030 target, which would de facto result in an emission 
profile that allows emissions to increase again.  

150 

 
Figure 38: Analysing the existing starting point methodology 

Source: Commission calculations based on EU Reference scenario 2016  

151 

 
 
 
 
8.9.  Annex 8.9: Analysis of interaction between the one-off transfer between ETS 

and ESR sectors and the Market Stability Reserve 

In the short term the impact on the ETS will notably be in the lowering of the surplus of 
allowances  in  the  ETS.  This  in  turn  will  impact  the  rate  at  which  allowances  will  be 
placed in  the  MSR and  impact the surplus on the market through the interaction of the 
one-off flexibility with the placement of allowances in the MSR . 

The below table gives a stylised example of such potential interactions. 

It  assumes  an  ETS  where  from  2019  onwards  the  emissions  are  in  balance  with  the 
annual target, but where there is still a historic surplus of 1.9 billion132 that needs to be 
reduced.  

In  example  1,  with  no  one-off  flexibility,  this  results  in  2026  in  an  ETS  that  has  an 
surplus of allowances of around 776 million after which no allowances are placed in the 
MSR. Overall the amount of allowances available for the market or placed into the MSR 
is equal to 1900 million (776 + 1124). 

By contrast in example 2, a one-off flexibility equal to 100 million is applied, reducing 
the  surplus  in  the  market  immediately  in  2021,  resulting  in  the  build-up  of  the  MSR 
stopping one year earlier in 2025. This actually results in a slight increase of the surplus 
of allowances to 814 million by the end of the period. Overall the amount of allowances 
available for the market or placed into the MSR is reduced by 100 million compared to 
example 1 (surplus of allowances + amount in MSR = 814 + 986 = 1800). 

Examples 3 and 4 have a one-off flexibility of the same size as example 1. The difference 
is the timing when the one-off flexibility reduced allowances in the ETS.  

In  example  3  it  is  assumed  that  the  one-off  affects  the  surplus  of  allowances  gradually 
during a number of years while in example 4 it Is assumed to only affect the supply of 
allowances after the feeding of allowances into the MSR has stopped. 

In examples 3 and 4 the one-off flexibility reduces the supply of allowances, even after 
the build-up of the MSR has stopped. The consequence is that the supply of allowances 
by  the  end  of  the  period  is  lower  than  in  example  1.  In  example  4  this  is  the  most 
extreme, with the one-off flexibility being neutral for the build-up of the MSR and only 
affecting the surplus of allowances.  

It  should  also  be  noted  that  there  is  a  risk  in  example  2  or  4,  with  cancellation  of 
allowances in the EU ETS undertaken in only one year (be it early or late in the period), 
that  this  could  undermine  the  integrity  of  the  auction  calendar,  given  the  proportion  of 
total auction volumes that the one-off flexibility represents in some Member States. This 
risk does not exist in example 3. 

132 It should be noted that this quantity does not take into account backloaded and unallocated allowances 
to be placed in the reserve. The starting quantity used for this example is purely illustrative. 

152 

 
 
 
                                                 
Table 34: Stylised examples of interactions of the one-off flexibility and the function 
of the Market Stability Reserve 

 Example 1 

(mio ton) 

2019  2020  2021  2022  2023  2024  2025  2026  2027  2028  2029  2030 

0 

0 

0 

0 

814 

814 

814 

814 

814 

925 

776 

776 

776 

776 

882 

814 

776 

-120 

-106 

-111 
986 

-126 
875 

-143 
749 

-155 
761 

-177 
605 

-201 
429 

-228 
228 

-201 
429 

-228 
228 

-100 
-177 
605 

1900  1672  1471  1195  1051 

1900  1672  1471  1295  1139  1003 

2019  2020  2021  2022  2023  2024  2025  2026  2027  2028  2029  2030 

-137 
0 
897  1018  1124  1124  1124  1124  1124  1124 

Surplus of 
allowances in 
year t* 
One off 
flexibility = 0 
MSR feed 
MSR total 
 Example 2 
(mio ton) 
Surplus of 
allowances in 
year t* 
One off 
flexibility 
MSR feed 
MSR total 
 Example 3 
(mio ton) 
Surplus of 
allowances in 
year t* 
One off 
flexibility 
MSR feed 
MSR total 
 Example 4 
(mio ton) 
Surplus of 
allowances in 
year t* 
One off 
flexibility 
MSR feed 
MSR total 
* Surplus of allowances in the year (t )= Surplus of allowances in the year (t-1) – one-off year (t-1) - 
MSR feed year (t-1) 

-10 
-134 
0 
894  1011  1113  1113  1113  1113  1113  1113 

-137 
0 
897  1018  1124  1124  1124  1124  1124  1124 

2019  2020  2021  2022  2023  2024  2025  2026  2027  2028  2029  2030 

2019  2020  2021  2022  2023  2024  2025  2026  2027  2028  2029  2030 

1900  1672  1471  1295  1139  1003 

1900  1672  1471  1285  1121 

-10 
-154 
759 

-10 
-177 
605 

-228 
228 

-201 
429 

-228 
228 

-201 
429 

-177 
605 

-155 
761 

-100 
0 

-10 
-102 

-10 
-117 

0 
986 

0 
986 

0 
986 

0 
986 

0 
986 

0 
986 

-10 
0 

-10 
0 

-10 
0 

-20 
0 

-106 

-120 

737 

776 

976 

849 

727 

717 

707 

687 

882 

676 

676 

676 

676 

0 

0 

0 

Taking  into  account  the  above  different  possible  impacts  on  the  market,  there  can  be 
some  impact  on  carbon  prices,  even  though  this  is  expected  to  be  limited.  In  the  short 
term there will be a reduction of allowances for auctioning, but with 100 to maximally 
200  million  over  10  year  period,  this  will  under  options  O2  and  O3  not  have  a  major 
impact on a market in relative terms when compared to the volumes that are placed in the 
MSR.  It  might  even  result  in  a  slight  increase  of  remaining  surplus  in  the  market  (see 
example  2  above  table),  even  though  in  the  extreme  case  if  the  one-off  flexibility  is 

153 

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
assumed only to reduce surplus of allowances in the last year, it may reduce the available 
surplus at an equal rate. 

In the longer term, if the MSR would potentially feed-back allowances to the market, the 
available  amount  will  in  most  be  lower  which  can  increase  prices,  but  again  given  the 
expected number of allowances entering the MSR, a reduction of this supply by 100 to 
200 million seems limited. 

154 

 
8.10. Annex  8.10:  Provisions  for  flexibility  instruments  in  the  Effort  Sharing 

Decision 

The  current  rules  for  inter-temporal  flexibility  allow  a  Member  State  to  carry  over 
(“bank”)  any  surplus  AEAs  from  a  given  year  to  subsequent  years  within  the 
commitment  period  (until  2020).  It  can  also  carry  forward  (“borrow”)  up  to  5  %  of  its 
annual  emission  allocation  from  the  following  year.  Thus,  Member  States  can  either 
cover  emissions  in  excess  of  their  AEAs  in  a  given  year  by  borrowing  AEAs  from 
allocations  for  future  years,  or,  where  the  emissions  of  a  Member  State  are  below  that 
annual  emission  allocation,  it  can  bank  unused  AEAs  from  one  year  in  order  to  offset 
future emissions in excess of the AEAs allocated in future years (Article 3.3 in the ESD).  

These  instruments  provide  flexibility  to  Member  States  within  their  own  schedule  of 
allocations across the 2013-2020 period and help them managing the use of their AEAs 
over  the  whole  commitment  period  to  cover  any  AEA  shortage  in  specific  years,  for 
example,  due  to  weather  fluctuations.  A  higher  borrowing  rate  is  available  to  Member 
States  for  the  years  2013-2014  under  the  current  ESD  in  the  event  of  “extreme 
meteorological conditions” (Article 3.3).  

With respect to inter-Member State flexibility, a Member State is allowed to transfer up 
to 5 % of its AEAs for a given year to another Member State at any time (Article 3.4). 
After  the annual compliance check has  been concluded it can transfer its entire surplus 
AEAs for a given year (Article 3.5). A receiving Member State may use these acquired 
AEAs for complying with its obligation under ESD for the given year or any subsequent 
years  of  the  compliance  period.  A  Member  State  cannot  transfer  any  part  of  its  annual 
emission  allocation  if,  at  the  time  of  transfer,  that  Member  State  is  not  in  compliance 
with  the  requirements  of  the  ESD.  Member  States  are  obliged  to  report  any  concluded 
transfers to the European Commission, which then publishes a summary of such transfers 
as part of its annual progress report. 

Finally,  under  Article  5  of  the  ESD,  Member  States  can  also  use  international  project 
the  Kyoto  Protocol’s  Clean  Development  Mechanism  and  Joint 
credits  under 
Implementation  to  meet  their  commitments  under  the  ESD.  The  use  of  such  credits  is 
limited on a yearly basis up to 3% of 2005 non-ETS emissions in Member State. Member 
States that do not use their 3% limit in any specific year can transfer their unused part for 
that  year  to  other  Member  States  or  bank  it  for  own  future  use.  Member  States,  which 
fulfil further criteria (AT, BE, DK, FL, IE, ES, IT, CY, LU, PT, SI, SE) may use CDM 
project credits up to  an additional  1%  of their verified  emissions  in  2005;  these  credits 
are not bankable and not transferable.133 

133 Such additional CDM project credits must be from less developed countries or small island states. 

155 

 
 
                                                 
8.11. Annex 8.11: ESD emissions in Member States in 2014  

Figure 39: Gap between ESD emissions and annual limits in 2014  

Source: Adapted from Figure 3 of the Climate Action Progress Report 2015, 
http://ec.europa.eu/clima/policies/strategies/progress/docs/com_2015_576_en.pdf 

The  figure  shows  based  on  preliminary  data  that  in  all  Member  States,  ESD  emissions 
were below their annual limit in 2014 as allocated to them under Commission Decisions 
2013/162/EU  and  2013/634/EU.  The  emissions  are  based  on  approximated  inventory 
data  reported  in  2015  by  Member  States  or  estimated  by  the  EEA  on  behalf  of  the 
Commission,  where  needed.  For  details  see  "Approximated  EU  GHG  inventory:  Proxy 
GHG estimates for 2014", report of the European Environment Agency 
http://www.eea.europa.eu/publications/approximated-eu-ghg-inventory-2014. 

, 

156