COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the document REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2018/842 on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 contributing to climate action to meet commitments under the Paris Agreement
Date: 2021-07-14
Institutions: Directorate-General for Climate Action, European Commission
Subjects: EU Member State, EU emission allowance, EU environmental policy, adaptation to climate change, climate change, environmental monitoring, greenhouse gas, international agreement, pollution control, reduction of gas emissions

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 14.7.2021  SWD(2021) 611 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT REPORT  Accompanying the document REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2018/842 on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 contributing to climate action to meet commitments under the Paris Agreement {COM(2021) 555 final} - {SEC(2021) 555 final} - {SWD(2021) 553 final} - {SWD(2021) 612 final}  
 
 
Table of Contents 

1. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT ............................................................... 8 

1.1.  Overall Policy context ....................................................................................... 8 
1.2.  The  Effort  Sharing  Regulation  within  the  overall  Climate  Policy 

architecture ........................................................................................................ 9 
1.3.  Key aspects of the Effort Sharing Regulation ................................................. 11 

2. 

PROBLEM DEFINITION .................................................................................................................. 14 

2.1.  What are the problems and their drivers? ........................................................ 14 
2.2.  How will the problem evolve? ........................................................................ 19 

3.  WHY SHOULD THE EU ACT? ........................................................................................................ 19 

3.1.  Legal basis ....................................................................................................... 19 
3.2.  Necessity (why EU action) and subsidiarity (why EU action instead of 

Member States) ................................................................................................ 19 

4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? ............................................................................... 21 

4.1.  General objectives ........................................................................................... 21 
4.2.  Specific objectives ........................................................................................... 21 

5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? .................................................................... 22 

5.1.  What is the baseline from which options are assessed? .................................. 22 
5.2.  What policy scenarios are assessed? ............................................................... 23 
5.3.  Description of the policy options .................................................................... 23 
5.3.1.  Option 1: Keep current ESR sectoral scope in parallel to extending 
emissions trading ....................................................................................................... 24 

5.3.2.  Option 2: Maintain in the ESR only the sectors not covered by emissions 
trading  25 

5.2.3. Option 3: Phase out of the Effort Sharing Regulation and replacement by other 
policy instruments ..................................................................................................... 26 

5.4.  Effort Sharing Regulation options discarded at an early stage ........................ 27 

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? ........................................................... 28 

6.1.  Option package 1: Keep current ESR sectoral scope unchanged .................... 28 
6.1.1.  Efficiency and environmental impacts of the 2030 targets in the ESR ...... 29 

6.1.2.  National targets and distributional impacts in the ESR .............................. 31 

6.1.3. 

Starting point and trajectory in the ESR and environmental integrity ....... 43 

6.1.4.  Assessing the impact of the existing ETS and LULUCF flexibilities over 
the period 2021-2030 ................................................................................................ 50 

6.1.5.  The role of existing flexibilities in the ESR (transfers, banking, borrowing)

57 

6.1.6.  Administrative impacts of the current compliance rules for option 1 ........ 59 

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6.2.  Option 2: Reduced scope ESR in line with the extended ETS scope to 

building and road transport .............................................................................. 60 
6.2.1.  Efficiency and environmental impacts of the 2030 point targets in a reduced 
scope ESR ................................................................................................................. 61 

6.2.2.  National targets and distributional impacts in a reduced scope ESR ......... 62 

6.2.3. 

Starting point and trajectory in the ESR in a reduced scope ...................... 66 

6.2.4.  Assessing the impact of the existing ETS and LULUCF flexibilities over 
the period 2021-2030 in a reduced scope ESR ......................................................... 67 

6.2.5.  Administrative impacts of the current compliance rules for option 2 ........ 71 

6.3.  Option 3: Phase out of the Effort Sharing Regulation and replacement 

by other policy instruments ............................................................................. 71 
6.3.1.  Environmental and cost-efficiency impacts ............................................... 72 

6.3.2.  Administrative impacts of the current compliance rules for option 3 ........ 75 

6.4.  Other impacts ................................................................................................... 75 
6.5.  Coherence with related legislation and other policy initiatives ....................... 77 

7.  HOW DO THE OPTIONS COMPARE? ............................................................................................ 82 

8. 

PREFERRED OPTION ...................................................................................................................... 91 

9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? .................................. 94 

10.  ANNEXES .......................................................................................................................................... 97 

10.1.  Procedural information .................................................................................... 97 
10.1.1.  Lead DG, Decide Planning/CWP references .............................................. 97 

10.1.2.  Organisation and timing ............................................................................. 98 

10.1.3.  Consultation of the RSB ............................................................................. 98 

10.1.4.  Evidence, sources and quality .................................................................... 99 

10.2.  Stakeholder consultation ............................................................................... 100 
10.2.1.  Feedback received on the ESR Inception Impact Assessment ................. 100 

10.2.2.  Feedback received on the Open Public Consultation (OPC) .................... 101 

10.3.  Who is affected and how? ............................................................................. 107 
10.4.  Analytical methods ........................................................................................ 120 
Common analytical framework for the Impact Assessments of the revision of ESR, 
ETS, LULUCF, RED and EED ............................................................................... 120 

10.4.1. 

Introduction .............................................................................................. 120 

10.4.2.  Modelling tools for assessments of policies ............................................. 120 

10.4.3.  Assumptions on technology, economics and energy prices ..................... 131 

10.4.4.  The existing 2030 framework: the EU Reference Scenario 2020 ............ 134 

10.4.5.  Scenarios for the “Fit for 55” policy analysis .......................................... 139 

10.4.6.  Results per Member State ......................................................................... 155 

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10.4.7.  Specific analytical elements for this impact assessment .......................... 155 

10.5.  Distributional impacts ................................................................................... 155 
10.5.1.  Overview potential gaps and surpluses for ESR review in options 1.1 and 
1.2 

155 

10.5.2.  Overview Member States with GDP per capita below or above the EU 
average(s) ................................................................................................................ 156 

10.6.  Further  information  on  related  policies  impacting  notably  energy 

system emissions in the ESR ......................................................................... 157 
10.6.1.  Related policy initiatives on the EU-level ................................................ 157 

10.6.2.  National measures in the building and transport sectors .......................... 159 

10.6.3.  Untapped potential for additional emissions reductions in EU level policy 
as per National Energy and Climate Plans .............................................................. 161 

10.7.  Starting  point  and  trajectory  of  annual  emission  allocations  –  further 

analysis .......................................................................................................... 162 
10.8.  Climate Target Plan policy conclusions ........................................................ 166 
10.9.  Glossary ......................................................................................................... 170 

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Figures 

Figure 1: Current climate policy architecture to achieve -40% GHG reductions in 2030 
compared to 1990 ............................................................................................................... 9 
Figure 2: Overview of relevant interactions identified between different EU legislative 
instruments in relation to Effort Sharing .......................................................................... 11 
Figure 3: Overview of the sectors currently covered under Effort Sharing Regulation ... 12 
Figure 4: Member State greenhouse gas emission reductions in 2030 in relation to their 
2005 levels determined in Effort Sharing Regulation ...................................................... 12 
Figure 5: Overview of the intervention logic of Effort Sharing Regulation review to 
define the scope and contribution of the Effort Sharing Regulation including drivers, 
problems and objectives. .................................................................................................. 18 
Figure 6: Option 1.1. national targets based on GDP/cap formula using 2017-2019 data 
under option 1.1 delivering -40% GHG reductions in ESR (in orange) as compared to 
current legislative ESR target (in blue) ............................................................................ 34 
Figure 7: Option 1.2. National targets based on GDP/cap under option 1.2 delivering -
35% GHG reductions (in grey) as compared to current legislative ESR target (in blue)  34 
Figure 8: Gap in 2030 between GDP per capita -based targets and cost-efficient EU 
emission reductions for high income Member States (as pp of 2005 emissions) to achieve 
overall -40% GHG reductions in the ESR ........................................................................ 35 
Figure 9: Gap in 2030 between GDP per capita -based targets with a limited target 
correction and cost-efficient EU emission reductions for high income Member States (as 
a % of 2005 emissions) to achieve overall -40% GHG reductions in the ESR ................ 37 
Figure 10: Gap (-) in 2030 between GDP per capita-based targets and cost-efficient EU 
emission reductions for low and middle income Member States (as pp of 2005 emissions) 
to achieve overall -40% GHG reductions in the ESR ...................................................... 38 
Figure 11 GHG emissions (CO2equivalent) per capita in 2005 for each Member State and 
the EU ............................................................................................................................... 42 
Figure 12 GHG emissions (CO2equivalent) per capita in 2030 for each Member State and 
the EU ............................................................................................................................... 42 
Figure 13: Emission profiles for ESR, sensitivity analysis .............................................. 44 
Figure 14: Options A, B and C related to target trajectory updated ESR with increased 
ambition to achieve -40% GHG reductions (option 1.1) .................................................. 46 
Figure 15: Option D related to target trajectory updated ESR with increased ambition to 
achieve -40% GHG reductions (option 1.1) ..................................................................... 48 
Figure 16: Annual average gap or surplus over the period, high income Member States 53 
Figure 17: Annual average gap or surplus over the period, low income Member States. 54 
Figure 18: Impact of reduced scope on gap between target (based on the GDP per capita 
formula only) and cost efficient projections for high income Member States. ................ 65 
Figure 19: Impact of reduced scope on surplus (gap) between target and cost efficient 
projections for low income Member States ...................................................................... 66 
Figure 20: Impact of ETS and LULUCF flexibilities on high income Member State gaps 
in case of a reduced scope ESR ........................................................................................ 68 

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Figure 21: Impact of ETS and LULUCF flexibilities on low income Member State 
surpluses and gaps in case of a reduced scope ESR ......................................................... 69 
Figure 22: Member States' share of GHG emissions per gas for option 3 ....................... 73 
Figure 23: Member States' GHG emissions per gas in option 3 ...................................... 74 
Figure 24: EU Recovery and Resilience funds available per Member States in relation to 
GDP, 2021-2023 ............................................................................................................... 80 
Figure 25: Distribution of respondents to the review of ESR open public consultation by 
type and country based on data related to EU-based respondents.................................. 102 
Figure 26: Distribution of CO2 and other GHGs in the ESR emissions (2015) ............ 108 
Figure 27: Distribution of 2015 non-CO2 GHG emissions per current ESR sector ...... 109 
Figure 28: Evolution (2030 vs. 2015) of GHG emissions of sectors currently under ESR
 ........................................................................................................................................ 110 
Figure 29: New vehicles per type of drivetrain .............................................................. 111 
Figure 30: Final energy consumption in road transport ................................................. 111 
Figure 31: GHG emissions from buildings .................................................................... 112 
Figure 32: Final energy consumption in buildings ......................................................... 113 
Figure 33: GHG emissions from agriculture .................................................................. 113 
Figure 34: GHG emissions from other current ESR sectors .......................................... 114 
Figure 35: Interlinkages between models ....................................................................... 122 
Figure 36: Schematic representation of the PRIMES model.......................................... 123 
Figure 37: Fuel mix evolution of the Reference Scenario 2020 ..................................... 138 
Figure 38: Share of energy carriers in final energy consumption in the Reference 
Scenario 2020 ................................................................................................................. 139 
Figure 39: Final energy demand by sector in the Reference Scenario 2020 .................. 139 
Figure 40: Interactions between different policy tools ................................................... 141 

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Tables 

Table 1: GHG reductions in ESR sectors 2030 compared to 2005 in option 1.1 ............. 29 
Table 2:  Comparison of current emission reduction targets in 2030 delivering -29% and 
targets based on GDP/cap formula using 2017-2019 data delivering -40% (option 1.1.) 
and delivering -35% (option 1.2.)..................................................................................... 33 
Table 3: Grouping of high income Member States according to gap between cost efficient 
projections and GDP per capita (avg. 2017-2019) based targets achieving -40% GHG 
reductions in the ESR ....................................................................................................... 36 
Table 4: Target correction for high income Member States under option 1.1 ................. 37 
Table 5: Overview of potential target corrections and resulting targets under option 1 .. 40 
Table 6: Characteristic of alternative AEA trajectories A, B and C for option 1.1 .......... 46 
Table 7: Characteristic of alternative AEA trajectory D for option 1.1 ........................... 49 
Table 8: Member States having access to the ETS flexibility under the current Effort 
Sharing Regulation ........................................................................................................... 51 
Table 9: Potential sellers and buyers of allocations for option 1.1 and 1.2 ...................... 58 
Table 10: GHG reductions in a reduced scope ESR (excluding road transport and 
buildings) in 2030 compared to 2005 ............................................................................... 61 
Table 11: Overview of emission reduction targets in 2030 for ESR with reduced scope, 
excluding buildings and road transportation under options 2.1 and 2.2. .......................... 62 
Table 12: Size and type of gas in a reduced scope ESR as of 2020 (option 3.1 - all energy 
combustion emission fall under ETS and all agriculture emissions under a new land 
instrument) ........................................................................................................................ 72 
Table 13: Weight and type of sector in a reduced scope ESR as of 2020 (option 3.1 - all 
energy combustion emission fall under ETS and all agriculture emissions under a new 
land instrument) ................................................................................................................ 72 
Table 14: EU Just Transition funds available per Member States, 2021-2027, EUR billion 
expressed in 2018 prices. .................................................................................................. 81 
Table 15: Comparison overview with all possible options .............................................. 90 
Table 16: Energy-related costs as a % of GDP for residential, services and transport 
(excluding carbon pricing related to the ETS extension) ............................................... 116 
Table 17: Lowered emissions of air pollutants............................................................... 118 
Table 18: Health and economic impacts of improved air quality .................................. 119 
Table 19. Projected population and GDP growth per MS .............................................. 131 
Table 20: International fuel prices assumptions ............................................................. 133 
Table 21: REF2020 summary energy and climate indicators. ....................................... 136 
Table 22: Scenario assumptions description (scenarios produced with the PRIMES-
GAINS-GLOBIOM modelling suite) ............................................................................. 144 
Table 23: ETS prices by 2030 in the difference scenarios (€2015/tCO2) ...................... 148 
Table 24: Energy efficiency value and renewable energy value (averaged 2025-2035) 149 
Table 25: Carbon value applied to non-CO2 emissions in the GAINS model 
(€2015/tCO2) .................................................................................................................. 151 
Table 26: Comparison of key scenario results ............................................................... 152 

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Table 27: Member States ESR GDP target (avg 2017-2019) compared to the efficient 
emission reduction (MIX scenario) for options 1.1 and 1.2 [High Income Member States 
in grey, gap in bold]........................................................................................................ 155 
Table 28: Overview of Member States’ GDP data used for calculating high income 
Member States ................................................................................................................ 156 
Table 29: Examples of Member State level policies in buildings and transport ............ 159 
Table 30: Characteristics of alternative trajectories for option 1.2 ................................ 163 
Table 31: Alternative AEA trajectories and total emission allowances for option 2.1 .. 164 
Table 32: Key characteristics of emission allocations for option 2.2 ............................. 165 
Table 33: Key policy conclusions of the Climate Target Plan ....................................... 167 
Table 34: Glossary .......................................................................................................... 170 

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1. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT 

1.1.  Overall Policy context 

The European Green Deal1 aims to transform the EU into a fairer and more prosperous 
society  with  a  modern,  resource-efficient  and  competitive  economy  where  there  are  no 
net  emissions  of  greenhouse  gases  by  2050  and  where  economic  growth  is  decoupled 
from resource use. The climate neutrality objective has been  endorsed by the European 
Council2 and Parliament3 and is laid down in a legally binding manner in the European 
Climate Law4. At the same time, the transition must be just and inclusive. 

The  European  Green  Deal  also  aims  to  protect,  conserve  and  enhance  the  EU's  natural 
capital, and protect the health and well-being of citizens from environment-related risks 
and impacts.  

The necessity and value of the European Green Deal have only grown in light of the very 
severe  effects  of  the  COVID-19  pandemic  on  our  health  and  economic  well-being. 
Unprecedented near term investments will be needed to reverse the negative impacts of 
the  COVID-19  crisis  on  jobs,  incomes  and  businesses.  In  this  regard,  the  agreed  Next 
Generation  EU  recovery  instrument  and  its  centerpiece,  the  Recovery  and  Resilience 
Facility, with a budget of EUR 672.5 billion, will strongly support the green and digital 
transitions, with at least 37% allocation to the first and 20% to the latter.  

With  its  Communication  on  stepping  up  Europe’s  2030  climate  ambition  (the  2030 
Climate Target Plan)5, the Commission proposes to raise the EU's ambition on reducing 
greenhouse  gas  emissions  to  at  least  55%  below  1990  levels  by  2030  in  a  responsible 
way. This is a substantial increase compared to the existing target of at least 40%. It is in 
line with the Paris Agreement6 objective to keep the global temperature increase to well 
below 2°C and pursue efforts to keep it to 1.5°C. 

The  December  2020  European  Council  (hereafter  referred  to  as  European  Council) 
confirmed  this  ambition  level  and  the  European  Climate  Law  ensures  that  it  is  legally 
binding. The European Council asked for delivering the target collectively by the EU in 
the  most  cost-effective  manner  possible,  preserving  EU’s  competitiveness  and  taking 
account of Member States’ different starting points, specific national circumstances and 
emission  reduction  potential.  It  gave  further  guidance  on  key  elements  for  a  2030 
Climate and Energy Policy Framework7. They invited the Commission to rapidly present 

1 European Green Deal, COM(2019)640 
2 European Council conclusions, 12 December 2019.   
3  European  Parliament  resolution  of  14  March  2019  on  climate  change  and  resolution  of  28  November 
2019 on the 2019 UN Climate Change Conference in Madrid, Spain (COP 25).   
4 Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June  2021 establishing 
the  framework  for  achieving  climate  neutrality  and  amending  Regulations  (EC)  No  401/2009  and  (EU) 
2018/1999 (‘European Climate Law’) (OJ L 243, 9.7.2021, p. 1) 
5 COM(2020)562 final and its impact assessment, SWD(2020)176 
6 http://unfccc.int/paris_agreement/items/9485.php  
7 European Council conclusions, 10 and 11 December 2020 1011-12-20-euco-conclusions-en.pdf 
(europa.eu) 

8 

 
                                                 
all the remaining relevant proposals to this end so as to swiftly inaugurate the legislative 
process.  To  this  end,  the  Commission  has  started  the  next  steps  towards  implementing 
these targets and will review the relevant climate-related policy instruments. To achieve 
55%  GHG  reductions  economy  wide,  the  sectors  under  the  Effort  Sharing  Regulation 
will need to step up efforts. The analysis supporting the  Climate Target Plan indicated 
that  overall  reductions  would  need  to  increase  by  around  10  percentage  points.  The 
Climate  Target  Plan  pointed  out  the  need  to  review  the  ESR,  decide  on  its  scope  and 
increase  its  ambition.  The  European  Council  conclusions  in  May  2021  reaffirmed  the 
December 20208 conclusions.  

1.2.  The Effort Sharing Regulation within the overall Climate Policy architecture 

The  current  economy-wide  target  of  at  least  40%  GHG  reduction  in  2030  compared  to 
1990, is achieved through 3 distinct policy instruments, as represented in Figure 1:  

-  The  EU  Emission  Trading  System  (ETS)  covers  large  point  sources  in  power  and 
industry,  as  well  as  currently  intra  EU  aviation,  taken  together  representing 
approximately 40% of EU GHG emissions. The ETS  will reduce GHG emissions in 
those sectors by 43% compared to 2005. 

-  The  Effort  Sharing  Regulation  covers  the  other  60%  GHG  emissions,  notably  in 
sectors  such  as  road  transport,  heating  in  buildings,  agriculture  and  other  non-CO2 
emissions  (e.g.  waste,  F-gases).  Overall,  these  sectors  need  to  reduce  emissions  by 
30% compared to 2005, which is a lower ambition than the ETS, notably due to the 
large cost-efficient emission reduction potential in the power sector in the ETS.  

-  Thirdly,  the  land  use  sector  is  presently  required  to  meet  the  so-called  “No-Debit” 
rule, which requires that the land use sink should not deteriorate compared to how the 
sink would evolve under current land use and forest management practices9. 

Figure  1:  Current  climate policy  architecture to  achieve  -40% GHG reductions in  2030 
compared to 1990 

Source: Commission services  

8 Special meeting of the European Council, 24-25 May 2021 - Conclusions (europa.eu) 
9 The no debit rule corresponds to a net sink of 225 Mt CO2eq in 2030, which means that in 2030 the land use sector in 
the EU removes 225Mt of CO2 from the atmosphere 

9 

EmissionsTrading System-43% cp. 2005Power/Energy sector, Industry, AviationMax 100 MtCO2eqNon-ETS sectors-30% cp. 2005Max 262 MtCO2eqLand use, land use change and forestry Regulation"No-Debit rule”Effort Sharing Regulation-30 %Road transport, Buildings,Agriculture,Waste, etcFull flexibilityCovering ca. 40% of EU GHG emissionsCovering ca. 60% of EU GHG emissions 
 
 
                                                 
This  impact  assessment  focusses  on  the  implementation  of  the  Climate  Target  Plan  as 
regards the Regulation on binding annual greenhouse gas (GHG) reductions by Member 
States,  the  so-called  Effort  Sharing  Regulation  (ESR).  The  ESR  primarily  addresses 
Member  States  as  institutional  actors  and  thus  in  first  instance  affects  national 
administrations.  

The Effort Sharing Regulation (ESR) combines national accountability for achieving the 
common climate objectives (environmental integrity) with flexibility for Member States 
to  implement  the  appropriate  measures  taking  into  account  national  circumstances 
(subsidiarity). 

A range of European policies and measures play an important role to help Member States 
reduce  emissions  in  the sectors  covered  by  the  ESR.  The  interaction  between  EU-level 
measures  and  Member  States  measures  has  been  growing  in  importance  and  intensity. 
Examples are:  

  The Renewable Energy Directive  (RED) and the Energy Efficiency Directive 
(EED)  drive  the  uptake  of  energy  efficient  and  renewable  technologies,  helping 
reduce GHG emissions in all sectors.  

  CO2  standards  for  new  vehicles  (cars,  vans,  trucks)  reduce  GHG  emissions  in 
the  road  transport  sector  as  the  existing  vehicle  stock  is  gradually  replaced  by 
cleaner vehicles.  

  The Directive on Alternative Fuels Infrastructure ensures the development of 
EU wide infrastructure that is required to allow the transport sector to switch to 
electricity or other low carbon fuels.  

  The  building  sector  will  also  see  emission 

the 
implementation  of  the  requirements  of  the  Energy  Performance  of  Buildings 
Directive. 

reductions 

following 

  Strategic plans under the Common Agriculture Policy allow Member States to 

focus agriculture funding on improving GHG efficiency of its agriculture. 

  Waste legislation aims to reduce landfilling of bio-waste and associated methane 

emissions.  

  F-gases10 are phased down by a set of EU regulations regulating their placing on 

the EU market, in conformity with the Montreal Protocol. 

The Revision of Effort Sharing Regulation presented in this impact assessment thus must 
be in coherence with the updates of other 2030 climate, energy and transport policies (see 
Figure  2).  Policies  being  updated  that  interact  with  the  ESR  are  notably  the  EU 
Emissions  Trading  System  (ETS)  Directive  and  the  Land  Use,  Land  Use  Change  and 
Forestry  (LULUCF)  Regulation.  Policies  being  updated  that  contribute  to  reducing 
emissions in the ESR are CO2 Emissions Performance Standards for Cars and Vans, the 

10 Fluorinated gases (or “F-gases”) are chemical substances with a very high global warming potential used in specific 
applications such as air-conditioning systems, switch gear and as chemical feed-stock 

10 

 
                                                 
Renewable Energy  Directive, the Energy  Efficiency  Directive, the Energy  Performance 
of  Buildings  Directive,  the  Energy  Taxation  Directive,  the  revision  of  the  Directive  on 
Deployment  of  Alternative  Fuels  Infrastructure  and  the  new  legislative  initiatives  to 
reduce methane emissions in the energy sector.  

Figure  2:  Overview  of  relevant  interactions  identified  between  different  EU  legislative 
instruments in relation to Effort Sharing 

Source: Commission services  

Further information on related policies and policy initiatives notably impacting the 
emissions from the energy system in the ESR is provided in annex 10.6. 

1.3.  Key aspects of the Effort Sharing Regulation  

The  ESR  currently  covers  all  GHG  emissions  included  in  the  EU’s  target  which  are 
covered  neither  by  the  EU  Emissions  Trading  System  (ETS)  nor  by  the  Regulation  on 
Land-Use,  Land-Use  Change  and  Forestry  (LULUCF).  It  currently  covers  direct  GHG 
emissions  from  transport  (except  aviation  and  non-domestic  shipping),  buildings, 
agriculture,  industrial  installations  and  gases  not  covered  by  the  EU  ETS  and  waste  as 
well as non-combustion related emissions from energy and product use (see Figure 3). It 
includes both CO2 emissions as well as a significant share of non-CO2 emissions.  

11 

 
 
Figure 3: Overview of the sectors currently covered under Effort Sharing Regulation 

Source: Commission services  

The  current  ESR  aims  at  reducing  covered  greenhouse  gas  emissions  by  30  %  below 
2005  levels  by  2030.  It  sets  “minimum  contributions”  in  the  form  of  binding  national 
emission  reduction  targets  for  each  Member  State  for  the  period  from  2021  to  2030  to 
reduce  GHG  emissions  in  the  sectors  covered  by  the  Regulation,  which  for  2030  vary 
between  0%  and  -40%  compared  to  2005.  The  distribution  key  is  based  on  economic 
capacity, i.e. GDP per capita, with some limited adjustments to reflect cost-efficiency in 
a fair and balanced manner. It also sets binding national emission trajectories from 2021 
to 2030, starting from the average of 2016 to 2018 emissions.  

Figure 4: Member State greenhouse gas emission reductions in 2030 in relation to their 
2005 levels determined in Effort Sharing Regulation 

Source: Commission services  

12 

 
 
 
 
In order to provide for flexibility for Member States in implementing their commitments 
and  as  a means  to  enhance  the  overall  cost-efficiency  of  reaching  the  EU-wide  
2030 target,  the  ESR  provides  a  range  of  flexibility  instruments:   

 

 

 

Emission allocations can be banked and borrowed with certain limitations.  

Transfers  of  allocations  between  Member  States  are  possible.  This  flexibility 
instrument  can  make  a  major  contribution  to  achieve  the  overall  target  in  a  cost-
efficient  way:  it  allows  Member  States  to  be  rewarded  for  overachievement,  while 
the  transfer  of  allocations  facilitates  compliance  for  Member  States  with  a  more 
ambitious target at a lower cost. 

The ESR contains limited flexibilities with the existing ETS and LULUCF sectors. 
Member  States  that  have  access  to  the  ETS  flexibility  had  to  communicate  the 
intended use of the allocated maximum amount, and can then use it under the ESR. 
Each  Member  State  has  been  allocated  a  maximum  amount  of  flexibility  with 
LULUCF,  which  can  only  be  used  if  a  Member  State  overachieves  its  LULUCF 
“No-Debit” commitment and if it needs it for ESR compliance.  

There is a compliance check at five-year intervals, with non-financial penalties for non-
compliance. This is a significant administrative simplification compared to the preceding 
Effort  Sharing  Decision11,  based  on  an  annual  compliance  check.  The  Effort  Sharing 
Regulation  related  planning,  monitoring  and  reporting  requirements,  including  the 
National Energy  and Climate Plans, are set under the Regulation on the  Governance of 
the  Energy  Union  and  Climate  Action  (Governance  Regulation)12.  Climate-related 
reporting  obligations  had  already  been  streamlined  under  the  preceding  Monitoring 
Mechanism  Regulation.  The  Governance  Regulation  provides  a  further  step  by 
integrating  these  with  streamlined  energy  related  reporting  obligations,  which  were 
before set in different sectoral laws.  

Achievement  of  the  targets  under  the  ESR  is  therefore  linked  with  adequate  and 
effectively  implemented  National  Climate  and  Energy  Plans  (NECPs),  with  a  range  of 
national  policies  and  measures,  many  of  them  needing  to  be  implemented  at  national 
level for reasons of subsidiarity. The ESR leaves it to Member States to decide through 
which measures they achieve their targets, although a number of EU policies contribute 
in  all  Member  States  to  emission  reductions.  In  the  context  of  the  Governance 
Regulation,  all  Member  States  have  established  NECPs,  outlining  their  existing  and 
planned policies and measures, including energy efficiency and renewable energy targets 
and  measures.  Under  the  Governance  Regulation,  Commission  recommendations  can 
guide  Member  States  in  the  establishment  of  ambition  and  the  implementation  of  the 

11 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 
emission reduction commitments up to 2020. 
12 Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the 
Governance of the Energy Union and Climate Action. 

13 

 
                                                 
necessary  policies  and  measures.  Overall  this  approach  is  based  on  subsidiarity,  and 
allows Member States to develop the measures that are best suited for their own national 
circumstances.  

The Climate Target  Plan  concluded that  all key  climate and energy policies need to be 
reviewed,  increased  in  ambition  and  that  this  should  be  done  in  a  coherent  manner.  It 
listed a number of policy  options for the ESR in this context, with a focus on what the 
scope  of  the  ESR  could  be  in  relation  to  notably  a  new  Emission  Trading  System  for 
sector presently included in the ESR. Therefore this impact assessment mainly focusses 
on: 

  Scope of ESR and resulting EU wide target. 

  Member State targets and trajectories keeping fairness and cost efficiency as key 

principles for the Effort Sharing Regulation. 

  Use  of  existing  flexibilities  to  enhance  cost  efficiency  (trade,  banking  and 
borrowing,  LULUCF  and  ETS 
two  principles: 
environmental integrity and preserving the balance of efforts among all sectors of 
the economy. 

flexibilities), 

respecting 

2. 

PROBLEM DEFINITION  

2.1. 

 What are the problems and their drivers? 

Higher  2030  climate  ambition  is  imperative  to  ensure  the  EU  is  set  on  a  gradual  and 
balanced  trajectory  to  reach  climate  neutrality  by  2050.  As  part  of  the  Green  Deal  to 
increase the climate ambition from at least -40% to at least -55%, the Commission will 
present proposals to revise most of the EU measures presented in section 1.2, with a view 
to  meeting  the  new  target  and  to  improve  further  the  interactions  between  different 
measures, at whatever level these are adopted and implemented.  

The  general  problem  is  that  with  current  national  targets  agreed  for  2030  (a  EU-27 
reduction of 29%13 compared to 2005) and existing and planned policies, GHG emissions 
in  ESR  sectors  are  not  expected  to  sufficiently  decrease  by  2030  to  achieve  the 
contribution of these sectors to the new overall EU target of at least 55%.  

The Climate Target Plan indicated the need to review the ESR, decide on its scope and 
increase  ambition  with  a  view  of  stepping  up  efforts  by  the  sectors  under  the  Effort 
Sharing Regulation. The Climate Target Plan and its Impact Assessment indicated that as 
part  of  the  overall  step  up  from  at  least  -40%  to  at  least  -55%  GHG  reductions  for  all 
sectors,  the  overall  reductions  in  the  Effort  Sharing  sectors  would  need  to  increase 
approximately by 10 percentage points.  

13 The ESR EU target with the United Kingdom (i.e. EU-28) was set at 30%. Without the UK in the EU 
(i.e. EU-27), this target is equivalent to 29% GHG reductions below 2005 levels.  

14 

 
                                                 
This needs to be further considered within an overall coherent revision of the regulatory 
framework  that  ensures  environmental  integrity,  including  the  revision  of  the  ambition 
undertaken in the existing Emissions Trading System and the revision of the Land Use, 
Land Use Change and Forestry Regulation.  

This  Impact  Assessment  assesses  also  options  that  set  targets  at  lower  ambition  in  the 
ESR  and  assesses  if  in  combination  with  the  achievement  of  other  policies,  this  would 
still allow to reach a combined effect of at least 55% GHG emissions economy wide by 
2030.   

The Climate Target  Plan  concluded that  all key  climate and energy policies need to be 
reviewed,  increased  in  ambition  and that  this should be done in  a  coherent manner. To 
ensure this, all impact assessments build on the same set of coherent modelling scenarios. 
The  modelling  is  based  on  an  updated  baseline,  i.e.  the  Reference  scenario  that 
incorporates existing policies as represented in the National Energy and Climate Plans.  

In  the  EU  Reference  scenario  (see  section  5.1)14,  reflecting  current  trends  and  the 
foreseen  implementation  of  NECP’s,  emissions  covered  by  the  ESR  are  projected  to 
decrease by around 32% in 2030, thereby overachieving the current ESR target, while the 
Impact assessment of the Climate Target Plan projects a substantially higher contribution 
in those sectors of around 39%-40% to be consistent with the overall EU target of at least 
55%. 

Scope of the ESR  

So far, the ETS, the ESR and the LULUCF Regulation together have covered the GHG 
emissions of different parts of the economy, as shown in Figure 1, each of them defining 
the contribution of the covered sectors to the overall target. Specific questions arise from 
the  possible  extension  of  carbon  pricing,  an  important  tool  to  combat  greenhouse  gas 
emissions, to new sectors.  

The possible extension of the ETS warrants the consideration of the scope of the Effort 
Sharing  Regulation  itself,  taking  into  account  the  effectiveness,  cost-efficiency  and 
fairness  of  the  instrument  and  the  climate  policy  architecture  as  a  whole.  Similarly  a 
change in scope of the LULUCF Regulation towards a Land Use instrument15 could also 
impact  the  ESR  scope.  Concretely,  in  case  emission  trading,  and/or  a  Land  Use 
instrument, is set up for certain sectors covered by the current ESR, different options for 
the scope of the ESR need to be considered, notably whether or not a sector is included 
both in the ESR and in one of the other instruments.  

14  The  EU Reference  scenario  assumes the  full  implementation of existing climate, energy, transport and 
energy  policies  and  is  based  on  the  National  Energy  and  Climate  Plans  by  the  Regulation  on  the 
Governance of the Energy Union and Climate Action, prioritising the achievement of the energy efficiency 
and renewable energy targets as included in these plans and the legislative framework as it currently exists 
for 2030 (achieving at least -40% GHG emission reductions compared to 2005).  

15 

 
 
                                                 
 
The  consequences  of  these  options  need  to  be  compared  in  terms  of  the  overall 
effectiveness, fairness and cost-efficiency of each option for the policy architecture.  

For  instance  the  potential  application  of  emissions  trading  to  sectors  such  as  buildings 
and  road  transport  would  cover  around  half  of  the  emissions  of  today’s  Effort  Sharing 
Regulation. As with the current ETS, such a system would integrate the price of CO2 in 
economic  and  financial  decisions  and  would  be  an  important  tool  to  incentivise  cost 
effective action by business and consumers in these sectors across all Member States.  

At the same time, a carbon price on its own would not deliver the required transformation 
in the sectors concerned in an efficient manner. The Climate Target Plan concluded that 
there is a clear need for complementary and targeted policies. These can address market 
failures  and  split  incentives,  accelerate  technological  change  and  develop  the  required 
infrastructure  in  a  coordinated  way  (e.g.  for  building  renovation,  electrification  and 
hydrogen technology for industry).    

Distribution of targets  

For each of the options for a different scope of a revised ESR, a further question concerns 
how the overall EU level effort in the ESR sectors should be distributed among Member 
States.  

ESR  target  setting  needs  to  be  considered  within  an  overall  coherent  revision  of  the 
regulatory framework that ensures environmental integrity, including the revision of the 
ambition  undertaken  in  the  existing  Emissions  Trading  System  and  the  revision  of  the 
Land Use, Land Use Change and Forestry Regulation.  

Fairness and cost efficiency remain key principles for the Effort Sharing Regulation. This 
includes  a  target  setting  approach  that  takes  into  account  differences  in  capacity  to  act 
while  considering  adjustments  to  take  into  account  specific  national  circumstances.  In 
this respect, European Council conclusions of December 202016 provided clear guidance 
and those of May 2020 reaffirmed them17.  

The  current  ESR  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 this reason,  in the 
current ESR, the  targets  for Member  States  with  a  GDP  per  capita  above  the  EU  
average    have  been  relatively  adjusted    to    reflect    cost-efficiency    in    a    fair    and  
balanced  manner. This issue needs to be reassessed in the context of the higher ambition, 
and in the context of a potentially revised scope of the ESR.  

16 European Council conclusions, 10 and 11 December 2020 - 1011-12-20-euco-conclusions-en.pdf 
(europa.eu) 
17 Special meeting of the European Council, 24-25 May 2021 - Conclusions (europa.eu) 

16 

 
 
                                                 
Flexibility instruments to enhance cost-efficiency   

Flexibility  between  Member  States  to  reward  overachievement  and  allow  for  cost 
efficient  attainment  of  the  collective  target  will  also  remain  important  with  increased 
ambition.  Limited  and  appropriate  flexibilities  will  need  to  respect  environmental 
integrity  and  preserve  the  balance  of  efforts  among  all  sectors  of  the  economy,  as 
outlined in the 2030 Climate Target Plan.  

The  flexibility  requirements  that  are  currently  foreseen  in  the  ESR  contribute  to 
achieving  overall  cost-efficiency  in  reaching  the  EU’s  GHG  emission  reduction  target, 
while respecting environmental integrity. The access to and use of flexibilities will need 
to be reassessed taking into account the different options for the scope of a revised ESR.   

The  ESR  provides  for  temporal  flexibility  (within  certain  boundaries  to  keep 
environmental integrity) around the target trajectory through banking and borrowing. An 
important but so far not frequently used element of the current Effort Sharing legislation, 
is the possibility of  AEA (annual emission allocations) transfers across Member States, 
whereby a Member State overachieving its target can transfer these AEA’s to a country 
that is not meeting its target domestically (geographical flexibility).  

Member States have currently  also the possibility to transfer a limited amount of credit 
generated  under  the  LULUCF  legislation  for  compliance  in  the  ESR.  This  so  called 
LULUCF flexibility can only be used to cover for own deficits and cannot be transferred 
to other Member States.  

However  this  flexibility  is  impacted  by  the  agreement  under  the  Climate  Law  that  the 
contribution  of  net  removals  to  the  at  least  -55%  net  GHG  reduction  target  should  be 
limited to 225 MtCO2-eq. While this provision in the Climate Law is without prejudice to 
the  revision  of  Union  legislation,  the  impact  of  any  continued  use  of  the  LULUCF 
flexibility  within  the  ESR  on  the  likelihood  or  not  to  meet  this  requirement  under  the 
Climate Law will also be assessed in this impact assessment.

Finally,  the  limited  flexibility  from  the  existing  ETS  towards  the  ESR,  for  Members 
States  with  targets  above  the  EU  average  target  and  above  their  own  cost-efficient 
reduction potential, needs to be  reassessed in the context of  the  higher ambition and  in 
the context of a potentially revised scope of the ESR.  

Figure 5 sets out the intervention logic. It summarises the described problems specific to 
the revision of the Effort Sharing Regulation, the relevant problem drivers, and outlines 
possible  approaches  to  address  them,  setting  them  in  relation  with  the  objectives  to 
pursue and the available policy options. The latter two elements are described in section 
4 and 5. 

17 

 
 
Figure 5: Overview of the intervention logic of Effort Sharing Regulation review to define the scope and contribution of the Effort Sharing Regulation 
including drivers, problems and objectives. 

18 

 
 
2.2. 

 How will the problem evolve? 

The need to revisit the scope of the Effort Sharing Regulation and/or the ambition level 
of  its  2030  target  and  the  distribution  of  the  effort  among  Member  States  is  a 
consequence of the proposal by the Commission endorsed by the European Council and 
confirmed by the co-legislators in the Climate Law, to step up the ambition of the climate 
target 2030 to at least -55 %. The existing framework of the ESR is projected to deliver 
by 2030 an overall reduction  of greenhouse  gases in the effort sharing  sectors of 32 % 
compared  to  200518.  Leaving  both  the  scope  and  ambition  level  of  the  Effort  Sharing 
Regulation  unchanged  would  put  the  entire  additional  burden  of  faster  decarbonisation 
onto the Emissions Trading System and LULUCF sectors, as well as on the strengthening 
of the other instruments relevant for these sectors, and the Energy Efficiency Directive, 
the  Renewable  Energy  Directive  and  the  Energy  Performance  Buildings  Directive  in 
particular.  This  could  potentially  have  high  economic  costs,  especially  in  the  sectors 
included  in  the  ETS.  It  would  also  leave  untapped  the  potential  of  the  ESR  to  hold 
national governments  accountable  for decarbonisation and to  allow  for  country specific 
policy approaches.  

3.  WHY SHOULD THE EU ACT?  

3.1.  Legal basis 

The  legal  basis  of  this  initiative  is  to  be  found  in  the  Treaty  on  the  Functioning  of  the 
European  Union  (TFEU).  According  to  Article  11  of  TFEU,  environmental  protection 
requirements must be integrated into the Union's policies and activities, in particular with 
a view to promoting sustainable development. Articles 191, 192 and 193 of TFEU further 
clarify  that  Union  policy  preserves,  protects,  and  improves  the  quality  of  the 
environment; protects human health; and promotes measures at the international level to 
deal with regional or worldwide environmental problems. Article 191 mentions climate 
change  as  one  such  problem  in  particular.  Article  192(1)  of  TFEU  empowers  the 
European Parliament and the Council to decide what action is to be taken by the Union to 
combat climate change, as an objective of the Union policy per article 191(1) TFEU.  

3.2.  Necessity  (why  EU  action)  and  subsidiarity  (why  EU  action  instead  of 

Member States) 

Climate  change  is  a  trans-boundary  problem  where  coordinated  EU  action  can 
supplement and reinforce national and local action effectively. Thus, individual action is 
unlikely  to  lead  to  optimal  outcomes  and  action  at  EU  level  is  therefore  indispensable. 
The EU has  worked since the  UNFCCC  was established to develop joint  solutions and 

18 At the same time, implementing policies foreseen in Member States’ national energy and climate plans 
would deliver a greenhouse gas emissions reduction of 32% relative to 2005 in the effort sharing sectors. 

19 

 
 
 
                                                 
drive forward a European approach to fight climate change.  Coordinated EU action can 
effectively  supplement  and  reinforce  national  and  local  action.  Coordination  at  the 
European  level  enhances  climate  action  and  EU  action  is  thus  justified  on  grounds  of 
subsidiarity  in  line  with  Article  191  of  the  Treaty  on  the  Functioning  of  the  European 
Union.  

The  reduction  of  greenhouse  gas  emissions  across  the  European  Union  benefits  from 
coordination at the EU level given the EU’s single market. An increase in the 2030 target 
for EU GHG reductions will impact all sectors included under the current Effort Sharing 
Regulation.  

Action  at  the  EU  level  is  therefore  indispensable  and  coordinated  EU  policies  have  a 
much  bigger  chance  of  leading  to  a  true  transformation  towards  a  climate  neutral 
economy  by  2050,  while  avoiding  fragmentation  of  the  internal  market.  Coordinated 
action  at  the  EU  level  furthermore  facilitates  the  full  consideration  of  the  different 
capabilities  to  act  among  Member  States.  The  EU  single  market  moreover  acts  as  a 
strong driver for cost-efficient change. 

The impacts of such ambition increase and related policies on growth and jobs creation, 
fairness and cost-effectiveness are examples of elements that can be better considered at 
the EU level. 

Coordinated EU policies have a much bigger chance of leading to a true transformation, 
particularly  in  light  of  the  global  dimension  of  the  challenge.  This  approach  must  take 
into  account  different  mitigation  potential  between  Member  States,  as  well  as  the  EU 
single market as a strong driver for cost-efficient change and upward convergence. 

Coordinated  EU  action  is  therefore  needed  to  achieve  the  EU-wide  55%  net  GHG 
reductions for 2030, in particular to ensure a cost-efficient 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 in 2019 joined the EU's effort sharing19. 

Nevertheless, the role of Member State action is crucial to achieve the increased overall 
EU  ambition,  in  particular  in  areas  where  the  competence  for  specific  policies  and 
measures lies mainly with Member States for reasons of subsidiarity.  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 
2030,  including  an  EU  governance  system  with  their  National  Energy  and  Climate 
Plans20. The legally binding national targets under the Effort Sharing Regulation leave it 
to  Member  States  to  decide  how  to  achieve  them  allowing  for  certain  flexibilities 
between Member  States  and other legislative  instruments, such  as   LULUCF and  ETS, 
fully respecting the principle of subsidiarity.  

19 Decision of the EEA Joint Committee 269/2019 of 25 October 2019.  
20 https://ec.europa.eu/info/energy-climate-change-environment/implementation-eu-countries/energy-and-
climate-governance-and-reporting_en 

20 

 
                                                 
4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? 

4.1. 

 General objectives  

The  general  objectives  of  this  initiative  is  to  reach  at  least  55%  net  greenhouse  gas 
emission  reductions  by  2030  compared  to  1990,  in  line  with  the  2030  Climate  Target 
Plan, with a view to achieving climate neutrality (i.e. net zero GHG emissions) by 2050 
in  a  gradual  and  balanced  way.  This  articulation  of  targets  and  objectives  requires  a 
coherent  strengthening  of  the  policy  architecture,  including  the  Effort  Sharing 
Regulation.  

4.2. 

 Specific objectives  

There are three specific objectives for the review of the Effort Sharing Regulation:  

The first specific objective is to define the scope of the ESR so that it remains coherent 
with  other  related  and  proposed  legislation  of  the  Fit  for  55  package,  as  well  with  the 
overall  architecture  incentivising  a  cost-efficient  contribution  of  all  sectors  to  meet  the 
overall  objective.  This  is  of  particular  importance  in  view  of  the  interactions  of  ESR 
scope  and  ambition  with  the  possible  ETS  extension  and  of  considerations  on  a  joint 
instrument  for  agricultural  and  LULUCF  emissions  (Land  Use  instrument),  taking  into 
account  also  linkages  with  other  instruments  in  the  2030  Climate  and  Energy  package 
(the Energy Efficiency Directive, the Renewable Energy Directive, the Energy Taxation 
Directive and the Regulation on the Governance of the Energy Union and Climate Action 
– amongst others). 

The second specific objective is that additional efforts should be shared in a consistent, 
fair  and  equitable  manner  between  Member  States.  Fairness  is  a  core  principle  of  the 
effort  sharing  legislation.  A  key  element  in  this  kind  of  legislation  so  far  has  been  to 
correlate the ambition level of national targets with national economic capacity, and there 
is clear guidance from the European Council that this correlation ought to be maintained. 
The  ambition  should  also  be  consistent  with  the  national  energy  and  climate  plans  for 
2030  as  starting  point  for  additional  efforts,  reflecting  national  circumstances  as  called 
for by the European Council.  

The  third  specific  objective  is  to  promote  cost-efficient  solutions  for  further  reducing 
emissions  in  effort  sharing  sectors.  In  the  current  ESR  this  is  done  by  some  target 
adjustments and the appropriate design of targeted flexibilities. This implies: 

  Ensuring  that  the  set  targets  are  achievable  with  reasonable  efforts,  taking  into 
account differences in cost-efficient mitigation potentials between Member States, 

  Providing sufficient flexibility over time and across Member States in the attainment 

of ESR targets,  

  Providing appropriate flexibility between ETS, LULUCF and ESR sectors. 

21 

 
5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? 

5.1. 

 What is the baseline from which options are assessed?  

The baseline for this initiative is the continuation of the current Effort Sharing Regulation 
(EU) 2018/842 (ESR) as adopted in 2018, without any changes. In modelling terms, this 
is reflected in the EU Reference Scenario 2020.  

The  Reference  scenario  assumes  the  full  implementation  of  existing  climate,  energy, 
transport and energy policies21. For  climate it includes the revised ETS  Directive22, the 
Effort  Sharing  Regulation23,  and  the  LULUCF  Regulation24,  and  it  assumes  the 
achievement  of  the  target  of  at  least  40%  GHG  reductions  by  2030.  For  energy  it 
includes the Energy Efficiency Directive and the Renewable Energy Directive25.  For a 
detailed description of the Reference scenario see Annex 10.426.  

In  this  respect,  it  is  important  to  note  that  the  Reference  scenario  is  based  on  the 
implementation  of  existing  EU  measures  as  well  as  the  National  Energy  and  Climate 
Plans (“NECPs”) foreseen by the Regulation on the Governance of the Energy Union and 
Climate  Action27.  The  Reference  scenario  focusses  on  a  bottom  up  representation  of 
these  national  contributions  to  achieve  the  national  renewable  energy  and  energy 
efficiency  policies  and  targets,  as  these  are  set  out  in  the  NECPs  as  well  as  existing 
policies related to non-CO2 emissions.  

While the Reference scenario projects  a limited overachievement of the EU 32% target 
for renewable energy, it also projects an underachievement of around 3 percentage points 
for the 32.5%  energy  efficiency target.  At EU level,  it projects  for the  ESR, an overall 
reduction  of  emissions  of  32%  by  2030  as  compared  to  2005.  This  is  in  line  with  the 
aggregation  of  the  Member  States’  NECPs  which  estimates  the  EU  wide  aggregate 
reduction of emissions for ESR sectors at -32%28. Thereby full implementation of current 
policies see a collectively overachievement of the EU-27 wide target of -29% as outlined 
in the ESR29. Nevertheless, it must be noted that while the projections in the Reference 
scenario achieve broadly the national  renewable energy and energy efficiency ambition 
of  the  NECPs,  they  do  not  always  match  fully  the  GHG  reductions  at  Member  States’ 
level referred to in the NECPs. 

21 This includes measures from the “Mobility Packages” published in 2017-2018 such as the CO2 standards 
for  cars  and  vans,  as  well  as  trucks,  the  Alternative  Fuels  Infrastructure  Directive,  the  Clean  Vehicles 
Directive,  and  the  Euro  vignette  Directive.  Regarding  non-CO2  emissions  measures  included  of 
importance  are  the  F-gas  Regulation,  the  waste  legislation  including  the  Landfill  Directive,  the  Nitrate 
Directive as well as the Common Agricultural Policy. 
22 As amended by Directive (EU) 2018/410 
23 Regulation (EU) 2018/842 
24 Regulation (EU) 2018/841 
25 Directive (EU) 2018/2001 
26  The  EU  Reference  Scenario  projects  the  impact  of  combined  measures  with  the  PRIMES  –  CAPRI  - 
GAINS – GLOBIOM modelling tools. This allows to see economy-wide interactions in a coherent manner.  
27 Regulation (EU) 2018/1999 
28 COM(2020)564 final 
29 The ESR EU target with the United Kingdom (i.e. EU-28) was set at 30%. Without the UK in the EU 
(i.e. EU-27), this target is fixed at 29%. 

22 

 
                                                 
5.2.  What policy scenarios are assessed?  

This  impact  assessment  uses  a  number  of  policy  scenarios  that  achieve  net  55%  GHG 
emission reductions economy wide by 2030 compared to 1990. They were developed to 
ensure coherence across the different impact assessments of the “Fit for 55 Package”. For 
more information regarding the policy scenarios, see annex 10.430.  

These core policy scenarios (MIX, MIX CP, and REG) build further upon the logic of the 
MIX  and  REG  scenarios  as  included  in  the  impact  assessment  supporting  the  2030 
Climate Target Plan31, but are based on the updated Reference scenario as baseline.  

The  central  policy  scenario  used  in  this  impact  assessment  is  the  MIX  scenario,  which 
assumes an extended emissions trading system in buildings and road transport, combined 
with  additional,  medium  to  high  ambition,  renewable  energy  and  energy  efficiency 
policies. In the MIX scenario the emission trading system for new sectors is assumed to 
be separate from the existing ETS, but its parameters are supposed to be set at a level of 
ambition that would lead to carbon prices similar to those projected for the existing ETS. 

The MIX CP scenario also assumes that a separate ETS is implemented for buildings and 
road  transport.  In  the  MIX-CP  scenario  energy  policies  are  less  ambitious  resulting  in 
higher  carbon  prices  in  the  new  ETS  sectors  than  the  existing  ETS.  The  REG  scenario 
instead assumes no extension of emission trading to new sectors, but delivers increased 
ambition in the non-ETS sectors by other regulatory interventions and incentives, notably 
related to very ambitious energy efficiency and renewable energy policies.  

Finally a scenario, referred to as ‘MIX-NECP-plus’ is developed. Whereas the Reference 
scenario  mimics  national  energy  efficiency  and  renewable  energy  targets,  it  sometimes 
overshoots  or  undershoots  emission  reductions  in  the  ESR  compared  to  individual 
Member  States  estimates  in  the  NECP.  For  those  Member  States  where  the  Reference 
does  not  project  the  achievement  of  the  NECPs  ambition  in  the  ESR,  the  MIX-NECP-
plus  scenario  assumes  the  achievement  of  additional  reductions  compared  to  the  MIX 
scenario, equal to half of the gap between the Reference and the NECPs. Conversely, for 
those  Member  States  where  the  Reference  overshoots  the  NECPs  estimates,  the  MIX-
NECP-plus scenario assumes less reductions compared to the MIX scenario equal to half 
of  this  gap.  This  is  an  alternative  manner  to  recognise  better  national  assumed  starting 
points  in  the  ESR  with  respect  to  emission  reductions,  while  still  recognising  the 
reduction potential seen in the modelling based on the energy mix goals of the NECPs. 

5.3.  Description of the policy options  

As outlined in the Climate Target Plan, the potential extension of the scope of the ETS to 
sectors  that  are  currently  covered  by  the  ESR,  and  the  potential  set-up  of  a  Land  Use 
instrument, warrants an analysis whether the scope of the ESR needs to be changed. This 

30  The  EU  Reference  Scenario  projects  the  impact  of  combined  measures  with  the  PRIMES  –  CAPRI  - 
GAINS – GLOBIOM modelling tools. This allows to see economy-wide interactions in a coherent manner.  
31 SWD(2020) 177 

23 

 
                                                 
can  have  a  profound  impact  on  the  role  of  the  ESR  in  the  overall  climate  policy 
architecture.  The  main  options  of  this  impact  assessment  therefore  relate  to  potential 
changes  to  the  scope  of  the  ESR.  However,  the  assessment  also  allows  to  draw 
conclusions on how the ESR can be updated in case of no extension of ETS scope, with 
the results of the REG scenario representing EU wide cost efficient projections without 
an extension of the ETS to new sectors.  

In addition, the main features of the ESR, in terms of the distribution of targets (based on 
fairness),  and  in  terms  of  flexibilities  (based  on  cost-efficiency)  vis-à-vis  the  ETS  and 
LULUCF  sectors  and  across  Member  States,  require  the  definition  of  different  sub-
options, within the different main options for the scope.  

5.3.1.  Option  1:  Keep  current  ESR  sectoral  scope  in  parallel  to  extending 

emissions trading 

In this option, the scope of the Effort Sharing Regulation is kept unchanged. Impacts of 
increasing  the  target  in  the  ESR  are  assessed  through  a  high  and  a  low  ambition  level 
increase. 

Furthermore,  this  option  is  assessed  in  terms  of  what  the  interactions  can  be  with  an 
expanded Emissions Trading System. This means that some sectors would be covered by 
both instruments.  

The  sectors  which  lend  themselves  to  the  extension  of  the  Emissions  Trading  System 
most straightforwardly, not least for reasons of the volume of the associated greenhouse 
gas emissions, are road transport and buildings. The introduction of EU-wide emissions 
trading for these sectors is being analysed in the impact assessment on the amendment of 
the Emissions Trading System32.  

Issues to analyse are the distribution of effort across Member States, balancing fairness 
and solidarity with cost-efficiency, taking into account national circumstances as well as 
the environmental integrity of the instrument.  

Flexibility mechanisms are further instruments to attain this balance.  

Lastly, the implications of the two policy variants on the ESR targets on the Governance 
Regulation,  and  Member  States’  NECPs  and  related  reporting  and  monitoring,  also 
warrant consideration. 

Option 1.1: Parallel coverage ETS/ESR, strong increase in ESR ambition  

A strong increase in overall ESR target is analysed under this option. This corresponds to 
the cost-efficient contribution of the relevant sectors – the current ESR sectors within an 
unchanged scope – to the 55% overall net GHG emissions reduction target.  

32 It is assumed in this Impact assessment that  in the emission trading system for the new sectors is kept 
separate from the current ETS (no link or gate-way). 

24 

 
                                                 
This option implies a reduction of emissions in these sectors by 39% to 40% relative to 
2005, which is an increase of 10 to 11 percentage points relative to the baseline.   

For the distribution of the increased ambition in the ESR the following sub-options are 
considered:  

-  Target option 1.1.1: baseline, where the distribution of targets is purely based on 
an update of the GDP/capita data methodology used under fairness target setting 
(see 5.1).  

-  Target option  1.1.2:  based on the same GDP/capita data methodology but  with 

additional adjustments to reflect cost-efficiency concerns 

The appropriateness of the current flexibility mechanisms is particularly relevant. For the 
EU-27,  the  current  energy  and  climate  framework  allows  for  a  limited  ESR-ETS 
flexibility  of  up  to  100  million  tonnes,  and  up  to  262  million  tonnes  are  available  for 
their  LULUCF 
ESR-LULUCF  flexibility  for  Member  States  who  overachieve 
commitment. As regards the LULUCF flexibility, this will need to be assessed also in the 
light of the requirements foreseen under the Climate Law.  

For  both  target  options  it  will  be  assessed  what  the  impact  would  be  of  continuing  or 
discontinuing the current ETS and LULUCF flexibility. In the case of continuing them, 
the assessment considers what could be changed, also taking into account considerations 
following the Climate Law.  

Option  1.2:  Parallel  coverage  ETS/ESR,  limited  increase  in  ESR  ambition  and  in 
flexibilities 

The introduction of a new expanded ETS has raised the question if this should lead to a 
reduced ambition update in the ESR. 

This option considers the impact of setting a target equivalent to emission reductions of 
around 35% relative to 2005 in the effort sharing sectors. This would set the target in the 
ESR at a level lower than what the projections see fit as contribution by the sectors to the 
overall economy wide GHG target.  

The assessment will focus notably on how the ESR would interact with an expanded EU 
ETS  that  has  a  target  set  at  a  level  in-line  with  cost  efficient  emission  reduction 
projections, given the significant synergies between the two systems. 

5.3.2.  Option 2: Maintain in the ESR only the sectors not covered by emissions 

trading 

A  second  option  is  a  scope  reduction  of  the  Effort  Sharing  Regulation  mirroring  the 
extension of the EU Emissions Trading System to road transport and buildings, keeping 
these two instruments separate. 

25 

 
In this context it will be assessed what the impact would be of keeping the ESR targets at 
current  level,  but  applied  to  this  reduced  scope,  or  to  increase  them  in  line  with  cost-
efficient projections. 

For both variants, in view of differences in the role of the sectors shifted to the ETS, the 
distribution of effort across Member States needs to be revisited, with particular attention 
to  differences  between  fairness  and  cost-efficiency  and  the  role  and  impact  of  existing 
LULUCF and ETS flexibility.  

Option 2.1: ESR reduced scope without buildings and transport, targets increased to cost-
efficient ESR ambition level 

The  first  variant  studies  the  cost-efficient  ambition  level  for  the  reduced-scope  effort 
sharing sectors for the overall 2030 target of -55 % relative to 1990. This is projected to 
be around -35 % relative to 2005. 

Option  2.2:  ESR  reduced  scope  without  buildings  and  transport,  current  ESR  targets 
maintained  

The second variant is to keep the current national ESR targets unchanged. In the reduced 
ESR scope the application of national targets reduces the scale of required reductions to -
27 % relative to 2005 for the EU-27. 

The  assessment  will  also  look  in  a  more  limited  manner  at  what  would  happen  if  the 
scope  of  the  ESR  is  further  reduced  with  all  fossil  fuel  combustion  emissions  being 
removed from the ESR scope (and thus assuming that all these sectors would be covered 
in an expanded ETS). In this case the ESR would be left to cover agricultural and energy-
related  non-CO2  emissions,  some  industrial  process  emissions  –  not  related  to  fuel 
combustions –, F-gases and waste and wastewater related methane emissions, covering to 
date about one third of the present effort sharing sector emissions. Some instruments put 
strong constraints on some of these emissions to date (solid waste and F-gases) while for 
other emissions (energy, agriculture and waste water) there are no sector specific policies 
that put effective caps on their non-CO2 emissions. 

5.2.3.  Option  3:  Phase  out  of  the  Effort  Sharing  Regulation  and  replacement  by  other 
policy instruments 

This option foresees a phase-out of the ESR following on the one hand an extension of 
the  ETS  to  all  fossil  fuel  combustion  emissions  and,  on  the  other  hand,  covering 
agriculture and the LULUCF sector with a single climate policy instrument with its own 
objectives and rules.  

A  repeal  or  phase-out  of  the  Effort  Sharing  Regulation  would  necessitate  appropriate 
regulation for the remaining limited greenhouse gas emissions not covered by either the 
extended  ETS  or  the  new  land  instrument.  This  applies  in  particular  to  emissions  from 
waste water treatment installations, and methane emissions from fossil fuel based energy 
installations.  

26 

 
5.4.  Effort Sharing Regulation options discarded at an early stage  

The following options have been discarded at an early stage:   

  ESR ambition levels which go beyond cost-efficient projected contributions given 
that this  would not  facilitate a cost-efficient sharing of efforts  between Member 
States and between sectors. It is to be noted that Member States have the option to 
aim  for  more  ambition  beyond  the  binding  national  targets  as  enshrined  in  the 
ESR. The policy scenarios as used for this impact assessment do typically show 
for  a  number  of  Member  States  overachievement  of  their  target  if  policies  are 
implemented cost efficiently across the EU.  

  An  ESR  scope  that  is  reduced  by  more  than  the  sectors  that  are  covered  by  an 
ETS extension as envisaged in the climate target plan, i.e. where the ESR scope 
would be reduced to cover only non-CO2 emissions other than agriculture. This is 
seen  as  a  scope  not  viable  for  a  full  ESR  system,  and  the  option  assessed  (see 
option 3) is rather to phase-out the ESR in this case. 
In case of the policy option to include maritime transport in the EU ETS, which 
includes  also  part  of  the  domestic  navigation  emissions,  the  option  to  remove 
domestic  navigation  emissions  from  the  ESR  scope  was  discarded  at  an  early 
stage.  

 

In  its  current  form,  the  Effort  Sharing  Regulation  covers  emissions  from  domestic 
navigation.  This includes emissions from fuels used by vessels that depart and arrive in 
the  same  country33.  In  2018,  domestic  navigation  emissions  represented  around  16.6 
MtCO2eq,  i.e.  around  11%  of  all  international  and  domestic  navigation  emissions  as 
reported in the EU GHG inventory.  

The  possible  extension  of  emissions  trading  to  at  least  intra-EU  maritime  transport,  as 
called in the Climate Target Plan communication, could have some implications on the 
scope of the ESR. Different options could be envisaged.  

If, on one hand, the scope of the ESR were to be maintained, it would create an overlap 
between  the  domestic  navigation  emissions  covered  by  the  EU  ETS  and  the  ESR.  It 
would provide an opportunity for Member States to continue taking subsidiary action to 
reduce emissions from domestic shipping. In addition, the overlap would only be partial 
as a substantial part of these domestic navigation emissions might not actually fall under 
the  emissions  trading  system,  if  this  one  is  based  on  the  EU  maritime  transport  MRV 
regulation that neither cover inland shipping, nor emissions from ships below 5 000 gross 
tonnage  such  as  small  ferries,  motor  boats  or  workboats,  nor  ship  movements  and 
activities  not  serving  the  purpose  of  transporting  cargo  or  passengers  for  commercial 
purposes,  such  as  dredging,  ice-breaking,  pipe  laying  or  offshore  installation  activities. 
According to the EU maritime transport Regulation, the ships below 5 000 gross tonnage 
are estimated to represent 45% of all ships calling into EU ports and around 10 % of all 

33 Domestic navigation does not include emissions from fishing vessels, which are included in the ESR 
under the inventory category agriculture/forestry/fisheries. 

27 

 
                                                 
maritime  transport  related  emissions.  A  large  share  of  these  ships  are  assumed  to  be 
involved in domestic navigation.  

Alternatively, another option would be to reduce the scope of the ESR by only deducting 
the domestic emissions that are covered by the ETS. Such an option would be difficult to 
implement in practice as the EU maritime transport MRV regulation considers domestic 
emissions  as  intra-EEA  emissions  and  because  it  does  not  allow  disaggregating 
navigation emissions per EEA countries. 

It  is  therefore  assumed  that  emissions  from  domestic  navigation  would  continue  being 
covered under the ESR.   

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? 

6.1. 

 Option package 1: Keep current ESR sectoral scope unchanged  

Option  1  is  the  option  where  the  ESR  sectoral  scope  is  kept  unchanged  and  where 
emission trading is potentially introduced in new sectors, notably the building and road 
transport sectors, at the same time. 

Two options are assessed. Under option 1.1 where the collective target at the EU level is 
increased in-line with cost efficient projections resulting in an increase from around 29% 
currently to 40% emissions reductions by 2030 compared to 2005. A second intermediate 
option, 1.2, sees an intermediate target increase of 35%. 

id

ed

want

social  media 

campaign launched

The  majority  of  stakeholders’  views  in  the  public  consultation 
  to  maintain  the 
current scope of the ESR. NGO’s in particular d  not see a new ETS as a policy tool that 
should replace the ESR or result in a reduced scope for the ESR. This was also the main 
message 
  from the 
 to  reply to the ESR open 
stemming
public  consultation
,  to  which  45,500  EU  citizens  contributed. A  number  of  Member 
States rather indicated that they want
 before 
deciding  to  reduce  the  scope  of  the  ESR.  Business  replies  were  more  diverse.  A 
  that  the  ESR 
significant  share  of  stakeholders  representing  the  energy  sector  support
scope  c
  expanded  in  the  future. A  majority  of 
stakeholders  was  in  favour  of  continuing  to  include  agricultural  non-CO2  emissions 
under the ESR. No stakeholders, nor Member States asked to expand the ESR to existing 
ETS sectors (see section 10.2.2).  

 to see how an 

  be  reduced 

would work

  an  ETS 

extended

 ETS 

were

ould

ed

ed

if

As regards ambition, 94% of stakeholders (229) agreed with increasing the ESR ambition 
level in line with Member States stepping-up their efforts and pursuing more ambitious 
targets. This is the case because stakeholders such as citizens, NGOs, public authorities 
and private actors indicated that keeping a stable framework and increasing targets would 
keep national governments accountable for the climate actions and also in line with the 
Climate Target Plan. A very limited number of stakeholders from the energy sector (4) 
did  not  agree  to  Member  States’  increased  ambition.  They  stated  that  ESR  would  not 
need to reflect an increase ambition but rather ETS as a market price driver would be the 

28 

 
 
 
driver  for  bringing  down  emissions  in  relevant  sectors  (including  transferring  those  of 
building and transport from ETS to ESR). 

6.1.1.  Efficiency and environmental impacts of the 2030 targets in the ESR 

In  option  1.1,  the  ESR  target  would  be  set  up  at  40%  reduction  of  emissions  by  2030 
compared  to  2005.  This  is  an  increase  relative  to  the  baseline  of  11  percentage  points. 
This is fully in line with cost efficient projections across different scenarios. 

Table 1: GHG reductions in ESR sectors 2030 compared to 2005 in option 1.1 

GHG reductions in ESR sectors in 2030 compared to 2005 
(PRIMES base year data for 2005) 

REG 

MIX 

MIX CP 

EU 

-40.6% 
Source: Commission Services 

-39.9% 

-39.0% 

If a separate ETS for road transport and buildings is implemented, it would cover a bit 
more  than  50%  of  total  ESR  emissions  and  contribute  around  50%  of  the  additional 
emission reductions required in the coming decade in the ESR sectors. As such it would 
provide additional means to achieve environmental integrity of the overall ESR target.  

If  the  extension  of  emission  trading  would  include  all  fossil  fuel  CO2  emissions,  the 
scope would cover around 2/3rd of all ESR emission  in  the EU, with a similar share of 
cost-efficient ESR emission reductions projected over the coming decade.  

Clearly,  the  larger  the  scope  of  an  ETS  with  a  cap  set  at  the  level  of  cost-efficient 
reduction projections economy-wide, the more the ETS would contribute in achieving the 
ESR target.  

Conversely,  the  achievement  of  the  ESR  cannot  be  assumed  to  be  only  driven  by  the 
ETS.  Firstly,  it  does  not  cover  all  emissions  in  the  ESR.  Secondly,  the  ESR-driven 
incentive to undertake action at government level should not be limited to the sectors not 
covered by the new ETS. In fact, for the sectors covered by a separate ETS, there is no 
certainty for all Member States that the private sector would deliver an emission profile 
in these sectors that meets the fairness-based differentiated targets under the ESR. There 
will thus be a need for those Member States to take national action also in sectors to be 
covered by the new ETS, or to acquire annual emission allocations (AEAs).  

This is an important feature for sectors like buildings and road transport, where alongside 
efficient pricing incentives, other policies are also important to achieve highly ambitious 
greenhouse gas emission reductions. Examples are providing the necessary infrastructure, 
addressing the lack of alternatives (e.g. the development of zero emission cars)  and the 
correction  of  split  incentives.  Such  policies  in  turn  will  reduce  the  impact  of  carbon 
pricing on individual consumers, providing an incentive to all Member States to provide 
a conducive regulatory framework. 

29 

 
 
In  option  1.2,  a  lower  ambition  increase  would  consider  emission  reductions  of  35% 
relative to 2005 in the effort sharing sectors. 

This option clearly has risks related to environmental integrity. On the one hand one still 
could expect a separate ETS to drive emission reductions in a significant part of the ESR. 
On the other hand, even in this case, still around half of the ESR emissions need to be 
reduced by other regulatory actions.  Assuming the new ETS sectors meet their cap, the 
ESR as a whole may not  achieve their  required  reduction potential (-40%), if the other 
ESR sectors not included in the new ETS do not see additional reductions. If these other 
sectors were to simply meet their Reference projections, overall the ESR would achieve -
36%  emission  reductions,  which  would  be  compliant  with  the  -35%  ESR  target  but 
clearly not in line with the required reduction of -40%.   

If  the  ETS  scope  extension  is  increased  to  all  fossil  fuels,  and  if  these  achieve  cost 
efficient  reduction  projections,  and  other  ESR  emissions  are  kept  as  projected  in  the 
Reference  scenario,  then  the  ESR  overall  would  achieve  -37%  emission  reductions, 
which  would  be  compliant  with  the  -35%  ESR  target  but  clearly  not  in  line  with  the 
required reduction of -40%.  Indeed, missing the ESR target by 2 to 3 percentage points 
is equivalent to missing the EU wide target of net -55% compared to 1990 by around 1 to 
1.5 percentage points.  

With all fossil fuels covered by an ETS, most remaining emissions in the ESR would be 
non-CO2 emissions, representing around 1/3 of the whole ESR currently. Achieving the 
ESR contribution to the overall -55% target in option 1.2 would thus require significant 
policy initiatives that, next to existing policies in waste and F-gas emissions, would also 
limit agriculture non-CO2 and methane leakage in the energy system. Strengthened EU 
policies related to methane leakage from the energy system as well a revision of the F-
gas legislation that may contribute to closing any potential gap in this situation are in fact 
under preparation.  

Conversely, in the largest remaining non-ETS sector, that is, agriculture, achievability of 
further  reductions  will  depend  strongly  on  the  implementation  of  ambitious  CAP 
strategic plans by Member States. Member States action in this regard clearly would be 
further  encouraged  by  setting  high  ambition  goals  in  the  ESR  in  line  with  option  1.1 
rather than option 1.2. 

It could be considered to put stopgaps in place in other regulatory instruments that would 
ensure  overall  achievement  of  the  net  55%  greenhouse  gas  reduction  target.  Increasing 
targets  beyond  cost-efficient  reductions  in  the  existing  ETS  and  the  new  ETS  could 
increase  environmental  integrity.  This  would  however  imply  a  risk  of  higher 
corresponding  economic  impacts  and  an  uneven  distribution  of  effort  between  “ETS 
covered” and “not ETS covered” ESR sectors.  

Finally, by limiting the assessment in this section to the year 2030 only, it does not take 
into  account  the  potential  accumulation  of  surpluses  early  in  the  period  resulting  from 
emissions  that  are  lower  than  the  annual  emission  allocation  in  early  years.  These 

30 

 
surpluses can then be used to offset deficits in later years when emissions may be higher 
than  the  annual  emission  allocation.  The  accumulation  of  surpluses  early  in  the  period 
could  thus  reduce  also  later  in  the  period  the  incentives  to  act.  This  clearly  results  in 
bigger environmental risks over time in option 1.2 than option 1.1. This will be assessed 
in more detail in section 6.1.3. 

Conclusion:  

From a perspective of efficiency and environmental integrity, option 1.1 clearly gives the 
strongest incentive to Member States to adopt additional policies to achieve their national 
target and can facilitate a cost efficient combination of EU and national measures. In this 
context,  it  is  important  to  note  that  many  measures  for  ESR  sectors  (buildings,  road 
transport,  waste,  agriculture)  are  taken  at  national  level  for  reasons  of  subsidiarity,  and 
that  a  significant  part  of  the  ESR  would  not  be  covered  anyway  by  a  new  ETS  for 
building  and  road  transport.  Option  1.1  is  therefore  characterised  by  a  combination  of 
carbon  pricing,  EU  measures  and  national  measures,  which  enhances  the  ability  to 
deliver  targets,  and  therefore  enhances  environmental  integrity.  From  an  economic 
perspective, this combination of measures can be important to enhance cost-efficiency of 
the overall policy because (1) some cost-efficient solutions can only be taken at national 
or  subnational  level  and  (2)  such  policies  can  help  to  unlock  the  full  potential  of  cost-
efficient  measures  taken  at  EU  level,  including  the  carbon  pricing  incentive  from  an 
extended emission trading to building and road transport.  

Option 1.2 does not have the same environmental integrity, and clearly risks missing the 
required  reductions  in  the  ESR  sectors.  A  larger  scope  of  a  new  ETS  to  road  transport 
and  building  sectors,  and  a  higher  target  in  this  new  ETS,  would  lower  this  risk. 
Similarly,  setting  higher  ambition  in  the  existing  ETS  or  the  LULUCF  sector,  beyond 
what  is  needed  under  the  cost-efficient  projections,  may  compensate  for  this  risk,  but 
may create new issues in terms of environmental integrity or cost in those sectors. 

6.1.2.  National targets and distributional impacts in the ESR 

The national targets under the Effort Sharing Regulation for 2030 adding up for EU-27 to 
-29% compared to  2005 emissions are based on  differentiation of  efforts  depending on 
relative  GDP  per  capita  for  2013  with  GDP  measured  at  market  prices  within  a  range 
from 0% to -40% compared to 2005 emission levels.  

The view of the majority of stakeholders is that the ambition increase at the EU level of 
the  instrument  should  be  in  line  with  the  cost  effective  reduction  potential  (such  as 
described  in  the  impact  assessment  of  the  2030  Climate  Target  Plan).  A  majority  of 
respondents of the open public consultation supported fairness (i.e. GDP per capita) and 
cost-efficiency as the key parameters for setting national targets in the ESR, taking into 
account  specific  national  circumstances.  Indeed,  56%  of  respondents  (154)  believed 
fairness  is  a  right  criteria,  mainly  EU  citizens,  NGOs  and  business  associations.  The 
energy  sector  expressed  mixed  views,  since  while  being  the  most  positive  sector  of 
activity  in  favour  of  fairness  criteria  (27)  it  was,  at  the  same  time,  the  relatively  larger 

31 

 
sector against (6). As regards cost-effectiveness, a majority of 51% rated it as a positive 
or  very  positive  criterion,  with  EU  citizens  (46)  and  business  associations  (47) 
representing  the  largest  groups  in  favour.  NGOs  rated  cost-efficiency  negatively  (17 
against and only 6 in favour) as they claimed all Member States should do their best to 
reduce  emissions  even  if  it  comes  at  a  higher  abatement  costs.  Public  authorities  were 
mostly in favour of this criteria (except 2) since they consider cost-effectiveness a useful 
and  valid  distribution  key  for  those  countries  with  higher  abatement  costs.  Most 
representatives  from  the  energy  sector  rated  positive  or  very  positive  this  cost-
effectiveness criteria, together with building & housing and manufacturing sectors. They 
considered  that  cost-effectiveness  criteria  is  valuable  when  it  comes  to  reflect  real 
abatement costs for GHG emission reductions.   

The starting point for calculating the 2030 targets to reach up to 40% reductions in the 
ESR  compared  to  2005  emissions  is  to  apply  all  elements  of  the  previous  2030 
methodology with the same differentiation in efforts depending on GDP per capita34. In 
terms  of  the  EU  target,  the  GHG  emission  limits  will  have  to  be  reduced  by  11 
percentage  points  in  the  first  option  1.1  with  high  ambition  in  the  ESR  and  by  6 
percentage  points  in  the  second  option  1.2  with  more  limited  ambition,  delivering 
respectively -40% and -35% (compared to 2005 emissions) as the collective EU target.  

It  is  opted to  continue limiting the overall spread in  targets  in the EU to  a range of 40 
percentage points (pp) with reductions in option 1 varying in the range of -10% to -50% 
and in option 2 in the range of -5% to 45%. This is in itself a measure that addresses cost 
efficiency  concerns, as it notably  caps the required emission reduction efforts  for some 
high  income  Member  States  compared  to  a  situation  that  only  the  GDP  per  capita 
formula is applied and contributes as such to convergence of efforts across the EU. 

Furthermore,  updating  the  target  ambition  also  allows  to  include  more  recent  data  for 
GDP per capita to better reflect capacity to act. This section includes therefore an update 
from the 2013 data to more recent and stable 2017-2019 data. By taking a more recent 
base year for target calculation the capacity to act is most representative of the updated 
timeframe and by averaging it out over 3 year one avoids annual variability issues, which 
can be seen as an improvement of the applied methodology.  

Table 2 below represents the current national emission reduction targets in 2030 for the 
ESR. It furthermore includes the increase required to achieve an overall 40% target and 
35% target in the ESR based an update of the GDP per capita formula only. In brackets 
the  unbound  result  of  the  formula  is  represented  (before  applying  the  range).  The 
approach includes also limited deviations for Greece, Latvia and Slovenia as included in 
the  2020  targets  under  the  Effort  Sharing  Decision  to  address  specific  Member  State 
concerns  and  as  maintained  in  the  target  setting  approach  under  the  current  Effort 
Sharing  Regulation.35  Figure  6  and  Figure  7  below  represent  the  same  information 

34 SWD/2016/0247 final 
35 Slovenia, Latvia and Greece receive a target correction of respectively 3 pp, 2 pp and 1 pp. 

32 

 
                                                 
respectively  for  a  step  up  in  ambition  to  -40%  and  -35%  compared  to  2005  emissions. 
From  this  assessment,  Ireland  and  Malta  are  the  two  Member  States  with  the  highest 
target increase (in percentage points) compared to the existing 2030 targets. 

Table 2:  Comparison of current emission reduction targets in 2030 delivering -29% and 
targets  based  on  GDP/cap  formula  using  2017-2019  data  delivering  -40%  (option  1.1.) 
and delivering -35% (option 1.2.) 

EU-27 / Member 
State 

Current ESR 
2030 target 

EU-27 

Belgium 

Bulgaria 

Czechia 

Denmark 

Germany 

Estonia 

Ireland 

Greece 

Spain 

France 

Croatia 

Italy 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Hungary 

Malta 

Netherlands 

Austria 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Finland 

Sweden 

-29% 

-35% 

0% 

-14% 

-39% 

-38% 

-13% 

-30% 

-16% 

-26% 

-37% 

-7% 

-33% 

-24% 

-6% 

-9% 

-40% 

-7% 

-19% 

-36% 

-36% 

-7% 

-17% 

-2% 

-15% 

-12% 

-39% 

-40% 

ESR Review 2030 
target delivering -40% 
(option 1.1.) 
Target based on 
GDP/capita formula 
update, bound to a 
range of -10% to -50% 
[unbound target] 

ESR Review 2030 
target delivering -35% 
(option 1.2.) 
Target based on 
GDP/capita formula 
update, bound to a 
range of -5% to -45% 
[unbound target] 

-40% 

-49% 

-35% 

-44% 

-10% [-8%] 

-5% [-3%] 

-28% 

-22% 

-50% [-55%] 

-45% [-50%] 

-50% 

-27% 

-44% 

-22% 

-50% [-62%] 

-45% [-57%] 

-22% 

-37% 

-47% 

-16% 

-43% 

-35% 

-18% 

-22% 

-17% 

-32% 

-42% 

-11% 

-38% 

-30% 

-13% 

-17% 

-50% [-77%] 

-45% [-72%] 

-18% 

-38% 

-50% [-52%] 

-50% [-51%] 

-13% 

-33% 

-45% [-47%] 

-45% [-46%] 

-17% 

-28% 

-12% 

-28% 

-22% 

-50% 

-11% 

-23% 

-7% 

-23% 

-17% 

-45% 

-50% [-53%] 

-45% [-47%] 

33 

 
Source: Commission Services using EUROSTAT data on GDP per capita36 

Figure 6: Option 1.1. national targets based on GDP/cap formula using 2017-2019 data 
under  option  1.1  delivering  -40%  GHG  reductions  in  ESR  (in  orange)  as  compared  to 
current legislative ESR target (in blue) 

Source: Commission Services using EUROSTAT data on GDP per capita for 2017-2019 

Figure  7:  Option  1.2.  National  targets  based  on  GDP/cap  under  option  1.2  delivering  -
35% GHG reductions (in grey) as compared to current legislative ESR target (in blue) 

36 See in Annex 10.5.2 for the data used from Eurostat. 

34 

 
 
 
 
                                                 
Source: Commission Services using EUROSTAT data on GDP per capita for 2017-2019 

Cost efficiency adjustments 

The  current  ESR  targets  are  based  on  GDP  per  capita  data  but  also  include  specific 
adjustments  to  take  into  account  that  for  certain  high  income  Member  States  a  target 
based purely on GDP is substantially more ambitious than the cost-efficient contribution. 
High income Member States are Member States with a GDP per capita above the EU-27 
average.37  

Figure  8  below  represents  the  gap,  for  high  income  Member  States,  between  a  target 
based only on the GDP per capita formula and cost efficient emissions projections in the 
ESR from the updated MIX scenario as well as a number of different emission reduction 
scenarios that also achieve economy wide 55% GHG reductions in the EU. 

Figure  8:  Gap  in  2030  between  GDP  per  capita  -based  targets  and  cost-efficient  EU 
emission reductions for high income Member States (as pp of 2005 emissions) to achieve 
overall -40% GHG reductions in the ESR 

Source: Commission Services 

37 The group of high income Member States applied in this impact assessment are those Member States that 
have  a  GDP  per  capita  above  the  EU-27  GDP  per  capita  calculated  as  the  average  over  the  years  2017, 
2018, and 2019. 

35 

 
 
 
 
 
                                                 
Without  adjustments,  high  income  Member  States  would  be  expected  to  reduce 
emissions more than their respective cost efficient reduction potential. These results are 
structurally similar to those obtained in 2016 for high income Member States.  

Within the group of high income Member States, the following main sub-groups could be 
distinguished (Table 3):  

Table 3: Grouping of high income Member States according to gap between cost efficient 
projections  and  GDP  per  capita  (avg.  2017-2019)  based  targets  achieving  -40%  GHG 
reductions in the ESR 

High Income Member States 

Group 1 
No or very 
low cost 
efficiency gap 
(well below 5 
pp) 
LU, SE, FR 

Group 2 
Low cost 
efficiency gap 
(well below 10 
pp) 

Group 3 
High cost 
efficiency gap 
(around 15 
pp) 

Group 4 
Very high cost 
efficiency gap 
(above 20 pp)  

DE, NL, FI, BE 

AT, DK 

IE 

Source: Commission services (based on MIX scenario) 

Sweden and Luxembourg have no gap, even with high reduction targets. Ireland instead 
shows the largest gap, in part driven by the large share of agriculture non-CO2 emissions 
in  their  emission  profile.  For  all  high  income  Member  States,  except  Austria  and  the 
Netherlands, the MIX NECP plus scenario outperforms the MIX scenario. This indicates 
that  typically  our  reference  projection  is  conservative  compared  to  what  higher  income 
Member States have planned in their NECPs regarding the ESR emissions. It shows that 
high  income  Member  States  in  current  NECPs  are  ready  to  take  action  and  reduce 
emissions beyond cost-efficient levels.  

In  order  to  reflect  high  income  Member  States’  differences  between  their  cost-efficient 
reduction  potential  and  targets  based  on  GDP  per  capita  only,  a  limited  cost  efficiency 
adjustment  to  the  GDP  based  targets  can  be  made,  similar  to  what  was  done  for  the 
current 2030 ESR targets. The aim is to smoothen part of the differences between high 
income  Member  States,  based  on  a  cost  efficiency  reflective  adjustment:  group  1 
contributes with 0.5 pp of additional reductions (but capped at -50%); group 2 stays with 
the targets defined by their GDP per capita; and groups 3 and 4 receive a less ambition 
target  (for  group  3  this  adjustment  is  set  at  the  same  level  as  for  the  current  target 
redistribution  for  cost  efficiency  reasons,  that  is,  a  decrease  by  3  pp  in  the  2030  point 
target). 

Ireland is a specific case as the cost efficiency gap for  Ireland is particularly high. The 
target  for  Ireland  has  increased  significantly  due  to  the  update  in  GDP  per  capita  data 
from 2013 data to average 2017-2019 data.  Ireland has seen strong upward revisions in 
its GDP since 2013 resulting in a target increase based on the GDP per capita formula of 
23pp. Even with a target correction of 9 pp., as is currently made for Ireland in the ESR, 

36 

 
 
Ireland would still have a 50% target, 20 pp higher than their current 2030 target, which 
was set at 30% after target correction. What is specific about  Ireland is that its GDP is 
already significantly higher than its GNI, and its GNI grew at a lower rate. Would targets 
be  calculated  based  on  GNI,  then  the  target  based  formula  would  give  Ireland  a  -55% 
target,  which  would  result  in  a  -46%  target  with  a  9  pp  target  correction.  Due  to  the 
exceptionally  large  cost  efficiency  gap  in  Ireland,  the  currently  applied  9  pp.  target 
correction  for  Ireland  will  be  assessed  for  a  target  based  on  GNI.  Table  4  gives  the 
resulting target corrections. 

Table 4: Target correction for high income Member States under option 1.1 

ESR Review 2030 target delivering -
40% (option 1.1) 

Target 
correction 

3 pp 

0 pp 

3 pp 

0 pp 

-0,5 pp 

0 pp 
9 pp GNI 
based 
-0.5 pp 

0 pp 

-0.5 pp 

Target based on 
GDP/capita 
formula update, 
bound to a range 
of -10% to -50% 
[unbound target]  
-50% [-51%] 

-49% 

-50% [-55%] 

-50% 

-47% 

-50% 

-50% [-62%] 

-50% [-76%] 

-50% [-51%] 

-50% [-53%] 

After target 
correction 

-48% 

-49% 

-50% 

-50% 

-47,5% 

-50% 

-46% 

-50% 

-50% 

-50% 

Austria 

Belgium 

Denmark 

Finland 

France 

Germany 

Ireland 

Luxembourg 

Netherlands 

Sweden 

Source: Commission services 

As can be seen from Figure 9 below, the differences in gaps between Member States are 
reduced  with  such  a  gap  correction,  though  not  to  such  an  extent  that  the  relative 
rankings change much. 

Figure  9:  Gap  in  2030  between  GDP  per  capita  -based  targets  with  a  limited  target 
correction and cost-efficient EU emission reductions for high income Member States (as 
a % of 2005 emissions) to achieve overall -40% GHG reductions in the ESR 

37 

 
 
Source: Commission Services  

Figure 10 below represents the gap in low and middle income Member States between a 
GDP  per  capita  target  based  only  on  the  GDP  per  capita  formula  and  cost  efficient 
emissions projections in the ESR. 

Generally, low and middle income Member States, i.e. Member States with a GDP below 
the  EU  average,  see  emissions  decrease  more  when  achieving  their  cost  efficient 
reduction potential than the target they would receive.  

Figure 10: Gap (-) in 2030 between GDP per capita-based targets and cost-efficient EU 
emission reductions for low and middle income Member States (as pp of 2005 emissions) 
to achieve overall -40% GHG reductions in the ESR38 

38 The most significant exception, and not represented in the figure is Malta. This Member State has a  gap 
of around 69 pp between its GDP based emission reduction target and its cost-efficient emission reductions 
in  modelling  based  on  the  most  recent  Reference  scenario.  This  is  because  of  particular  developments 
related  for  instance  to  population  development,  build-up  of  housing  stock  and  F-gas  emissions  from  air 
conditioning  systems.  The  projections  are  also  in-line  with  Malta’s  own  ‘with  additional  measures 
scenario’ that still sees emissions increase by 41% compared to 2005 emissions by 2030. 

38 

 
 
 
 
 
                                                 
Source: Commission Services 

For  many  low  and  middle  income  Member  States,  the  MIX  NECP  plus  scenario 
underperforms compared to the MIX scenario. This indicates that typically our reference 
projection is optimistic compared to what lower income Member States have planned in 
their  NECPs  regarding  the  ESR  emissions.  But  even  taking  into  account  the  more 
pessimistic  starting  point  of  the  NECPs  in  the  MIX  NECP  plus  scenario,  overall  the 
picture remains the same. 

Estonia,  Cyprus,  Latvia  and  Lithuania  face  a  negative  gap  between  their  GDP  based 
target  and their cost  efficient emission reductions,  which is  however more modest than 
for those high income Member States that receive a target correction. Instead, the gap for 
Malta, using the latest projections is of the order of magnitude of 55 pp. 

A  target  correction  for  Estonia  and  Cyprus  of  3  pp  and  Lithuania  and  Latvia  of  1  pp 
would  reduce  their  gap  but  not  eliminate  it.  Important  in  this  context  is  also  to  assess 
what  the  potential  role  may  be  of  notably  the  LULUCF  flexibility,  which  under  the 
existing ESR is also available to this group of countries (see section 6.1.4).  

Given this level of target correction is small (at levels less or up to the correction applied 
in the group 3 of the high income Member States) and due to the size of these countries, 
this would  not  majorly  negatively impact the overall environmental integrity  at  the EU 
level. 

For Malta the large gap between its calculated GDP based target and its projected cost-
efficient emissions merits considering an approach with a higher target correction. With 
the gap running into levels of around 55 pp., even a GDP based target reduction of 19 pp. 
(to  a  level  of  -19%,  which  is    equal  to  its  current  target)  would  still  result  in  a  gap  of 
around 36%.  

39 

 
 
Convergence of targets 

The distribution of efforts  among Member States based on the continued application of 
the formula based approach as used for the existing Effort Sharing Regulation, together 
with  an  update  based  on  most  recent  GDP  per  capita  data,  has  as  a  consequence  that 
while at the EU level the collective target increase compared to the existing 2030 target is 
11 pp, a number of Member States see significantly higher increases in their individual 
targets. This is not beneficial to improve convergence of targets between Member States. 
Assuming  Member  States  will  try  to  meet  targets  domestically,  higher  target  increases 
may be more challenging to implement and lead to higher cost concerns. 

Therefore,  in  order  to  contain  target  increases  closer  to  the  increase  in  the  collective 
target,  an  additional  correction  is  assessed:  no  Member  States  should  see  its  target 
increase by more than 12 pp. The application of this cap limits the target (further) for a 
few  high,  middle  or  lower  income  Member  States.  Taking  into  account  the  potential 
target corrections as discussed above, it would correct the target of Ireland by a further 4 
pp,  the  targets  for  Belgium,  Czechia,  and  the  Netherlands  by  2  pp  and  the  target  for 
Slovenia  by  1  pp.  It  is  further  noted  that  Austria,  Estonia,  Lithuania  and  Malta  are 
already  within  the 12 pp cap due to  the potential cost  efficiency  adjustments explained 
above. If these correction for cost efficiency would not have been introduced, they would 
have benefited also from this 12 pp limitation in target increase. 

This  type  of  target  correction  would  of  course  require  an  increase  in  target  of  other 
Member  States  to  ensure  environmental  integrity.  This  should  not  be  expected  from 
Member States that have a gap when comparing cost efficient projections with updated 
target,  that  already  have  contributed  to  a  target  correction  or  that  are  already  at  the 
boundaries of the target  range. Thus in  order not  to  jeopardise environmental integrity, 
the targets for Member States with no gap, i.e. Croatia, Greece, Hungary, Italia, Poland, 
Portugal,  Romania,  Slovakia,  and  Spain,  are  increased  by  0.7  pp  to  ensure  the  ESR 
delivers on a -40% emission reduction compared to 2005. 

The  result  of  the  12  pp  cap  on  the  target  increase  can  thus  address  cost  efficiency 
concerns  and  leads  to  more  reduced  variance  (and  thus  improved  convergence)  of 
Member  States’  targets  compared  to  a  target  setting  approach  that  has  no  such  cap  on 
target increase. 

Table 5: Overview of potential target corrections and resulting targets under option 1 

 Overview of 
potential target 
corrections 
Member States 
under option 
1.1.EU-27 / 
Member State 

Target based on 
GDP/capita 
formula update, 
bound to a range 
of -10% to -50% 
[unbound target] 

Cost Efficiency 
correction based on 
gap assessment 
[applied on unbound 
target] 

Correction for 
12 pp cap 
[applied after 
cost efficiency 
correction and 
after bounded 
target] 

Target after 
corrections 

EU-27 

-40% 

-40% 

40 

 
 
 
 
 
 
Belgium 

Bulgaria 

Czechia 

Denmark 

Germany 

Estonia 

Ireland 

Greece 

Spain 

France 

Croatia 

Italy 

Cyprus 

Latvia 

Lithuania 

-49% 

-10% [-8%] 

-28% 

-50% [-55%] 

-50% 

-27% 

3 pp 

3 pp 

-50% [-62%] 

9 pp (GNI based) 

-22% 

-37% 

-47% 

-16% 

-43% 

-35% 

-18% 

-22% 

-0.5 pp 

3 pp 

1 pp 

1 pp 

Luxembourg 

-50% [-77%] 

-0.5 pp 

Hungary 

Malta 

-18% 

-38% 

Netherlands 

-50% [-52%] 

19 pp 

Austria 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Finland 

Sweden 

-50% [-51%] 

3 pp 

-17% 

-28% 

-12% 

-28% 

-22% 

-50% 

-50% [-53%] 

-0.5 pp 

2 pp 

2 pp 

4 pp 

-0.7 pp 

-0.7 pp 

-0.7 pp 

-0.7 pp 

-47% 

-10% 

-26% 

-50% 

-50% 

-24% 

-42% 

-22.7% 

-37.7% 

-47.5% 

-16.7% 

-43.7% 

-32% 

-17% 

-21% 

-50% 

-0.7 pp 

-18.7% 

2 pp 

-0.7 pp 

-0.7 pp 

-0.7 pp 

1 pp 

-0.7 pp 

-19% 

-48% 

-48% 

-17.7% 

-28.7% 

-12.7% 

-27% 

-22.7% 

-50% 

-50% 

Clearly,  for  option  1.2  with  the  more  limited  GDP  based  target  setting  at  -35%  as 
compared to -40%, any gaps between the (lower) GDP based target in option 1.2 and the  
cost-efficient emissions projections (unchanged from option 1.1) would correspondingly 
be smaller. For more detail on the corresponding potential gap and surplus estimates, see 
annex 10.5.1. 

Convergence to low emissions per capita 

The long-term aim to achieve low emissions would require over time a convergence of 
the per capita emissions to levels that are overall lower than today. Figure 12 shows that 
with targets set at a level representing the right column in Table 5, strong convergence is 
expected  by  2030.  By  2030,  21  Member  States  have  an  allocated  emissions  level  per 

41 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
capita within a range of 1 ton around EU average, as opposed to 10 in 2005 (see Figure 
11).  Two  higher  income  Member  States  (Luxembourg,  Ireland)  and  two  lower  income 
Member  State  (Czechia,  Greece)  have  allocated  emissions  per  capita  above  this  range. 
Sweden  and  Malta  have  allocated  emissions  per  capita  below  this  range.  This 
convergence  is  also  significant  compared  to  the  existing  2030  targets.  In  reality,  actual 
emissions  per  capita  can  deviate  in  2030  depending  on  the  extent  to  which  flexibilities 
are used. 

Figure  11 GHG emissions  (CO2equivalent) per capita in  2005 for each Member State and 
the EU 

Note: the actual figure for Luxembourg is 21,93 which is not visible from the chart. 

Figure 12 GHG emissions (CO2equivalent) per capita in 2030 for each Member State and 
the EU 

42 

 
 
 
 
 
 
 
Source: MIX scenario 

Conclusion:  

In  general  the  GDP/cap  approach  remains  a  valid  approach  in  order  to  distribute  the 
effort  among  Member  States  in  a  fair  way  reflecting  different  economic  capacity.  The 
choice  of  the  2017-2019  average  reference  period  for  GDP  per  capita  ensures  this  is 
based on the most recent, stable economic data.  

A detailed comparison with the MIX scenario that achieves a cost-efficient contribution 
makes  clear  that  for  selected  high  and  low  or  middle-income  countries,  a  limited 
adjustment gives a fairer distribution of effort. For 2 countries, i.e. Ireland and Malta, a 
more  extensive  adjustment  is  warranted  to  take  into  account  very  specific  national 
circumstances. 

In order to avoid a too high target increase for Member States any increase in Member 
States’ targets could be capped. A small target increase for Member States with no gap 
would ensure the ESR delivers still on a 40% emission reduction compared to 2005.  

In  addition,  the  above  overall  approach  would  imply  that  GHG  emissions  per  capita 
converge strongly by 2030. 

6.1.3.  Starting point and trajectory in the ESR and environmental integrity 

The  present  set  of  annual  emission  allocations  (AEA)  for  the  EU-27  Member  States 
draws a trajectory of allowed emissions in the period 2021-2030. In 2030 it translates in a 
point  target  equal  to  29%  reductions  by  2030  compared  to  2005.  The  sum  of  annual 
allocations  over  the  period  provides  for  an  AEA  budget  in  that  decade  of  19,944  Mt 
CO2eq, close to 20 Gt.  

In the reference scenario, Member States’ aggregate emissions are projected to cumulate 
in  2021-2030  to  19346  Mt  CO2eq.  This  reflects  a  limited  2030  target  overachievement 
planned in the NECPs (-31% reductions achieved in the ESR) and the significant impact 
of COVID-19 reducing emissions in 202039.  

With policy changes to promote faster decarbonisation as modelled in the MIX scenario, 
EU-27 greenhouse gas emissions are projected to decrease cumulative by around 1.1 Gt 
compared to the Reference scenario.  

The MIX scenario foresees a fair degree of progress with decarbonisation already in the 
first half of the next decade. But there is high uncertainty what the impact or COVID will 

39  The  PRIMES-GAINS  modelling  tool,  provides  point  year  estimates  for  emission  for  each  five  years. 
Values  for  the  years  in  between  have  been  derived  by  linear  interpolation.  It  includes  an  estimate  of  the 
impact  on  2020  emissions  following  the  COVID-19  crisis;  for  the  Reference  and  the  MIX  scenarios  the 
value for 2021 emissions has been adjusted upward, proportional to projected GDP growth assumptions for 
2021  as  used  in  the  Reference  projection;  the  values  2022-2024  have  been  then  derived  by  linear 
interpolation between 2021 and 2025.  

43 

 
 
                                                 
be  in  the  coming  years.  For  this  assessment  of  the  impact  of  trajectory  over  time,  and 
given  the  uncertainties  related  to  the  COVID-19  pandemic  recovery,  two  sensitivity 
scenarios  are  introduced.  One  with  an  emission  profile  that  is  more  conservative  than 
MIX and one with higher emission reductions than MIX. 

The  more  conservative  profile  is  referred  to  as  REF-MIX.  This  scenario  sees  a  higher 
rebound  in  emissions  in  2021  than  assumed  in  Reference  and  MIX,  and  an  emission 
profile  between  2021  and  2024  going  towards  the  2025  Reference  projection,  only 
declining faster from there to the 2030 level of the MIX scenario. Cumulative emissions 
under this outlook are around 0.4 Gt more than in the MIX scenario, but still around 0.7 
Gt less than the Reference scenario. 

Instead  the  Low  Emissions  scenario  would  see  a  very  low  rebound  in  2021,  with 
emissions straight onwards on a decreasing trajectory towards the 2030 level of the MIX 
scenario, with emissions already in 2025 below the MIX scenario. Cumulative emissions 
under this outlook are around 0.3 Gt lower than in the MIX scenario, and 1.4 Gt less than 
the Reference scenario. 

Figure 13: Emission profiles for ESR, sensitivity analysis 

Alternative AEA trajectories that achieve -40% GHG reductions 

The 2030 endpoints of alternative AEA trajectories are set at the point targets as defined 
by  options  1.1  and  1.2,  i.e.  a  reduction  of  respectively  40%  and  35%  respectively 

44 

 
 
 
compared  to  200540.  But  regarding  the  overall  trajectory  of  the  target,  the  following 
issues warrant consideration:  

  The starting point and value for a new linear AEA trajectory. At present, the AEA 
trajectory  for  the  period  2021-2030  starts  at  five  twelfths  of  the  point  between 
2019 and 2020, with the average of the emissions 2016-2018.41  

  The entry into force of the new AEAs in lieu of those in force currently.  

  The  question  if  unused  AEAs  should  be  carried  over  into  the  time  period  with 
updated  AEAs,  or  if  banking  (as  specified  in  Art.  5(3)  of  the  Effort  Sharing 
Regulation)  should  be  discontinued  or  at  least  constrained  and  resulting  in  a 
tightening instead.  

On  these  grounds,  for  both  options  1.1  and  1.2  each,  a  number  of  options  for  AEA 
trajectories  are assessed. For a representation  regarding AEA trajectories for option 1.1 
see Figure 14 with the blue dotted lines representing different possible emission profiles 
as presented in Figure 13 and the yellow, green and red lines showing possible new target 
trajectories.  Up  until  the  year  of  entry  into  force  of  the  updated  ESR  scheme,  the 
trajectory currently in force achieving -29% by 2030 (red line) would apply:  

  Trajectory  A:  AEAs  remain  unchanged  compared  to  existing  legislation  until 
2025, and are reduced faster as of 2026, in a linear manner to reach the increased 
2030 ambition. For the -40% target this results in an AEA budget over 10 years of 
19.1 billion (one AEA being 1 ton of CO2eq). 

  Trajectory B: AEAs remain unchanged in 2021 and 2022; steeper reductions are 
mandated as of 2023, assuming a fast  legislative process,  to  reach the increased 
2030 ambition targets. The early tightening allows for more gradual year-by-year 
reductions but delivers an overall smaller budget. For the -40% target this results 
in an AEA budget over 10 years of 18.7 billion. 

  Trajectory  C:  the  starting  point  and  method  for  the  calculation  for  the  annual 
emission  allocations  and  their  linear  decreasing  trajectory  spelled  out  in  Art. 
4 ESR  is  maintained,  including  the  starting  point  of  the  calculation  (i.e.  at  five 
twelfths  of  the  distance  between  the  points  for  2019  and  2020),  but  now  taking 
into  account  the  new  2030  target.  New  AEAs  are  applied  as  of  2023.  With  this 
approach, a step change would arise in 2023. For the 40% target this results in an 
AEA budget over 10 years of 18.4 billion. 

40 For the assessment in this section, 2030 emissions at EU level are assumed to be exactly equal to the 
ESR target at EU level. 
41 See Art. 4(2) of the Effort Sharing Regulation.  

45 

 
                                                 
Figure  14: Options A,  B and C related to target  trajectory updated ESR  with  increased 
ambition to achieve -40% GHG reductions (option 1.1)  

Source: Commission services 

For the AEA trajectories as described above, the following impacts need to be assessed: 

(1) Would  the  transition  to  a  more  ambitious  trajectory  allow  for  AEA  transfers 
among  Member  States  in  line  with  article 5 (4)  ESR  to  smoothly  operate?  The 
tighter the system overall, the less likely that those Member States that have a gap 
will be able to find Member States willing to sell any surplus generated.  

(2) Is the AEA budget defined by the new trajectory tight enough, so as not to corrupt 
the credibility of the 2030 target? The more lenient the trajectory, the higher the 
risk that early on large surpluses are built up that may provide a reduced incentive 
to take action later on in-line with the actual target trajectory. 

 Assessing impacts of different AEA trajectories that achieve -40% GHG reductions 

For  option  1.1  relevant  characteristics  of  the  alternative  AEA  trajectories  and  implied 
budgets are summarized in Table 6 below and compared to the possible emission profiles 
of  the  MIX,  REF-MIX  and  LOW  scenarios.  In  annex  10.7  similar  information  is 
provided for option 1.2. 

Table 6: Characteristic of alternative AEA trajectories A, B and C for option 1.1 

Current trajectory  
New trajectory 

Option 1.1: Possible new AEA trajectories 
B 
2021-22 

A 
2021-2025 

C 
2021-22 

Period  
Trajectory starting value 

2026-2030 
Current AEA 2025 

2023-2030 
Current AEA 2023 

2023-2030 
2016-18 emissions 

46 

150017502000225025002005201320142015201620172018201920202021202220232024202520262027202820292030Target options versus emission profilesHistoric emissionsREF-MIX, MIX and LOW emissions projectionsExisting AEA cap 2021 including one off adjustmentExisting AEA cap 2021-2030Target Trajectory BTarget Trajectory C 
 
 
Trajectory starting time 

Total AEAs (Mt CO2-eq) 

AEAs Current trajectory 
AEAs New trajectory 

2025 
19090 
10534 
8556 

2022 
18664 
4368 
14295 

2019+5/12 
18421 
4368 
14052 

Evaluation with REF-MIX projection, Unused (surplus) or gap of AEAs, annual average, Mt CO2-eq. 

2021-2030 
% of 2005 ESR base year 
Current trajectory 
% of 2005 ESR base year 
New trajectory 
% of 2005 ESR base year 

37 
1.5% 
43 
1.7% 
32 
1.3% 

-5 
-0.2% 
35 
1.4% 
-15 
-0.6% 

-30 
-1.2% 
35 
1.4% 
-46 
-1.8% 

Evaluation with MIX projection, Unused (surplus) or gap of AEAs, annual average, Mt CO2-eq. 

2021-2030 
% of 2005 ESR base year 
Current trajectory 
% of 2005 ESR base year 
New trajectory 
% of 2005 ESR base year 

79 
3.2% 
103 
4.1% 
55 
2.2% 

37 
1.5% 
83 
3.3% 
25 
1.0% 

12 
0.5% 
83 
3.3% 
-5 
-0.2% 

Evaluation with LOW projection, Unused (surplus) or gap of AEAs, annual average, Mt CO2-eq. 

2021-2030 
% of 2005 ESR base year 
Current trajectory 
% of 2005 ESR base year 
New trajectory 
% of 2005 ESR base year 

111 
4.4% 
152 
6.1% 
70 
2.8% 

69 
2.7% 
141 
5.6% 
51 
2.0% 

44 
1.8% 
141 
5.6% 
20 
0.8% 

For  option  1.1,  achieving  40%  GHG  reductions  in  the  ESR  by  2030,  the  target 
trajectories considered result in total stocks of AEAs that are 4.3% to 7.6% smaller than 
the one defined by the AEAs presently in force.  

Under the MIX emission profile, target trajectory C would leave the overall budget very 
tight, with only the equivalent of 0.5% of 2005 base year emissions left unused. Target 
trajectory A instead would  be generous, resulting  in  a surplus of unused carbon budget 
equivalent to 3.2% of 2005 base year emissions. Target trajectory B is in the middle, with 
a surplus of unused carbon budget equivalent to 1.5% of 2005 base year emissions. 

Target  trajectory  C  is  the  tightest  trajectory.  For  the  REF-MIX  emission  profile  target 
trajectory  C  would  result  in  a  deficit  over  the  whole  period  of  -1.2%.  For  the  MIX 
scenario,  if  excess  AEAs  from  the  beginning  of  the  period  are  not  admitted  for  further 
banking  from  2023  onwards,  this  results  for  target  trajectory  C  that  is  tighter  than  the 
MIX emission profile with a resulting gap of -0.6 % under the updated target trajectory. 
Even  with  banking  in  case  of  the  MIX  emission  profile,  the  market  is  tight.  This  will 
increase the risks that there are not enough Member States willing to enter into transfers 
to allow those with deficits to compensate for them. Overall target trajectory C seems too 
tight. 

47 

 
 
 
Instead  target  trajectory  A  is  the  most  generous.  It  results  in  all  emission  profiles  in 
significant  surplus,  increase  to  as  much  as  4.4%  of  base  year  emissions  in  case  of  the 
LOW  emission  profile.  Not  allowing  to  bank  unused  AEAs  into  the  period  2026-2030 
when the target trajectory is updated, does reduce the surplus significantly in case of the 
LOW emission profile.  

Target trajectory B is in the middle. It generates a surplus of unused AEAs equivalent to 
1.5%  of  base  year  emissions  in  the  MIX  scenario.  The  target  trajectory  has  the 
disadvantage that with a high rebound of emissions and/or a delayed start of reductions 
early  in  this  decade,  as  represented  in  the  REF-MIX  scenario,  it  results  in  an  overall 
deficit  over  the  period  of  -0.2%,  aggravated  if  no  banking  would  be  allowed  once  the 
target trajectory update comes in place in 2023.  

With the COVID crisis unfolding, there is high uncertainty of the rebound and thus the 
emission profile early on in the period. To take this into account a fourth target trajectory 
option  D  is  assessed.  In  this  option  the  first  5  years  the  target  trajectory  follows  target 
trajectory  B.  But  in  2026  and  update  is  implemented.  In  practical  terms,  in  2025, 
information on actual emissions for the years 2021-2023 will be available. The average 
of these will be taken to start a new trajectory as of 2024, to arrive at the 2030 target of -
40% relative to 2005 in 2030.  

Figure 15 below represents option D. The update of the target trajectory is dependent on 
the level  of emissions  in 2021-2023, and thus  different  target  trajectories  can be drawn 
depending on the emission profile that will develop. 

Figure 15: Option D related to target trajectory updated ESR with increased ambition to 
achieve -40% GHG reductions (option 1.1)  

48 

150017502000225025002005201320142015201620172018201920202021202220232024202520262027202820292030Target option D versus emission profilesExisting AEA cap 2021 including one off adjustmentExisting AEA cap 2021-2030REF-MIX, MIX and LOW emissions projectionsTarget Trajectory D with the LOW emissions profileTarget Trajectory D with the MIX emissions profileTarget Trajectory D with the REF-MIX emissions profile 
 
For option 1.1 relevant characteristics of the target trajectory D is summarized in Table 7 
below. Clearly trajectory D has the benefit that even in case of a high rebound, or a delay 
in  the  increase  of  reductions,  the  emission  profile  would  be  updated,  allowing  for  a 
deficit that may have build-up early, to be compensated. This may be crucial to allow a 
market to develop early on, where Member States are willing to transfer AEAs to other 
Member States with deficits already in the period 2021-2025. Without it, the compliance 
cycle  for  the  period  2021-2025  may  become  more  difficult  in  case  of  higher  emission 
profiles early on. 

On  the  other  hand,  if  emission  are  low  early  on,  the  update  will  remain  limited.  In  the 
example employed it remains close to the initial target trajectory B, and can go below if 
emissions would be even lower in 2021-2023 than assumed in the LOW emission profile. 
Overall surplus build up is similar to target trajectory B. While the surplus is significant, 
it also can only develop if the system is on an emission pathway that is already early on 
more in-line with what is required to achieve the 2030 targets. If necessary, and only in 
case of such low emission profiles, one could see purpose in limiting partly the banking 
from the one period into the other. 

Table 7: Characteristic of alternative AEA trajectory D for option 1.1 

Current trajectory  
New trajectory 

Period 

Trajectory starting value 
Trajectory starting time 

Emission profile 
Total AEAs (Mt CO2-eq) 

AEAs 2021-2025 
AEAs 2026-2030 

Option 1.1: Target trajectory D  
2021-22 

2023-2025 like trajectory B 
2026-2030 
2021-23 emissions 
2024 
MIX 
18.804 
10321 
8483 

LOW 
18.713 
10321 
8392 

REF-MIX 
18.895 
10321 
8574 

Unused (surplus) or gap of AEAs, annual average, Mt CO2-eq. 

2021-2030 
% of 2005 ESR base year 
2021-2025 
% of 2005 ESR base year 
2026-2030 
% of 2005 ESR base year 

74 
2.9% 
110 
4.4% 
38 
1.5% 

51 
2.0% 
61 
2.4% 
41 
1.6% 

18 
0.7% 
0 
0.0% 
35 
1.4% 

In summary, for option 1.1 trajectories A would appear generous. Trajectories C appears 
too  tight.  Instead  trajectory  B  seems  acceptable  except  in  case  of  a  high  rebound  in 
emissions  early  on,  then  it  also  results  in  a  deficit.  To  address  this  it  can  be  useful  to 
update the target trajectory in 2026. In case of a very low emission profile early on, there 
might  be  merit  in  considering  limiting  partly  banking  into  the  period  with  the  updated 
target trajectory. 

49 

 
 
 
Assessing impacts of different AEA trajectories that achieve -35% GHG reductions 

Target trajectories, similar to options A to C for option 1.1 have also been developed for 
option 1.2 that is set at 35 % of emissions reductions relative to 2005 in the effort sharing 
sectors. For all detail on target trajectories and resulting impacts, see annex 10.7. Overall, 
they are of course more generous than those of option 1.1, by about 1.5 to 2.5 percentage 
points  over  time.  They  provide  for  overall  emission  allocations  between  19.1  to  19.5 
Gt CO2eq  for  the  decade,  on  average  540  Mt  more  than  those  for  option  1.1.  In  case 
emissions  do  reduce  up  to  -40%  (which  would  represent  the  achievement  of  the 
environmental objective), under the MIX scenario, they would leave 3.1 % to  4.6 % of 
overall emission allocations 2021-2030 unused.  

With banking allowed only within periods with current and new AEAs respectively, the 
target and emissions trajectories would leave a large amount of 3.0 % to 5.1 % of the new 
AEAs  unused.  In  fact  trajectories  A  and  B,  the  surplus  of  unused  AEAs  in  the  second 
period  is  larger  than  in  the  first  period,  as  the  path  of  projected  emissions  is  reducing 
faster than the AEA trajectories.  

Under  a  less  favourable  outlook  of  emissions  declining  more  slowly,  the  amount  of 
excess  allowances  would  be  about  1.7  percentage  points  lower  than  in  the  more 
optimistic case. Again, in the period with new AEAs, more unused AEAs would accrue, 
from 1.4 % to 4.1 % of the overall amount in that period, respectively.  

What is clear is that the build-up of significant surpluses of AEAs over time is a realistic 
outcome with emissions profiles that would effectively be on a pathway to achieve -40% 
GHG reductions. This in turn means that towards the second part of the decade, there is 
less and less incentive coming from the ESR to actually achieve emission profiles in line 
with a 40% reduction, and theoretically emissions reductions could actually reverse and 
end up with emissions reductions of less than 35% by 2030. This would magnify risks of 
too  little  action  in  those  sectors  not  covered  by  a  new  ETS,  and  thereby  endanger  the 
attainment of the net zero objective for 2050.  

6.1.4.  Assessing  the  impact  of  the  existing  ETS  and  LULUCF  flexibilities  over 

the period 2021-2030 

The  current  ESR  has  specific  flexibilities  that  allow  Member  States  to  achieve  their 
sector commitments using corresponding emission reductions in other sectors. 

First, a limited number of high income Member States may use a limited amount of ETS 
allowances  for  compliance  purposes  in  the  ESR.  This  reduces  these  Member  States’ 
auctioning  volumes  in  the  existing  ETS,  reducing  the  cap  and  increasing  the  overall 
stringency of the ETS. The Member States having access to the flexibility were those that 
were deemed at risk of a gap between their cost-efficient reductions and their GDP-based 

50 

 
target42. Furthermore, this ETS flexibility was also granted for Member States that have 
no free allocation in the current ETS, i.e. Malta. 

The maximum amount of the ETS flexibility is expressed as a % of 2005 ESR emissions, 
or equivalent to around 10 million allocations that are received annually, with flexibility 
as to  when to  use it over the 10  year period 2021-2030. The total  maximum  volume is 
thus equivalent to around 100 million allocations over ten years.  

Table  8:  Member  States  having  access  to  the  ETS  flexibility  under  the  current  Effort 
Sharing Regulation 

Maximum annual ETS 
flexibility under current 
ESR 
(expressed as a share of 
2005 ESR emissions) 

Ireland 
Luxembourg 
Austria 
Belgium 
Finland 
Denmark 
Netherlands 
Sweden 
Malta 
Source: Commission Services 

4% 
4% 
2% 
2% 
2% 
2% 
2% 
2% 
2% 

Member States had to indicate by the end of 2019 the extent to which they want to use 
this flexibility, which can be reviewed downwards in 2023 and 2025. Belgium, Denmark, 
Ireland, Luxembourg, Malta, Austria and Finland have indicated that they will make use 
of the ETS Flexibility, amounting to maximum 65.2 million allocations, a volume which 
can  still  be  reviewed  downwards  twice.  The  Netherlands  and  Sweden  did  not  take  the 
opportunity to use ETS flexibility. 

Second, there is a bi-directional flexibility to and from the LULUCF sector. If Member 
States  outperform  their  regulatory  commitment  set  out  in  the  current  LULUCF 
Regulation,  they  can  generate  LULUCF  credits,  for  use  in  the  ESR  or  for  trading  with 
other Member States in the LULUCF sector. If they underperform against the regulatory 
commitment, they need to compensate for the gap in the LULUCF sector: and although 
this  can  be  done  through  acquiring  LULUCF  credits  from  other  Member  States,  it  can 
also be achieved by a Member State using ESR AEAs.  

42  Ireland  and  Luxembourg  faced  a  large  gap  between  their  GDP  target  and  cost-efficient  emissions 
reduction. Austria, Belgium, Denmark and the Netherlands also faced a gap but smaller than Ireland and 
Luxembourg,  which  resulted  in  a  lower  level  of  ETS  flexibility.  Finland  and  Sweden  were  granted  ETS 
flexibility as a matter of precaution in case the smaller gap from more recent projects would not materialise 
(See section 5.3, SWD(2016) 247 final). 

51 

 
  
                                                 
Of direct relevance to this impact assessment is the situation where Member States do not 
This  LULUCF 
meet  their  ESR  target,  and  they  can  use  their  own  LULUCF  credits. 
flexibility for compliance with the ESR has as a premise the lower mitigation potential in 
the agricultural sector. It is therefore limited in size, and the quantity of LULUCF credits 
that  Member  States  can  use  for  ESR  compliance  (annually,  with  flexibility  over  the 
period) varies according to the relative size of their agricultural emissions, expressed as 
an annual percentage43 of the average 2008-2012 agriculture emissions. Summed at EU 
level, this LULUCF flexibility is set currently to a maximum amount of LULUCF credits 
equivalent  to  262  MtCO2  over  the  10  year  period.  Moreover,  Member  States  can  only 
use LULUCF credits to cover for an ESR deficit, if the LULUCF credits are generated on 
their own territory – in other words, they cannot be traded for compliance purposes in the 
ESR. 

Stakeholder’s  views  as  regards  the  role  of  flexibilities  as  collected  in  the  open  public 
consultation (see section 10.2.2) showed that, for ETS flexibility, half of the respondents 
agreed that should only be applicable for ETS allowances originating from the ETS, and 
not for allowances from sectors joining the new ETS. As regards LULUCF flexibility, all 
public  authorities  agreed  that  if  ESR  targets  were  increased,  the  maximum  allowed 
number of  credits should be increased to strengthen incentives for carbon  removals. At 
the  same  time,  all  NGOs  but  3  were  against  the  use  of  LULUCF  credits  by  Member 
States to achieve their ESR targets and even in more disagreement in case of increase of 
LULUCF  credits  if  targets  were  increased.  The  reason  argued  is  that  targets  should  be 
met  in  isolation  without  additional  flexibilities  or  credits  from  other  elements  of  the 
climate  policy  framework  since  this  national  target  should  be  reflected  in  concrete 
national  initiatives  and  investments.  The  agriculture  sector  representatives  were  also 
mainly  against  (6  against  and  2  in  favour).  On  the  role  of  the  flexibilities,  the  energy 
sector  was  neutral,  not  showing  strong  preference  or  role  for  the  flexibilities  that  ESR 
allows. For the ETS flexibility, NGOs were largely against its extension to all Member 
States  (20  against  and  3  in  favour)  while  business  associations  and  citizens  showed 
mixed  views.  In  this  regard,  the  NGOs    argument  was  similar  to  the  one  used  for 
LULUCF  credits,  in  the  sense  that  national  ESR  targets  should  be  reached  in  isolation 
and  with  a  relevant  set  of  measures  and  policies  to  reduce  emissions  in  ESR  sectors 
without allowing  and extension to all Member States. Per sector  of  activity, the energy 
sector was to a large extent against, together with agriculture, trade, manufacturing and 
chemicals. For the latter, ETS and ESR should work in isolation without interactions that 
would reduce the expected contribution/effort of each legislative instrument. 

Both  the  existing  ETS  and  LULUCF  flexibilities  can  contribute  to  reduce  the  cost-
efficiency  gap  in  countries  with  a  projected  gap  between  cost  efficient  reductions  and 
target
.  Consequently  this  may  result  in  a  situation  in  which  Member  States  are  in 

43 For the group with highest shares of agriculture emissions this is equal to 15% (IE, LT ,DK ,LV), for a 
second group this share is equal to 7.5% (RO, BG, FR, EE, FI, ES, SE, CY, EL, PT, NL, SI, PL) and for 
the remaining Member States this share is equal to 3.75%. 

52 

 
                                                 
 
compliance  with  their  ESR  obligation  while  emissions  are  higher  than  the  target 
trajectory in the ESR. This can impact how the EU achieves its target of at least 55% net 
greenhouse gas reductions.  

The  Climate  Law  foresees  that  in  order  to  ensure  that  sufficient  mitigation  efforts  are 
deployed  until  2030,  the  contribution  of  net  removals  to  the  at  least  net  55%  GHG 
reduction target in 2030 shall be limited to 225 Mt CO2-eq. This provision in the Climate 
Law  is  without  prejudice  to  the  revision  of  Union  legislation,  and  thus  it  does  not 
preclude  the  continued  use  of  the  LULUCF  flexibility  under  the  ESR.  Nevertheless  it 
needs  to  be  assessed  to  which  extent  the  potential  use  of  the  LULUCF  flexibility  can 
increase the risk of not meeting the ambition as foreseen under the Climate Law. 

Both  ETS  and  LULUCF  flexibilities  can  currently  be  used  over  the  2021-2030  period 
insofar  as  the  ETS  flexibility  was  selected  and  insofar  as  there  was  effective 
overcompliance  in  the  LULUCF  sector  in  a  given  Member  State.  To  assess  how  this 
annual flexibility impacts  the gap or  surplus between cost-efficient emission  reductions 
and target in Member States one needs to look at this gap or surplus over the period, and 
not just in the point year. This in turn will depend on the trajectory of the target over time 
and  the  achieved  emission  profile  over  time  (see  section  6.1.3).  In  the  assessment  as 
presented in Figure 16 and Figure 17 the average annual gap or surplus is estimated over 
the period of 10 years, using the MIX scenario, the target trajectory I and II (as presented 
in Table 7

) and assuming an equal use per annum of the LULUCF and ETS flexibility.

For those Member States with a gap by 2030, the gap is typically not existent, or smaller 
at  the  beginning  of  the  period  (e.g.  2021)  than  in  2030.  Therefore,  for  these  Member 
States, a smaller gap (or larger surplus) can be expected over the period than at the 2030 
end-point.  Member  States  should  pro-actively  plan  for  how  to  manage  their  gap  over 
time.  It  is  important  to  note  that  the  projections  used,  from  the  MIX  scenario,  imply  a 
cost-efficient increase in reduction efforts compared to the reference scenario. This does 
not prevent high-income Member States to  step up efforts  and go beyond  cost-efficient 
reductions,  requiring  potentially  less  transfers  between  those  Member  States  with 
surpluses and those with a gap

.  

Applying both a limited target correction (see Section 6.1.2) and assuming the ‘full use’ 
of  ETS  flexibility  leads  to  a  significant  reduction  of  the  gap  in  most  high  income 
Member  States.  These  are  clearly  the  most  readily  available  flexibilities  to  use  by 
Member States. The possibility to use the LULUCF flexibility is more uncertain, and will 
depend on action in the LULUCF sector

. 

Both  Sweden  and  Luxembourg  seem  less  in  need  of  the  additional  flexibilities,  which 
raises the question if it is still fully appropriate to maintain the ETS flexibility for them. 

Figure 16: Annual average gap or surplus over the period, high income Member States 

53 

 
 
Source: Commission services 

For low-income Member States, the use of LULUCF credits could provide for flexibility, 
notably for countries that have actually a gap in 2030 in a cost-efficient projection  Both 
Cyprus and Latvia see their gap turn into a surplus if the LULUCF flexibility would be 
used to the fullest, while for Estonia the gap would significantly reduce. The possibility 
to use the LULUCF flexibility is however more uncertain, and will depend on additional 
action  in  the  LULUCF  sector,  so  as  to  increase  the  national  LULUCF  net  removals 
beyond the increased targets in the LULUCF Regulation.

.

Only  one  low-income  Member  State  benefits  from  the  ETS  flexibility,  Malta,  who  is 
expected to remain in significant deficit over the period even with the existing 2% ETS 
flexibility.  For  Malta  it  could  be  considered  for  instance  to  increase  this  flexibility  for 
instance by 5  pp.  which, due  to the size of  its ESR  emissions, would only have  a  very 
small impact on the total size of the ETS flexibility

. 

Figure 17: Annual average gap or surplus over the period, low income Member States 

54 

 
 
 
 
Source: Commission services 

This impact assessment uses a projection that achieves around -40% GHG reductions in 
the ESR compared to 2005 (see Table 1). Combined with efforts in the ETS this would 
result in GHG reductions of the sectors covered, but excluding LULUCF of around -53% 
in  2030  compared  to  1990.  In  principle  any  use  of  LULUCF  flexibilities  may  result  in 
lesser reductions in the ESR. Instead the ETS flexibility will in principle reduce the cap 
in the ETS and increase corresponding efforts, thus not impacting total GHG reductions 
excluding LULUCF. 

The  lower  the  use  of  LULUCF  credits  in  the  ESR,  the  more  likely  it  is  that  the 
requirement of the Climate Law will be met to limit the contribution of net removals to 
the at least net 55% GHG reduction target in 2030 to 225 Mt CO2-eq.. At the same time, 
where LULUCF credits are used, the emission reductions in the ESR could still meet its 
ambition of -40% if for instance other Member States overachieve their ESR target but 
do not engage in transfers to other Member States. Also any overachievement in the ETS 
could  contribute  to  meeting  the  requirements  in  the  Climate  Law,  even  with  use  of 
LULUCF credits in the ESR. Finally the transfer of ESR credits into the LULUCF sector 
for compliance purposes with the LULUCF target could increase overall ambition in the 
ESR.  

The effective use of the LULUCF flexibility in the ESR is dependent on what gap may 
remain after Member States have undertaken their own reduction efforts in the ESR and 
after use of the other flexibilities foreseen in the ESR.  

If  the  LULUCF  flexibility  towards  the  ESR  would  be  split  over  two  periods,  with  half 
available up to 2025 and the other half for the period 2026-2030, then the potential use in 
the ESR sector would be reduced significantly. This would restrict the maximum use of 

55 

 
 
LULUCF  credits  to  131  million  in  the  period  2026-2030  with  a  view  to  achieving  the 
2030 ambition. 

Furthermore  the  effective  use  can  only  materialise  if  Member  States  overachieve  their 
obligations  under  the  LULUCF  regulation.  An  increase  in  climate  ambition  in  the 
LULUCF regulation for the period 2026-2030 would reduce the likelihood of generating 
significant amounts of LULUCF credits for compliance use in the ESR. 

For instance option 1.2. of the  LULUCF  IA, which increases the  LULUCF target  from 
2026 onwards to achieve by 2030 the equivalent of -310 Mt CO2 will make it harder to 
generate LULUCF credits than under the present LULUCF regulation. 

Estimates  using  the  GLOBIOM  model  show  that  when  introducing  an  incentive  in  the 
LULUCF  sector  equivalent  to  €10  per  ton  of  CO2,  abatement  could  increase  net 
removals  to  -324  Mt  CO2  in  2030.  This  could  generate  LULUCF  credits  equivalent  to 
240 Mt CO2 over the period 2026-2030 in a group of Member States while generating a 
gap  equivalent  to  153  Mt  CO2  in  the  other  Member  States.  Assuming  perfect  trade 
between  Member  States  in  the  LULUCF  sectors  for  compliance  purposes,  this  would 
result in a net amount of credits equivalent to 87 Mt CO2 over 5 years being available to 
compensate  excess  emissions  in  the  ESR  sectors44.  It  is  important  to  note  that  the 
assumption of perfect trade is unrealistic. Therefore, the impact on the ESR would likely 
be more limited, given that a number of Member States may need to transfer AEAs from 
the ESR to their own LULUCF sectors for compliance purposes.  

Of  the  Member  States  that  effectively  generate  LULUCF  credits,  some  would 
overachieve their maximum allowed limit of LULUCF credits for use in their own ESR, 
while others would potentially generate more limited credits or none at all in the period 
2026-2030. If no trading of LULUCF credits would be allowed for compliance purposes 
in  the  ESR,  those  with  remaining  surpluses  could  not  transfer  them  to  other  Member 
States for compliance in the ESR.  

In  case  that  the  LULUCF  flexibility  is  split  over  two  periods,  and  assuming  Member 
States cannot trade LULUCF credits for compliance purposes in the ESR, the projections 
with  the  GLOBIOM  model  indicate  that  of  the  LULUCF  credits  generated,  in  total  68 
million ton, can effectively be used as LULUCF flexibility in the ESR or on average 13.6  
million credits per annum in the period 2026 -2030.  

When reducing the incentive in the LULUCF sector from €10 per ton of CO2 to €5, the 
overall ambition level in the LULUCF sectors would still be met, with a sink as large as -
314  Mt  CO2  in  2030.  But  the  availability  of  LULUCF  credits  that  can  be  transferred 
would  further  reduce.  In  this  case,  with  the  LULUCF  flexibility  split  over  two  periods 
and assuming Member States cannot trade LULUCF credits for compliance purposes in 
the ESR, the projections indicate that of the LULUCF credits generated, in total only a 

44 This amount would be lower if the sink would not overachieve the ambition level of 310 Mt CO2. 

56 

 
                                                 
net  44  million  ton45  can  effectively  be  used  as  LULUCF  flexibility  in  the  ESR  or  on 
average around 9 million credits per annum in the period 2026 - 2030.  

Instead  Member  States  with  a  gap  in  the  LULUCF  sector  would  need  to  acquire 
LULUCF  credits  or  transfer  AEA  units  from  the  ESR  into  their  LULUCF  sector  for 
compliance,  increasing  scarcity  in  the  ESR.  If  AEA  units  from  the  ESR  are  used  for 
compliance  in  the  LULUCF  sector,  it  would  have  the  opposite  effect  and  potentially 
allow for overachievement of the overall ESR target.  

Finally  not  all  Member  States  that  can  generate  credits  in  the  LULUCF  sector  will 
effectively need them in the ESR, further reducing this  risk of the  LULUCF flexibility 
undermining  the  requirements  of  the  Climate  Law.  For  the  Member  States  with  a  high 
agriculture  share  in  their  ESR  emissions,  the  LULUCF  flexibility  is  of  particular 
importance. Not all are projected to be generating LULUCF credits. Target increases in 
the LULUCF sector thus will reduce the likelihood of this flexibility being used, even if 
retained. 
Presently, only a few Member States have declared in their NECPs an intention 
to make use of the LULUCF flexibility in order to comply with their current ESR targets.  

An option for increased used of LULUCF credits that does not impact the likelihood or 
not  of  meeting  the  requirements  of  the  Climate  Law  is  the  creation  of  a  reserve  for 
unused LULUCF credits. This additional reserve can only be accessed ex post, provided 
that compliance with the requirements of the Climate Law has been established, to allow 
Member States to use LULUCF flexibility for compliance purposes in the ESR. Such a 
reserve  would  operate  in  a  similar  manner  as  the  already  existing  safety  reserve  in  the 
ESR. 

6.1.5.  The role of existing flexibilities in the ESR (transfers, banking, borrowing) 

Flexibility instruments do not jeopardise environmental integrity since they allow tighter 
GHG emission reduction targets overall, enhance cost-efficiency and further contribute to 
a fair distribution of effort. They should be transparent, predictable and easy to operate. 
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.  

The current Effort Sharing Regulation provides a  range  of  flexibility  instruments: 

  Own  annual  emission  allocations  can  be  banked  and  borrowed  with  certain 

limitations.  

In this regard, a Member State has the flexibility to borrow a quantity of up to 10 % from 
its annual emission allocation for the following year for the period 2021-2025 and up to 
5% for the period 2026-2030. Keeping the limits  for the period 2026-2030 reduces the 

45  The  projections  indicate  that  66  Mt  of  LULUCF  credits  would  be  available  in  a  number  of  Member 
States that can be transferred into the ESR for compliance purpose. If this would occur then there would 
also be Member States with a deficit in the LULUCF sector that cannot be compensated by trade anymore 
within the LULUCF sector. These would then need to transfer the equivalent of 22 Mt from the ESR into 
the LULUCF for compliance purposes, resulting in a net inflow of LULUCF credits into the ESR of 44 Mt.  

57 

 
                                                 
risk  for  non-compliance,  as  it  limits  any  incentives  to  delay  the  introduction  of  new 
policies.  It  also  limits  the risk that Member States will not  be able to  cover any deficit 
created for future years either from domestic mitigation, or by securing Annual Emission 
Allocations (AEAs) from other countries.  

As  regards  environmental  integrity,  if  aggregate  surpluses  are  available,  this  flexibility 
mechanism can help Member States to effectively deliver the target, reducing the risk of 
overall  non-compliance.  On  the  other  hand,  too  many  surpluses  may  compromise  the 
overall attainment of the target. This is considered in the economic impact section. 

  Transfers of allocations between Member States are possible.  

This flexibility instrument can make a major contribution to achieve the overall target in 
a  cost-efficient  way:  it  allows  Member  States  with  a  lower  target  to  be  rewarded  for 
overachievement,  while  the  transfer  of  allocations  facilitates  compliance  for  Member 
States with a higher target

. 

The transfer of allocation between Member States does not impact the achievement of the 
overall  EU-wide  ESR  target,  but  increases  the  cost-efficiency  of  reaching  that  overall 
target. Depending on their GDP-based GHG emission reduction targets, relative to their 
potential  for  cost-efficient  reductions  in  the  effort  sharing  sectors,  Member  States  may 
either be suppliers or recipients of such transfers

Table 9

 (see 

).  

Table 9: Potential sellers and buyers of allocations for option 1.1 and 1.2 

Member  States  with  cost-
below 
efficient 
GDP 
(potential 
buyers) 

target 

target 

Member  States  with  cost-
above 
efficient 
GDP 
(potential 
sellers) 

target 

target 

Option 1.1 (40% target) 
Denmark, 
Belgium, 
Germany,  Estonia,  Ireland, 
France,  Cyprus,  Latvia, 
the 
Lithuania,  Malta, 
Austria, 
Netherlands, 
Finland 
Bulgaria,  Czechia,  Greece, 
Spain,  Croatia,  Hungary, 
Italy,  Luxembourg,  Poland, 
Portugal, 
Romania, 
Slovakia, Slovenia, Sweden  

Option 1.2 (35% target) 
Belgium, Cyprus, Denmark, 
Germany,  Estonia,  Latvia, 
Ireland,  France,  Lithuania, 
Malta, 
the  Netherlands, 
Austria,  

Bulgaria,  Czechia,  Greece, 
Spain,  Croatia,  Finland, 
Italy, 
Luxembourg, 
Hungary,  Poland,  Portugal, 
Romania, 
Slovenia, 
Slovakia, Sweden  

Source: Commission Services 

Potential  sellers  are  virtually  all  lower  income  Member  States,  but  not  only  these. 
Notably,  Sweden  and  Luxembourg  also  have  a  higher  cost-efficient  reduction  potential 
than  their  target  resulting  from  the  application  of  the  GDP  method.  A  transfer  of 
allocations  can  therefore  reduce  higher  income  Member  States’  costs  to  achieve  their 
GDP  based  targets  and  tap  into  the  potential  for  cost-efficient  emission  reductions 
beyond their target in lower-income Member States. 

This  raises  a  number  of  important  questions  in  how  the  ESR  interacts  with  other 
instruments, notably a new emission trading to new sectors. In principle, an increase in 

58 

 
 
the overall target in the ESR will steer an increased demand in transfers of AEA between 
Member  States.  Member  States  with  a  projected  gap  are  likely  to  be  concerned  as  to 
whether
 the supply of such AEAs will effectively materialise, because it would require in 
particular  low-income  Member  States  to  overachieve  their  target  and  reduce  their 
emissions towards cost efficient levels. In this context, the introduction of a new ETS for 
road transport and buildings would provide for increased incentives to effectively achieve 
this cost efficient abatement level and increase the likelihood that surpluses of AEAs will 
be available.  

With regards to flexibility mechanisms in the ESR and stakeholders’ views, they showed 
a  preference  for  flexibility  between  countries  and  flexibility  over  time  either  through 
banking or borrowing (see section 10.2.2).  

6.1.6.  Administrative impacts of the current compliance rules for option 1 

For  option  1  there  would  be  some  administrative  impacts  resulting  from  the  ETS 
coverage of certain sectors, while maintaining them in the ESR  at the same time. First, 
ESR  administrative  rules  would  continue  to  apply.  However  they  are  generic  and  the 
administrative costs related to ESR implementation are limited and are independent from 
the  emission  scope,  as  they  always  start  from  GHG  inventory  emissions  deducting  (or 
not)  emissions  covered  by  the  EU  ETS46.  It  is  relevant  to  bear  in  mind  that  the  2016 
impact  assessment  for  the  Effort  Sharing  Regulation47  already  showed  that  the 
administrative costs related to implementing the regulation were limited. 

Impacts of double coverage on monitoring and accounting 

In  a  nutshell,  there  is  no  change  envisaged  compared  to  current  ESR  monitoring  and 
compliance architecture. The ESR inventory will be determined by subtracting from the 
UNFCCC inventory the existing ETS inventory covering. One does not need to subtract 
the new ETS sector from this. The monitoring of the new ETS system, separate from the 
monitoring of the existing ETS system, will overlap, but not impact, the ESR inventory. 

The new ETS would be a fully independent instrument from the ESR. Therefore transfers 
under the ESR do not have to be met with transfers under the new ETS and vice versa.  

However, given the relative size of the new ETS sectors within the ESR, the behaviour of 
these new ETS sectors also impacts Member States own likelihood related to the need or 
not to engage in transfers in AEAs. 

For instance, if a Member State’s new ETS sectors would not decrease emissions in an 
ambitious  manner,  and  rather  decide  to  acquire  ETS  allowances,  then  it  is  also  more 
likely that the Member State itself will be confronted with an emission profile in the ESR 
that  does  not  match  its  target,  and  thus  that  it  will  need  to  acquire  AEAs  or  use  other 
flexibilities. 

46 See section 6.3.4. of ETS Impact Assessment SWD (2021) 601.  
47 SWD (2016) 247 final. 

59 

 
                                                 
The  opposite  is  also  through.  If  a  Member  State’s  new  ETS  sectors  collectively  would 
reduce  emissions  in  a  very  ambitious  manner,  and  thus  acquire  relative  less  ETS 
allowances,  it  is  also  more  likely  that  the  Member  States  will  be  confronted  with  an 
emission profile in the ESR that matches or goes beyond its target in the ESR and thus 
that  it  may  transfer  its  surplus  AEAs  if  it  would  like  to  do  so.  While  this  clearly  also 
depends on how the Member State undertakes action in its ESR sectors not covered by 
the  new  ETS,  such  outcome  is  more  likely  if  the  Member  State  undertakes  itself 
supportive  policies  to  reduce  emissions  in  the  new  ETS  sectors.  By  doing  so  it  would 
reduce  both  the  pressure  on  its  entities  in  the  new  ETS  to  acquire  ETS  allowances,  as 
well as reduce the likelihood it has to acquire itself AEAs for compliance under the ESR. 

The ESR and new ETS thus have independent monitoring systems which do not increase 
complexity since they target  different  groups  (national  authorities for ESR and specific 
sector  actors  for  the  new  ETS  for  building  and  road  transport).  The  impacts  on 
monitoring and evaluation are further assesed in section 9. 

There will be differences in emission calculation in the methods under the new ETS and 
the ESR inventory that will need to be assessed if they turn out significant. But they will 
not directly impact the functioning of the ESR. 

In  summary  for  option  1,  there  is  no  change  envisaged  compared  to  current  ESR 
monitoring and compliance architecture. The current compliance cycle is fit for purpose 
and addresses appropriately the risks of Member States not being in compliance, thanks 
to  annual  emissions reporting and to  a close follow-up by the Commission  on Member 
States'  progress  towards  their  targets.  This  option  does  not  increase  administrative 
burdens in  the Member  States’ reporting mechanism. Member States  ’progress  towards 
their 2030 targets would also continue to be monitored every year as part of the progress 
report  published  by  the  Commission48.  This  procedure  complements  the  compliance 
checks by providing early warning in case Member States are lagging behind with their 
obligations every 5 years. 

6.2.  Option  2:  Reduced  scope  ESR  in  line  with  the  extended  ETS  scope  to 

building and road transport 

Option 2, in which the ESR sectoral scope would be reduced and not have any overlap 
with a new ETS, is assessed in this section. The first variant (option 2.1.) would exclude 
buildings and road transportation from the ESR scope, and the ESR (with its remaining 
scope) would have a target of -35% in 2030 compared to 2005, in  line with cost efficient 
projections.  The  second  variant  (option  2.2.)  would  not  include  buildings  and  road 
transportation in the ESR either, and the national targets for 2030 would be kept as they 
stands currently, but applied to the reduced scope ESR.  Furthermore the section briefly 
assesses what would potentially happen to the ESR if all fossil fuel would move into a 
new ETS and a corresponding reduction in the ESR’s scope would also occur. 

48 Climate Action Progress Report 2020: 
https://ec.europa.eu/clima/sites/clima/files/strategies/progress/docs/com_2020_777_en.pdf 

60 

 
                                                 
6.2.1.  Efficiency  and  environmental  impacts  of  the  2030  point  targets  in  a 

reduced scope ESR 

The  first  variant  of  option  2  (option  2.1.)  would  exclude  buildings  and  road 
transportation. The reductions to be achieved in cost efficient projections in this reduced 
scope  setting  would  be  around  -35%  (see  Table  10).  This  is  the  target  that  will  be 
assessed in respect of this option.  

Table  10:  GHG  reductions  in  a  reduced  scope  ESR  (excluding  road  transport  and 
buildings) in 2030 compared to 2005  

GHG reductions in ESR sectors in 2030 compared to 2005, 
reduced scope, excluding road transport and buildings 
(PRIMES base year data for 2005) 

MIX 

REG 

MIX CP 

EU 

-36.3% 
Source: Commission services 

-36.4% 

-36.3% 

Option  2.2 would keep the current  ambition in  place with  Member States’ targets  as in 
today’s  ESR,  but  apply  this  to  the  reduced  scope,  excluding  buildings  and  road 
transportation from the ESR scope. Due to a different relative distribution of emissions in 
the ESR, with low income Member States taking a relatively larger share of emissions in 
this reduced scope ESR, the combined target would not reduce emissions by 29% as in 
the full scope of today’s ESR, but only by 27% compared to 2030. 

For  option  2.1  the  EU  point  target  is  set  at  the  level  -35%,  around  cost-efficient 
projections  (for  the  sectors  remaining  in  a  new  ESR)  which  would  thus  deliver  the 
required  ESR  contribution  to  achieve  the  overall  -55%  EU-wide  target.  Assuming  a 
similar  cap  setting  in  the  new  ETS,  then  the  ‘current  ESR  sectors  as  a  whole’  (i.e.  the 
remaining ESR sectors and the road transport and buildings in the new emission trading) 
would  match  a  reduction  of  40%  GHG  compared  to  2030  and  thus  there  would  be  no 
environmental risk related to the point target in principle. However, overall there will be 
no incentive from the ESR to take national measures in the sectors that will be covered 
by  the  new  ETS  for  instance  related  to  the  availability  of  infrastructure  in  the  road 
transport sector or split incentives in the building sector, increasing the risk of too little 
policy intervention in these sectors. 

For option 2.2 the point target in 2030 is set at -27%, which is clearly less ambitious than 
the required  -35%,  assuming other sectors would not  receive targets  going beyond cost 
efficient  projections.  Actually  in  the  Reference  scenario,  the  reduced  scope  ETS  is 
projected  to  reduce  emissions  by  -27%.  It  should  be  noted  that  while  the  Reference 
projections indicate that the EU as a whole would achieve the option 2.2 target, mostly 
high  income  Member  States  would  still  not  meet  their  own  target  through  domestic 
action  alone.  Given  that  perfect  trade  is  unlikely,  and  thus  extra  efforts  would  still  be 
needed  in  those  Member  States  not  achieving  their  targets  domestically,  this  should  in 
principle allow for some overachievement of the 27% target. 

61 

 
 
On the other hand, by limiting the assessment to the year 2030 only, one does not take 
into  account  the  potential  accumulation  of  surpluses  early  in  the  period,  which  could 
reduce  the  incentives  to  act  later  in  the  period  and  which  therefore  results  in  bigger 
environmental risks over time in option 2.2. 

Assuming  the  point  target  in  option  2.2.  would  ensure  that  the  sector  would  meet 
Reference  projections,  this  would  still  pose  an  environmental  risk,  equivalent  to  8%  of 
reduced  scope  ESR  base  year  emissions  or  around  90  million  ton  CO2-eq,  equivalent  to 
missing the EU wide target of net -55% compared to 1990 by almost 2 percentage points. 

Conclusion:  

Considering  a  reduced  scope  without  road  transport  and  buildings,  purely  from  a 
perspective of efficiency and environmental integrity, option 2.1 compared to option 2.2 
gives  the  strongest  incentive  for  Member  States  to  adopt  additional  policies  in  the 
remaining sectors in the ESR with many measures taken at national level for reasons of 
subsidiarity.  

It is important to note though, that the ESR in this case will not support any action in the 
sectors covered by a new ETS and vice versa, the new emission trading to building and 
roads transport will not support action in the remaining ESR.  

Option  2.2  clearly  has  strong  environmental  risks  in  this  context,  with  no  incentives 
coming from the separate ETS and a target setting approach that puts the collective effort 
too low.  

6.2.2.  National targets and distributional impacts in a reduced scope ESR  

For  this  assessment,  the  same  methodology  as  in  Section  6.1  is  applied  for  target 
increases,  based  on  updated  GDP  per  capita  data  for  the  years  2017-2019.  Table  11 
provides an overview of the additional target effort Member States would have to deliver 
by 2030 in a reduced ESR scope without buildings and road transportation but increased 
ambition  to  -35%  overall  for  ESR,  as  well  as  of  the  current  ESR  targets  (which  would 
reduce total emissions in the reduced scope ESR by only -27%.)  

Table 11: Overview of emission reduction targets in 2030 for ESR with reduced scope, 
excluding buildings and road transportation under options 2.1 and 2.2.  

ESR reduced scope 
(excl. buildings & road 
transportation) 
delivering -35%  
(option 2.1)  

ESR reduced scope 
(excl. buildings & road 
transportation) 
delivering -27%  
(option 2.2) 

 EU-27 / 
Member 
State 

62 

 
Target based on 
GDP/capita formula 
update, bound to a 
range of -5% to -45% 
[unbound target] 

Targets equal to 
existing ESR targets  

EU-27 
Belgium 
Bulgaria 
Czechia 
Denmark 
Germany 
Estonia 

Ireland 
Greece 
Spain 
France 
Croatia 
Italy 

Cyprus 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 

Netherlands 
Austria 
Poland 
Portugal 
Romania 
Slovenia 

Slovakia 
Finland 

Sweden 

 -35% 
-45% [-47%] 
-6% 
-25% 
-45% [-53%] 
-45% [-47%] 
-25% 
-45% [-60%] 

-20%  
-35% 
-45% 
-14% 
-41% 
-33% 

-16% 
-20% 
-45% [-75%] 
-16% 
-36% 
-45% [-49%] 

-45% [49%] 
-14% 
-26% 
-10% 
-26% 
-20% 

-45% [-48%] 
-45% [-50%] 

-27% 
-35% 
0% 
-14% 
-39% 
-38% 

-13% 
-30% 
-16% 
-26% 
-37% 
-7% 
-33% 

-24% 
-6% 
-9% 
-40% 
-7% 
-19% 

-36% 
-36% 
-7% 
-17% 
-2% 
-15% 

-12% 
-39% 

-40% 

Source: Commission Services  

In  option  2.1  a  similar  pattern  as  under  option  1.1  emerges  regarding  the  gap  between 
cost-efficient  emission  reductions  and  targets  set  on  the  basis  of  GDP  per  capita.  High 
income Member States typically have a GDP based target that is higher than their cost-
efficient emissions projections, while low income Member States typically have a GDP 
based target that is lower than their cost-efficient emissions projections. 

This gap actually increases for high income Member States. While in full scope ESR in 
the MIX scenario the  gap (weighted average) was almost  7%, it  would be  increased to 
over 10% in the reduced scope ESR.  

Figure 18 below includes the gap assessment for high income Member States. Next to a 
reduced  scope  ESR  excluding  buildings  and  road  transport  the  figure  also  includes  for 

63 

 
illustration the assessment  of the  gap if non-CO2 emissions only covered by  a reduced 
scope ESR49.50 

A strong driver regarding the change in  gap for high income Member States is the fact 
that  non-CO2  emissions  in  high  income  Member  States  tend  to  decrease  less  in  the 
coming  decade  than  CO2  emissions  in  road  transport  and  buildings,  with  waste  policy 
already  having  captured  the  low  hanging  fruit  regarding  non-CO2  waste  emissions  and 
agriculture non-CO2 emissions having more limited mitigation potential. The size of the 
agriculture sector impacts the picture, with Ireland in particular seeing a serious increase 
of its gap in relative terms compared to option 1. Similarly, also Member States that have 
exceptionally  high  reductions  in  road  transport  and  building,  such  as  Luxembourg  for 
road transport, see their gap increase due to a reduced scope in the ESR. 

Overall,  a  reduced  scope  would  impact  a  potential  target  redistribution  in  high  income 
Member  States  and  would  lead  to  different  conclusions  than  the  target  correction 
assessed in section 6.1.2. In the extreme case of a reduced ESR scope that would include 
only  non-CO2  emissions  Luxembourg  would  instead  become  a  candidate  for  a  target 
correction. 

At  the  same  time,  it  is  also  important  to  assess  the  impact  of  both  ETS  and  LULUCF 
flexibilities (see section 6.2.4), given that their relative impact, and especially that of the 
LULUCF flexibility, would increase with a reduced scope ESR. 

49  The  targets  are  set  for  the  EU  to  achieve  cost  efficient  reductions,  i.e.  33.5%  reduction,  applying  the 
GDP per capita formula with  updated 2017-2019 data, and bounding targets in a range between -4% and -
44%. 
50 The assessed scope of a reduced scope ESR is too limited in this example. In practice, even if the ETS 
extension would include all fossil fuels, it would still result in a reduced scope ESR that covers cover any 
process  or  fugitive  CO2  emissions  not  covered  by  the  existing  or  new  ETS  which  would  remain  in  the 
reduced scope ESR. Overall these emission are limited in size.  

64 

 
                                                 
Figure 18: Impact of reduced scope on gap between target (based on the GDP per capita 
formula only) and cost efficient projections for high income Member States. 

Source: Commission services 

For  low  income  Member  States  the  reverse  trend  can  be  seen  (see  Figure  19).  In  full 
scope, in the MIX scenario, the surplus (weighted average) was close to 9%, whereas it 
would increase to close to 11% in the reduced scope ESR. By and large this group would 
reduce their emissions in small industry, waste, agriculture and non-CO2 from energy at 
similar rates than in buildings and road transport, as compared with 2005 emissions.  

Within  the  group  of  low  income  Member  States,  Eastern  European  Member  States51 
typically  would  see  fewer  reductions  in  buildings  and  transport  and  relatively  higher 
reductions  in  non-CO2  emissions,  as  compared  with  2005.  The  size  of  the  agriculture 
sector  matters,  and  a  larger  share  of  agriculture  emissions  tends  to  reduce  the  size  of 
overall non-CO2 emission reductions. These Member States also still can benefit from a 
significant reduction through the implementation of waste policy as well as the impact of 
reductions in coal mining on methane emissions. The impact from a move to a reduced 
ESR scope on the gap between the GDP target and the projected cost-efficient emissions 
reduction may therefore not only depend on the relative size of the agriculture sector but 
also other non-CO2 emitting sectors can play a role.  

51 Assumed here to be the 13 Member States that joined in the EU since 2004. 

65 

 
 
                                                 
Figure  19:  Impact  of  reduced  scope  on  surplus  (gap)  between  target  and  cost  efficient 
projections for low income Member States 

Source: Commission services 

6.2.3.  Starting point and trajectory in the ESR in a reduced scope 

Emission allocations from alternative AEA trajectories  

In Table 32 and Table 33 in annex 10.7, similar trajectories A, B, and C are assessed for 
options 2.1 and 2.2 as for options 1.1 and 1.2 (see section 6.1.3).  

The  complication  for  options  2.1  and  2.2  is  the  change  in  scope  over  the  2021-2030 
period.  The  current  scope  would  prevail  up  until  the  entry  into  force  of  new  AEAs. 
Hence, in the assessment the period 2021-2030 is split into two parts: in the first part, the 
AEAs  are  related  to  the  emissions  projections  under  the  scenarios  explained  above  in 
their present scope. In the second part, the emissions projections relate to the remaining 
sectors in the ESR.  

The impact of the scope correction on the availability of AEAs is significant. For option 
2.1, trajectory A, which only applies a new AEA trajectory from 2026 onwards, provides 
for  an  overall  stock  of  AEAs  of  14.8  Gt  of  CO2eq.  Trajectories  B  and  C  only  allocate 
AEAs  equivalent  to  11.4  and  11.1  Gt  of  CO2eq  respectively,  because  they  apply  the 
scope adjustment already from 2023 onwards.   

The  stock  of  AEAs  in  force  in  trajectory  A  for  2021-2025  equals  to  10.5 Gt CO2eq, 
while the updated AEAs for the next five years add 4.2 Gt. For trajectories B and C, the 
stock of current AEAs is limited to 4.4 Gt in the years 2021-2022, and another 7.1 and 
6.8 Gt new scope AEAs respectively are available for the rest of the period.  

66 

 
 
Overall the assessment in Table 32 and Table 33 is similar to section 6.1.3.  

For option 2.1, under a scenario with a slower decline in emissions (REFMIX), trajectory 
option C is  not  viable.  Even with  banking into  the new system option  B remains tight. 
Conversely option A sees a large a surplus build up, which is not solved by not allowing 
banking into the new system. This is in part because the deviation in trajectory starts too 
late  (from  2026  onwards),  and  sets  a  2026  AEA  cap  that  is  too  high  compared  to 
plausible cost efficient emission scenarios.  

The main limitation of the assessment as presented in Table 32 and Table 33 is that the 
data to calculate the starting point (be it the amount of current AEAs that would need to 
be  attributed  to  reduced  scope  ESR  sectors  for  options  A  and  B,  or  the  2016-2018 
emissions for option C) are not presently available. The exercise as presented in Table 32 
and Table 33 is based on PRIMES-GAINS estimates of sectoral shares. 

An  approach  to  get  around  this  could  be  to  await  until  MRV  data  of  the  new  ETS  is 
available52. While this would give credibility to the data for the starting point, it would 
come  late,  certainly  if  multiple  years  are  used.  For  instance  if  MRV  data  for  an  new 
scope ETS would be available from 2023 onwards, inventory data using average 2023-
2025  data  to  define  the  starting  point  in  2026  would  have  to  wait  until  2027.  Such 
approach, if used to define a new trajectory would require some ex post adjustments to 
the allocations. 

In summary, trajectories using methodologies such as  B and C may be too tight,  while 
option A would be rather generous. A major limitation to any trajectory is that no exact 
data is available to define the reduced scope emissions. Any target trajectory will thus be 
based on inventory estimates which could then be reviewed when MRV data of the new 
ETS scope for building and road transport is available. 

6.2.4.  Assessing  the  impact  of  the  existing  ETS  and  LULUCF  flexibilities  over 

the period 2021-2030 in a reduced scope ESR 

The ETS flexibility that is available for a limited number of high income Member States 
and  Malta  (see  Table  8)  can  also  be  used  to  reduce  the  gap  (between  cost-efficient 
emission reductions and targets set on the basis of GDP per capita) under Option 2.1.  

The analysis below is based on a target trajectory similar to trajectory D as presented in 
section 6.1.3. It is assumed that the current scope prevails in 2021-2022, and the reduced 
scope only applies from 2023 onwards. This is an important driver impacting on the gap 
or surplus over time compared to the assessment in section 6.2.2 of the gap or surplus in 
the year 2030, with the gap or surplus in 2021-2022 having a relative larger impact on the 
gap or surplus over time due to the reduced scope from 2023 onwards. 

52 Different options are available if limited data points are available. If only one inventory year is used as 
the starting point for a downward trajectory, the starting value could be somewhat increased compared to 
that inventory point to allow for a not too tight system early on. Another option is to use that inventory data 
as the starting value in a subsequent year with a similar outcome. 

67 

 
                                                 
The ETS  flexibility is  expressed as a share of 2005 base  year emissions of a shrinking 
scope ESR, and thus the absolute amount of the ETS flexibility is reduced. This roughly 
halves  the  ETS  flexibility’s  absolute  size  in  case  of  reduction  of  scope  of  the  ESR  to 
exclude buildings and road transport. If the ESR scope is reduced to non-CO2 only, then 
it would be reduced by around 2/3rd.  

Instead,  the  LULUCF  flexibility,  which  is  there  to  allow  alternative  options  to  address 
difficult to abate non-CO2 emissions in the agriculture sector, is kept constant compared 
to full scope ESR, given that exactly these emissions remain part of also a reduced scope 
ESR. This has the opposite effect. With full scope, the LULUCF flexibility represents the 
equivalent of around 1% of 2005 base year emission. If the scope excludes buildings and 
road  transport,  this  LULUCF  flexibility  would  represent  the  equivalent  of  over  2%  of 
2005 base year emission. If the scope were to include non-CO2 only, then the LULUCF 
flexibility would represent over 3% of 2005 base year emissions.  

Overall  both  flexibilities  provide  for  a  strong  correction  for  any  gaps  in  high  income 
Member  States  in  case  of  a  reduced  scope  ESR,  even  in  case  no  target  correction  is 
applied (see Figure 20). This is an important finding. Target correction is thus less of an 
issue  in  case  of  reduced  scope,  given  that  flexibilities  gain  in  importance,  notably  the 
LULUCF  flexibility.  On  the  other  hand,  the  introduction  of  a  much  higher  ambition  in 
the  LULUCF  regulation,  together  with  the  possible  split  of  the  existing  LULUCF 
flexibility  into  two  periods  would  likely  significantly  reduce  the  availability  of  the 
LULUCF flexibility. See also section 6.1.4 which discusses also the relationship between 
this review and the Climate Law which requires a higher level of mitigation efforts. 

Figure 20: Impact of ETS and LULUCF flexibilities on high income Member State gaps 
in case of a reduced scope ESR 

68 

 
 
Source: Commission services 

The  one  Member  State  that  has  a  very  high  gap  in  2030  between  its  cost  efficient 
emission reduction potential and its target on the basis of GDP per capita is Malta (see 
Figure 19). But over period this reduces strongly, in part due to the surplus available in 
the year 2021, which in relative terms is large compared to the reduce scope from 2023 
onwards.  Also  in  a  reduced  ESR  scope  setting,  Malta  sees  a  significant  deficit  over 
period. In this case additional corrections could be contemplated, for instance in the form 
of a one off flexibility or to the ESR target itself. LULUCF is less of an option, given the 
limited mitigation potential in this area that Malta has. 

Figure  21:  Impact  of  ETS  and  LULUCF  flexibilities  on  low  income  Member  State 
surpluses and gaps in case of a reduced scope ESR 

69 

 
 
  
 
 
Source: Commission services 

The following conclusion can be drawn

: 

Economic and environmental 

A  reduced  scope  of  the  ESR  will  not 
climate action in sectors 
in these sectors if
in reducing emissions 

, as a result,
are
but 

  any  incentives 

towards  greater 

national 
. This could lead to suboptimal solutions 
 efficient 

would be

 national actions are not undertaken that 
 not triggered by carbon prices 

alone or other EU policies

. 

excluded from the ESR

create

Within the ESR sectors in a reduced scope, the absolute demand for transfers and thus for 
government purchases of credits would decrease, but not its relative size compared to the 
target, with a consequently increasing gap on the side of high income Member States

.  

Social & Distributional 

A  reduced  scope  ESR  would  become  less  relevant  as  a  tool  to  address  fairness  in  the 
distribution of emission reduction efforts, since it  would be  impacting  a lower share of 
emissions  and  thus  incentivising  fewer  efforts  in  Member  States,  based  on  GDP  per 
capita.  Significant  changes  would  occur  as  to  where  there  would  be  gaps  in  emissions 
reduction  by  Member  States  as  compared  with  their  individual  targets.  The  increased 
relative  share  of  the  LULUCF  flexibility  can  potentially  not  materialise,  due  to  the 
increased ambition in the LULUCF regulation itself and potential split of the LULUCF 
flexibility  over  2  period  (see  also  section  6.1.4  for  a  discussion  on  the  LULUCF 
flexibility). Target corrections may thus be required, with Malta having the largest gap

. 

Environmental 

70 

 
 
    
Overall, a less ambitious target of 27% than the cost efficient projection in the reduced 
scope ESR would entail environmental integrity risks. 

6.2.5.  Administrative impacts of the current compliance rules for option 2 

For option 2, impacts are as indicated for option 1, though the main difference would be 
that  we  would  establish  the  ESR  inventory,  by  not  only  subtracting  the  existing  ETS 
reported emissions, but also the new ETS reported emissions. Therefore in the ESR there 
would be no additional administrative impact, though the system is of course dependent 
on the establishment of the new ETS monitoring and reporting system. While compliance 
cycle of ESR would be reduced in emission scope, the ESR administrative rules would 
continue to apply for the remaining sectors. Here, the generic and the administrative costs 
related to ESR implementation are independent from the emission scope of the ESR. In 
this regard, the assessment depicted under option 1 would continue to be relevant and the 
administrative costs related to implementing the regulation would also be limited using a 
5-year cycle in line with the Paris Agreement.  

Regardless of the scope being reduced, the Commission would continue with its annual 
monitoring exercise described in the Climate Action Progress Reports and the reporting 
obligations by Member States presented as per current ESR 5-year compliance cycle. The 
Governance  Regulation  and  related  Implementing  Regulations  would  still  apply  as 
regards  ESR.  It  can  thus  be  concluded  that  option  2  is  not  likely  to  have  additional 
administrative impacts compared to the current ESR.  

The complication under this option might be rather related to the exact specification of 
the EU and national target trajectories and how to adapt it to a reduced scope given that 
historic  inventory  data  related  to  the  exact  scope  of  the  new  ETS  might  not  be  fully 
available. 

6.3.  Option  3:  Phase  out  of  the  Effort  Sharing  Regulation  and  replacement  by 

other policy instruments   

Under this option, the large majority of GHG emissions that are currently covered by the 
ESR, would be regulated, on the one hand, by the extension of the scope of the ETS to all 
fossil fuel combustion emissions and, on the other hand, by covering agriculture and the 
LULUCF sector by a single climate policy instrument with own objectives and rules. 

In that sense, the impacts of this option are primarily analysed in the impact assessments 
of  amending  the  ETS53  and  the  LULUCF  Regulation54,  in  particular  the  economic  and 
distributional impacts.  

53 SWD (2021) 601.  
54 SWD (2021) 609.  

71 

 
                                                 
6.3.1.  Environmental and cost-efficiency impacts 

From  a  perspective  of  the  overall  environmental  integrity  and  cost-efficiency  of  the 
climate policy architecture, this option is  similar to option 2 for the share of  emissions 
covered by the mentioned extended instruments. In particular, it would reduce incentives 
for Member States to take cost-efficient measures at national level in the sectors that are 
covered  by  the  new  ETS  only.  Beyond  the  land  instrument,  there  would  be  no  EU 
determined GHG target  guiding the update of the NECPs. On the side of the new land 
instrument55  however,  Member  States  would  continue  to  have  a  strong  incentive  to 
consider specific measures.  

The  remaining  GHG  emissions  that  would  not  be  covered  by  other  instruments  would 
amount to  some 358Mt CO2eq., less than 1/6  of the scope of the ESR today.  Table 12 
and Table 13 below give an overview which GHG emissions that are not covered by the 
other  two  instruments,  first  in  terms  of    type  of  gas  and  secondly,  in  terms  of 
sector/activity.  

Table 12: Size and type of gas in a reduced scope ESR as of 2020 (option 3.1 - all energy 
combustion  emission  fall  under  ETS  and  all  agriculture  emissions  under  a  new  land 
instrument) 

Size (in Mt 
CO2eq.) 

195 Mt 

80 Mt. 
72 Mt.  
10 Mt.  

Type of gas 
CH4 
emissions 
F-gases 
CO2 
N2O 

Source: Commission Services based on PRIMES and GAINS. 

Table 13: Weight and type of sector in a reduced scope ESR as of 2020 (option 3.1 - all 
energy  combustion  emission  fall  under  ETS  and  all  agriculture  emissions  under  a  new 
land instrument) 

% of total ESR 
emissions 
(option 3.1) 

41 
23% 
16% 
16% 
4% 

Type of sector 
Waste and wastewater 
industrial process & product use emissions 
fugitive emissions from energy supply 
Non-CO2 from buildings  
Others 

Source: Commission Services based on PRIMES and GAINS. 

The distribution of these remaining emissions  is  very diverse across Member States, as 
shown  in  the  graphs  below.  What  is  more,  the  remaining  emission  reduction  potential 
and required instruments for the different sectors/activities are very diverse. For instance, 

55 LULUCF + agriculture, also referred to in option 3 in the LULUCF impact assessment. 

72 

 
                                                 
the  emission  reduction  potential  in  F-gases  by  2030  is  large,  but  F-gases  are  already 
regulated  by  the  regulation  to  phase  down  their  use  and  spur  the  use  of  alternative 
chemicals,  and  this  legislation  will  be  further  updated  (proposals  scheduled  for  late 
2021). The emission reduction potential for methane emissions in the sector of waste and 
waste water treatment is large, but this remaining potential is very dependent on national 
circumstances and on the progress that Member States have made in the implementation 
of waste regulation and waste water treatment practices and technology.  

Figure 22 and Figure 23: All GHG emissions for the sectors under option 3 (“Buildings”, “Waste 
and  waste  water”,  “Fugitive  emissions  from  energy  supply”,  “Industrial  process  and  product 
use”, and “other” sectors) in shares per gas in average 2016-2018 emissions from inventory data. 

Figure 22: Member States' share of GHG emissions per gas for option 3 

Source: Commission Services based on EEA  

73 

 
 
Figure 23: Member States' GHG emissions per gas in option 3 

Source: Commission Services based on EEA  

A GDP/cap approach is an appropriate parameter to distribute efforts in an equitable way 
only  if  a  broad  scope  of  sectors  is  covered,  but  this  seems  much  less  the  case  in  these 
remaining  sectors.    As  a  result  it  does  not  seem  appropriate  to  set-up  a  specific  ESR 
instrument  for  these  remaining  emissions,  because  their  mitigation  potential  is  sector 
specific,  with  wide  differences  among  Member  States,  and  the  overall  size  of  the 
emissions is small in absolute terms..  

Therefore,  in  practice  the  Effort  Sharing  Regulation  as  such  would  be  phased  out,  and 
other instruments would have to make sure that emissions reductions (especially in non-
CO2  gases)  take  place  in  respect  of  the  remaining  approximately  358  million  tons 
CO2eq.  

In the energy sector in particular, new policies would need to be put in place to activate a 
host  of  cost-efficient  mitigation  actions.  These  actions  relate  first  and  foremost  to 
methane, and are linked to the methane strategy that the European Commission adopted 
in  2020.  Mitigation  actions  include  reductions  of  leakage  in  gas  transmission  and 
distribution  networks,  which  are  often  tied  to  increased  frequency  of  controls  and  to 
improved MRV capabilities. The Commission has already begun work on implementing 
key measures from the methane strategy56. Some cost-efficient mitigation potential also 
exists to reduce nitrous oxide emissions from power plants through the modification of 
fluidized bed combustion. 

In  the  waste  sector,  increased  enforcement  of  existing  waste  legislation  such  as  on  the 
sorting  of  organic  waste  is  key  for  mitigating  methane  emissions.  Such  actions  are 
equally  foreseen  under  the  methane  strategy.  Additional  cost-efficient  mitigation 

56 Inception impact assessment: https://ec.europa.eu/info/law/better-regulation/have-your-
say/initiatives/12581-Climate-change-new-rules-to-prevent-methane-leakage-in-the-energy-sector  

74 

 
 
                                                 
potential still exists in wastewater for both domestic and industrial point sources. In both 
cases, optimized processes can reduce emissions of nitrous oxide cost-effectively, while 
the  anaerobic  treatment  of  wastewater  streams  with  biogas  recovery  reduces  methane 
emissions (with precise mitigation costs depending on local conditions).  

Currently many Member States have national measure on F-gases in addition to the F-gas 
Regulation,  e.g.  in  the  form  of  taxes,  additional  leak  reduction,  record  keeping  and 
reporting measures. These measures tend to reduce F-gas emissions beyond the reduction 
that can be obtained by the measures at EU level. Without an obligation on each Member 
State to comply with an emission reduction target that includes F-gas emissions under the 
ESR,  there  is  a  risk  that  Member  States  have  less  incentive  to  continue  with  such 
complementary national measures in the medium term.  

6.3.2.  Administrative impacts of the current compliance rules for option 3 

Option 3 would eliminate the administrative burden of ESR implementation as such for 
Member States. The monitoring and compliance cycle for the Effort Sharing Regulation 
would  in  fact  no  longer  be  required.  However,  achieving  the  required  emission 
reductions would necessitate implementation of other EU or national policies.   

Phasing-out of the ESR would also have implications for the Regulation (EU) 2018/1999 
on the Governance of the Energy Union and Climate Action (Governance Regulation)57, 
as  some  planning,  monitoring  and  reporting  rules  are  linked  with  the  existing  ESR. 
Under  option  3,  many  of  the  GHG  emissions  that  are  currently  covered  by  the  ESR 
would  be  regulated,  on  the  one  hand,  by  the  extension  of  the  scope  of  the  ETS  to  all 
fossil  combustion  emissions  and,  on  the  other  hand,  by  covering  all  agricultural 
emissions  in  the  LULUCF.  Therefore,  while  the  ESR  references  in  the  Governance 
Regulation  relate  to  a  period  to  2030  and  not  beyond,  option  3  would  require  such 
amendments to reflect the material changes, as article 4 refers materially to ESR targets 
and  related  policies  and  annex  I  also  does  so  for  ESR  reporting  obligations  under  the 
general framework for integrated National Energy and Climate Plans. In a reduced scope 
scenario (option 2), the Governance Regulation would not require such amendments. 

6.4. 

 Other impacts 

As presented in the Climate Target Plan (CTP) impact assessment58, climate and energy 
policy have wide-ranging implications on the economy, including in terms of the sectoral 
composition of demand, output and employment, relative producer and consumer prices 
and the international competitiveness of domestic firms. The transition to climate neutral 
economies requires innovation and the reallocation of productive capital  and the labour 
force across and within sectors. This is a gradual process that entails shifts in investment 
patterns. This in turn creates risks related to the retirement of productive assets before the 

57 Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the 
Governance of the Energy Union and Climate Action. 
58 SWD/2020/176 final 

75 

 
                                                 
end of their economic lifetime and potentially difficult adjustments in the labour market 
as a result of natural frictions and potential mismatches between skills available and the 
skills requirements of the economy. The speed at which the process transition has to take 
place  increases  the  challenges  related  to  resource  reallocation.  As  the  COVID-19 
pandemic has made amply evident, however, many other  factors affect  the economy in 
multiple and at times significant manners, whether in terms of cyclical developments or 
structural changes.  

The higher level of mitigation ambition will also affect sectoral investment significantly. 
As  expected,  investment  in  fossil  fuels  would  drop  sharply,  in  particular  for  coal. 
Similarly,  the  transition  to  clean  power  technologies  and  the  electrification  of  the 
economy would imply a significant increase in investment in clean electricity supply. In 
industrial sectors, investment is affected by two contrasting trends: the need to invest for 
decarbonisation purposes and the evolution of output in the sector. 

The CTP impact assessment also indicated that the impact of increased climate ambition 
on  aggregate  output  by  2030  would  be  relatively  limited,  but  that  it  could  have 
repercussions  at  the  sectoral  level  and  thus  affecting  the  related  labour  market.  On  the 
other  hand,  household  income  was  also  projected  to  increase.  In  that  sense,  the  CTP 
impact  assessment  also  developed  appropriate  analysis  around  the  redistribution  of 
carbon revenues that are part of the ETS impact assessment.  

Finally,  positive  impacts  could  still  be  expected  on  air  quality  and  human  health  as  a 
result of reducing GHG emissions from combustion, correlated with other air pollutants. 
In  particular  the  use  of  solid  fuels  for  household  heating  and  liquid  fuels  for  road 
transport are a strong driver for regional air pollution. The shift to electrification, both in 
transport and building heating, actions in line with the achievement of the ESR targets, 
will  allow  for  improved  local  air  pollution  impacts.  Additional  benefits  deriving  from 
energy efficiency policies, in particular the improved indoor environment, may have also 
a positive impact on health and worker productivity59. 

The combination of existing air pollution policies as well as ambitious climate policies 
results in additional reductions of air pollutants by 2030. This is due to the reduction in 
energy consumption as well as a general shift towards less polluting fuels. This results in 
strong benefits for air quality, human health and ecosystems impacts. In terms of health 
impacts,  the  reduction  of  GHG  emissions  is  associated  with  lower  emissions  and 
concentrations of air pollutants, in particular fine particles with a diameter of 2.5 μg or 
less (PM2.5), nitrogen oxides (NO2) and sulphur dioxide (SO2). For instance, premature 
deaths from PM2.5 exposure decrease with around 16.8 thousands cases/year in 203060. 
In  addition,  there are benefits  such as a reduced number of lost working  days resulting 
from avoided illnesses and reduced ecosystem impacts.  

59 Shnapp, S., Paci, D. and Bertoldi, P., Untapping multiple benefits: hidden values in environmental and 
building policies, EUR 30280 EN, Publications Office of the European Union, Luxembourg, 2020, ISBN 
978-92-76-19983-0, doi:10.2760/314081, JRC120683. 
60 The figures are based on the MIX scenario compared to REF scenario. 

76 

 
                                                 
For further quantitative details, see annex 10.3.  

6.5.  Coherence with related legislation and other policy initiatives    

Relevant  aspects  of  links  and  coherence  with  the  ETS  Directive  and  the  LULUCF 
Regulation have already been covered in prior sections.  

Related policy initiatives that are relevant to all the options in this IA include the reviews 
of several initiatives summarised below: 

-  The  Renewable  Energy  Directive  (RED  II)  review  will  a)  assess  how  far  EU 
renewable energy rules (Directive 2018/2001/EU) can contribute to a higher EU 
climate ambition of 55% GHG reduction target by 2030  with a possible upward 
review of the minimum 32% target for renewable energy set at EU level and b) 
explore  how  to  accelerate  the  transition  to  a  more  integrated  energy  system  as 
outlined in the energy system integration & hydrogen strategies61. 

-  The Energy Efficiency Directive (EED) main goal is to assess the basis of what 
needs  to  be  streamlined  and  strengthened  as  regards  EU’s  headline  targets  to 
increase  energy  efficiency  by  20%  for  2020  and  by  at  least  32.5%  for  2030 
embedded  in  this  Directive  (EED)62.  On  this  basis,  it  will  a)  address  any 
remaining  ambition  gap,  in  case  the  national  contributions  in  the  final  NECPs 
submitted by Member States do not add up to achieve the existing 2030 targets, 
and  b)  deliver  on  the  potential  contribution  of  energy  efficiency  to  a  higher 
greenhouse emissions reduction target by 2030 of -55%63. 

-  The  Energy  Performance  of  Buildings  Directive  (EPBD)  revision  aims  to 
strengthen  the  legal  framework  on  energy  performance  of  buildings.  Together 
with the other actions from the Renovation Wave action plan (see below), it will 
aim to at least double the annual energy renovation rate of buildings by 2030, to 
foster  deep  energy  renovation,  and  to  contribute  to  the  achievement  of  the  EU 
climate ambition of 55% GHG reduction target by 2030 and the climate neutrality 
objective for 205064. 

-  The Regulation setting CO2 standards for cars and vans’ main objective is to 
reduce  CO2  emissions  from  cars  and  vans  cost-effectively,  in  line  with  the 
European  Green  Deal,  so  as  to:  a)  contribute  to  the  objectives  of  the 
Communication on stepping up Europe’s 2030 climate ambition and b) define a 
clear pathway towards zero-emission mobility, in the broader context of climate 
neutrality by 205065.  

-  The  Revision  of  the  Alternative  Fuels  Infrastructure  Directive66’s  main 
objective  is  to  set  requirements  for  greatly  expanding  the  EU’s  network  of 

61 Inception impact assessment - Ares(2020)4087053 
62 Directive 2012/27/EU. 
63 Inception impact assessment - Ares(2020)4101900 
64 Inception Impact assessment - Ares(2021)1397833 
65 Inception Impact assessment - Ares(2020)6081912 
66 Directive 2014/94/EU 

77 

 
                                                 
recharging  and  refuelling  stations  for  alternative  vehicle  fuels  –  mainly  electric 
batteries and hydrogen. The goal is to install a sufficient number of points in all 
countries  that  are  easy  to  access  and  use  to  encourage  people  to  use  low-  and 
zero-emission vehicles in much greater numbers than currently – as a measure to 
ensure achievement of the EU climate ambition of 55% GHG reduction target by 
2030 and the climate neutrality objective for 2050 as presented in  the European 
Green Deal67. 

-  Climate change mitigation is among the specific objectives of the Commission’s 
proposal for the next Common Agricultural Policy (CAP). The CAP proposals 
require  that  the  CAP  Strategic  Plans  should  contribute  to  the  objectives  of  EU 
legislation concerning the environment and climate, including the Effort Sharing 
Regulation (which covers inter alia emissions from the agriculture sector) towards 
the  achievement  of  the  EU  climate  ambition  presented  in  the  European  Green 
Deal.   

-  The  Farm to  Fork strategy68  aims to  accelerate  the transition  to  a sustainable 
food  system  that  should  a)  have  a  neutral  or  positive  environmental  impact;  b) 
help  to  mitigate  climate  change  and  adapt  to  its  impacts;  c)  reverse  the  loss  of 
biodiversity; d) ensure food security, nutrition and public health, making sure that 
everyone  has  access  to  sufficient,  safe,  nutritious,  sustainable  food  and  e) 
preserve affordability of food while generating fairer economic returns, fostering 
competitiveness of the EU supply sector and promoting fair trade in line with the 
European Green Deal. 

-  The  Renovation  Wave69  aims  to  double  annual  energy  renovation  rates  in  the 
next ten years. These renovations will enhance the quality of life for people living 
in and using the buildings, reduce Europe’s greenhouse gas emissions, and create 
up to 160,000 additional green jobs in the construction sector. 

-  The Circular Economy Action Plan70 aims at accelerating the transformational 
change required by the European Green Deal, while building on circular economy 
actions  implemented  since  2015. It  sets  the  agenda  of  interrelated  initiatives  to 
establish a strong and coherent product policy framework to help contributing to 
GHG  emission  reduction  in  key  sectors,  such  as  buildings  where  material 
efficiency can save 80% of building emissions71. 
-  The Sustainable and Smart Mobility Strategy72

 lays the foundation for how the 
EU transport system can achieve its green and digital transformation and become 
more resilient to future crises. As outlined in the European Green Deal, the result 
will be a 90% cut in emissions by 2050, delivered by a smart, competitive, safe, 
accessible and affordable transport system. 

67 Inception Impact assessment - Ares(2020)1948408 
68 Farm to Fork Strategy Communication: f2f_action-plan_2020_strategy-info_en.pdf (europa.eu)  
69 COM(2020)662 
70 COM/2020/98 final 
71 Hertwich, E., Lifset, R., Pauliuk, S., Heeren, N., IRP, (2020), Resource Efficiency and Climate Change: 
Material Efficiency Strategies for a Low-Carbon Future. 
72 COM/2020/789 final 

78 

 
                                                 
-  And  the  Revision  of  Energy  Tax  Directive’s  (ETD)73  main  objectives  are:  a) 
aligning taxation of energy products and electricity with EU energy and climate 
policies,  to  contribute  to  the  EU  2030  energy  targets  and  climate  neutrality  by 
2050  and  b)  preserving  the  EU  single  market  by  updating  the  scope  and  the 
structure  of  tax  rates,  and  rationalising  the  use  of  optional  tax  exemptions  and 
reductions. 

Other  policies  that  drive  improvements  in  the  efficiency  of  the  transport  sector  and 
greater use of sustainable transport modes will also contribute to the decarbonisation of 
the economy and sectors under ESR review and its option 1. The sectorial legislation for 
setting  GHG  emission 
targets  under  Urban  Waste  Water  Treatment  Directive 
(UWWTD)74  is  currently  being  assessed  and  could  also  further  contribute  to  GHG 
emission reductions in sectors covered by the ESR.  

Additionally,  there  are  implications  for  the  Governance  Regulation75,  as  the  integrated 
national energy and climate progress reporting due in 2023 on biennial basis and related 
reporting and monitoring will require attention and perhaps adjustment to any changes to 
the  current  ESR,  especially  as  these  changes  may  impact  the  policies  and  measures 
Member States adopted or planned to reduce GHG in the ESR sectors. This would apply 
all  the  more  to  the  phasing-out  of  ESR  under  option  3.  This  option  would  call  for  the 
amendment of the Governance Regulation to reflect the material changes of this option, 
as  it  both  refers  materially  to  ESR  targets  and  related  policies  as  well  as  to  the  ESR 
reporting  obligation  in  Annex  I.  However,  the  ESR  references  in  the  Governance 
Regulation relate to a period to 2030 and not beyond.  

The National  Energy and Climate Plans (NECPs) NECPs are both a policy tool and an 
investment  agenda  that  provide  business  and  investors  a  forward-looking  framework. 
They  constitute  a  strong  basis  for  Member  States  to  design  their  green  recovery  and 
resilience strategies and deliver on broader European Green Deal objectives from a clean 
and  circular  economy  to  a  zero  pollution  ambition  while  ensuring  energy  security. 
Innovation  and  investment  strategies,  supported  and  triggered  by  public  funds,  will  be 
required, both at the Member States and at the EU level, including in the context of the 
economic  recovery  from  the  current  pandemic,  by  investing  in  energy  efficiency, 
renovating  buildings,  deploying  renewable  energies  and  storage,  sustainable  mobility, 
modernising  electricity  grids  and  boosting  innovation  and  securing  supply  chains  in 
crucial technology areas such as renewable hydrogen and batteries. 

To  this  end,  the  EU  budget  (Multiannual  Financial  framework  –  MFF-  2021-2027) 
together  with  the  Next  Generation  EU  package  and  the  related  proposed  national 
recovery  and  resilience  plans  can  be  a  strong  driver  for  transformation  and  leverage 

73 Directive 2003/96/EC 
74 Inception Impact assessment: https://ec.europa.eu/info/law/better-regulation/have-your-
say/initiatives/12405-Revision-of-the-Urban-Wastewater-Treatment-Directive 
75 Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the 
Governance of the Energy Union and Climate Action. 

79 

 
                                                 
sustainable private and public investment. Overall, the EU budget (MFF) 2021-2027 and 
the Next Generation EU package will ensure a 30% climate mainstreaming expenditure 
target.  As  regards  specifically  the  Resilience  and  Recovery  Facility  under  Next 
Generation  EU,  each  national  recovery  and  resilience  plan  will  have  to  include  a 
minimum of 37% of expenditure related to climate investments. These funds can heavily 
support the investments and reforms identified in the NECPs76. 

Figure 24: EU Recovery and Resilience funds available per Member States in relation to 
GDP, 2021-2023  

Source: Commission Services 

In  this  respect,  the  Just  Transition  Mechanism  (JTM)  was  announced  as  part  of  the 
European Green Deal Investment Plan Communication on 14 January 2020.  

The  resources  will  be  leveraged  through  the  three  pillars  of  the  mechanism:  (i)  a  Just 
Transition  Fund implemented under shared management;  (ii) a dedicated scheme under 
Invest-EU; (iii) and a new public sector loan facility to mobilise investments benefiting 
the most affected regions.  

The commitment 2021-2027 for the Just Transition Fund has an allocation of EUR 17.5 
billion,  of  which  EUR  7.5  billion  from  the  new  Multiannual  Financial  Framework  and 
EUR 10 billion from the Recovery Instrument77. 

The negotiation of the JTF Regulation, although proposed quite late in the MFF package, 
in  January  2020,  has  been  completed  end  December  2020.  The  Just  Transition 

76 According to the IEA, a sustainable recovery plan could add 1.1 percentage points to global economic 
growth  each  year.  The  effect  on  employment  would  be  significant,  saving  or  creating  roughly  9  million 
jobs  a  year  over  the  next  three  years  (IEA’s  World  Energy  Outlook  Special  Report  on  Sustainable 
Recovery)  
77 Multiannual Financial Framework 2021-2027 (in commitments) – 2018 prices 

80 

 
 
                                                 
Mechanism  Regulation  is  currently  discussed  with  the  co-legislators  in  trilogues.  The 
Just  Transition  Fund  Regulation  will  enter  into  force  along  with  the  Cohesion  policy 
legislative package most probably end of June. The InvestEU Regulation governing the 
second JTM pillar has been adopted in March 202178. The Regulation governing the third 
pillar  (i.e.  a  new  public  sector  loan  facility)  is  currently  under  discussion  with  the  co-
legislators and adoption is expected in July. 

The aim is to mobilise investment over the 2021-2027 period to benefit the territories and 
people  across  Europe  most  affected  by  the  transition  to  a  climate-neutral  economy  in 
terms of impact on their economic structure and consequently the social impact. The Just 
Transition Mechanism focuses on those regions and sectors that are most affected by the 
transition  given  their  dependence  on  fossil  fuels,  including  coal,  peat  and  oil  shale  or 
carbon-intensive industrial processes emitting greenhouse gases. 

The  Just  Transition  Fund  will  provide  primarily  grants  to  support  the  transition  to  a 
climate-neutral continent of the most impacted European regions; the dedicated transition 
scheme under Invest-EU will crowd-in private investments; and the partnership with the 
EIB  will  leverage  public  financing.  The  Just  Transition  Platform,  a  dedicated  advisory 
and  technical  assistance  for  the  regions  and  projects  concerned  will  accompany  these 
measures.  The  Just  Transition  Mechanism  will  include  a  strong  governance  framework 
centred  on  territorial  just  transition  plans,  the  expected  transition  process  set  out  in  the 
plans should be aligned with the National Energy and Climate Plans (NECPs).  

Table 14: EU Just Transition funds available per Member States, 2021-2027, EUR billion 
expressed in 2018 prices. 

EUR m, 2018 
prices 

Allocation under 
the European 
Union Recovery 
Instrument 

Allocations under 
the Investment 
for growth and 
jobs goal 

Total 

Share 

BE 
BG 
CZ 
DK 
DE 
EE 
IE 
EL 
ES 
FR 
HR 
IT 
CY 
LV 
LT 
LU 
HU 

95 
673 
853 
46 
1.288 
184 
44 
431 
452 
535 
97 
535 
53 
100 
142 
5 
136 

71 
505 
640 
35 
966 
138 
33 
324 
339 
402 
72 
401 
39 
75 
107 
4 
102 

166 
1.178 
1.493 
81 
2.254 
322 
77 
755 
790 
937 
169 
937 
92 
174 
249 
8 
237 

0,9% 
6,7% 
8,5% 
0,5% 
12,9% 
1,8% 
0,4% 
4,3% 
4,5% 
5,4% 
1,0% 
5,4% 
0,5% 
1,0% 
1,4% 
0,0% 
1,4% 

78 Regulation (EU) 2021/523 of the European Parliament and of the Council of 24 March 2021 establishing 
the InvestEU Programme and amending Regulation (EU) 2015/1017.  

81 

 
                                                 
MT 
NL 
AT 
PL 
PT 
RO 
SI 
SK 
FI 
SE 
EU-27 

0,1% 
3,2% 
0,7% 
20,0% 
1,2% 
11,1% 
1,3% 
2,4% 
2,4% 
0,8% 
100,0% 
Source: Annex I Just Transition Fund Regulation. All amounts reflect gross allocations, before transfers for 
technical assistance. Totals may not tally due to rounding.  

21 
567 
124 
3.500 
204 
1.947 
235 
418 
424 
142 
17.500 

12 
324 
71 
2.000 
116 
1.112 
134 
239 
242 
81 
10.000 

9 
243 
53 
1.500 
87 
834 
101 
179 
182 
61 
7.500 

7.  HOW DO THE OPTIONS COMPARE? 

In Sections 5 and 6 the different options are described and assessed in detail. This section 
offers  a  comparison  between  the  policy  options  assessed  in  terms  of  the  three  specific 
objectives  that the Effort Sharing Regulation  review has at  its core:  (1) the potential to 
ensure  environmental  integrity,  (2)  allowing  for  a  consistent,  fair  and  equitable 
distribution  of  climate  ambition  efforts  between  Member  States  and  (3)  taking  into 
account  cost  efficiency  in  such  distribution.  Consequently,  the  comparison  has  been 
designed  around  the  following  areas:  scope,  environmental  integrity,  distribution  of 
efforts and flexibility.   

Comparison as regards the scope (specific objective 1) 

So far, the ESR, EU ETS and the LULUCF Regulation together have covered all GHG 
emissions  in  a  mutually  exclusive  way,  each  of  them  defining  the  contribution  of  the 
covered  sectors  to  the  overall  target.  The  assessed  options  consider  two  broad 
possibilities. On the one hand, an ESR with the current scope and the ESR and EU ETS 
both  covering  the  buildings  and  road  transport  sectors  (Options  1.1  and  1.2).  On  the 
other  hand,  an  ESR  with  a  reduced  scope  excluding  the  buildings  and  road  transport 
sector  which  maintains  the  current  mutually  exclusive  architecture  of  the  ESR  and  EU 
ETS (Options 2.1 and 2.2). 

From a perspective of effectiveness and environmental integrity, option 1.1 clearly gives 
the  strongest  incentive  to  Member  States  to  adopt  additional  policies  to  achieve  their 
national target. In this context, it is important to note that many measures for ESR sectors 
(buildings,  road  transport,  waste,  agriculture)  are  implemented  at  national  level  for 
reasons of subsidiarity, even if they are governed by EU legislation. Option 1.1 (and to 
lesser extent option 1.2) is therefore characterised by a combination of carbon pricing (in 
transport and buildings), EU measures and national measures, triggered by the individual 
accountability  of  Member  States  to  comply  with  their  national  target.  It  enhances  the 
individual and collective ability to deliver on targets, and therefore enhances the overall 
environmental integrity at EU level.  

From  an  economic  perspective,  this  combination  of  measures  can  be  important  to 
enhance  cost-efficiency  of  the  overall  policy  because  (1)  some  cost-efficient  solutions 

82 

 
can only be taken at national or subnational level and (2) such policies can unlock the full 
potential  of  cost-efficient  measures  taken  at  EU  level,  including  the  carbon  pricing 
incentive  from  a  new  emission  trading.  As  regards  the  second  point,  cost-efficiency 
through carbon pricing will work best if accompanied by national measures, for instance 
related  to  the  availability  of  infrastructure,  ensuring  appropriate  tax  systems,  the 
development  of  financing  mechanisms  for  investments,  and  the  removal  of  market 
barriers and failures (e.g. related to split incentives) and lack of information. At the same 
time,  carbon  pricing  as  well  as  other  EU  policies  will  facilitate  the  achievement  of  the 
targets under the ESR in all Member States.  

In option 2.1 and 2.2 (reduced scope) and in Option 3, Member States have a much lower 
incentive to adopt national measures in the sectors covered by the new ETS to building 
and  road  transport,  as  they  no  longer  have  a  national  target  for  those  sectors.  In  those 
sectors, there is a clear risk that the synergetic effects of both policy instruments will be 
much lower, potentially leading to carbon prices that are higher than needed, which also 
may have distributional effects at the level of lower income groups.   

In Option 3, due to the small size of the remaining emissions (excluding all energy and 
agricultural emissions), the divergent abatement potential, and the regulatory approaches 
already in place for a significant part of these sectors, it does not seem appropriate to set-
up a specific ESR instrument, nor would a GDP/cap based approach seem  suitable.  As 
the  Effort  Sharing  Regulation  would  be  phased  out,  other  instruments  to  cover  the 
remaining  358  MTCO2eq  would  have  to  make  sure  cost-efficient  reductions  in  these 
sectors takes place.  

As regards stakeholder’s preference as detailed in section 6.1, a majority of respondents 
agreed that sectors covered in  the future by the new ETS  should also  remain  under the 
ESR (option 1) for a certain period of time after emissions trading has proved successful. 
As  regards  agricultural  non-CO2  emissions,  a  majority  was  in  favour  of  continuing  to 
include agricultural non-CO2 emissions under the ESR (options 1 and 2).  

Comparison as regards ambition level - Environmental integrity 

Option 1 (maintaining the current scope of the ESR) has two main sub-options: either an 
ambitious  target  increase  to  40%  (Option  1.1)  or  a  moderate  target  increase  of  35% 
(Option  1.2).  Option  1.1  sets  an  ambition  level  through  ESR  targets  that  creates  clear 
incentives  for  Member  States  to  implement  national  policies  in  all  ESR  sectors  (both 
those covered and those not covered by the new ETS) that ensure environmental integrity 
in  2030.  Option  1.2  clearly  has  risks  related  to  environmental  integrity  in  2030  as  the 
ESR  target  itself  would  not  ensure  achievement  the  overall  ambition  of  -40%  GHG 
reductions  in  the  ESR  and  the  carbon  price  signal  (for  the  building  and  road  transport 
sector) are not to deliver the additional efforts required in the ESR sectors not covered by 
the ETS, if not incentivised by an ambitious ESR target or other new policies. A larger 
scope of a new ETS, and a more ambitious target in the new ETS, would lower the risk. 
Similarly  setting  higher  ambition  in  the  existing  ETS  or  the  LULUCF  sector,  beyond 

83 

 
what  is  needed  in  the  cost-efficient  projections,  may  compensate  for  this  risk,  but  may 
create new issues in terms of environmental integrity or cost in those sectors.  

Taking  into  account  the  period  up  to  2030  and  the  potential  accumulation  of  AEA 
surpluses  early  in  the  period,  also  points  to  a  bigger  environmental  risks  over  time  in 
Option 1.2 than Option 1.1. Under Option 1.2, it is a challenge to avoid a too generous 
AEA trajectory compared to emission profiles that could lead to  -40% GHG reductions 
by 2030. 

Option 2 (reducing the current scope of the ESR) also has two main sub-options, either a 
target increase to 35% (Option 2.1) or maintaining current targets (Option 2.2). While 
option 2.1 would set an ambition level that could ensure environmental integrity at least 
for the sectors remaining in the ESR, option 2.2 clearly has risks related to environmental 
integrity in 2030. 

Option 2.1 sets an ambition level through ESR targets with clear incentives for Member 
States to implement national policies that ensure environmental integrity in 2030 in the 
remaining ESR sectors. However, it lacks accountability for Member States in the sectors 
covered  by  an  extended  ETS  to  building  and  road  transport,  and  therefore  lacks 
incentives  for  Member  States  to  take  cost-efficient  measures in  the  new  ETS  sectors. 
Option 2.2 has similar risk characteristics as Option 1.2 related to environmental integrity 
in 2030 as the reduced scope ESR target together with an extended ETS to building and 
road transport would not ensure achievement the overall ambition of -40% in the current 
ESR sectors.  

Option 3 has similar effects in terms of the overall environmental integrity as Option 2 
in so far as it reduces incentives to take measures at national level in the sectors that are 
covered by the new ETS only. In sectors still covered in option 3 but not covered by the 
new ETS or a new land instrument79, additional and updated policies would be required, 
but given its significantly reduced scope with remaining emissions of 358 MTCO2eq the 
overall  environmental  integrity  concerns  related  to  those  specific  sectors  are  more 
limited. 

As indicated in section 6.1, the results of the ESR open public consultation showed that 
the  great  majority  of  respondents  agreed  that  the  regulated  sectors  should  deliver 
additional  reductions  (options  1  and  2.1.).  A  very  limited  number  of  stakeholders  from 
the energy sector (4) did not agree to Member States’ increased ambition. The results of 
the campaign launched to  provide feedback in  the open public consultation resulting in 
more than 45,500 EU citizens asking to keep ESR scope and increasing national targets 
in line with the 55% GHG net reduction ambition for 2030 are reflected along the same 
lines (see 10.2.2).  

Summarising  the  findings  under  specific  objective  1  (Define  scope  ensuring 
effectiveness  and  overall  environmental  integrity),  option  1.1.  (i.e.  an  ESR  with  the 

79 LULUCF + agriculture, also referred to in option 3 in the LULUCF impact assessment. 

84 

 
                                                 
current  scope  and  the  ESR  and  a  new  EU  ETS  both  covering  the  buildings  and  road 
transport  sectors)  is  shown  as  the  most  advantageous.  This  option  clearly  gives  the 
strongest incentive to Member States to adopt additional policies to achieve their national 
target, respecting subsidiarity principle, indicated in  Table 15.  As (++) rating indicates, 
carbon pricing will work best if accompanied by national measures, for instance related 
to the availability of infrastructure, ensuring appropriate tax systems, the development of 
financing  mechanisms  for  investments,  and  the  removal  of  market  barriers  and  failures 
(e.g. related to split incentives) and lack of information.  

Additionally,  option  1.1.  scores  the  highest  (++)  as  opposed  to  option  1.2.  (0)  on 
environmental integrity because in the latter case national targets would only increase to 
a limited extent, which would need to be matched by further ambition increases in other 
sectors, which would be very difficult to realise. Option 2.1. scores positive (+) in terms 
of  environmental  integrity,  but  lower  than  option  1.1,  given  the  fact  that  synergies 
between national measures and carbon pricing would be lower. Finally, option 2.2. and 3 
score  negative  in  Table  15  (-)  as  the  burden  is  diverted  to  other  policy  instruments, 
challenging the effectiveness and environmental integrity of the ESR itself.  

Comparison  as  regards  fairness  (specific  objective  2)  and  cost  efficiency  (specific 
objective 3) 

The basic design of the current ESR to address the differences in economic capacity of 
Member States, as well as a relative adjustment to reflect the cost-efficiency in a fair and 
balanced  manner  is  maintained  under  both  options  1  and  2.  Under  Options  1,  a 
distribution based on GDP per capita results typically in a gap between the GDP based 
target  and  the  cost  efficient  abatement  potential  for  high  income  Member  States,  while 
low  income  Member  States  receive  targets  that  tend  to  be  below  the  cost  efficient 
reduction potential.  

In  order  to  smoothen  part  of  these  differences  between  high  income  Member  States  a 
continuation  of  a  limited  but  updated  adjustment  of  the  GDP  target  between  the  high 
income Member States could be considered, as well as other elements, such continuation 
of the one-off ETS flexibility. 

Some  differences  between  the  GDP  based  target  and  the  cost  efficient  abatement 
potential  can  be  observed  also  within  the  group  of  low  and  middle-income  Member 
States, although most Member States in this group have targets which are set below the 
cost  efficient  reduction  potential.  This  is  fair,  because  achieving  the  full  cost  efficient 
potential may still require in relative terms larger efforts in these countries. 

Among  the  low  and  middle-income  Member  States  Malta  faces  a  significantly  higher 
cost-efficiency gap and a specific treatment could therefore be considered. This is already 
recognised in the current ESR, with Malta being the only low to middle income Member 
State having access to the ETS flexibility in the ESR. Also Cyprus, as small island state, 
and all the Baltic states have a cost-efficiency gap, though significantly smaller than MT. 
For these Member States limited corrective actions could be considered.  

85 

 
To improve convergence of targets between Member States for Option 1.1 compared to 
a situation that only updates the targets according to the GDP per capita formula, a limit 
to  the  target  increase  could  be  introduce.  This  would  then  need  to  be  compensated  by 
increased  efforts  by  those  Member  States  that  have  no  gap.  Overall  the  target  option 
consider, strongly converge GHG emissions per capita in the EU by 2030, also compared 
to the existing 2030 targets. 

Under Option 2.1, a distribution of emissions reduction based on GDP per capita mainly 
results in different gaps between the GDP based target and the cost efficient abatement 
potential for each high income Member States. With a reduced scope, the impact of the 
LULUCF flexibility gains in relative importance.  

Even with the (relatively small) adjustments for cost efficiency that have been described 
in this IA for Option 1.1 , a gap between certain Member States’ adjusted target and their 
cost-efficient  abatement  potential  will  remain.  The  flexibility  requirements  that  are 
currently foreseen in the ESR contribute to achieving overall cost-efficiency in reaching 
the EU’s GHG emission reduction target. The impact of these flexibilities for each of the 
options is summarised below. 

Under Option 3 the distribution of emissions that would not be covered by an ETS or a 
land  instrument80  is  very  diverse  across  Member  States.  This  option  would  require  EU 
specific legislation tackling current ESR sectors to provide incentives as regards fairness 
and cost-efficiency.  

As regards stakeholder views, a majority of respondents of the open public consultation 
supported fairness and cost-efficiency as key parameters for setting national targets in the 
ESR, taking national circumstances into account.  

As a summary of the findings focusing only on specific objective 2 (fairness), option 1 
(i.e. an ESR with the current scope and the ESR and a new EU ETS both covering the 
buildings and road transport sectors) is the most favourable option, as depicted in Table 
15  with  rating  (++).  Under  option  1,  GDP/capita  is  main  driver  for  target  setting  and 
Member States’ specific potential is better taken into account. Options 2 scores positive 
too  (++)  given  the  fact  that  GDP/capita  is  kept  as  the  main  driver  for  target  setting. 
Finally, option 3 scores neutral (0) since achievement of the fairness objective will solely 
depend on specific measures implemented in remaining sectors as indicated in Table 15.  

A  summary  of  the  comparison  of  options  under  specific  objective  3  (cost-efficiency), 
brings option 1.1.2. and option 1.2. to be rated the highest (++) in Table 15 because both 
options  are  based  on  GDP/capita  with  additional  adjustments  based  on  cost  efficient 
abatement potential, not only in high-income Member States but also within the group of 
low  and  middle-income  Member  States.  High  income  Member  States  could  be 
considered eligible to a limited one-off ETS flexibility in some specific cases. This is the 
case  for  both  Option  1.1  and  Option  1.2.  Target  option  1.1.1.  received  only  partial 

80 LULUCF + agriculture, also referred to in option 3 in the LULUCF impact assessment. 

86 

 
                                                 
positive  rating  (+)  because  under  this  option  target  adjustments  are  not  applied.  As 
regards  option  2,  the  assessment  of  the  cost-efficiency  specific  objective  is  neutral  (0) 
due  to  the  fact  that  less  cost-efficiency  arises  in  meeting  ambition  in  transport  and 
buildings,  which  would  not  be  part  of  ESR  scope  at  all.  Finally,  option  3  receives  a 
neutral  rating  (0)  in  Table  15  since  cost-efficiency  will  depend  on  specific  measures 
implemented in remaining sectors and not in ESR itself. 

Comparison as regards flexibility mechanism 

The impact of the current ETS flexibility is assessed for all options. The options do not 
materially  change the logic for such flexibility set  out  in  the  current  Regulation,  as the 
gap between a fair target  based on GDP per capita and the cost  efficient  abatement  for 
high income Member States and for Malta is still largely in line with the analysis made in 
2016.  The  ETS  flexibility  would  continue  to  allow  these  Member  States  the  ability  to 
achieve their target more cost efficiently. 

The  current  LULUCF  flexibility  provides  the  possibility  for  Member  States  to  achieve 
their  targets  in  the  ESR  in  a  more  cost  efficiently  under  all  options. 
The  Climate  Law 
foresees that in order to ensure that sufficient mitigation efforts are deployed until 2030, 
the  contribution  of  net  removals  to  the  at  least  net  55%  GHG  reduction  target  in  2030 
shall be limited to 225 Mt CO2-eq. This provision in the Climate Law is without prejudice 
to the revision of Union legislation, and thus it does not preclude the continued use of the 
LULUCF  flexibility  under  the  ESR.  Nevertheless  it  was  assessed  to  which  extent  the 
potential use of the LULUCF flexibility can increase the risk of not meeting the ambition 
as foreseen under the Climate Law. 

This  risk  will  significantly  reduce  with  a  high  ambition  in  the  LULUCF  sector  itself, 
reducing  the  available  credits  and  potentially  even  resulting  in  some  demand  in  some 
Member  States  for  ESR  AEAs  going  towards  the  LULUCF  sector  for  compliance. 
Furthermore  if  the  LULUCF  flexibility  would  split  over  the  two  compliance  periods 
without banking over these period, this risk to not meet the requirements of the Climate 
Law would be further reduced. 

Thus, both the existing ETS and LULUCF flexibility serve their purpose, contributing to 
some extent to reducing the gap in countries where this is most evident, though the role 
of the LULUCF flexibility will be reduced.  

Due  to  the  increased  overall  ambition,  notably  in  option  1.1,  it  can  be  expected  that 
flexibilities  will be used in  a more targeted manner. The dynamics of flexibilities have 
changed  and  additional,  more  restricted  elements  might  arise,  leading  to  a  choice  at 
Member  State  level  on  what  actions  to  put  in  place.  In  that  sense,  the  high  income 
Member  States  as  a  group  will  need  to  make  a  choice  to  either  increase  abatement 
beyond  cost  efficient  projections,  or  engage  in  trading  in  the  ESR  with  those  Member 
States that will overachieve their targets.  In this regard, the carbon price of a new ETS 
will lead to additional abatement in low and middle income countries which increases the 
likelihood that surpluses of AEAs available in case of option 1.1. 

87 

 
Finally, similar to the existing safety reserve, a new reserve could be contemplated that 
allows for the use of unused LULUCF credits81, once the environmental integrity of the 
Climate Law is secured at the end of the second compliance period (i.e. in case the EU 
overall  has  achieved  sufficient  mitigation)  for  those  Member  States  in  need  of 
compliance  credits.  This  reserve  would  also  be  dependent  upon  performance  in  the 
LULUCF sector.  

With regards to flexibility mechanisms, stakeholders showed a preference for flexibility 
between  countries  and  flexibility  over  time  either  through  banking  or  borrowing.  As 
regards ETS flexibility, half of the respondents agreed that should only be applicable for 
ETS  allowances  originating  from  the  ETS,  and  not  for  allowances  from  sectors  in 
transitional ETS arrangements (i.e. option 1 and 2). As regards LULUCF flexibility, all 
public  authorities  agreed  that  if  ESR  targets  were  increased,  the  maximum  allowed 
number of credits should be increased to strengthen incentives for carbon removals.  

In a nutshell, after the assessment of the flexibility mechanism for each option, option 
1.1.2.  and  option  1.2.  are  rated  the  highest  (++)  in  Table  15  under  specific  objective  3 
which includes also flexibilities’ assessment because both options ensured the continued 
role  of  flexibilities  from  current  ESR.  The  combination  of  flexibilities  could  somehow 
help Member States to meet their target through a combination of domestic measures and 
available flexibilities, under all options. 

 Administrative and monitoring impacts 

The Effort Sharing Regulation primarily addresses Member States as institutional actors 
and thus mostly affects their national administrations.  The practical implications of this 
initiative  as  regards  administrative  and  monitoring  impacts  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 actions. 

As the Commission would continue with its monitoring exercise of the ESR emissions, 
and the reporting obligations by Member States presented in the Governance Regulation 
would still apply, the administrative and monitoring impact for Options 1 and Options 2 
appear limited. Under Option 1 the impact is expected to be higher than under option 2 
for  the  involved  sectors,  as  ETS  obligations  will  also  apply  to  the  buildings  and  road 
transport  sector  and  some  complexities  may  result  from  differences  in  emission 
calculation method between ESR and the new extended ETS.  

Option 3 would reduce the administrative burden related to the ESR implementation for 
Member States. The monitoring and compliance cycle for the Effort Sharing Regulation 
would no longer be  required as ESR would be redistributed in  other climate legislative 
instruments.  However,  achieving  the  required  emission  reductions  would  necessitate 
implementation of other EU or national policies.  

81

  Unused  net  removals  are  those  not  used  in  the  current  LULUCF  flexibility  of  Article  7  ESR,  and  not 

used in the newly contemplated LULUCF safety reserve. 

88 

 
                                                 
Finally, concerning the administrative burden, while Options 1 and 2 might only require 
minimum  amendments  to  the  Governance  Regulation,  Option  3  is  likely  to  require  a 
larger  number  of  amendments  to  reflect  the  material  changes  of  the  phase-out  of  the 
Effort Sharing Regulation.  

When asked about the role of the National Energy and Climate Plans (NECPs) embedded 
under Governance Regulation, stakeholders did not express strong views (neither positive 
nor  negative)  on  the  level  of  ambition  presented  in  each  NECP  to  distribute  additional 
efforts (70 left the question blank and 56 were neutral, compared to 96 in favour and 53 
against).  The  agricultural  sector  was  mainly  in  favour  of  considering  NECPs  ambition 
when distributing additional efforts under ESR targets. However, as regards monitoring 
and compliance several NGOs were vocal about the necessity of establishing coherence 
between the EU instruments and the NECP framework.  

In summary,  administrative and  monitoring impacts would have a  minimal  impact 
for options 1 and 2.  Under option 1 which includes parallel  coverage of  transport and 
building sectors under ESR and a new ETS for both sectors, the impact is expected to be 
higher that under option 2, where parallel  coverage is  not  included.  In this  regard, it is 
important to flag that the primary actors of ESR are national public administrations and 
Member  States  as  institutional  actors.  Nonetheless,  the  reporting  and  compliance 
obligations  would  exist  regardless  of  the  scope  of  ESR.  Option  3  would  reduce  the 
administrative burden in the ESR itself since it would no longer exist. However, it would 
increase  the  administrative  burden  in  other  legislative  instruments  in  the  phase-out 
transition. Achieving the required emission reductions would necessitate implementation 
of other EU or national policies.  

89 

 
Table 15: Comparison overview with all possible options 

General objective: Reach at least 55% net greenhouse gas emission reductions by 2030 compared to 1990, in line with the 
2030 Climate Target Plan. 

Policy option  

Main elements 

 1. Unchanged Scope (Parallel coverage ETS/ESR) 

1.1. Parallel coverage 

  ESR scope maintained 

Specific objective 1: 
Define scope 
ensuring overall 
environmental 
integrity  

Specific objective 
2: Fairness 
reflecting national 
circumstances 

Specific objective 3: 
Promote cost-
efficiency, including 
with targeted 
adjustment and use 
of flexibilities 

ETS/ESR with high 
ESR ambition (-40%) 

  New ETS parallel to current ETS for ESR sectors: building & road transport 

  Targets revised in line with -55% 

  Role of flexibilities kept unchanged but reduced availability of the LULUCF flexibility. 

Target option 1.1.1: baseline, based purely based on GDP/cap  

++ 

Target  option  1.1.2:  based  on  GDP/cap  with  additional 
adjustments  

++ 

1.2. Parallel coverage 
ETS/ESR, limited increase 
in ESR ambition and in 
flexibilities 

  ESR scope maintained 

0 

  New ETS parallel to current 

ETS for ESR sectors: building 
and road transport 

  Limited increase of ambition (-
35%), no adjustments for cost 
efficiency high income Member 
States 

  Role of flexibilities kept 
unchanged but reduced 
availability of the LULUCF 
flexibility. 

  Option 2: Reduced scope ESR (without transport & buildings sectors) 

2.1. Reduced scope ESR, increase in ambition (i.e. -35% at EU 
level), unchanged role of flexibilities but reduced availability of 
the LULUCF flexibility 

2.2. Reduced scope ESR, current ESR ambition maintained (i.e. 
-27% at EU level), unchanged role of flexibilities reduced 
availability of the LULUCF flexibility 

Option 3: phasing-out ESR 

Phase out of the Effort 
Sharing Regulation and 
replacement by other 
policy instruments 

  New ETS and new land 
instrument (LULUCF + 
agriculture) + relevant sectorial 
regulation to cover remaining 
ESR sectors. 

+ 

-  

-    

++  

++ 

++ 

++ 

+ 

0 

+ 

++ 

++ 

0 

0 

Note: (++) represents the highest possible rating for each specific objective; (+) represents a positive rating with 
areas for improvement for the respective specific objective; (0) represents a neutral assessment for the respective 

90 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
specific objective, either because of not ESR intervention or because of lack of specific measures for suggested 
scope  and  the  respective  specific  objective;  (-)  represents  a  negative  effect  for  the  respective  each  specific 
objective.  

8. 

PREFERRED OPTION 

When proposing its updated 2030 greenhouse gas emissions reduction target of at least 
55%,  the  European  Commission  also  described  the  actions  across  all  sectors  of  the 
economy  that  would  complement  national  efforts  to  achieve  the  increased  ambition.  A 
number of impact assessments have been prepared to support the envisaged revisions of 
key legislative instruments.  

Against  this  background,  this  impact  assessment  has  analysed  the  various  options 
through  which  a  revision  of  the  Effort  Sharing  Regulation  could  effectively  and 
efficiently contribute to the delivery of the updated target as part of a wider “Fit for 55” 
policy package. 

Methodological approach  

Drawing  conclusions  about  preferred  options  from  this  analysis  requires  tackling  two 
methodological issues.  

First,  as  often  the  case  in  impact  assessment  analysis,  ranking  options  may  not  be 
straightforward as it may not be possible to compare options through a single metric and 
no option may clearly dominate the others across relevant criteria. Ranking then requires 
an  implicit  weighting  of  the  different  criteria  that  can  only  be  justifiably  established  at 
the political level. In such cases, an impact assessment should wean out as many inferior 
options  as  possible  while  transparently  provide  the  information  required  for  political 
decision-making.  This  is  what  this  report  does  for  the  revision  of  the  Effort  Sharing 
regulation.  

Secondly,  the  “Fit  for  55”  package  involves  a  high  number  of  interlinked  initiatives 
underpinned  by  individual  impact  assessments.  Therefore,  there  is  a  need  to  ensure 
coherence between the preferred options of various impact assessments.  

Policy interactions 

Given  the  complex  interdependence  across  policy  tools  and  the  interplay  with  the 
methodological  issue  outlined  above,  no  simultaneous  determination  of  a  preferred 
policy package is thus possible. A sequential approach was therefore necessary.  

First, the common economic assessment, underpinning the “Communication on Stepping 
up  Europe’s  2030  climate  ambition”  looked  at  the  feasibility  of  achieving  a  higher 
climate target and provided insights into the efforts that individual sectors would have to 
make. It could not, however, discuss precise sectoral ambitions or detailed policy tools. 
Rather, it looked at a range of possible pathways/scenarios to explore the delivery of the 
increased  climate  ambition.  It  noted  particular  benefits  in  deploying  a  broad  mix  of 

91 

 
 
policy  instruments,  including  strengthened  carbon  pricing,  increased  regulatory  policy 
ambition and the identification of the investments to step up the climate ambition. 

An update of the pathway/scenario focusing on a combination of extended use of carbon 
pricing  and  medium  intensification  of  regulatory  measures  in  the  economy,  while  also 
reflecting  the  COVID-19  pandemic  and  the  National  Energy  and  Climate  Plans, 
confirmed these findings.  

Taking  this  pathway  and  the  Communication  on  Stepping  up  Europe’s  2030  climate 
ambition  as  central  reference,  individual  impact  assessments  for  all  “Fit  for  55” 
initiatives were then developed with a view to provide the required evidence base for the 
final step of detailing an effective, efficient and coherent “Fit for 55” package. 

At the aggregate level, these impact assessments provide considerable reassurances about 
the policy indications adopted by the Commission in the Communication on Stepping up 
Europe’s  2030  climate  ambition.  This  concerns  notably  a  stronger  and  more 
comprehensive role of carbon pricing, energy efficiency and renewable energy policies, 
land  sector,  and  the  instruments  supporting  sustainable  mobility  and  transport.  These 
would be complemented by a carbon border adjustment mechanism and phasing out free 
allowances.  This  would  allow  to  continue  to  address  the  risk  of  carbon  leakage  in  an 
efficient manner. It would also preserve the full scope of the Effort Sharing Regulation 
for the achievement of the increased climate target.   

Various elements of the analyses also suggest that parts of the revenues of a strengthened 
and  new  ETS  should  be  used  to  counter  any  undesirable  distributional  impacts  such  a 
package would entail (between and within Member States). While the best way to do this 
is still to be determined, this would seem a superior alternative to foregoing the relevant 
measures  altogether  or  simply  disregarding  the  uneven  nature  of  their  distributional 
impacts.  Under  both  these  alternatives,  the  eventual  success  of  any  package  proposed 
would be at risk.  

Preferred policy options 

Preliminarily  assuming  this  fact  and  the  analysis  above  as  the  framework  for    the 
aggregate “Fit for 55” package, the specific analysis carried out in this impact assessment 
comes  to  the  main  following  conclusions  and  would  suggest  the  following  preferred 
policy options for the revision of the Effort Sharing Regulation. 

The  ESR  currently  regulates  around  60%  of  the  EU’s  greenhouse  gas  emissions  by 
setting  a  collective  target,  as  well  as  national  targets  that  explicitly  take  into  account 
fairness.  Actual  emission  reductions  in  the  ESR  sectors  will  still  require  actions  and 
policies  at  national  level  driven  by  Member  States.  In  addition,  the  EU  can  support 
emission reductions within this framework with dedicated policies providing for: 

92 

 
 
 

 

improved pricing instruments to reward low carbon solutions and efficiency (i.e. 
a strengthened Energy Tax Directive making energy taxation more coherent with 
the  transition  to  climate  neutrality  and  the  further  development  of  emission 
trading in sectors such as buildings and road transport); 
increased  availability  of  technologies  and  infrastructure  for  end  consumers  that 
enable    decarbonisation  through  a  combination  of  regulatory  instruments  and 
investment  incentives  (e.g.  CO2  and  cars/vans  legislation,  Renewable  Energy 
Directive, Alternative Fuels Infrastructure Directive, TEN-E and TEN-T); 

  addressing market failures and improving information (e.g. the Energy Efficiency 
Directive, the Energy Performance of Buildings Directive, Eco-design standards 
and Energy labelling);  
improved  means  and  access  to  finance  that  allows  supporting  increased 
investments  required  for  decarbonisation  (e.g.  Connecting  Europe  Facility,  the 
EU’s  Multiannual  Financial  Framework  and  Next  Generation  EU  and  re-
distributional mechanisms related to auctioning in the emission trading system). 

 

Given the strong role of subsidiarity in many of these sectoral EU policies, continuation 
of  the  ESR  in  its  current  scope  is  seen  as  the  preferred  option.  This  will  ensure  that 
Member States are accountable and have the right incentives to implement both national 
and  EU  policies  in  an  ambitious  manner,  while  providing  the  flexibility  to  take  into 
account their national circumstances. This national accountability is accompanied by the 
Governance Regulation and National Energy and Climate Plans to further strengthen an 
integrated and pro-active approach to deliver on the national targets. The administrative 
burden is not increased by keeping ESR’s current scope in the reporting mechanism by 
Member States.  

The  Impact  Assessments  clearly  point  towards  the  need  for  strong  complementary 
policies  to  deliver  emission  reductions  in  conjunction  with  pricing  instruments,  as 
demonstrated in the MIX scenario.  In such a context, the extension of emission trading 
to new sectors, is seen as contributing to the achievement of the ESR target, and not as a 
substitution of it.  

The  preferred  option  is  to  increase  ambition  in  the  ESR  in  line  with  the  cost  efficient 
projections to achieve the overall climate ambition for 2030 set out in the Climate Target 
Plan. Indeed, from an environmental integrity perspective, the option to propose only a 
limited increase in ambition in national targets under the ESR and instead to rely mainly 
on  EU  instruments,  including  an  extended  Emission  Trading  System  to  road  transport 
and  building  sectors,  carries  a  risk  not  to  deliver  the  required  emission  reductions. 
Indeed, an extended Emission Trading System cannot be the only architectural pillar of 
these  sectors  but  rather  an  additional  support  to  ensure  reaching  the  increased  2030 
ambition.  

93 

 
 
Increasing  the  national  targets  under  the  ESR  will  require  revisiting  fairness  and  cost 
efficiency  within  the  instrument.  As  regards  fairness,  the  assessment  concludes  that  an 
update of the target setting approach based on GDP per capita is still appropriate, while 
applying  a  limited  amount  of  targeted  corrections  to  address  cost  efficiency  concerns. 
Overall  this  will  drive  towards  convergence  of  per  capita  emissions  in  these  sectors 
across the EU. 

In view of ensuring maximum cost-efficiency, all existing flexibilities are expected to be 
used with the increased ambition, reflected in a 40% EU target for ESR. The flexibility 
instruments, both in their scale and functioning, are deemed to be appropriate to ensure 
enhanced cost efficiency of the overall policy.  

The  Climate  Law  foresees  that  in  order  to  ensure  that  sufficient  mitigation  efforts  are 
deployed  until  2030,  the  contribution  of  net  removals  to  the  at  least  net  55%  GHG 
reduction target in 2030 shall be limited to 225 Mt CO2-eq. This provision in the Climate 
Law is without prejudice to the revision of Union legislation. The proposed increase in 
ambition  of  the  LULUCF  regulation,  together  with  splitting  the  existing  LULUCF 
flexibility for use in each of the 5 year compliance periods, reduces the likelihood of not 
meeting the requirements of the Climate Law. Still, allowing for flexibility from the ESR 
sector into the LULUCF sectors and limited flexibility vice versa, is beneficial in order to 
enable Member States to comply effectively with their individual obligations. 

The establishment of a new mechanism taking the form of an additional reserve could be 
considered.  This  reserve  could  be  triggered  only  once  the  requirements  of  the  Climate 
Law  are  achieved,  for  the  purpose  of  national  compliance  with  ESR  targets  by 
transferring any unused LULUCF credits82 at the end of the second compliance period to 
those  Member  States  in  need.  However,  the  use  of  this  reserve  will  depend  on  over-
performance in the LULUCF sector.  

9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED?  

As  concluded  in  section  6.1.6  and  6.2.5  on  administrative  impacts  of  the  current 
compliance rules, the monitoring and evaluation of the effects and impacts of the revised 
Effort  Sharing  Regulation  would  follow  largely  the  same  rules  and  procedures  already 
established  in  the  current  ESR  for  the  commitment  period  2021-2030  for  the  preferred 
option.  It  would  not  increase  the  administrative  burden  of  the  reporting  mechanism  by 
Member States, as main actors targetted by the ESR. 

A comprehensive framework of monitoring, reporting and verification is laid down partly 
in the ESR itself and partly in the Regulation (EU) 2018/1999 on the Governance of the 

82

  Unused  net  removals  are  those  not  used  in  the  current  LULUCF  flexibility  of  Article  7  ESR,  and  not 

used in the newly designed LULUCF safety reserve. 

94 

 
 
                                                 
Energy  Union  and  Climate  Action  (Governance  Regulation)83  and  its  implementing 
provisions84.  Member  States  are  obliged  to  annually  report  their  greenhouse  gas 
emissions to the Commission. 

In a nutshell, the current framework reviews Member States’ emissions as follows:  

1.  First,  the  data  is  requested  to  Member  States  to  produce  the  annual  inventory 
checks, with the support of the European Environment Agency. This include the 
UNFCCF  inventory  data  as  well  as  the  inventory  data  of  the  existing  ETS  (for 
option 1) and the new ETS (for option 2). 

2.  Second, the Commission produces the evaluative annual progress reports.  
3.  Thirdly,  the  five-yearly  comprehensive  review  is  carried  out  before  compliance 

checks, which, de facto, are formalised as ESR progress checks. 

The Implementing Decision85 adopted by the Commission in December 2020 sets out the 
annual  emission  allocations  (AEAs)  for  each  Member  State  for  the  years  from  2021  to 
2030  in  terms  of  tonnes  of  CO2  equivalent  as  laid  down  in  the  ESR86.  A  similar 
implementing  decision  would  need  to  be  adopted  to  set  revised  AEAs,  unless  it  is 
decided  to  define  them  in  ESR  legislation  already  if  the  scope  is  not  changed  (under 
option 1).  

The  Commission  annually  evaluates  Member  States’  progress  in  reducing  GHG 
emissions, taking into account progress in Union policies and measures and information 
from  Member  States.  Member  States  report  their  GHG  emissions  every  year  and  their 
submitted  greenhouse  gas  emissions  inventories  are  subject  to  a  quality  assurance  and 
quality  control  that  includes  checks  of  the  transparency,  accuracy,  consistency, 
comparability and completeness of the submitted inventories. Every two years, Member 
States  are  obliged  to  report  on  national  policies  and  measures  and  national  systems  of 
policies and measures implemented in order to achieve their targets under the ESR and 
on their emission projections. 

83 Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the 
Governance of the Energy Union and Climate Action, amending Regulations (EC) No 663/2009 and (EC) 
No 715/2009 of the European Parliament and of the Council, Directives 94/22/EC, 98/70/EC, 2009/31/EC, 
2009/73/EC,  2010/31/EU,  2012/27/EU  and  2013/30/EU  of  the  European  Parliament  and  of  the  Council, 
Council  Directives  2009/119/EC  and  (EU)  2015/652  and  repealing  Regulation  (EU)  No  525/2013  of  the 
European Parliament and of the Council 
84  Commission  Implementing  Regulation  (EU)  2020/1208  of  7  August  2020  on  structure,  format, 
submission processes and review of information reported by Member States pursuant to Regulation (EU) 
2018/1999  of  the  European  Parliament  and  of  the  Council  and  repealing  Commission  Implementing 
Regulation (EU) No 749/2014 
85  Commission  Implementing  Decision  (EU)  2020/2126  of  16  December  2020  on  setting  out  the  annual 
emission allocations of the Member States for the period from 2021 to 2030 pursuant to Regulation (EU) 
2018/842 of the European Parliament and of the Council. 
86 Idem. 

95 

 
 
                                                 
In order to ensure efficient, transparent, cost-effective reporting and verification of GHG 
emissions  and  of  other  information  necessary  to  assess  progress  with  Member  State’s 
annual targets in 2021-2030, the requirements for annual reporting and evaluation under 
ESR integrated into the Governance Regulation would be kept as in current ESR (option 
1 and option 2).  

Under article 9 of the ESR, the control of Member States’ compliance with their annual 
targets  is  carried  out  every  5  years.  The  Commission  shall  carry  out  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  ensures  that  the  compliance  check  is  synchronised  with  accounting  and 
compliance under the LULUCF Regulation87, and allows for using any LULUCF credit 
for compliance with the non-ETS target. It also aligns the ESR compliance cycle in the 
2021-2030  commitment  period  with  the  ambition  cycle  agreed  under  the  Paris 
Agreement. 

To ensure that the five  yearly compliance check is based on accurate and verified data, 
the  GHG  emissions  inventories  submitted  by  Member  States  for  the  relevant  years  are 
subject  to  a  comprehensive  Union  review  co-ordinated  by  the  European  Environment 
Agency on behalf of the Commission as laid down in the Governance Regulation and its 
implementing legislation. 

The compliance control is performed by the Commission by comparing the reported and 
reviewed emissions with the annual emission allocations. 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 emissions and 
emission limits for a particular year. 

If a Member State does not comply after applying the flexibility instruments, a deduction 
is applied 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.  

In addition to the compliance checks in 2027 and 2032, Member States’ progress towards 
their 2030 targets are monitored every year and reported by the Commission in its annual 
climate action progress report88. Should the progress report show that a Member State is 
not on track for a specific year during the compliance period, it will have to submit to the 
Commission  a  corrective  action  plan  including  the  actions  to  be  taken  by  the  Member 

87  Regulation  (EU)  2018/841  of  the  European  Parliament  and  of  the  Council  of  30  May  2018  on  the 
inclusion  of  greenhouse  gas  emissions  and  removals  from  land  use,  land  use  change  and  forestry  in  the 
2030  climate  and  energy  framework,  and  amending  Regulation  (EU)  No  525/2013  and  Decision  No 
529/2013/EU 
88 The report will present Member States’ progress towards their obligations under the Energy Union and 
its governance system.  

96 

 
 
                                                 
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. 

Since  the  Effort  Sharing  emissions  under  option  1  are  impacted  by  notably  the 
availability of the ETS inventory data it is important to have a clear understanding of the 
implications of current  data availability. Here it is  relevant  to  mention  that the existing 
ETS  compliance  cycle  is  defined  as  the  annual  procedure  of  monitoring,  reporting  and 
verification  (MRV),  together  with  all  the  associated  processes.  Every  year,  operators 
must submit an emissions report. An accredited verifier must verify the data for a given 
year  by  31  March  of  the  following  year.  Once  verified,  operators  must  surrender  the 
equivalent number of allowances by 30 April of that year.  

As regards the options presented in this impact assessment, option 1 implies keeping the 
current scope of the ESR and the existing monitoring, reporting and compliance system. 
If  GHG  inventories  would  continue  to  be  used  for  all  the  sectors  covered,  consistency 
checks to explain differences between the emissions which would be covered double in 
GHG  inventories  and  under  a  new  ETS  would  be  introduced  into  the  GHG  inventory 
reporting, similar as for current ETS emissions. If new ETS MRV data would be used for 
those  sectors,  then  ESR  emissions  would  be  calculated  as  under  option  2,  and  then 
verified new ETS emissions be added to calculate ESR emissions.  Under option 2 which 
foresees a reduced  scope of the current  ESR, the scope of the ETS  emissions deducted 
and  based  on  a  separate  MRV  system  would  now  be  larger,  which  would  mean  that 
AEAs and 2005 base years would need to be recalculated based on the reduced scope.  

In conclusion, the existing monitoring, reporting and compliance check and as laid down 
in the current ESR and the Governance Regulation would be maintained in the Revision 
of  the  ESR  proposal.  An  update  of  the  AEAs  would  be  needed  in  case  of  increased 
national  targets.  The  two  independent  monitoring  systems  (for  parallel  coverage  of 
transport  and  building  sectors  both  under  new  ETS  and  ESR)  do  not  increase  the 
complexity since they target different reporting actors (national authorities for ESR and 
specific sectors for the new ETS).  

10.  ANNEXES 

10.1. Procedural information 

10.1.1. Lead DG, Decide Planning/CWP references 

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.  The 
planning entry was approved in Decide Planning under the reference PLAN/2020/8680. 

97 

 
 
It is included in the 2021 Commission Work Programme under the policy objective “Fit 
for 55 Package”89. 

10.1.2. Organisation and timing  

  The planned adoption date (Q2 2021) was included in the Commission Work 

Programme adopted on 19 October 2020. 

  The Inception Impact Assessment was open for feedback between 29 October 

2020 and 26 November 2020 

  The Open Public Consultation was online between 13 November 2020 and 05 

February 2021 

  An inter-service steering group (ISG), was established for preparing the climate-
related  “Fit  for  55  Package”  initiatives.  Its  members  were:  SG,  LS,  AGRI, 
BUDG, COMM,  COMP,  CNECT,  DEFIS, DGT, DIGIT,  EAC, ECFIN,  ECHO, 
the  EEAS,  EMPL,  ENER,  ENV,  ESTAT,  FISMA,  FPI,  GROW,  HOME,  HR, 
IDEA,  IAS,  INTPA,  JRC,  JUST,  MARE,  MOVE,  NEAR,  OLAF,  REFORM, 
REGIO, RTD, SANTE, TAXUD, and TRADE.  

  The ISG met four times in the period from September until adoption in July 2021. 

10.1.3. Consultation of the RSB  

The  RSB  meeting  on  this  initiative  took  place  on  14  April  2021  with  positive  opinion 
with reservations delivered on 19th April. Following the RSB opinion from 19th April the 
changes  where  introduced  to  address  detailed  comments  by  the  RSB.  Regarding  key 
findings of the RSB, the following changes were introduced:  

(i) 

(ii) 

(iii) 

The  narrative  in  sections  1,  2,  4  and  5  has  been  improved  specifically 
regarding  the  complementarities  between  ESR  and  related  Fit  for  55 
legislation, notably the ETS and the LULUCF legislation. This includes more 
explicitly  what  elements  were  part  of  the  Climate  Target  Plan,  and  which 
elements needed further scrutiny under this impact assessment. A new annex 
10.8 includes now the 2030 Climate Target Plan policy conclusions. 
In the analytical section the link with the LULUCF Regulation was reviewed, 
also  to  take  into  account  the  implications  of  the  Climate  Law  political 
agreement.  
The narrative to justify the appropriateness of keeping ESR scope untouched, 
is reinforced in section 6.1. and consequently reflected in sections 7, 8 and 9.  

89 COM(2020) 690 final  

98 

 
 
                                                 
(iv)  Annex 10.3 was elaborated and now identifies who will be affected and how, 
what  are  the  main  costs  and  benefits  of  the  preferred  option.  It  includes  a 
more  detailed  assessment  of  impacts  at  sectoral  and  country  level  related  to 
sector  of  key  importance  to  the  ESR  such  as  road  transport,  buildings, 
agriculture  and  Non-CO2  emissions  in  general.  Additionally,  a  summary  of 
costs  and  benefits  has  been  developed  based  on  modelling  results  including 
energy-related  costs  as  %  GDP  per  residential,  services  and  transport,  air 
quality  benefits  depicted  as  lowered  emissions  of  air  pollutants  and,  finally, 
health and economic impacts of improved air quality.  
This  version  includes  better  representation  of  stakeholder  views,  namely  a 
detailed  assessment  and  representation  of  stakeholder  views  across  the 
document (especially in section 6, 7 and 8) including correlation assessment 
of main stakeholder groups. A complete annex 10.2 also includes a complete 
overview of the results of stakeholder consultation activities carried out in the 
context of the revision of the ESR and Fit for 55 policy package.  

(v) 

Finally, a thorough exercise to improve readability and address editorial aspects flagged 
by the Board has been carried out aiming at adding explanations to make the content as 
clear as possible. 

10.1.4. Evidence, sources and quality  

See annex 10.4 

99 

 
 
 
10.2. Stakeholder consultation 

The Commission carried out consultation activities on the plan to increase the EU 2030 
Greenhouse Gas (GHG) emissions reduction target. This plan included the review of the 
Effort  Sharing  Regulation  (ESR).  The  review  started  with  an  Inception  Impact 
Assessment (IIA) consultation and was followed by an Open Public Consultation (OPC). 
The  IIA was conducted  from  the 29th  of October 2020 to  the 26th  of November 2020. 
The  OPC  was  conducted  through  an  EU  online  survey  between  the  13th  of  November 
2020 and the 5th of February 2021.  

10.2.1. Feedback received on the ESR Inception Impact Assessment 

from  company/business  organisation,  8 

The  Commission  received  100  responses,  including  40  from  business  associations,  22 
from  NGOs,  21 
from  environmental 
organisations,  4  from  individuals,  2  from  public  authorities,  and  2  from  other 
stakeholders.  Almost  all respondents  (94%) came from 16 EU Member  States, and 6% 
from non-EU countries [Canada (1), Norway (2), Switzerland (1), the United States (1), 
and  the  United  Kingdom  (1),  mostly  from  environmental  organisations  and  business 
associations].  In  addition,  48  papers  were  received  as  attachments  by  as  many 
stakeholders.  

Respondents  acknowledged  the  need  to  revise  the  2030  target,  perceived  as  an 
intermediate step to achieve climate neutrality by 2050, and to increase the contribution 
level  for  the  ESR  to  achieve  this  goal.  Regarding  the  specific  approaches,  there  was 
strong  agreement  with  using  a  cost-efficient  approach,  while  opinions  on  the  fair 
distribution  based  on  the  different  economic  capacities  of  Member  States  were  more 
balanced. 

A  large  consensus  was  registered  for  maintaining  the  existing  architecture  of  the  ESR 
(ESR IA’s options 1 and 2). Some respondents expressed concerns or disagreement with 
the presented policy options and regretted the absence of an option to simply strengthen 
the  ESR  with  its  current  scope  without  a  new  ETS.  The  other  respondents  expressed 
differing opinions as regards their preferred option for the scope (keep current scope or 
reduce the scope), but only very few favoured the phase-out of the ESR (ESR IA’s option 
3). The two public authorities who responded welcomed the ESR revision, but claimed 
that the impact of the proposed options on Member States should be further assessed. 

A number of respondents expressed doubts about the benefits that could come from the 
inclusion of the road transport and buildings sectors under the ETS in terms of emissions 
reduction.  Respondents  also  underlined  the  need  to  articulate  ETS  and  ESR  to  ensure 
clarity, stability and predictability. Among alternative approaches, the reliance on carbon 
pricing  based  on  the  energy  taxation  rather  than  on  the  extension  of  the  ETS  or  the 
introduction of an EU-wide carbon tax for the transport sector were suggested. Another 

100 

 
 
concern raised included the possibility to recourse to the energy taxation lever if the ETS 
were  extended  to  the  road  transport  sector.  For  the  waste  sector,  respondents  would 
prefer to keep it under the ESR. 

In terms of impacts, respondents generally expressed concerns about the potential effect 
of the ESR revision on competitiveness, innovation, uptake of alternative fuels or carbon 
market  distortions  (mainly  stakeholders  from  the  private  sector),  and  carbon  leakage 
associated  with  an  extended  ETS  scope.  Likewise,  respondents  expressed  worries 
regarding  the  just  transition  as  price  increases  are  passed  on  directly  to  consumer  for 
buildings and road transport sectors, leading to affordability issues. 

10.2.2. Feedback received on the Open Public Consultation (OPC)  

The  key  issues  addressed  by  this  OPC  were  the  overall  ambition  of  ESR  and  how  this 
ambition  is  shared  between  Member  States,  the  sectors  and  type  of  emissions  covered, 
and the interaction between the ESR and the ETS and LULUCF. 

45678  stakeholders  responded  to  the  Open  Public  Consultation  for  the  ESR.  45403 
responses  were  associated  to  a  campaign  and  submitted  by  citizens,  and  276  by  other 
respondents 
representing  Business 
Associations (26%), Companies/businesses (15%), EU citizens (36%), Public Authorities 
(4%) and Trade Unions (1%). 

from  different  categories  of  stakeholders, 

Of  the  respondents  non-associated  to  a  campaign,  96%  came  from  within  the  EU. 
Concretely, EU responses came from 22 Member States. Belgium was the country with 
most respondents90 (26%), followed by France (14%) and Germany (12%). In addition, 
45 papers were submitted as attachments by 42 stakeholders. 32 were selected for further 
analysis from respectively, Public Authorities, business associations, companies, NGOs, 
and academia. 

90 This result is influenced by the fact that one-third of business associations and NGOs that respondents 
are based in Belgium. 

101 

 
 
                                                 
Figure 25: Distribution of respondents to the review of ESR open public consultation by type and 
country based on data related to EU-based respondents. 

 Source: Technopolis, based on data of EU-based respondents to the public consultation 

Campaign  

As  indicated  above,  a  web  campaign91  was  identified  involving  99%  of  total  responses 
and  supported  by  45403  individuals,  from  EU  (98%)  and  non-EU  countries  (2%).  The 
respondents  represented  all  EU  Member  States.  France  was  the  country  with  most 
respondents  (45%),  followed  by  Germany  (21%),  Belgium  (12%)  and  Austria  (5%). 
Campaign  respondents  agreed  that  the  ESR  regulated  sectors  should  deliver  additional 
reductions, that all Member States should step-up their efforts and pursue more ambitious 
targets, and that sectors covered in the future by the new ETS should also remain under 
the ESR. 

Assessment of the ESR open public consultation questionnaire 

The questionnaire was composed of two sections. The first collected general feedback on 
the contribution of the ESR to the overall climate ambition for 2030, and on the treatment 
of relevant sectors. The second addressed the review of the ESR scope, level of ambition, 
legislation,  flexibility  mechanisms,  and  finally, 
interaction  with  other  relevant 
monitoring,  reporting  and  compliance.  According  to  the  Better  Regulation  Guidelines, 
the results of the campaign related to this part of the questionnaire have been isolated and 
reported separately.  

As questions in the online survey were optional, the percentages presented below refer to 
the  total  respondents  that  answered  the  concerned  questions.  Some  questions  allowed 

91

  Transport  &  Environment  has  developed  and  launched  this  web  campaign,  with  the  support  of  other 
NGOs  including  Birdlife,  CAN-Europe,  Carbon  Market  Watch,  EEB,  WWF  and  SumofUs.  They  have 
developed  responses  to  the  first  three  ‘general’  questions  in  the  European  Commission's  public 
consultation, arguing that “scrapping binding national climate targets that cover sectors such as buildings 
and road transport would be unacceptable”. https://www.everybodycounts.eu/about/about-this-campaign.  

102 

 
 
 
 
                                                 
respondents  to  ‘rate’  options  (from  -2  to  +2,  including  a  neutral  option  0).  On  these 
ratings,  the  report  generally  provides  figures  for  the  highest  rating  as  well  as  for  the 
lowest  one,  as  these  are  indicative  of  most  relevant  positions.  The  scales  for  most 
questions  included  one  or  more  ‘opt-out’  responses  to  avoid  forcing  respondents  into 
giving an opinion they do not feel qualified giving. Finally, one open question at the end 
asked the respondent for any further relevant feedback, information, papers or opinions 
they wished to share.  

The responses from the online survey were processed statistically and thematically, with 
a correlation analysis being carried out for each question.  

Part A – General remarks on the ESR review (Questions from 1 to 4) 

The  great  majority  of  respondents  (87%;  229)  agreed  that  the  regulated  sectors  should 
deliver  additional  reductions.  Overall,  individuals  (93%),  Business  Associations  (77%) 
and companies (87%) agreed. Public Authorities replying to this question (6) and Trade 
Unions (2) responded favourably. 

The majority of stakeholders (88%; 229), agreed that Member States should step-up their 
efforts and pursue more ambitious targets. Notably, 98% of individuals, 77% of private 
stakeholders, as well as 86% public authorities and all Trade Unions (2) agreed. 

About 60% of the respondents either strongly agreed (50%) or agreed (9%) that sectors 
covered in the future by the ETS to new sectors should also remain under the ESR. Over 
half of those who strongly agreed or agreed were from the private sector (34). In contrast, 
26%  of  respondents  argued  either  very  strongly  (19%)  or  strongly  (7%)  that  sectors 
covered in the future by the ETS to new sectors should not remain under the scope of the 
ESR. Most of those came from the private sector (54), representing 64% of all responses 
from private sector stakeholders to this question.  

When  asked  about  preferences  in  sectorial  coverage  of  the  ESR,  sector-specific 
stakeholders  for  road  transport,  waste  and  building  sectors  typically  opposed  to  an 
extension of the ETS  to  their sector. With regards to  the exclusion of agricultural  non-
CO2 emissions  from  the scope of the ESR and their transfer to  another instrument  (for 
instance  by  combining  agriculture  non-CO2  emissions  and  LULUCF  emissions  under 
one regulatory instrument), there was no clear position, as opinions were almost equally 
split among respondents. 

Part B – Expert questions (Questions from 5 to 18) 

A majority of 126 respondents were in favour of parallel coverage ESR/ETS in case of 
an extension of the ETS, with  a large majority of NGOs and citizens’ in favour of this 
option.  Instead,  a  smaller  but  significant  share  of  81  respondents  were  in  favour  of 

103 

 
 
reducing  the  sectoral  scope  of  the  ESR  with  a  much  more  limited  majority  of  private 
sector  replies  in  favour  of  this  option.  Of  those  in  favour,  around  half  would  agree  to 
reduce the scope immediately while the other half  only once emission trading for these 
new sectors is  proven successful. Only one public authority agreed to  reduce the scope 
immediately.  

With regards to what sectors should be moved to ETS, 57% of respondents indicated all 
fossil  fuel  combustion,  20%  indicated  buildings,  4%  indicated  transport  and  18% 
indicated a combination of building and transport.  

Based  on  these  responses,  maintaining/strengthening  incentives  for  national  GHG 
reduction  policies  was  seen  as  the  most  important  consideration  when  determining 
double  sector  coverage  (72%),  with  ensuring  environmental  integrity  (57%)  and 
considering the implications on flexibility (54%) as important additional factors.  

A strong consensus was registered (75%; 175) for changing the current levels EU-wide 
and national targets under the existing ESR, in case the current scope of the ESR is kept. 
Strong  majorities  of  both  NGOs  and  private  sector  respondents  agreed  to  this. 
Respondents  also  largely  agreed  that  targets  should  be  increased  in-line  with  cost 
effective  reduction  potential  (such  as  depicted  in  the  impact  assessment  of  the  2030 
Climate Target Plan). 

Regarding the distribution criteria, almost half of the respondents (46%; 105), including 
half of the respondents from the private sector (53%; 49) and from public authorities (3), 
argued in favour of changing them. The rest was equally split between those who did not 
see the need for a revision and those who did not answer. 

As for the most relevant criteria for distributing the additional efforts between Member 
States,  71%  of  respondents  either  strongly  agreed  or  agreed  that  those  Member  States 
that are best equipped economically to reduce GHG emissions should do relatively more, 
66% either strongly  agreed or agreed that the contribution  of Member States should be 
linked  to  cost  effective  emission  reduction  potentials,  46%  either  agreed  or  strongly 
agreed  that  the  distribution  of  additional  efforts  should  also  take  into  account  Member 
States’  ambitions  in  their  National  Energy  and  Climate  Plans,  77%  either  agreed  or 
strongly  agreed  that  the  distribution  of  additional  efforts  should  also  take  into  account 
long-term  convergence  in  ESR  sectors  in  view  of  climate  neutrality  by  2050,  and  61% 
either  agreed  or  strongly  agreed  that  other  criteria  should  be  considered.  The  private 
sector,  Public  authorities  and  Trade  Unions  either  agreed  or  strongly  agreed  on  all 
questions above. 

When  asked  about  how  LULUCF  should  interact  under  the  ESR,  47%  of  respondents, 
including all Public authorities either agreed or strongly agreed that, if targets under the 
ESR  were  increased,  the  maximum  allowed  number  of  credits  under  the  LULUCF 
flexibility at Member State level should be increased to strengthen incentives for carbon 

104 

 
 
removals.  Respondents’  views  were  also  split  regarding  the  opportunity  to  keep  the 
current level of flexibility. 

Likewise,  respondents  were  split  on  how  the  ESR  should  contribute  to  the  EU  climate 
policy  when  it  comes  to  agriculture.  Slightly  more  than  half  of  the  responses  were  in 
favour  of  continuing  to  include  agricultural  non-CO2  emissions  under  the  ESR,  with  a 
preference (24%) for continuing to allow for the use of LULUCF credits in the ESR up to 
the  current  limit,  compensating  LULUCF  debits  with  additional  reductions  in  sectors 
covered  by  the  ESR.  About  one-fifth  argued  that  emissions  from  agriculture  should  be 
excluded from the ESR and regulated elsewhere. 

With  regards  to  flexibility  mechanisms,  the  most  selected  answers  were  (i)  flexibility 
between countries (23%); (ii) flexibilities over time either through banking or borrowing; 
and  (iii)  flexibilities  with  the  ETS  and  (iv)  with  the  LULUCF  being  similarly  rated 
(between 13% and 17%).  

As regards the use of the ETS  flexibility, respondents’ views were almost  equally split 
(38%  in  disagreement  vs  36%  in  agreement)  as  regards  appropriateness  of  the  current 
limited  ETS  flexibility  even  with  increased  targets  under  current  scope.  A  majority  of 
respondents agreed or strongly agreed that with an extended ETS to new sectors, the ETS 
flexibility  should  be  abolished  or  reduced.  Views  were  more  mixed  towards  the 
possibility  to  make  the  ETS  flexibility  accessible  to  all  Member  States.  Respondents 
favoured  the  option  that  the  ETS  flexibility  should  only  be  applicable  for  ETS 
allowances originating from the ETS, and not for allowances from sectors in transitional 
ETS arrangements. 

Last,  but  not  least,  55%  of  the  respondents  (representing  individuals,  academics,  and 
NGOs)  stated  that  there  are  insufficient  incentives  for  Member  States  to  comply  with 
increased ESR targets while only 17% indicated there are sufficient incentives.  

Assessment of position papers received 

43 papers were received as attachments to the open public consultation. Out of them, 31 
were selected for a more detailed analysis. The papers were selected for analysis based 
on criteria regarding: 

the overall ambition increase for ESR EU and national targets;  
the distribution between Member States and associated criteria;  
the reduction of sectorial coverage due to ETS extension;  

 
 
 
  differences between all fossil fuel combustion, buildings and transport; 
  elements to be taken into consideration for emissions to enter the scope of both 

ETS and ESR;  

  monitoring, reporting and compliance;  
  consequences for emissions under ETS and ESR;  

105 

 
 
flexibility between LULUCF and ESR and the role of the ESR for agriculture;  
flexibility mechanisms to be mobilised to achieve an increased climate ambition;  

 
 
  main challenges and benefits. 

The papers received came from  business  organisations  -  notably private operators from 
the energy sector, manufacturing of chemicals and chemical products, forestry, waste, or 
construction,  environmental  organisations  or  other  NGOs  and  public  administrations. 
The key messages of the position papers were: 

  There is overall support to further raise the ambitions of the ESR. 
  On  the  distribution  of  the  burden  among  Member  States,  papers  typically 
recognised the need to account for the cost-effectiveness of abatement, requiring 
all Member States to achieve GHG reductions. Some paper favour an objective of 
achieving convergence of Member State emissions by 2050. 

  While the extension of the ETS finds positive support in seven papers, often this 
support  is  conditional.  The  papers,  for  instance,  warned  against  combining 
buildings  and  road  transport  with  the  current  ETS  in  either  the  absence  of 
mitigating  measures  (to  fend  off  an  increased  allowance  price  for  incumbent 
sectors)  or  a  (transitionally)  separate  ETS  (for  particularly  buildings  and  road 
transport).  Four papers supported a parallel  new  ETS  and ESR scope, while six 
called for either reducing the scope of or withdrawing the ESR.  
Instead  five  papers  assessed  opposed  an  extended  ETS  scope  to  new  sectors  of 
which two were explicitly against including road transport.   

 

  Eight papers commented on the LULUCF sectors of which the majority favours 
the  creation  of  an  AFOLU  sector,  but  submissions  by  the  forestry  sector  argue 
against this. 

106 

 
 
 
10.3. Who is affected and how? 

Practical implications of the initiative 

The Effort Sharing Regulation primarily addresses Member States as institutional actors 
and thus directly 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 actions. 

With respect to businesses in general and SMEs in particular there are no direct reporting 
obligations  for  SMEs  or  other  enterprises  under  the  ESR  and  the  policy  options  would 
not change this status. 

As explained and justified in section 6 of this impact assessment,  reporting by Member 
States under the ESR would follow the same well established rules and procedures as in 
the  current  commitment  period  2021-2030.  That  means  annual  reporting  of  GHG 
inventory reviews and compliance checks every 5 years. That implies that the associated 
administrative burden and costs for monitoring compliance are already reduced both for 
Member  States  and  the  European  Commission  and  fit  for  purpose.  As  regards  AEA 
transfers that are notified by Member States selling or buying AEAs, the information site 
is  web-based  and  hosted  by  the  European  Commission  with  minimal  costs  and  very 
limited administrative burden by Member States and the policy options proposed would 
not change this status. 

Indirectly,  there  are  strong  impacts  on  sectors  due  to  the  measurse  taken  at  EU  and 
Member States’ level to effectively achieve the ESR targets.  

Impacts  at  sectoral  level  have  been  analysed  in  detail  in  the  Impact  Assesment  of  the 
Climate  Target  Plan92,  and  are  also  further  assessed  in  specific  IA’s  of  the  Fit  for  55 
package,  notably  of  the  ETS  (and  its  potential  extension),  the  Energy  Efficiency 
Directive,  the  Renewable  Energy  Directive,  the  CO2&cars/vans  Regulation  and  the 
LULUCF Regulation. Member State level detail of sector transformation required in the 
energy  system  (including  transport)  and  non-CO2  emissions  for  the  different  core 
scenarios is available (see also annex 10.4). 

The sub-sections below discuss which sectors in the ESR are affected by a strengthening 
of the ESR ambition. It uses results from the baseline (“REF”) and the MIX scenario, i.e. 
the common and central policy scenario of the impact assessments underpinning the “Fit 
for 55” policy package (see annex 10.4).  

92 SWD/2020/176 final 

107 

 
 
 
                                                 
Current GHG emissions in ESR sectors 

The EU-level GHG emissions under the ESR hide a diversity of profiles at the Member 
States  level  with  regards  to  the  contribution  of  sectors  and  gases.  Figure  26  shows  the 
relative  contribution  of  CO2  emissions  and  of  other  GHGs  to  the  total  historical  ESR 
emissions93, at EU level and per Member State.  

At EU level, about two thirds of the ESR emissions are CO2, with road transport alone 
representing  about  a  third  and  direct  emissions  in  buildings  a  fifth.  The  share  of  CO2 
emissions ranges from close to 50% in BG, IE, LT  or RO - four Member States where 
the  non-CO2  emissions  have  a  comparatively  higher  weight  (although  with  different 
sectoral compositions, see Figure 27) - to around 75% for AT, BE, DE and even close to 
90%  for  LU  due  in  particular  to  the  relative  importance  of  the  road  transport  in  that 
Member State. Non-CO2 GHG emissions represent 33% of the total at EU level, ranging 
from close to 55% to less than 25%.  

Figure 26: Distribution of CO2 and other GHGs in the ESR emissions (2015)  

Notes: * “CO2 Buildings” are direct emisions from fossil fuels combustion in residential and services 
buidlings ; ** “Other CO2” includes UNFCCC “category 3” CO2 emissions (from agriculture) as well as 
calibration factor to match the total ESR CO2 emissions from the inventories. 

Source: CO2 road transport and buildings: EEA GHG data viewer, “Other CO2”: PRIMES model, non-CO2: 
GAINS model (GWP AR5) 

Nearly  all  non-CO2  greenhouse  gase  emissions  are  covered  under  the  Effort  Sharing 
Regulation94.  The  split  of  2015  non-CO2  GHG  emissions95  is  shown  in  Figure  27.  For 
the EU, the majority of these non-CO2 GHG emissions come from agriculture (54% of 
total  EU  non-CO2  GHG  emissions)  while  waste  and  wastewater  are  the  second-largest 
source (22%), followed by the energy sector (13%) and F-gas consuming applications in 

93 In 2015, based on information from the EEA GHG data viewer (retrieved i 
on 27/4/2021) for energy CO2 emissions in road transport, buildings, the PRIMES model for other CO2 
emissions and the GAINS model for non-CO2 GHGs) converted to “CO2 equivalent” using the global 
warming potentials of IPCC Assessment Report 5 (AR5). 
94 Less than 1% are covered by the EU Emissions Trading System. 

108 

0%20%40%60%80%100%EUATBEBGCYCZDEDKEEESFIFRELHRHUIEITLTLULVMTNLPLPTROSESISKCO2 Road transportCO2 Buildings*Other CO2**Non-CO2 GHGs 
 
 
                                                 
air conditioning  and refrigeration (10%). These sectors will therefore be impacted by  a 
strengthening of the Effort Sharing Regulation.  

Figure 27: Distribution of 2015 non-CO2 GHG emissions per current ESR sector 

Source: GAINS model (GWP AR5) 

Figure  27  shows  that  the  options  to  mitigate  non-CO2  emissions  per  sector  matter 
differently to different countries. Agricultural emissions are the majority of the non-CO2 
GHG  emissions,  but  mitigation  opportunities  exist  also  in  waste,  in  energy,  and  in  the 
cooling  sector.  Member  States  such  as  Ireland  or  Denmark,  whose  agricultural  sector 
dominates  their  non-CO2  GHG  emissions,  will  be  affected  by  the  relatively  smaller 
reduction potential from this sector. Member States with a hotter climate can see a higher 
demand for air conditioning and cooling services, which leads to a relatively higher share 
of, and higher mitigation opportunities in,  F-gas emissions from  that sector. This  is  for 
instance the case for Malta. Significant differences exist in waste emissions and related 
mitigation potential. 

Figure  28  shows  the  evolution  (compared  to  2015)  of  EU-level  GHG  emissions  for 
different  sectors  covered  by  the  ESR:  road  transport,  buildings,  agriculture,  and  other 
sectors. The buildings sector will have to reduce significantly its GHG emissions by 2030 
(by about 56%95, or 53% for energy CO2 alone) in the context of a revised ESR target. 
While  road  transport  and  agriculture  are  sectors  more  difficult  to  abate,  they  will  also 
contribute to the revised ESR target for 2030, by reducing GHG emissions by about 26% 
and 15%, respectively. 

95 Including CH4 emissions in residential and commercial buildings as per the inventories, as well as 
allocating to buildings the F-gases emissions related to refrigeration in commercial sector and in the 
domestic sector according to the GAINS model.  

109 

0%10%20%30%40%50%60%70%80%90%100%EUATBEBGCYCZDEDKEEELESFIFRHRHUIEITLTLULVMTNLPLPTROSESISKAgricultureWaste and wastewaterEnergyAir conditioning & refrigerationOther 
 
 
                                                 
Figure 28: Evolution (2030 vs. 2015) of GHG emissions of sectors currently under ESR 

Note: * “Other GHGs” in Buildings include F-gases from cooling 

Source: Energy CO2: EEA GHG data viewer (2015) and PRIMES model, other CO2: PRIMES model, 
non-CO2 : GAINS model (GWP AR5) 

Road transport 

As shown in Figure 26, road transport CO2 emissions represented, with 747 Mt in 2015, 
about  a  third  of  total  ESR  GHG  emissions.  In  the  context  of  strengthened  ESR  target, 
these  energy  CO2  emissions  should  decrease  to  close  to  555  Mt  in  2030  in  the  MIX 
scenario,  under  the  influence  of  the  strengthened  CO2  standards  legislation  and  of  the 
ETS price, compared to about 585 Mt in the Reference scenario. 

This evolution stems to a large extent from the dynamics at play in the vehicles stocks, 
which  progressively  shift  away  from  ICEs  to  electrification.  Under  the  influence  of 
notably the revised CO2 standards, the share of electric and plug-in hybrid cars in new 
vehicles will get  slightly above 50% in  2030  (against just below 40% in  the Reference 
scenario under current CO2 standards) and to more than 35% for vans (against less than 
30% in the Reference scenario). Heavy duty vehicles would see a further deployment of 
plug-in hybrids and a limited role for electric vehicles and hydrogen. 

110 

0%10%20%30%40%50%60%70%80%90%100%0102030405060708090100REFMIXREFMIXREFMIXREFMIXREFMIXCurrent ESRRoad transportBuildings*AgricultureOther sectorsShare of energy CO2 in GHGs2015 = 100GHGsEnergy CO2Other GHGsShare of energy CO2 (right  axis) 
 
 
Figure 29: New vehicles per type of drivetrain 

Source: PRIMES model 

Although the effect of the changes on new vehicles entering the market  in 2030 on the 
total  stock  structure  is  limited,  effects  are  already  visible  in  2030,  with  total  stock  of 
electric and plug-in hybrids cars representing close to 20% in the MIX scenario 2030, i.e. 
about 3 pp. additional compared to the Reference mostly coming from electric cars.   

The  transformation  of  the  vehicles  fleet  is  completed  by  a  limited  further  uptake  of 
biofuels  and  biogas  use  in  ICEs.  In  total,  this  leads  to  a  decrease  of  oil  products 
consumption by 2030, from 241 Mtoe in 2015 to 177 Mtoe in MIX (i.e. -27%) compared 
to 186 Mtoe in REF, higher demand of liquid biofuels (about 18 Mtoe, compared to 13 
Mtoe in 2015 and 16 Mtoe in 2019), of gaseous fuels (9 Mtoe of natural gas and 1 Mtoe 
of biogas) and of electricity (about 7 Mtoe) – see Figure 30. 

Figure 30: Final energy consumption in road transport 

Source: 2000-2015: Eurostat, 2030: PRIMES model 

Buildings 

The  buildings  sector  represents  a  sizeable  share  of  current  ESR  GHG  emissions  (see 
Figure  26).  Most  of  these  are  produced  by  fossil  fuels  combustion  in  the  residential 
sector (313 MtCO2 in  2015), followed by fossil  fuels  combustion in  services buildings 

111 

0%10%20%30%40%50%60%70%80%90%100%REFREFMIXREFREFMIX2015203020152030CarsVansFuel cellElectricPlug-in HybridICE gaseousICE liquids050100150200250300ESTATESTATREFMIX200020152030MtoeOil productsE-liquidsLiquid biofuelsNatural GasBiogasE-gasHydrogenElectricity 
 
 
 
(141  MtCO2)  and  by  non-CO2  GHG  emissions  mainly  related  to  cooling  (about  45 
MtCO2-eq) (Figure 31).   

Figure 31: GHG emissions from buildings 

Source: Energy CO2 : EEA GHG data viewer (2015) and PRIMES model (2030), Non-CO2 GHGs: 
GAINS model (GWP AR5) 

While representing a limited share of buildings GHG emissions, non-CO2 emissions will 
reduce significantly by about 73% compared to 2015 under the current ESR target in the 
Reference scenario and even further under the revised target (by 85%).   

The  reductions  of  energy  CO2  emissions  are  driven  by  the  combination  of  energy 
efficiency measures and fuel switch towards energy forms with lower carbon intensity, as 
shown  in  Figure  32.  The  progress  in  energy  efficiency  compared  to  2015  is  especially 
visible  in  residential  buildings,  where  it  is  completed  by  a  virtual  phasing  out  of  solid 
fossil fuels, and results also in a strong reduction of the use of oil products (close to -80% 
compared  to  2015)  and  a  reduction  of  the  use  of  natural  gas  (about  -40%),  which  are 
subsituted  notably  by  heat  pumps.  The  demand  for  bioenergy  is  actually  projected  to 
decrease compared to the Reference and to 2015, as an effect of more efficient buildings 
and equipment when it comes to needs for space heating.  

In  services  buildings  energy  efficiency  policies  allow  to  limit  the  growing  needs 
associated with a further tertiarisation of the EU economy by 2030. As for the residential 
buildings, the consumption of oil products is reduced by almost 75% compared to 2015, 
and natural gas by about 30%, replaced by a strong uptake of heat pumps and a moderate 
increase of the role of distributed heat. 

112 

050100150200250300350REFREFMIXREFREFMIXREFREFMIX201520302015203020152030Energy CO2, ResidentialEnergy CO2, ServicesNon-CO2MtCO2-eq 
 
 
Figure 32: Final energy consumption in buildings  

Note: * Other renewables include ambient heat from heat pumps as well as low temperature solar 
thermal 

Source: 2000-2015: Eurostat, 2030: PRIMES model 

Agriculture 

The agriculture sector is a strong contributor to the current ESR emissions: about half the 
total  non-CO2  emissions  (Figure  27),  which  themselves  represent  about  a  third  of  the 
total  ESR  emissions  (Figure  26).  Although  it  also  emits  energy  CO2  emissions  (69 
MtCO2  in  2015),  non-CO2  emissions  attached  to  agricultural  activitires  represent  the 
bulk of these emissions (410 MtCO2-eq96 in 2015). 

Figure 33: GHG emissions from agriculture 

Source: Non-CO2 GHGs: GAINS model (GWP AR5), CO2: EEA GHG data viewer (2015), PRIMES  (2030) 

Owing  to  its  large  share  of  non-CO2  GHG  emissions,  agriculture  plays  a  key  role  in 
mitigation  even  though  only  about  10%  of  agriculture  non-CO2  GHG  emissions  will 

96 According to the GAINS model, using global warming potential as per IPCC AR5 

113 

050100150200250ESTATESTATREFMIXESTATESTATREFMIX200020152030200020192030ResidentialServicesMtoeElectricityOther renewables*BioenergyHeat, distributedHydrogenE-gasNatural gasOil productsSolid fossil fuels050100150200250REFREFMIXREFREFMIXREFREFMIX201520302015203020152030CH4Other GHGsEnergy CO2MtCO2-eq 
 
 
 
                                                 
likely be mitigated through to 2030. A number of attractive zero to low-cost mitigation 
options exist for the sector, especially with to regards methane emissions. Satellite data 
show,  for  instance,  that  some  illegal  burning  of  agricultural  waste  is  still  taking  place 
across a number of member states97. Bans – as well as full enforcement of existing bans – 
would help mitigate methane emissions at no cost. Methane emissions in EU agriculture 
originate to 81% from rumiants (enteric fermentation) and to 17% animal manure98. Feed 
additives and optimised feeding concepts, as well as breeding programmes focussing on 
health,  longevity  and  fertility,  can  significantly  reduce  at  low  cost  methane  emissions 
from  enteric  fermentation.  Moreover,  manure  management  and  tapping  into  anaerobic 
digestion  of  animal  excrements  can  cost  efficiently  reduce  methane  production  from 
animal  husbandry.  Feed  additives  and  optimised  feeding  concepts,  as  well  as  breeding 
programmes focussing on health, longevity and fertility, can significantly reduce at low 
cost  methane emissions  from  enteric  fermentation.  Moreover, manure management  and 
tapping  into  anaerobic  digestion  of  animal  excrements  can  cost  efficiently  reduce 
methane production from animal husbandry.  

Representing a smaller share of the sector’s GHG emissions, by reducing CO2 emissions 
by close to 45% compared to 2005, the energy demand of the sector will still contribute 
to the sectoral mitigation in the context of the new ESR target. This reduction stems from 
a strong reduction of the use of solid fossil fuels and oil products, substituted by biomass 
and  other  renewable  options  in  a  context  of  reducing  energy  needs  because  of  better 
insulated facilities. 

Other sectors 

Remaing GHG emissions under ESR are produced by industry not covered by the ETS 
(mostly CO2, but  also  some N2O and F-gases  emissions  in  specific sectors), the waste 
sector (CH4), the energy sector (CH4, notably related to fossil fuels production, transport 
and distribution infrastructure), rail and domestic navigation (mostly CO2). 

Figure 34 shows that CO2 emissions in other sectors than buidings, road transport, and 
agriculture  are expected to reduce by close to 15% compared to 2015 under the proposed 
new ESR target  (MIX scenario), 10 percentage points (pp.) additional to  the Reference 
scenario (current ESR target).  

CH4 emissions are expected to decrease by 46% in the MIX scenario compared to 2015, 
although  a  large  share  of  this  mitigation  should  take  place  under  the  current  policy 
framework already. F-gases are expected to reduce by close to 80% and N2O emissions 
by 86%. 

Figure 34: GHG emissions from other current ESR sectors 

97 Source: GAINS 
98 EU Methane Strategy: COM(2020) 663 final 

114 

 
 
                                                 
Source: CO2 : PRIMES model, Non-CO2 GHGs: GAINS model (GWP AR5) 

In terms of volume, the largest expected reductions of non-CO2 emissions compared to 
current levels are CH4 emissions from the waste sector, including for waste water. Strict 
application  and  enforcement  of  existing  European  waste  legislation,  including  the 
Landfill  Directive,  will  ensure  emissions  for  the  waste  sector  to  drop  by  nearly  half. 
Sorting  and  separate  collection  of  organic  waste  further  helps  reductions  of  emissions. 
Additional  cost-effective mitigation options include the treatment  of both domestic and 
industrial  wastewater  through  anaerobic  digestion  with  biogas  recovery,  leading  to  an 
increasingly circular treatment of wastewater streams. For industrial waste water streams 
this is most releveant to the food and paper industries. Further process optimisation can 
additionally  reduce  emissions  of  nitrous  oxide  related  to  waste  water  from  domestic 
sources.  

The energy sector, in turn, will cut its non-CO2 GHG emissions (mostly CH4) by more 
than half by 2030 through a combination of cost-effective mitigation opportunities: long-
distance gas transmission and distribution networks show significant mitigation potential 
at  very  limited  cost99.  Similarly,  coal  mining  practices  could  include  degasification  as 
well as oxidation of ventilation air methane for significant mitigation opportunities at no 
cost. Flooding of abandoned coal mines, in turn, can further cut energy-related methane. 

Air conditioning and refrigeration comprises a host of specialized applications that often 
rely  on  fluorinated  gases,  or  F-gases,  many  of  which  are  powerful  greenhouse  gases. 
Alternative agents such as ammonia or HFCs with a lower global warming potential exist 
for most of the F-gases, which points to reductions in F-gases from air conditioning and 
refrigeration  of  over  80%  by  2030.  While  only  10%  of  overall  EU27  non-CO2  GHG 
emissions today, this sector still represents significant mitigation opportunities  in all its 

99 Relatedly, the European Commission is preparing a regulatory proposal on MRV as well as leak 
detection and repair in the energy sector in the context of the Methane Strategy: 
https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12581-Climate-change-new-rules-
to-prevent-methane-leakage-in-the-energy-sector  

115 

050100150200250REFREFMIXREFREFMIXREFREFMIXREFREFMIX20152030201520302015203020152030CO2CH4F-gasesN2OMtCO2-eq 
 
 
                                                 
applications:  stationary  and  mobile  air  conditioning,  as  well  as  refrigeration  across  the 
economy: in the commercial sector, in industry, and in transport.  

System cost for sectors under ESR 

Table  16  shows  the  energy-related  costs100  per  unit  of  GDP  of  the  three  sectors 
responsible of the energy CO2 emissions of the ESR, representing about two thirds of the 
current  total  GHG  emissions  under  the  ESR  (see  Figure  26):  the  residential  sector,  the 
services buildings and transport101.  

Table  16:  Energy-related  costs  as  a  %  of  GDP  for  residential,  services  and  transport 
(excluding carbon pricing related to the ETS extension)  

Scenario 

EU 

MS < 60% EU 
GDP/capita 

MS between 
60-100% EU 
GDP/capita 

MS>100% EU 
GDP/capita 

2030 

Services and 
agriculture* 

Residential  REF 
MIX 
REF 
MIX 
Transport**  REF 
MIX 
2021-2030  Residential  REF 
MIX 
REF 
MIX 
Transport**  REF 
MIX 

Services and 
agriculture* 

3.8% 
4.1% 
2.1% 
2.1% 
4.1% 
4.2% 
3.7% 
3.9% 
2.0% 
2.0% 
3.8% 
3.8% 

5.1% 
5.7% 
2.9% 
2.9% 
6.9% 
6.9% 
5.1% 
5.5% 
2.7% 
2.8% 
6.3% 
6.4% 

4.0% 
4.3% 
2.2% 
2.1% 
4.5% 
4.6% 
3.9% 
4.1% 
2.0% 
2.0% 
4.2% 
4.3% 

3.5% 
3.7% 
1.9% 
2.0% 
3.5% 
3.5% 
3.4% 
3.5% 
1.9% 
1.9% 
3.2% 
3.2% 

Note: * “agriculture” refers to energy-related costs of agriculture; **: includes road transport, rail, inland 
navigation  and  aviation.  Results  are  presented  for  four  country  groupings:  EU,  countries  with  GDP  per 
capita below 60% of EU average over 2016-2018, countries between 60% and 100%, and countries above 
100%. 

100  Energy  system  costs  are  calculated  ex-post  after  the  model  is  solved.  They  include  energy  purchase 
costs,  capital  costs  associated  with  energy  consuming  equipment  as  well  as  with  direct  efficiency 
investments (for house insulation, double/triple glazing, control systems, ..). Capital costs are expressed in 
annuity  payments,  calculated  on  the  basis  of  a  financial  discount  rate  of  10%.  For  transport,  only  the 
“additional” capital costs for energy purposes (additional capital costs for improving energy efficiency or 
for using alternative fuels) is included – the energy system associated to transport cost thus does not cover 
the full cost of vehicles purchasing.  
101  The  table  shows  the  cost  for  total  transport,  as  a  first  order  proxy  of  the  behaviour  the  cost  of  road 
transport,  which  represents  the  bulk  of  the  total  mobility  needs  (about  80%  for  passengers  and  70%  for 
freight in 2015 at EU level) and of associated energy consumption (about 75%)  – see published results of 
the core policy scenarios of the “Fit for 55” package [Reference to results published!] 

116 

 
 
 
 
                                                 
Air quality co-benefits  

While  air  pollution  is  produced  by  sectors  covered  both  in  the  ETS  and  ESR,  a  significant  share  is  generated  by  inefficient  and  often  solid  based 
residential heating, as well as transport, notably in urban areas. As such, achievement of the ESR targets will significantly contribute to the air quality 
improvements from the ‘Fit for 55’ package. Based on the same methodology as used for the Clean Air Outlook while using updated assumptions, Table 
17 and Table 18 show these air quality co-benefits across different groups of Member States: 

117 

 
 
Table 17: Lowered emissions of air pollutants 

PM2.5 emissions 

SO2 emissions 

NOx emissions102 

Baseline in 
2015 (kt) 

Baseline in 
2030 
(%-
age change 
compared 
to 2015) 

in 
MIX 
2030 
(%-
age change 
compared 
to 2015) 

Baseline in 
2015 (kt) 

Baseline in 
2030 
(%-
age change 
compared 
to 2015) 

in 
MIX 
2030 
(%-
age change 
compared 
to 2015) 

Baseline in 
2015 (kt) 

Baseline in 
2030 
(%-
age change 
compared 
to 2015) 

in 
MIX 
2030 
(%-
age change 
compared 
to 2015) 

MS group 

< 

MS 
GDP/capita 

60% 

EU 

558 

-50.4% 

-62.2% 

1192 

-62.5% 

-78.2% 

1706 

-48.3% 

-55.7% 

60-100% 

MS 
GDP/capita  

EU 

391 

-41.6% 

-47.9% 

610 

-60.6% 

-66.8% 

2120 

-56.6% 

-59.7% 

> 

MS 
GDP/capita  

100% 

EU 

416 

-28.5% 

-35.8% 

671 

-43.7% 

-52.6% 

3392 

-55.9% 

-60.2% 

EU 

1365 

-41.2% 

-50.0% 

2473 

-56.9% 

-68.5% 

7218 

-54.3% 

-59.0% 

102 NOx emissions presented here include NOx emissions from agricultural soils and differ in this regards from NOx emissions presented in the second 
Clean Air Outlook. 

118 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 
Table 18: Health and economic impacts of improved air quality 

Sum premature deaths (cases/year) 

Million life years lost due to PM2.5 

Lowered  health  damages  and 
air  pollution  control  cost 
(€billion/year) 

MS group 

Baseline  in 
2015 

Baseline  in 
2030 
(%-
age  change 
compared 
to 2015) 

in 
MIX 
2030 
(%-
age  change 
compared 
to 2015) 

Baseline 
in 2015 

2030 

Baseline 
in 
(%-age 
change 
compared 
to 2015) 

in 
(%-

MIX 
2030 
age 
change 
compared 
to 2015) 

Difference 
baseline 
2030 
Low 
benefits 
estimate 

to 
in 

health 

< 

MS 
GDP/capita 

60% 

EU 

98825 

-38.5% 

-45.9% 

78.6 

-39.5% 

-47.5% 

9.7 

60-100% 

MS 
GDP/capita  

EU 

94355 

-36.5% 

-41.7% 

78.2 

-37.6% 

-42.9% 

6.2 

> 

MS 
GDP/capita  

100% 

EU 

107590 

-29.2% 

-34.1% 

93.0 

-29.7% 

-34.7% 

8.3 

EU 

300765 

-34.5% 

-40.4% 

249.8 

-35.2% 

-41.3% 

24.1 

119 

Difference 
to  baseline 
2030 
in 
High  health 
benefits 
estimate 

16.9 

11.1 

13.7 

41.7 

 
 
 
 
10.4. Analytical methods  

Common analytical framework for the Impact Assessments of the revision of ESR, ETS, 
CO2 standards, LULUCF, RED and EED  

10.4.1. Introduction 

Aiming  at  covering  the  entire  GHG  emissions  from  the  EU  economy,  and  combining 
horizontal  and  sectoral  instruments,  the  various  pieces  of  legislation  under  the  “Fit  for 
55” package strongly interlink, either because they cover common economic sectors (e.g. 
buildings sector is  currently  addressed by  energy  efficiency and renewables polices but 
would  be  also  falling  in  the  scope  of  extended  ETS)  or  by  the  direct  and  indirect 
interactions between these sectors (e.g. electricity supply sector and final demand sectors 
using electricity). 

As a consequence, it is crucial to ensure consistency of the analysis across all initiatives. 
For  this  purpose,  the  impact  assessments  underpinning  the  “Fit  for  55”  policy  package 
are using a collection of integrated modelling tools covering the entire GHG emissions of 
the EU economy.  

These tools are used to produce a common Baseline and a set of core scenarios reflecting 
internally  coherent  policy  packages  aligned  with  the  revised  2030  climate  target,  key 
policy  findings  of  the  CTP  (see  annex  Error!  Reference  source  not  found.)  and 
building  on  the  Reference  Scenario  2020,  a  projection  of  the  evolution  of  EU  and 
national  energy  systems  and  GHG  emissions  under  the  current  policy  framework103. 
These core scenarios serve as a common analytical basis for use across different “Fit for 
55”  policy  initiatives,  and  are  complemented  by  specific  variants  as  well  as  additional 
tools and analyses relevant for the different initiatives. 

This  Annex  describes  the  tools  used  to  produce  the  common  baseline  (the  Reference 
Scenario  2020)  and  the  core  policy  scenarios,  the  key  assumptions  underpinning  the 
analysis, and the policy packages reflected in the core policy scenarios.  

10.4.2. Modelling tools for assessments of policies  

Main modelling suite  

The main model suite used to produce the scenarios presented in this impact assessment 
has a successful record of use in the Commission's energy, transport and climate policy 

103 The “current policy framework” includes EU initiatives adopted as of end of 2019 and the national 
objectives and policies and measures as set out in the final National Energy and Climate Plans – see the EU 
Reference Scenario 2020 publication. 

120 

 
 
 
                                                 
assessments.  In  particular,  it  has  been  used  for  the  Commission’s  proposals  for  the 
Climate  Target  Plan104  to  analyse  the  increased  2030  mitigation  target,  the  Sustainable 
and  Smart  Mobility  Strategy105,  the  Long  Term  Strategy106  as  well  as  for  the  2020 and 
2030 EU’s climate and energy policy framework.  

The PRIMES and PRIMES-TREMOVE models are the core elements of the modelling 
framework  for  energy,  transport  and  CO2  emission  projections.  The  GAINS  model  is 
used for non-CO2 greenhouse gas emission projections, the GLOBIOM-G4M models for 
projections  of  LULUCF  emissions  and  removals  and  the  CAPRI  model  is  used  for 
agricultural activity projections.  

The model suite thus covers: 

  The entire energy system (energy demand, supply, prices and investments to 
the future) and all GHG emissions and removals from the EU economy. 

  Time horizon: 1990 to 2070 (5-year time steps). 
  Geography: individually all EU Member States, EU candidate countries and, 
where  relevant  the  United  Kingdom,  Norway,  Switzerland  and  Bosnia  and 
Herzegovina. 

  Impacts:  energy  system  (PRIMES  and  its  satellite  model  on  biomass), 
transport  (PRIMES-TREMOVE),  agriculture,  waste  and  other  non-CO2 
emissions  (GAINS),  forestry  and  land  use  (GLOBIOM-G4M),  atmospheric 
dispersion, health and ecosystems (acidification, eutrophication) (GAINS). 

The  modelling  suite  has  been  continuously  updated  over  the  past  decade.  Updates 
include the addition of a new buildings module in PRIMES, improved representation of 
the  electricity  sector,  more  granular  representation  of  hydrogen  (including  cross-border 
trade107)  and  other  innovative  fuels,  improved  representation  of  the  maritime  transport 
sector,  as  well  updated  interlinkages  of  the  models  to  improve  land  use  and  non-CO2 
modelling. Most recently a major update was done of the policy assumptions, technology 
costs  and  macro-economic  assumptions  in  the  context  of  the  Reference  scenario  2020 
update. 

The  models  are  linked  with  each  other  in  such  a  way  to  ensure  consistency  in  the 
building of scenarios (Figure 35). These inter-linkages are necessary to provide the core 
of the analysis, which are interdependent energy, transport and GHG emissions trends.  

104 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52020SC0176 
105 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52020SC0331 
106 https://ec.europa.eu/clima/sites/clima/files/docs/pages/com_2018_733_analysis_in_support_en_0.pdf  
107 While cross-border trade is possible, the assumption is that there are no imports from outside EU as the 
opposite would require global modelling of hydrogen trade. 

121 

 
 
                                                 
Figure 35: Interlinkages between models 

Energy: the PRIMES model 

The  PRIMES  model  (Price-Induced  Market  Equilibrium  System)108  is  a  large  scale 
applied  energy  system  model  that  provides  detailed  projections  of  energy  demand, 
supply, prices and investment to the future, covering the entire energy system including 
emissions.  The  distinctive  feature  of  PRIMES  is  the  combination  of  behavioural 
modelling (following  a  micro-economic foundation) with  engineering  aspects,  covering 
all energy sectors and markets.  

The model has a detailed representation of policy instruments related to energy markets 
and  climate,  including  market  drivers,  standards,  and  targets  by  sector  or  overall.  It 
simulates the EU Emissions Trading System. It handles multiple policy objectives, such 
as  GHG  emissions  reductions,  energy  efficiency,  and  renewable  energy  targets,  and 
provides pan-European simulation of internal markets for electricity and gas. 

The  model  covers  the  horizon  up  to  2070  in  5-year  interval  periods  and  includes  all 
Member States of the EU individually, as well as neighbouring and candidate countries.  

PRIMES  offer  the  possibility  of  handling  market  distortions,  barriers  to  rational 
decisions, behaviours and market coordination issues and it has full accounting of costs 
(CAPEX and OPEX) and investment on infrastructure needs.  

PRIMES  is  designed  to  analyse  complex  interactions  within  the  energy  system  in  a 
multiple agent – multiple markets framework. Decisions by agents are formulated based 
on  microeconomic  foundation  (utility  maximization,  cost  minimization  and  market 
representation  of 
equilibrium)  embedding  engineering  constraints  and  explicit 

108 More information and model documentation: https://e3modelling.com/modelling-tools/primes/  

122 

 
 
 
 
                                                 
technologies and vintages, thus allowing for foresight for the modelling of investment in 
all sectors. 

PRIMES allows simulating long-term transformations/transitions and includes non-linear 
formulation  of  potentials  by  type  (resources,  sites,  acceptability  etc.)  and  technology 
learning. Figure 36 shows a schematic representation of the PRIMES model. 

Figure 36: Schematic representation of the PRIMES model 

It  includes  a  detailed  numerical  model  on  biomass  supply,  namely  PRIMES-Biomass, 
which  simulates  the  economics  of  current  and  future  supply  of  biomass  and  waste  for 
energy  purposes.  The  model  calculates  the  inputs  in  terms  of  primary  feedstock  of 
biomass and waste to satisfy a given demand for bio-energy and provides quantification 
of  the  required  capacity  to  transform  feedstock  into  bioenergy  commodities.  The 
resulting  production  costs  and  prices  are  quantified.  The  PRIMES-Biomass  model  is  a 
key link of communication between the energy system projections obtained by the core 
PRIMES energy system model and the projections on agriculture, forestry and non-CO2 
emissions provided by other modelling tools participating in the scenario modelling suite 
(CAPRI, GLOBIOM/G4M, GAINS).  

It also includes a simple module which projects industrial process GHG emissions.  

123 

 
 
 
PRIMES  is  a  private  model  maintained  by  E3Modelling109,  originally  developed  in  the 
context  of  a  series  of  research  programmes  co-financed  by  the  European  Commission. 
The model has been successfully peer-reviewed, last in 2011110; team members regularly 
participate in international conferences and publish in scientific peer-reviewed journals. 

Sources for data inputs 

A summary of database sources, in the current version of PRIMES, is provided below: 

• 

• 

• 
• 

• 
• 

Eurostat and EEA:  Energy Balance sheets, Energy prices (complemented by 
other sources, such IEA), macroeconomic and sectoral activity data (PRIMES 
sectors  correspond  to  NACE  3-digit  classification),  population  data  and 
projections,  physical  activity  data  (complemented  by  other  sources),  CHP 
surveys,  CO2  emission  factors  (sectoral  and  reference  approaches)  and  EU 
ETS registry for allocating emissions between ETS and non ETS 
Technology  databases:  ODYSSEE-MURE111,  ICARUS,  Eco-design,  VGB 
(power  technology  costs),  TECHPOL  –  supply  sector  technologies,  NEMS 
model database112, IPPC BAT Technologies113 
Power Plant Inventory: ESAP SA and PLATTS 
RES  capacities,  potential  and  availability:  JRC  ENSPRESO114,  JRC 
EMHIRES115, RES ninja116, ECN, DLR and Observer, IRENA 
Network infrastructure: ENTSOE, GIE, other operators 
Other  databases:  EU  GHG  inventories,  district  heating  surveys  (e.g.  from 
COGEN),  buildings  and  houses  statistics  and  surveys  (various  sources, 
including  ENTRANZE  project117, 
INSPIRE  archive,  BPIE118),  JRC-
IDEES119, update to the EU Building stock Observatory120 

Transport: the PRIMES-TREMOVE model  

The  PRIMES-TREMOVE  transport  model  projects  the  evolution  of  demand  for 
passengers  and  freight  transport,  by  transport  mode,  and  transport  vehicle/technology, 
following  a  formulation  based  on  microeconomic  foundation  of  decisions  of  multiple 
actors. Operation, investment and emission costs, various policy measures, utility factors 

109 E3Modelling (https://e3modelling.com/) is a private consulting, established as a spin-off inheriting staff, 
knowledge and software-modelling innovation of the laboratory E3MLab from the National Technical 
University of Athens (NTUA).  
110 SEC(2011)1569 : https://ec.europa.eu/energy/sites/ener/files/documents/sec_2011_1569_2.pdf  
111 https://www.odyssee-mure.eu/  
112 Source: https://www.eia.gov/outlooks/aeo/info_nems_archive.php  
113 Source: https://eippcb.jrc.ec.europa.eu/reference/  
114 Source: https://data.jrc.ec.europa.eu/collection/id-00138   
115 Source: https://data.jrc.ec.europa.eu/dataset/jrc-emhires-wind-generation-time-series   
116 Source: https://www.renewables.ninja/   
117 Source: https://www.entranze.eu/   
118Source:  http://bpie.eu/   
119 Source: https://ec.europa.eu/jrc/en/potencia/jrc-idees   
120 Source: https://ec.europa.eu/energy/en/eubuildings  

124 

 
 
                                                 
and  congestion  are  among  the  drivers  that  influence  the  projections  of  the  model.  The 
projections  of  activity,  equipment  (fleet),  usage  of  equipment,  energy  consumption  and 
emissions (and other externalities) constitute the set of model outputs.  

The PRIMES-TREMOVE transport model can therefore provide the quantitative analysis 
for  the  transport  sector  in  the  EU,  candidate  and  neighbouring  countries  covering 
activity,  equipment,  energy  and  emissions.  The  model  accounts  for  each  country 
separately which means that the detailed long-term outlooks are available both for each 
country and in aggregate forms (e.g. EU level). 

In the transport field, PRIMES-TREMOVE is suitable for modelling soft measures (e.g. 
eco-driving,  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  light  duty 
vehicles  and  heavy  duty  vehicles;  EURO  standards  on  road  transport  vehicles; 
technology  standards  for  non-road  transport  technologies,  deployment  of  Intelligent 
Transport Systems) and  infrastructure policies  for  alternative fuels  (e.g.  deployment of 
refuelling/recharging  infrastructure  for  electricity,  hydrogen,  LNG,  CNG).  Used  as  a 
module  that  contributes  to  the  PRIMES  model  energy  system  model,  PRIMES-
TREMOVE  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, the model can show differentiated trends across Member States.  

The PRIMES-TREMOVE has been developed and is maintained by E3Modelling, based 
on,  but  extending  features  of,  the  open  source  TREMOVE  model  developed  by  the 
TREMOVE121 modelling community. Part of the model (e.g. the utility nested tree) was 
built  following  the  TREMOVE  model.122  Other  parts,  like  the  component  on  fuel 
consumption and emissions, follow the COPERT model. 

Data inputs 

The main data sources for inputs to the PRIMES-TREMOVE model, such as for activity 
and  energy  consumption,  comes  from  EUROSTAT  database  and  from  the  Statistical 

121 Source: https://www.tmleuven.be/en/navigation/TREMOVE    
122 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, LNG, hydrogen and e-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. 

125 

 
 
                                                 
Pocketbook  "EU  transport  in  figures123.  Excise  taxes  are  derived  from  DG  TAXUD 
excise  duty  tables.  Other  data  comes  from  different  sources  such  as  research  projects 
(e.g. TRACCS project) and reports. 

In the context of this exercise, the PRIMES-TREMOVE transport model is calibrated to 
2005, 2010 and 2015 historical data. Available data on 2020 market shares of different 
powertrain types have also been taken into account. 

Maritime transport: PRIMES-maritime model 

The  maritime  transport  model  is  a  specific  sub-module  of  the  PRIMES  and  PRIMES-
TREMOVE  models aiming to enhance the representation of  the  maritime sector within 
the energy-economy-environment modelling nexus. The model, which can run in stand-
alone and/or linked mode with PRIMES and PRIMES-TREMOVE, produces long-term 
energy and emission projections, until 2070, separately for each EU Member-State. 

The coverage of the model includes the European intra-EU maritime sector as well as the 
extra-EU maritime shipping. The model covers both freight and passenger international 
maritime.  PRIMES-maritime  focuses  only  on  the  EU  Member  State,  therefore  trade 
activity  between  non-EU  countries  is  outside  the  scope  of  the  model.  The  model 
considers the transactions (bilateral trade by product type) of the EU-Member States with 
non-EU  countries  and  aggregates  these  countries  in  regions.  Several  types  and  sizes  of 
vessels are considered. 

PRIMES-maritime  features  a  modular  approach  based  on  the  demand  and  the  supply 
modules. The demand module projects maritime activity for each EU Member State by 
type of cargo and by corresponding partner. Econometric functions correlate demand for 
maritime  transport  services  with  economic  indicators  considered  as  demand  drivers, 
including  GDP,  trade  of  energy  commodities  (oil,  coal,  LNG),  trade  of  non-energy 
commodities, international fuel prices, etc. The supply module simulates a representative 
operator  controlling the  EU  fleet,  who offers  the requested  maritime transport services. 
The  operator  of  the  fleet  decides  the  allocation  of  the  vessels  activity  to  the  various 
markets  (representing  the  different  EU  MS)  where  different  regulatory  regimes  may 
apply  (e.g.  environmental  zones).  The  fleet  of  vessels  disaggregated  into  several 
categories is specific to cargo types. PRIMES maritime utilises a stock-flow relationship 
to simulate the evolution of the fleet of vessels throughout the projection period and the 
purchasing of new vessels. 

PRIMES-maritime  solves  a  virtual  market  equilibrium  problem,  where  demand  and 
supply interact dynamically in  each consecutive time period, influenced by a variety of 
exogenous  policy  variables,  notably  fuel  standards,  pricing  signals  (e.g.  ETS), 
environmental and efficiency/operational regulations and others. The PRIMES maritime 
model  projects  energy  consumption  by  fuel  type  and  purpose  as  well  as  CO2,  methane 
and N2O and other pollutant emissions. The model includes projections of costs, such as 

123 Source: https://ec.europa.eu/transport/facts-fundings/statistics_en  

126 

 
 
                                                 
capital, fuel, operation costs, projections of investment expenditures in new vessels and 
negative externalities from air pollution. 

The model  serves  to quantify policy scenarios  supporting the transition towards carbon 
neutrality.  It  considers  the  handling  of  a  variety  of  fuels  such  as  fossil  fuels,  biofuels 
(bioheavy124,  biodiesel,  bio-LNG),  synthetic  fuels  (synthetic  diesel,  fuel  oil  and  gas,  e-
ammonia and e-methanol) produced from renewable electricity, hydrogen produced from 
renewable  electricity  (for  direct  use  and  for  use  in  fuel  cell  vessels)  and  electricity  for 
electric  vessels.  Well-to-Wake  emissions  are  calculated  thanks  to  the  linkage  with  the 
PRIMES energy systems model which derives ways of producing such fuels. The model 
also  allows  to  explore  synergies  with  Onshore  Power  Supply  systems.  Environmental 
regulation, fuel blending mandates, GHG emission reduction targets, pricing signals and 
policies  increasing  the  availability  of  fuel  supply  and  supporting  the  alternative  fuel 
infrastructure are identified as drivers, along fuel costs, for the penetration of new fuels. 
As the model is dynamic and handles vessel vintages, capital turnover is explicit in the 
model influencing the pace of fuel and vessel substitution.  

Data inputs 

The  main  data  sources  for  inputs  to  the  PRIMES-maritime  model,  such  as  for  activity 
and  energy  consumption,  comes  from  EUROSTAT  database  and  from  the  Statistical 
Pocketbook "EU transport in figures125. Other data comes from different sources such as 
research projects (e.g. TRACCS project) and reports. PRIMES-maritime being part of the 
overall PRIMES model is it calibrated to the EUROSTAT energy balances and transport 
activity; hence the associated CO2 emissions are assumed to derive from the combustion 
of  these  fuel  quantities.  The  model  has  been  adapted  to  reflect  allocation  of  CO2 
emissions into intra-EU, extra-EU and berth, in line with data from the MRV database.126 
For air pollutants, the model draws on the EEA database. 

In the context of this exercise, the PRIMES-maritime model is calibrated to 2005, 2010 
and 2015 historical data. 

Non-CO2 GHG emissions and air pollution: 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  non-CO2  greenhouse  gas  emissions  at 
detailed sub-sectorial level, GAINS assesses air pollution impacts on human health from 

124  Bioheavy refers to bio heavy fuel oil.  
125  Source: https://ec.europa.eu/transport/facts-fundings/statistics_en  
126  https://mrv.emsa.europa.eu/#public/eumrv 

127 

 
 
                                                 
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  the  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  interface127  and  has 
been  developed  and  is  maintained  by  the  International  Institute  of  Applied  Systems 
Analysis128.  The  underlying  algorithms  are  described  in  publicly  available  literature. 
GAINS  and  its  predecessor  RAINS  have  been  peer  reviewed  multiple  times,  in  2004, 
2009 and 2011. 

Sources for data inputs 

The GAINS model assesses emissions to air for given externally produced activity data 
scenarios. For Europe, GAINS uses macroeconomic and energy sector scenarios from the 
PRIMES model, for agricultural sector activity data GAINS adopts historical data from 
EUROSTAT and aligns these with future projections from the CAPRI model. Projections 
for  waste  generation,  organic  content  of  wastewater  and  consumption  of  F-gases  are 
projected in GAINS in consistency with macroeconomic and population scenarios from 
PRIMES.  For  global  scenarios,  GAINS  uses  macroeconomic  and  energy  sector 
projections from IEA World Energy Outlook scenarios and agricultural sector projections 
from FAO. All other input data to GAINS, i.e., sector- and technology- specific emission 
the 
taken  from 
factors  and  cost  parameters,  are 
documentation.  

literature  and  referenced 

in 

Forestry and land-use: 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. 

127 Source: http://gains.iiasa.ac.at/models/  
128 Source: http://www.iiasa.ac.at/   

128 

 
 
                                                 
GLOBIOM covers 50 world regions / countries, including the EU27 Member States.  

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  and 
forest  management  decisions.  GLOBIOM-G4M  is  also  used  in  the  LULUCF  impact 
assessment  to  assess  the  options  (afforestation,  deforestation,  forest  management,  and 
cropland and grassland management) and costs of enhancing the LULUCF sink for each 
Member State. 

The  GLOBIOM-G4M  has  been  developed  and  is  maintained  by  the  International 
Institute of Applied Systems Analysis129. 

Sources for data inputs 

The  main  market  data  sources  for  GLOBIOM-EU  are  EUROSTAT  and  FAOSTAT, 
which provide data at the national level and which are spatially allocated using data from 
the SPAM model130. Crop management systems are parameterised based on simulations 
from  the  biophysical  process-based  crop  model  EPIC.  The  livestock  production  system 
parameterization  relies  on  the  dataset  by  Herrero  et  al131.  Further  datasets  are 
incorporated, coming from the scientific literature and other research projects. 

GLOBIOM is calibrated to FAOSTAT data for the year 2000 (average 1998 - 2002) and 
runs recursively dynamic in 10-year time-steps. In the context of this exercise, baseline 
trends of agricultural  commodities are aligned with FAOSTAT data  for  2010/2020  and 
broadly  with  AGLINK-COSIMO  trends  for  main  agricultural  commodities  in  the  EU 
until 2030. 

The  main  data  sources  for  G4M  are  CORINE,  Forest  Europe  (MCPFE,  2015)132, 
countries’  submissions  to  UNFCCC  and  KP,  FAO  Forest  Resource  Assessments,  and 
national  forest  inventory  reports.  Afforestation  and  deforestation  trends  in  G4M  are 
calibrated to historical data for the period 2000-2013. 

129 Source : http://www.iiasa.ac.at/   
130 See You, L., Wood, S. (2006). An Entropy Approach to Spatial Disaggregation of Agricultural 
Production, Agricultural Systems 90, 329–47 and http://mapspam.info/ . 
131 Herrero, M., Havlík, P., et al. (2013). Biomass Use, Production, Feed Efficiencies, and Greenhouse Gas 
Emissions from Global Livestock Systems, Proceedings of the National Academy of Sciences 110, 20888–
93. 
132 MCPFE (2015). Forest Europe, 2015: State of Europe's Forests 2015. Madrid, Ministerial Conference 
on the Protection of Forests in Europe: 314. 

129 

 
 
                                                 
Agriculture: CAPRI  

CAPRI is  a global  multi-country agricultural  sector model, supporting decision making 
related to the Common Agricultural Policy and environmental policy and therefore with 
far greater detail for Europe than for other world regions. It is maintained and developed 
in a network of public and private agencies including the European Commission (JRC), 
Universities (Bonn University, Swedish University of Agricultural Sciences, Universidad 
Politécnica  de  Madrid),  research  agencies  (Thünen  Institute),  and  private  agencies 
(EuroCARE), in charge for use in this modelling cluster). The model takes inputs from 
GEM-E3,  PRIMES  and  PRIMES  Biomass  model,  provides  outputs  to  GAINS,  and 
exchanges  information  with  GLOBIOM  on  livestock,  crops,  and  forestry  as  well  as 
LULUCF effects. 

The  CAPRI  model  provides  the  agricultural  outlook  for  the  Reference  Scenario,  in 
particular  on  livestock  and  fertilisers  use,  further  it  provides  the  impacts  on  the 
agricultural  sector  from  changed  biofuel  demand.  It  takes  into  account  recent  data  and 
builds on the 2020 EU Agricultural Outlook133.  Depending on the need it may also be 
used to run climate mitigation scenarios, diet shift scenarios or CAP scenarios.  

Cross checks are undertaken ex-ante and ex-post to ensure consistency with GLOBIOM 
on overlapping variables, in particular for the crop sector.  

Sources for data inputs 

The  main  data  source  for  CAPRI  is  EUROSTAT.  This  concerns  data  on  production, 
market balances, land use, animal herds, prices, and sectoral income. EUROSTAT data 
are  complemented  with  sources  for  specific  topics  (like  CAP  payments  or  biofuel 
production).  For  Western  Balkan  regions  a  database  matching  with  the  EUROSTAT 
inputs for CAPRI has been compiled based on national data. For non-European regions 
the  key  data  source  is  FAOSTAT,  which  also  serves  as  a  fall  back  option  in  case  of 
missing EUROSTAT data. The database compilation is a modelling exercise on its own 
because  usually  several  sources  are  available  for  the  same  or  related  items  and  their 
reconciliation  involves  the  optimisation  to  reproduce  the  hard  data  as  good  as  possible 
while maintaining all technical constraints like adding up conditions. 

In the context of this exercise, the CAPRI model uses historical data series at least up to 
2017, and the first simulation years (2010 and 2015) are calibrated on historical data. 

133 EU Agricultural Outlook for markets, income and environment 2020-2030,  
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/agricultural-outlook-
2020-report_en.pdf  

130 

 
 
                                                 
10.4.3. Assumptions on technology, economics and energy prices 

to  reflect 

the  fundamental  socio-economic, 

technological  and  policy 
In  order 
developments,  the  Commission  prepares  periodically  an  EU  Reference  Scenario  on 
energy, transport and GHG emissions. The scenarios assessment used for the “Fit for 55” 
policy package builds on the latest “EU Reference Scenario 2020” (REF2020)134. 

The main assumptions related to economic development, international energy prices and 
technologies are described below. 

Economic assumptions 

The  modelling  work  is  based  on  socio-economic  assumptions  describing  the  expected 
evolution  of  the  European  society.  Long-term  projections  on  population  dynamics  and 
economic  activity  form  part  of  the  input  to  the  energy  model  and  are  used  to  estimate 
final energy demand.  

Population  projections  from  Eurostat135  are  used  to  estimate  the  evolution  of  the 
European  population,  which  is  expected  to  change  little  in  total  number  in  the  coming 
decades.  The  GDP  growth  projections  are  from  the  Ageing  Report  2021136  by  the 
Directorate  General  for  Economic  and  Financial  Affairs,  which  are  based  on  the  same 
population growth assumptions. 

Table 19. Projected population and GDP growth per Member State 

Population  

GDP growth  

2020  2025  2030  2020-‘25  2026-‘30 

EU27 

447.7  449.3  449.1  0.9% 

1.1% 

Austria 

8.90 

9.03 

9.15 

0.9% 

1.2% 

Belgium 

11.51  11.66  11.76  0.8% 

0.8% 

Bulgaria 

6.95 

6.69 

6.45 

0.7% 

1.3% 

Croatia 

4.06 

3.94 

3.83 

0.2% 

0.6% 

Cyprus 

0.89 

0.93 

0.96 

0.7% 

1.7% 

134 See related publication. 
135 EUROPOP2019 population projections 
https://ec.europa.eu/eurostat/web/population-demography-migration-projections/population-projections-
data  
136 The 2021 Ageing Report : Underlying assumptions and projection methodologies 
https://ec.europa.eu/info/publications/2021-ageing-report-underlying-assumptions-and-projection-
methodologies_en  

131 

 
 
 
  
                                                 
Czechia 

10.69  10.79  10.76  1.6% 

2.0% 

Denmark 

5.81 

5.88 

5.96 

2.0% 

1.7% 

Estonia 

1.33 

1.32 

1.31 

2.2% 

2.6% 

Finland 

5.53 

5.54 

5.52 

0.6% 

1.2% 

France 

67.20  68.04  68.75  0.7% 

1.0% 

Germany 

83.14  83.48  83.45  0.8% 

0.7% 

Greece 

10.70  10.51  10.30  0.7% 

0.6% 

Hungary 

9.77 

9.70 

9.62 

1.8% 

2.6% 

Ireland 

4.97 

5.27 

5.50 

2.0% 

1.7% 

Italy 

60.29  60.09  59.94  0.3% 

0.3% 

Latvia 

1.91 

1.82 

1.71 

1.4% 

1.9% 

Lithuania 

2.79 

2.71 

2.58 

1.7% 

1.5% 

Luxembourg  0.63 

0.66 

0.69 

1.7% 

2.0% 

Malta 

0.51 

0.56 

0.59 

2.7% 

4.1% 

Netherlands  17.40  17.75  17.97  0.7% 

0.7% 

Poland 

37.94  37.57  37.02  2.1% 

2.4% 

Portugal 

10.29  10.22  10.09  0.8% 

0.8% 

Romania 

19.28  18.51  17.81  2.7% 

3.0% 

Slovakia 

5.46 

5.47 

5.44 

1.1% 

1.7% 

Slovenia 

2.10 

2.11 

2.11 

2.1% 

2.4% 

Spain 

47.32  48.31  48.75  0.9% 

1.6% 

Sweden 

10.32  10.75  11.10  1.4% 

2.2% 

Beyond  the  update  of  the  population  and  growth  assumptions,  an  update  of  the 
projections on the sectoral composition of GDP was also carried out using the GEM-E3 
computable general equilibrium model. These projections take into account the potential 
medium- to long-term impacts of the COVID-19 crisis on the structure of the economy, 

132 

 
 
 
even  though  there  are  inherent  uncertainties  related  to  its  eventual  impacts.  Overall, 
conservative  assumptions  were  made  regarding  the  medium-term  impacts  of  the 
pandemic on the re-localisation of global value chains, teleworking and teleconferencing 
and global tourism. 

International energy prices assumptions 

Alongside  socio-economic  projections,  EU  energy  modelling  requires  projections  of 
international  fuel  prices.  The  2020  values  are  estimated  from  information  available  by 
mid-2020. The projections of the POLES-JRC model – elaborated by the Joint Research 
Centre and derived from the Global Energy and Climate Outlook (GECO137) – are used 
to obtain long-term estimates of the international fuel prices.  

The  COVID  crisis  has  had  a  major  impact  on  international  fuel  prices138.  The  lost 
demand cause an oversupply leading to decreasing prices. The effect on prices compared 
to pre-COVID estimates is expected to be still felt up to 2030. Actual development will 
depend on the recovery of global oil demand as well as supply side policies139. 

Table  20  shows  the  international  fuel  prices  assumptions  of  the  REF2020  and  of  the 
different  scenarios  and  variants  used  in  the  “Fit  for  55”  policy  package  impact 
assessments.  

Table 20: International fuel prices assumptions  

in $'15 per boe 

2000 

‘05 

‘10 

‘15 

‘20 

‘25 

‘30 

‘35 

‘40 

‘45 

‘50 

Oil 

38.4 

65.4 

86.7 

52.3  39.8  59.9  80.1  90.4  97.4  105.6  117.9 

Gas (NCV) 

26.5 

35.8 

45.8 

43.7  20.1  30.5  40.9  44.9  52.6  57.0 

57.8 

Coal 

11.2 

16.9 

23.2 

13.1  9.5 

13.6  17.6  19.1  20.3  21.3 

22.3 

in €'15 per boe 

2000  2005 

‘10 

‘15 

‘20 

‘25 

‘30 

‘35 

‘40 

‘45 

‘50 

Oil 

34.6 

58.9 

78.2 

47.2  35.8  54.0  72.2  81.5  87.8  95.2 

106.3 

Gas (NCV) 

23.4 

31.7 

40.6 

38.7  17.8  27.0  36.2  39.7  46.6  50.5 

51.2 

Coal 

9.9 

15.0 

20.6 

11.6  8.4 

12.0  15.6  16.9  18.0  18.9 

19.7 

Source: Derived from JRC, POLES-JRC model, Global Energy and Climate Outlook (GECO) 

137 https://ec.europa.eu/jrc/en/geco  
138 IEA, Global Energy Review 2020, June 2020 
139 IEA, Oil Market Report, June 2020 and US EIA, July 2020. 

133 

 
 
 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
Technology assumptions 

Modelling  scenarios  on  the  evolution  of  the  energy  system  is  highly  dependent  on  the 
assumptions  on  the  development  of  technologies  -  both  in  terms  of  performance  and 
costs. For the purpose of the impact assessments related to the “Climate Target Plan” and 
the  “Fit  for  55”  policy  package,  these  assumptions  have  been  updated  based  on  a 
rigorous  literature  review  carried  out  by  external  consultants  in  collaboration  with  the 
JRC140.  

Continuing  the  approach  adopted  in  the  long-term  strategy  in  2018,  the  Commission 
consulted  on  the  technology  assumption  with  stakeholders  in  2019.  In  particular,  the 
technology database of the main model suite (PRIMES, PRIMES-TREMOVE, GAINS, 
GLOBIOM, and CAPRI) benefited from a dedicated consultation workshop held on 11th 
November 2019. EU Member States representatives also had the opportunity to comment 
on  the  costs  elements  during  a  workshop  held  on  25th  November  2019.  The  updated 
technology assumptions are published together with the EU Reference Scenario 2020. 

10.4.4. The existing 2030 framework: the EU Reference Scenario 2020  

The EU Reference Scenario 2020 as the common baseline  

The  EU  Reference  Scenario  2020  (REF2020)  provides  projections  for  energy  demand 
and supply, as well as greenhouse gas emissions in all sectors of the European economy 
under  the  current  EU  and  national  policy  framework.  It  embeds  in  particular  the  EU 
legislation in place to reach the 2030 climate target of at least 40% compared to 1990, as 
well  as  national  contributions  to  reaching  the  EU  2030  energy  targets  on  Energy 
efficiency  and  Renewables  under  the  Governance  of  the  Energy  Union.  It  thus  gives  a 
detailed picture of where the EU economy and energy system in particular would stand in 
terms of GHG emission if the policy framework were not updated to enable reaching the 
revised  2030  climate  target  to  at  least  -55%  compared  to  1990  proposed  under  the 
Climate Target Plan141. 

The Reference Scenario serves as the common baseline shared by all the initiatives of the 
“Fit for 55” policy package to assess options in their impact assessments: 

-  updating the Effort Sharing Regulation, 
-  updating the Emission Trading System, 
- 
- 
- 

revision of the Renewables Energy Directive, 
revision of the Energy Efficiency Directive, 
revision  of  the  Regulation  setting  CO2  emission  performance  standards  for  cars 
and light commercial vehicles, 

140 JRC118275 
141 COM/2020/562 final 

134 

 
 
                                                 
- 

review of the LULUCF EU rules. 

Difference with the CTP “BSL” scenario 

The  REF2020  embeds  some  differences  compared  to  the  baseline  used  for  the  CTP 
impact assessment. While the technology assumptions (consulted in a workshop held on 
11th  November  2019)  were  not  changed,  the  time  between  CTP  publication  and  the 
publication  of  the  “Fit  for  55”  package  allowed  updating  some  other  important 
assumptions:    

  GDP  projections,  population  projections  and  fossil  fuel  prices  were  updated,  in 
particular  to  take  into  account  the  impact  of  the  COVID  crisis  through  an 
alignment  with  the  2021  Ageing  Report142  and  an  update  of  international  fossil 
fuel prices notably on the short run.  

  While the CTP baseline aimed at reaching the current EU 2030 energy targets (on 
energy  efficiency  and  renewable  energy),  the  Reference  Scenario  2020,  used  as 
the baseline for the “Fit for 55” package, further improved the representation of 
the National Energy Climate Plans (NECP). In particular it aims at reaching the 
national  contributions  to  the  EU  energy  targets,  and  not  at  respecting  these  EU 
targets themselves.  

Reference scenario process 

The  REF2020  scenario  has  been  prepared  by  the  European  Commission  services  and 
consultants  from  E3Modelling,  IIASA  and  EuroCare,  in  coordination  with  Member 
States experts through the Reference Scenario Experts Group.  

It benefitted from a stakeholders consultation (on technologies) and is aligned with other 
outlooks  from  Commission  services,  notably  DG  ECFIN’s  Ageing  Report  2021  (see 
section  0),  as  well  as,  to  the  extent  possible,  the  2020  edition  of  the  EU  Agricultural 
Outlook 2020-2030 published by DG AGRI in December 2020143.  

Policies in the Reference scenario  

The  REF2020  also  takes  into  account  the  still-unfolding  effects  of  the  COVID-19 
pandemic,  to  the  extent  possible  at  the  time  of  the  analysis.  According  to  the  GDP 
assumptions  of  the  Ageing  Report  2021,  the  pandemic  is  followed  by  an  economic 
recovery  resulting  in  moderately  lower  economic  output  in  2030  than  pre-COVID 
estimates.  

142 The 2021 Ageing Report : Underlying assumptions and projection methodologies 
https://ec.europa.eu/info/publications/2021-ageing-report-underlying-assumptions-and-projection-
methodologies_en 
143 https://ec.europa.eu/info/news/eu-agricultural-outlook-2020-30-agri-food-sector-shown-resilience-still-
covid-19-recovery-have-long-term-impacts-2020-dec-16_en  

135 

 
 
                                                 
The  scenario  is  based  on  existing  policies  adopted  at  national  and  EU  level  at  the 
beginning  of  2020.  In  particular,  at  EU  level,  the  REF2020  takes  into  account  the 
legislation adopted in the Clean Energy for All  European Package144. At national level, 
the scenario takes into account the policies and specific targets, in particular in relation 
with renewable energy and energy efficiency, described in the final National Energy and 
Climate  Plans  (NECPs)  submitted  by  Member  States  at  the  end  of  2019/beginning  of 
2020. 

The  REF2020  models  the  policies  already  adopted,  but  not  the  target  of  net-zero 
emissions  by  2050.  As  a  result,  there  are  no  additional  policies  introduced  driving 
decarbonisation  after  2030.  However,  climate  and  energy  policies  are  not  rolled  back 
after  2030  and  several  of  the  measures  in  place  today  continue  to  deliver  emissions 
reduction  in  the  long  term.  This  is  the  case,  for  example,  for  products  standards  and 
building codes and the ETS Directive (progressive reduction of ETS allowances is set to 
continue after 2030). 

Details  on  policies  and  measures  represented  in  the  REF2020  can  be  found  in  the 
dedicated “EU Reference Scenario 2020” publication. 

Reference Scenario 2020 key outputs 

For 2030, the REF2020  scenario mirrors the main targets  and projections submitted by 
Member  States  in  their  final  NECPs.  In  particular,  aggregated  at  the  EU  level,  the 
REF2020  projects  a  33.2%  share  of  renewable  energy  in  Gross  Final  Energy 
Consumption.  Final  energy  consumption  is  823  Mtoe,  which  is  29.6%  below  the  2007 
PRIMES Baseline.  

In the REF2020, GHG emissions from the EU in 2030 (including all domestic emissions 
& intra EU aviation and maritime) are 43.8% below the 1990 level. A carbon price of 30 
EUR/tCO2eq.  in  2030  drives  emissions  reduction  in  the  ETS  sector.  Table  21  shows  a 
summary  of  the  projections  for  2030.  A  detailed  description  of  the  REF2020  can  be 
found in a separate report published by the Commission145. 

Table 21: REF2020 summary energy and climate indicators. 

 EU 2030 

GHG reductions (incl. Domestic emissions & intra EU aviation and maritime) vs 
1990 

RES share 

PEC energy savings 

144 COM(2016) 860 final. 
145 Link to reference. 

136 

REF2020 

-43.8% 

33.2% 

-32.7% 

 
 
                                                 
FEC energy savings 

Environmental impacts 

GHG emissions reduction in current ETS sectors vs 2005 

GHG emissions reduction in current non-ETS sectors vs 2005 

Energy system impacts 

GIC (Mtoe) 

 - Solid fossil fuels  

 - Oil  

 - Natural gas  

 - Nuclear  

 - Renewables 

Final Energy Demand (Mtoe) 

RES share in heating & cooling 

RES share in electricity 

RES share in transport 

Economic and social impacts 

-29.6% 

-48.2% 

-30.7% 

1224.2 

9.3% 

31.9% 

22% 

11% 

25.8% 

822.6 

32.8% 

58.5% 

21.2% 

System costs (excl. auction payment) (average 2021-30) as % of GDP 

10.9% 

Investment expenditures (incl. transport) average annual (2021-30) vs (2011-20) 
(bn€) 

EU ETS carbon price (€/ton, 2030) 

285 

30 

Energy- expenditures (excl. transport) of households as % of total consumption 

7.0% 

The system costs (excluding ETS carbon-related payments) reaches close to 11% of the 
EU’s GDP on average over 2021-2030. This cost146 is calculated ex-post with a private 

Source: PRIMES model 

146 Energy system costs for the entire energy system include capital costs (for energy installations such as 
power  plants  and  energy  infrastructure,  energy  using  equipment,  appliances  and  energy  related  costs  of 
transport),  energy  purchase  costs  (fuels  +  electricity  +  steam)  and  direct  efficiency  investment  costs,  the 
latter being also expenditures of capital nature. For transport, only the additional capital costs for energy 
purposes (additional capital costs for improving energy efficiency or for using alternative fuels, including 
alternative  fuels infrastructure) are covered, but not other costs including the  significant  transport related 
infrastructure costs e.g. related to railways and roads. Direct efficiency investment costs include additional 
costs  for  house  insulation,  double/triple  glazing,  control  systems,  energy  management  and  for  efficiency 

137 

 
 
 
  
 
 
                                                 
 
sector perspective applying a flat 10% discount rate147 over the simulation period up to 
2050 to compute investment-related annualized expenditures. 

By 2050, final energy consumption is projected at around 790 Mtoe and approximately 
74%  of  the  European  electricity  is  generated  by  renewable  energy  sources.  GHG 
emissions in the EU are projected to be about 60% lower than in 1990: the REF2020 thus 
falls short of the European goal of climate neutrality by 2050. 

Focusing  on  the  energy  system,  REF2020  shows  that  in  2030  fuel  mix  would  still  be 
dominated by fossil fuels. While the renewables grow and fossil fuels decline by 2050, 
the substitution is not sufficient for carbon neutrality. It also has to be noted that there is 
no deployment of e-fuels that are crucial for achievement of carbon neutrality as analysed 
in the Long Term Strategy148 and in the CTP. 

Figure 37: Fuel mix evolution of the Reference Scenario 2020 

Source: Eurostat, PRIMES model 

enhancing  changes  in  production  processes  not  accounted  for  under  energy  capital  and  fuel/electricity 
purchase costs. Energy system costs are calculated ex-post after the model is solved. 
147  See  the  EU  Reference  Scenario  2020  publication  for  a  further  discussion  on  the  roles  and  levels  of 
discount  rates  in  the  modelling,  which  also  represent  risk  and  opportunity  costs  associated  with 
investments. 
148 COM(2018) 773 

138 

02004006008001000120014001600180020002005201020152020202520302035204020452050MtoeOther renewables***Bioenergy**SolarWindNuclearNatural gasOilCoal* 
 
 
 
                                                                                                                                                 
Figure  38:  Share  of  energy  carriers  in  final  energy  consumption  in  the  Reference 
Scenario 2020  

Note: * includes peat and oil shale; ** includes manufactured gases, *** includes waste  
Source: Eurostat, PRIMES model 

Coal use in power generation decrease by 62% by 2030 and almost completely disappear 
by 2050. Also demand for oil sees a significant decrease of 54% over the entire period – 
the most important in absolute terms. Electricity generation grows by 24% by 2050.  

Figure 39: Final energy demand by sector in the Reference Scenario 2020 

Source: Eurostat, PRIMES model 

Despite  continued  economic  growth,  final  energy  demand  decreases  by  18%  between 
2015 and 2050 (already by 2030 it decreases by more than 8%). 

10.4.5. Scenarios for the “Fit for 55” policy analysis 

From the Climate Target Plan scenarios to “Fit for 55” core scenarios 

In the Climate Target Plan (CTP) impact assessment, the increase of efforts needed for 
the  GHG  55%  target  was  illustrated  by  policy  scenarios  (developed  with  the  same 

139 

0100200300400500600700800900100020002005201020152020202520302035204020452050MtoeElectricityOther RESBioenergy***Heat distributedHydrogenNatural gas**OilCoal*0100200300400500600700800900100020002005201020152020202520302035204020452050MtoeTransportResidentialServices &agriIndustry 
 
 
 
modelling  suite  as  the  scenarios  done  for  the  “Fit  for  55”  package)  showing  increased 
ambition  (or  stringency)  of  climate,  energy  and  transport  policies  and,  consequently, 
leading to a significant investment challenge. 

The  first  key  lesson  from  the  CTP  exercise  was  that  while  the  tools  are  numerous  and 
have  a  number  of  interactions  (or  even  sometimes  trade-offs)  a  complete  toolbox  of 
climate, energy and transport policies is needed for the increased climate target as all 
sectors would need to contribute effectively towards the GHG 55% target.  

The  second  key  lesson  was  that  even  though  policy  tools  chosen  in  the  CTP  scenarios 
were different - illustrating in particular the fundamental interplay between the strength 
of the carbon pricing and intensity of regulatory measures  - the results achieved were 
convergent. All CTP policy scenarios that achieved a 55% GHG target149 showed very 
similar  levels  of  ambition  for  energy  efficiency,  renewables  (overall  and  on  sectoral 
level) and GHG reductions across the sectors indicating also the cost-effective pathways.  

The third lesson was that carbon pricing working hand in hand with regulatory measures 
helps avoid “extreme” scenarios of either: 

  a  very  high  carbon  price  (in  absence  of  regulatory  measures)  that  will  translate 

into increased energy prices for all consumers,  

  very ambitious policies that might be difficult to be implemented (e.g. very high 
energy  savings  or  renewables  obligations)  because  they  would  be  costly  for 
economic operators or represent very significant investment challenge. 

The Figure 40 below illustrates the interactions between different policy tools relevant to 
reach the EU’s climate objectives. 

149 A 50% GHG target was also analysed 

140 

 
 
                                                 
Figure 40: Interactions between different policy tools  

With  the  55%  GHG  target  confirmed  by  EU  leaders  in  the  December  2020  EUCO 
Conclusions150  and  the  2021  Commission  Work  Programme151  (CWP  2021)  that  puts 
forward the complete toolbox to achieve the increased climate target (so-called “Fit for 
55” proposals), the fundamental set-up of the CTP analysis was confirmed. This set-up is 
still  about  the  interplay  between  carbon  pricing  and  regulatory  measures  as  illustrated 
above, and the extension of the ETS is the central policy question.  

As  described  above,  the  policy  scenarios  of  the  CTP  assessment  are  cost-effective 
pathways that capture all policies needed to achieve the increased climate target of 55% 
GHG  reductions.  This  fundamental  design  remains  robust  and  the  CTP  scenarios  were 
thus used as the basis to define the “Fit for 55” policy scenarios.  

In  the  context  of  the  agreed  increased  climate  target  of  a  net  reduction  of  55%  GHG 
compared to 1990, the 50% GHG scenario (CTP MIX-50) explored in the CTP has been 
discarded since no longer relevant. The contribution of extra EU aviation and maritime 
emissions in  the CTP  ALLBNK scenario  was  assessed in  the respective  sector specific 
impact  assessments  and  was  not  retained  as  a  core  scenario.  This  leaves  the  following 
CTP scenarios in need of further revisions and updates in the context of preparing input 
in a coherent manner for the set of IAs supporting the “Fit for 55” package, ensuring the 
achievement  of  the  overall  net  55%  GHG  reduction  ambition  with  similar  levels  of 
renewable energy and energy efficiency deployment as in CTP:  

150 https://www.consilium.europa.eu/media/47328/1011-12-20-euco-conclusions-fr.pdf  
151 COM(2020) 690 final 

141 

 
 
 
                                                 
  CTP  REG  (relying  only  on  intensification  of  energy  and  transport  policies  in 

absence of carbon pricing beyond the current ETS sectors);  

  CTP  MIX  (relying  on  both  carbon  price  signal  extension  to  road  transport  and 

buildings and intensification of energy and transport policies);  

  CTP CPRICE (relying chiefly on carbon price signal extension, and more limited 

additional sectoral policies). 

Scenarios for the “Fit for 55”package 

Based on the Climate Target  Plan analysis, some  updates  were needed  though for the 
purpose of the “Fit for 55” assessment, in terms of: 

  Baseline: 

o 

o 

to  reflect  the  most  recent  statistical  data  available,  notably  in  terms  of 
COVID impacts,  
to  capture  the  objectives  and  policies  put  forward  by  Member  States  in 
the NECPs, which were not all available at the time of the CTP analysis, 

The  baseline  used  in  the  Fit  for  55  package  is  thus  the  “Reference  Scenario  2020”,  as 
described in section Error! Reference source not found..  

  Scenario design in order to align better with policy options as put forward in the 

CWP 2021 and respective Inception Impact Assessments152. 

As  a  consequence,  the  three  following  core  policy  scenarios  were  defined  to  serve  as 
common policy package analysis across the various initiatives of the “Fit for 55” policy 
assessments: 

  REG: an update of the CTP REG case (relying only on very strong intensification 
of energy and transport policies in absence of carbon pricing beyond the current 
ETS sectors). 

  MIX:  reflecting  an  update  of  the  CTP  MIX  case  (relying  on  both  carbon  price 
signal  extension  to  road  transport  and  buildings  and  strong  intensification  of 
energy  and  transport  policies).  With  its  uniform  carbon  price  (as  of  2025),  it 
reflects  either  an  extended  and  fully  integrated  EU  ETS  or  an  existing  EU  ETS 
and new ETS established for road transport and buildings with emission caps set 
in line with cost-effective contributions of the respective sectors. 

152 Importantly, all “Fit for 55” core scenarios reflect the Commission Work Programme  (CWP) 2021 in 
terms of elements foreseen. This is why assumptions are made about legislative proposals to be made  later 
on - by Quarter 4 2021. On the energy side, the subsequent proposals are: the revision of the EPBD, the 
proposal  for  Decarbonised  Gas  Markets  and  the  proposal  for  reducing  methane  emissions  in  the  energy 
sector.  For  transport  they  refer  to  the  revision  of  the  TEN-T  Regulation  and  the  revision  of  the  ITS 
Directive.  In  addition,  other  policies  that  are  planned  for  2022  are  also  represented  in  a  stylised  way  in 
these scenarios, similar to the CTP scenarios. In this way, core scenarios represent all key policies needed 
to deliver the increased climate target. 

142 

 
 
                                                 
  MIX-CP:  representing  a  more  carbon  price  driven  policy  mix,  combining  thus 
the general philosophy of the CTP CPRICE scenario with  key drivers of the MIX 
scenario albeit at a lower intensity. It illustrates a revision of the EED and RED 
but limited to a lower intensification of current policies in addition to the carbon 
price signal applied to new sectors.  
Unlike MIX, this scenario allows to separate carbon price signals of “current” and 
“new” ETS. The relative split of ambition in GHG reductions between “current” 
ETS  and  “new  ETS”  remains,  however,  close  in  MIX-CP  to  the  MIX  scenario 
leading to differentiated carbon prices between “current” ETS and “new” ETS153.   

These  three  “Fit  for  55”  core  policy  scenarios  have  been  produced  starting  from  the 
Reference  Scenario  2020  and  thus  use  the  same  updated  assumptions  on  post-COVID 
economics and international fuel prices. 

Table 22 provides an overview of the policy assumptions retained in the three core policy 
scenarios. It refers in particular to different scopes of emissions trading system (“ETS”):  

- 

- 

- 

“current+”:  refers  to  the  current  ETS  extended  to  cover  also  national  and 
international intra-EU maritime emissions154: this scope applies to all scenarios, 
“new”:  refers  to  the  new  ETS  for  buildings  and  road  transport  emissions:  this 
scope applies in MIX and MIX-CP up to 2030, 
“large”:  refers  to  the  use  of  emissions  trading  systems  covering  the  “current” 
scope  ETS,  intra-EU  maritime,  buildings  and  road  transport  (equivalent  to 
“current+” + “new”): this scope applies in MIX and MIX-CP after 2030. 

The scenarios included focus on emissions within the EU, including intra-EU navigation 
and intra-EU aviation emissions. The inclusion or not of extra-EU navigation and extra-
EU maritime emissions is assessed in the relevant sector specific Impact Assessments. 

153 This is a feature not implemented in the CTP CPRICE scenario. 
154 For modelling purposes “national maritime” is considered as equal to “domestic navigation”, i.e. also 
including inland navigation. 

143 

 
 
                                                 
Table 22: Scenario assumptions description (scenarios produced with the PRIMES-GAINS-GLOBIOM modelling suite)  

Scenario 

REG 

Brief 
description: 
ETS 

Extension of “current” ETS to 
also cover intra-EU maritime 
navigation155  
Strengthening of “current+” 
ETS in line with -55% 
ambition 

MIX 
By 2030: 2 ETS systems: 

MIX-CP 

- 
- 

one “current+” ETS (current extended to intra-EU maritime) 
one “new” ETS applied to buildings and road transport 

After 2030: both systems are integrated into one “large” ETS 

Relevant up to 2030: the 2 ETSs are 
designed so that they have the same 
carbon price, in line with -55% 
ambition 

Relevant up to 2030: “current+” ETS 
reduces emissions comparably to MIX 

Lower regulatory intervention resulting in 
higher carbon price than in MIX, notably in 
the “new” ETS 

Lower intensity increase of EE and RES 
policies versus Reference.  
Transport policies as in MIX (except 
related to CO2 standards) 

Brief 
description: 
sectoral policies 

High intensity increase of EE, 
RES, transport policies versus 
Reference 

Medium intensity increase of EE, 
RES and transport policies versus 
Reference 

Target scope 

EU27 

Aviation 

Maritime 

Intra-EU aviation included, extra-EU excluded 

Intra-EU maritime included, extra-EU excluded 

155 “Intra-EU navigation” in this table includes both international intra-EU and national maritime. Due to modelling limitations, energy consumption by “national maritime” is assumed 
to be the same as “domestic navigation”, although the latter also includes inland navigation.  

144 

 
 
 
                                                 
MIX 

REG 

MIX-CP 

Around 55% reductions 

Scenario 
navigation 
Achieved GHG reduction of the target scope 
Including 
LULUCF 
Excluding 
LULUCF 
Assumed Policies 
Carbon pricing (stylised, for small industry, international aviation and maritime navigation may represent also other instruments than 
EU ETS such as taxation or CORSIA for aviation) 
Stationary ETS  Yes 
Aviation-Intra 
EU ETS 

Around 53% reductions 

Yes 

Aviation - Extra 
EU ETS 

Maritime-Intra 
EU ETS 

Yes: mixture 50/50 carbon pricing (reflecting inclusion in the “current+” / “large” ETS, or taxation, or CORSIA) 
and carbon value (reflecting operational and technical measures); total equal to the carbon price of the “current+” 
(up to 2030) / “large” ETS  

Yes, carbon pricing equal to the price of the “current+” (up to 2030) / “large” EU ETS 

Maritime-Extra 
EU ETS 

As in MIX (but applied to the 
“current+” ETS) 

Up to 2030: no carbon pricing. 
After 2030: 50% of extra-EU MRV156 sees the “large” ETS price, while the 
remaining 50% sees a carbon value equal to the “large” ETS carbon price. 

Buildings and 
road transport 
ETS 
CO2 standards 
for LDVs and 

No 

Yes (in the “new” ETS up to 2030, and in the “large” ETS after 2030) 

CO2 standards for LDVs and HDVs + Charging and refuelling infrastructure development (review of the Directive 
on alternative fuels infrastructure and TEN-T Regulation & funding), including strengthened role of buildings 

156 50% of all incoming and all outgoing extra-EU voyages 

145 

 
 
                                                 
Scenario 
HDVs 
EE policies 
overall ambition 

EE policies in 
buildings 

EE policies in 
transport 
RES policies 
overall ambition 

RES policies in 
buildings + 
industry 

RES policies in 
transport and 
policies 
impacting 
transport fuels  

Taxation 
policies 

REG 
High ambition increase 

MIX 
Medium ambition increase 

MIX-CP 
Lower ambition increase 

High ambition increase 

Medium ambition increase 

Lower ambition increase 

High intensity increase (more 
than doubling of renovation 
rates assumed) 

Medium intensity increase (at least 
doubling of renovation rates 
assumed) 

Lower intensity increase, no assumptions 
on renovation rates increases 

High ambition increase 

Medium intensity increase 

As in MIX 

High ambition increase 

Medium intensity increase 

Lower ambition increase except for 
transport (see below)  

Incentives for uptake of RES in 
heating and cooling 

 Incentives for uptake of RES in 
heating and cooling 

No increase of intensity of policy 
(compared to Reference) 

Increase of intensity of policies to decarbonise the fuel mix (reflecting ReFuelEU aviation and FuelEU maritime 
initiatives). 
Origin of electricity for “e-fuels” under the aviation and shipping mandates:  
up to 2035 (inclusive) “e-fuels” (e-liquids, e-gas, hydrogen) are produced from renewable electricity, applying 
additionality principle. 
from 2040 onwards “e-fuels” are produced from “low carbon” electricity (i.e. nuclear and renewable origin). No 
application of additionality principle. 
CO2 from biogenic sources or air capture. 

Central option on energy content taxation of the ETD revision 

146 

 
 
Scenario 
Additional non-
CO2 policies 
(represented by 
a carbon value) 

REG 

MIX 

MIX-CP 

Medium ambition increase  

147 

 
 
Quantitative elements and key modelling drivers 

Policies and measures are captured in the modelling analysis in different manners. Some 
are  explicitely  represented  such  as  for  instance  improved  product  energy  performance 
standards,  fuel  mandates  or  carbon  pricing  in  an  emission  trading  system.  Others  are 
represented by modelling drivers (“shadow values”) used to achieve policy objectives. 

The  overall  need  for  investment  in  new  or  retrofitted  equipment  depends  on  expected 
future demand and expected scrapping of installed equipment. The economic modelling 
of the competition among available investment options is based on: 

- 

the investment cost, to which a “private” discount rate is applied to represent risk 
adverseness of the economic agents in the various sectors157, 
fuel prices (including their carbon price component),  

- 
-  maintenance  costs  as  well  as  performance  of  installations  over  the  potential 

- 

lifetime of the installation,  
the  relevant  shadow  values  representing  energy  efficiency  or  renewable  energy 
policies.  

In particular, carbon pricing instruments impact economic decisions related to operation 
of existing equipment and to investment, in the different sectors where they apply. Table 
23 shows the evolution of the ETS prices by 2030 in the Reference and core scenarios. 

Table 23: ETS prices by 2030 in the difference scenarios (€2015/tCO2) 

Scenarios 

REF2020 

REG 

MIX 

MIX-CP 

Carbon price “current” ETS sectors 

Carbon price “new” ETS sectors 

2025 

2030 

2025 

2030 

27 

31 

35 

35 

30 

42 

48 

52 

0 

0 

35 

53 

0 

0 

48 

80 

The investment decisions are also taken considering foresight of the future development 
of fuel prices, including future carbon values158 post 2030. Investment decisions take into 
account  expectations  about  climate  and  energy  policy  developments,  and  this  carbon 
value achieves in 2050 levels between €360/tCO2 (in REG, where energy policy drivers 
play comparatively a larger role) and €430/tCO2 (MIX-CP)159.  

157 For more information on the roles and levels of discount rates applied per sector, see the EU Reference 
Scenario 2020 publication. 
158 Post 2030, carbon values should not be seen as a projected carbon price in emissions trading, but as a 
shadow value representing a range of policies  to achieve climate neutrality that are as yet to be defined.  
159 The foresight and the discounting both influence the investment decisions. While in the modelling the 
discounting is actually applied to the investment to compute annualised fixed costs for the investment 

 
 
 
                                                 
 
In complement to carbon pricing drivers, the modelling uses “shadow values” as drivers 
to  reach  energy  policy  objectives  of  policies  and  measures  that  represent  yet  to  be 
defined  policies  in  the  respective  fields:  the  so-called  “energy  efficiency  value”  and 
“renewable  energy  value”,  which  impact  investment  decision-making  in  the  model. 
These values are thus introduced to achieve a certain ambition on energy efficiency, for 
instance related to national energy efficiency targets and renewable energy targets in the 
NECPs as  represented in the Reference Scenario 2020, or increased renovation  rates in 
buildings and increased sector specific renewable energy ambition related to heating and 
cooling in the policy scenarios. 

Table  24  shows  average  2025-2035  values  for  the  different  scenarios.  The  values  in 
REF2020  reflect  the  existing  policy  framework,  to  meet  notably  the  national  energy 
targets  (both  energy  efficiency  and  renewable  energy)  as  per  the  NECPs.  They  are 
typically  higher  in  policy  scenarios  that  are  based  on  regulatory  approaches  than  in 
scenarios  that  are  more  based  on  carbon  pricing.  The  “energy  efficiency  value”  and 
“renewable energy value” also interact with each other through incentivising investment 
in  options  which  are  both  reducing  energy  demand  and  increasing  the  contribution  of 
renewables, like heat pumps. This is for instance the case in the REG scenario, where the 
comparatively  higher  “energy  efficiency  value”  complements  the  “renewable  energy 
value”  in  contributing  to  the  renewable  energy  performance  of  the  scenario,  notably 
through the highest heat pump penetration of all scenarios. 

Table 24: Energy efficiency value and renewable energy value (averaged 2025-2035) 

Scenarios 

REF2020 

REG 

MIX 

MIX-CP 

Average renewables 
shadow value 

Average energy efficiency 
shadow value 

(€'15/ MWh) 

(€'15/ toe) 

62 

121 

61 

26 

330 

1449 

1052 

350 

Specific measures for the transport system 

Policies  that  aim  at  improving  the  efficiency  of  the  transport  system  (corresponding  to 
row “EE in  Transport” in the  Table 22), and thus reduce  energy  consumption and  CO2 
emissions, are phased-in in scenarios that are differentiated in terms of level of ambition 
(low, medium,  high ambition  increase). All  scenarios assume an intensification of such 
policies  relative  to  the  baseline.  Among  these  policies,  the  CO2  emission  standards  for 

decision, its effect can be illustrated if applied to the future prices instead: for example, the average 
discounted carbon price in 2030 for the period 2030-2050 for renovation of houses and for heating 
equipment, applying a 12% discount rate, is €65 in the MIX scenario and €81 in the MIX CP scenario. 

149 

 
 
 
 
                                                                                                                                                 
vehicles are of particular importance. The existing standards160, applicable from 2025 and 
from 2030, set binding targets for automotive manufacturers to reduce emissions and thus 
fuel consumption and are included in the Reference Scenario. 

Medium ambition increase 

In  this  case,  the  following  policy  measures  are  considered  that  drive  improvements  in 
transport system efficiency and support a shift towards more sustainable transport modes, 
and lead to energy savings and emissions reductions: 

-  Initiatives  to  increase  and  better  manage  the  capacity  of  railways,  inland  waterways 
and short sea shipping, supported by the TEN-T infrastructure and CEF funding;  

-  Gradual internalisation of external costs (“smart” pricing); 
-  Incentives to improve the performance of air navigation service providers in terms of 

efficiency and to improve the utilisation of air traffic management capacity; 

-  Incentives to improve the functioning of the transport system: support to multimodal 
mobility  and  intermodal  freight  transport  by  rail,  inland  waterways  and  short  sea 
shipping; 

-  Deployment  of  the  necessary  infrastructure,  smart  traffic  management  systems, 

transport digitalisation and fostering connected and automated mobility; 

-  Further  actions  on  clean  airports  and  ports  to  drive  reductions  in  energy  use  and 

emissions; 

-  Measures to reduce emissions and air pollution in urban areas; 
-  Pricing measures such as in relation to energy taxation and infrastructure charging; 
-  Revision of roadworthiness checks; 
-  Other measures incentivising behavioural change; 
-  Medium intensification of the CO2 emission standards for cars, vans, trucks and buses 
(as  of  2030),  supported  by  large  scale  roll-out  of  recharging  and  refuelling 
infrastructure. This corresponds to a reduction in 2030 compared to the 2021 target of 
around 50% for cars and around 40% for vans. 

Low ambition increase 

In this case, the same policy measures as in the Medium ambition increase are included. 
However,  limited  increase  in  ambition  for  CO2  emission  standards  for  vehicles 
(passenger cars, vans, trucks and buses) as of 2030 is assumed, supported by the roll-out 

160 The existing legislation sets for newly registered passengers cars, an EU fleet-wide average emission 
target of 95 gCO2/km from 2021, phased in from 2020. For newly registered vans, the EU fleet-wide 
average emission target is 147 gCO2 /km from 2020 onward. Stricter EU fleet-wide CO2 emission targets, 
start to apply from 2025 and from 2030. In particular emissions will have to reduce by 15% from 2025 for 
both cars and vans, and by 37.5% and 31% for cars and vans respectively from 2030, as compared to 2021. 
From 2025 on, also trucks manufacturers will have to meet CO2 emission targets. In particular, the EU 
fleet-wide average CO2 emissions of newly registered trucks will have to reduce by 15% by 2025 and 30% 
by 2030, compared to the average emissions in the reference period (1 July 2019–30 June 2020). For cars, 
vans and trucks, specific incentive systems are also set to incentivise the uptake of zero and low-emission 
vehicles. 

150 

 
 
                                                 
of  recharging  and  refuelling  infrastructure.  This  corresponds  to  a  reduction  in  2030 
compared to the 2021 target of around 40% for cars and around 35% for vans. 

High ambition increase 

Beyond  measures  foreseen  in  the  medium  ambition  increase  case,  the  high  ambition 
increase case includes: 

-  Further  measures  related  to  intelligent  transport  systems,  digitalisation,  connectivity 

and automation of transport - supported by the TEN-T infrastructure; 
-  Additional measures to improve the efficiency of road freight transport; 
-  Incentives for low and zero emissions vehicles in vehicle taxation; 
-  Increasing  the  accepted  load/length  for  road  in  case of zero-emission High Capacity 

Vehicles; 

-  Additional measures in urban areas to address climate change and air pollution; 
-  Higher intensification of the CO2 emission standards for cars, vans, trucks and buses 
(as of 2030) as compared to the medium ambition increase case, leading to lower CO2 
emissions and fuel consumption and further incentivising the deployment of zero- and 
low-emission  vehicles,  supported  by  the  large  scale  roll-out  of  recharging  and 
refuelling  infrastructure.  This  corresponds  to  a  reduction  in  2030  compared  to  the 
2021 target of around 60% for cars and around 50% for vans. 

Drivers of reduction in non-CO2 GHG emissions 

Non-CO2  GHG  emission  reductions  are  driven  by  both  the  changes  taking  place  in  the 
energy  system  due  to  the  energy  and  carbon  pricing  instruments,  and  further  by  the 
application  of  a  carbon  value  that  triggers  further  cost  efficient  mitigation  potential 
(based  on  the  GAINS  modelling  tool)  in  specific  sectors  such  as  waste,  agriculture  or 
industry. 

Table  25:  Carbon  value  applied  to  non-CO2  emissions  in  the  GAINS  model 
(€2015/tCO2) 

Scenarios 

Non-CO2 carbon values 

2025 

2030 

REF2020 

REG 

MIX 

MIX-CP 

0 

4 

4 

5 

0 

4 

4 

10 

151 

 
 
 
 
Key results and comparison with Climate Target Plan scenarios  

Table 26: Key results of the “Fit for 55” core scenarios analysis for the EU 

2030 unless otherwise stated 

REF 

REG 

MIX 

MIX-
CP 

Key results 

GHG emissions* reductions (incl. 
intra EU aviation and maritime, 
incl. LULUCF) 
GHG emissions* reductions (incl. 
intra EU aviation and maritime, 
excl. LULUCF)  
Overall RES share 

RES-E share 

RES-H&C share 

RES-T share 

PEC energy savings  

FEC energy savings 

CO2 emissions reductions (intra-EU 
scope, excl. LULUCF), of which 

Supply side (incl. power 
generation, energy branch, 
refineries and district heating) 
Power generation 

Residential 

Services 

Agriculture (energy) 
Transport (incl. domestic and intra 
EU aviation and navigation) 

Non-CO2 GHG emissions 
reductions (excl. LULUCF) 
Reduced air pollution vs. REF 
Reduced health damages and air 
pollution control cost vs. REF - 
Low estimate 
Reduced health damages and air 
pollution control cost vs. REF - 
High estimate 

% reduction from 1990 

45% 

55% 

55% 

55% 

% reduction from 1990 

43.4% 

53.0% 

52.9% 

52.9% 

% 

% 

% 

% 
% reduction from 2007 
Baseline 
% reduction from 2007 
Baseline 
Environmental impacts 

33% 

59% 

33% 

21% 

33% 

40% 

65% 

41% 

29% 

39% 

38% 

65% 

38% 

28% 

39% 

38% 

65% 

36% 

27% 

38% 

30% 

37% 

36% 

35% 

(% change from 2015) 

-30% 

-43% 

-42% 

-42% 

(% change from 2015) 

-49% 

-62% 

-63% 

-64% 

(% change from 2015) 

(% change from 2015) 

(% change from 2015) 

(% change from 2015) 

-51% 

-10% 

-32% 

-36% 

-23% 

-64% 

-23% 

-56% 

-53% 

-36% 

-65% 

-23% 

-54% 

-52% 

-36% 

-67% 

-23% 

-50% 

-48% 

-35% 

(% change from 2015) 

-17% 

-22% 

-21% 

-21% 

(% change from 2015) 

-22% 

-32% 

-32% 

-33% 

(% change) 

(€ billion/year) 

(€ billion/year) 

Energy system impacts 

-10% 

24.8 

42.7 

Industry (incl. process emissions) 

(% change from 2015) 

Primary Energy Intensity 

toe/M€'13 

83  

75  

76  

76  

Gross Available Energy (GAE) 

Mtoe 

1,289  

1,194  

1,198  

1,205  

 - Solids share 

 - Oil share 

 - Natural gas share 

 - Nuclear share 

% 

% 

% 

% 

9% 

34% 

21% 

10% 

6% 

33% 

20% 

11% 

5% 

33% 

20% 

11% 

5% 

33% 

21% 

11% 

152 

 
 
  
  
  
  
  
  
  
  
  
  
 - Renewables share 

 - Bioenergy share 

 - Other Renewables share 

% 

% 

% 

26% 

13% 

13% 

31% 

13% 

18% 

30% 

12% 

18% 

30% 

12% 

18% 

Gross Electricity Generation 

TWh 

2,996  

3,152  

3,154  

3,151  

- Gas share 

- Nuclear share 

- Renewables share 

% 

% 

% 

14% 

17% 

59% 

12% 

16% 

65% 

13% 

16% 

65% 

14% 

16% 

65% 

Investment expenditures (excl. 
transport) (2021-30) 
Investment expenditures (excl. 
transport) (2021-30) 

Economic impacts 

bn €'15/year 

297 

417 

402 

379 

% GDP 

2.1% 

3.0% 

2.9% 

2.7% 

Additional investments to REF 

bn €'15/year 

120 

105 

83 

Investment expenditures (incl. 
transport) (2021-30) 
Investment expenditures (incl. 
transport) (2021-30) 

bn €'15/year 

944 

1068 

1051 

1028 

% GDP 

6.8% 

7.7% 

7.6% 

7.4% 

Additional investments to REF 

bn €'15/year 

Additional investments to 2011-20 
Energy system costs excl. carbon 
pricing and disutility (2021-30) 
Energy system costs excl. carbon 
pricing and disutility (2021-30) 
Energy system costs incl. carbon 
pricing and disutility (2021-30) 
Energy system costs incl. carbon 
pricing and disutility (2021-30) 
ETS price in current sectors (and 
maritime) 
ETS price in new sectors (buildings 
and road transport) 
Average Price of Electricity 

bn €'15/year 

bn €'15/year 

124 

408 

107 

392 

84 

368 

285 

1518 

1555 

1550 

1541 

% GDP 

10.9% 

11.2%  11.15% 

11.1% 

bn €'15/year 

1535 

1598 

1630 

1647 

% GDP 

€/tCO2 

€/tCO2 

€/MWh 

11.0% 

11.5% 

11.7% 

11.8% 

30 

0 

42 

0 

48 

48 

52 

80 

158 

156 

156 

157 

% 

54% 

52% 

bn €'15 

Import dependency  
Fossil fuels imports bill savings 
compared to REF (2021-30) 
Energy-related expenditures in 
buildings  (excl. disutility) 
Energy-related expenditures in 
transport (excl. disutility) 
Note: *All scenarios achieve 55% net reductions in 2030 compared to 1990 for domestic EU emissions, 
assuming net LULUCF contributions of 255 Mt CO2-eq. in 1990 and 225 Mt CO2-eq. in 2030 and 
including national, intra-EU maritime and intra-EU aviation emissions161.  

% of private 
consumption 
% of private 
consumption  

18.1% 

18.1% 

18.3% 

7.5% 

6.9% 

7.5% 

53% 

136 

115 

53% 

99 

18.5% 

7.4% 

Source: PRIMES model, GAINS model 

161 Emissions estimates for 1990 are based on EU UNFCCC inventory data 2020, converted to IPCC AR5 
Global Warming Potentials for notably methane and nitrous oxide. However, international intra-EU 
aviation and international intra-EU navigation are not separated in the UNFCCC data from the overall 
international bunker fuels emissions. Therefore, 1990 estimates for the intra-EU emissions of these sectors 
are based on (a combination of) data analysis for PRIMES modelling and 2018-2019 MRV data for the 
maritime sector. 

153 

 
 
  
  
  
                                                 
Table 27: Comparison with the CTP analysis 

Results for 2030 

CTP 55% GHG reductions 
scenarios range 

“Fit for 55” core scenarios 
range 

(REG, MIX, CPRICE, 
ALLBNK) 

(REG, MIX, MIX-CP) 

Overall net GHG reduction (w.r.t. 1990)* 

55% 

Overall RES share 

RES-E 

RES-H&C  

RES-T 

FEC EE 

PEC EE 

CO2 reduction on the supply side (w.r.t. 
2015) 

CO2 reduction in residential sector (w.r.t. 
2015) 

CO2 reduction in services sector (w.r.t. 
2015) 

38-40% 

64-67% 

39-42% 

22-26% 

36-37% 

39-41% 

67-73% 

61-65% 

54-61% 

CO2 reduction in industry (w.r.t. 2015) 

21-25% 

CO2 reduction in intra-EU transport (w.r.t. 
2015) 

16-18% 

CO2 reduction in road transport (w.r.t. 2015) 

19-21% 

Non-CO2 GHG reductions (w.r.t. 2015, excl. 
LULUCF) 

31-35% 

55% 

38-40% 

65% 

36-41% 

27-29% 

35-37% 

38-39% 

62-64% 

50-56% 

48-53% 

23% 

21-22% 

24-26% 

32-33% 

Investments magnitude, excluding transport 
(in bn€/per year) 

Energy system costs (excl. auction payments 
and disutility) as share of GDP (%, 2021-
2030) 

401-438 bn/year 

379-417 bn/per year 

10.9-11.1% 

11.1-11.2% 

Note: *All scenarios achieve 55% net reductions in 2030 compared to 1990 for domestic EU emissions, 
assuming net LULUCF contributions of 255 Mt CO2-eq. in 1990 and 225 Mt CO2-eq. in 2030 and 
including national, intra-EU maritime and intra-EU aviation emissions163 (except the CTP ALLBNK that 
achieves 55% net reductions including also emissions from extra-EU maritime and aviation).  

Source: PRIMES model, GAINS model 

154 

 
 
10.4.6. Results per Member State  

This document is completed by detailed modelling results at EU and Member State level 
for the different core policy scenarios162: 

-  Energy, transport and overall GHG (PRIMES model)  
-  Details on non-CO2 GHG emissions (GAINS model) 
-  LULUCF emissions (GLOBIOM model) 
-  Air pollution (GAINS model) 

10.4.7. Specific analytical elements for this impact assessment 

For  this  IA  an  additional  scenario,  referred  to  as  ‘MIX-NECP-plus’  was  developed. 
Whereas the Reference scenario mimics national energy efficiency and renewable energy 
targets,  it  sometimes  overshoots  or  undershoots  emission  reductions  in  the  ESR 
compared to individual Member States estimates in the NECP. For those Member States 
where  the  Reference  does  not  project  the  achievement  of  the  NECPs  ambition  in  the 
ESR,  the  MIX-NECP-plus  scenario  assumes  the  achievement  of  additional  reductions 
compared to the MIX scenario, equal to half of the gap between the Reference and the 
NECPs.  Conversely,  for  those  Member  States  where  the  Reference  overshoots  the 
NECPs estimates, the MIX-NECP-plus scenario assumes less reductions compared to the 
MIX scenario equal to half of this gap. 

This scenario allows to assess to what extent deviation of the Reference projections from 
the NECP projections by Member States may impact overall results. 

10.5. Distributional impacts 

10.5.1. Overview potential gaps and surpluses for ESR review in options 1.1 and 

1.2 

Table  28:  Member  States  ESR  GDP  target  (avg  2017-2019)  compared  to  the  efficient 
emission reduction (MIX scenario) for options 1.1 and 1.2 [High Income Member States 
in grey, gap in bold] 

Efficient 
Emission 
reduction 
projections 
2030 
delivering -
40% 

ESR Review 
2030 GDP 
target 
delivering -
40% (option 
1.1.) 

Potential 
surplus 
(efficient > 
target) (+) or 
gap (-), to 
deliver -40% 
(option 1.1.) 

ESR Review 
2030 GDP 
target 
delivering -
35% (option 
1.2.) 

Potential 
surplus 
(efficient > 
target) (+) or 
gap (-), to 
deliver 35% 
(option 1.2.)  

162 See the “Technical Note on the Results of the “Fit for 55” core scenarios for the EU Member States” 

155 

 
 
 
 
  
                                                 
EU-27 
Belgium 

Bulgaria 

Czechia 

Denmark 

Germany 

Estonia 

Ireland 

Greece 

Spain 

France 

Croatia 

Italy 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Hungary 

Malta 

Netherlands 

Austria 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Finland 

Sweden 

-40% 
-43% 

-11% 

-35% 

-33% 

-43% 

-18% 

-28% 

-51% 

-45% 

-44% 

-33% 

-47% 

-28% 

-13% 

-19% 

-53% 

-32% 

17% 

-43% 

-34% 

-31% 

-42% 

-15% 

-31% 

-31% 

-45% 

-51% 

-40% 
-49% 

-10% 

-28% 

-50% 

-50% 

-27% 

-50% 

-22% 

-37% 

-47% 

-16% 

-43% 

-35% 

-18% 

-22% 

-50% 

-18% 

-38% 

-50% 

-50% 

-17% 

-28% 

-12% 

-28% 

-22% 

-50% 

-50% 

0% 
-6% 

1% 

7% 

-17% 

-7% 

-9% 

-22% 

29% 

8% 

-3% 

17% 

4% 

-7% 

-5% 

-3% 

3% 

14% 

-55% 

-7% 

-16% 

14% 

14% 

3% 

3% 

9% 

-5% 

1% 

-35% 
-44% 

-5% 

-22% 

-45% 

-44% 

-22% 

-45% 

-17% 

-32% 

-42% 

-11% 

-38% 

-30% 

-13% 

-17% 

-45% 

-13% 

-33% 

-45% 

-45% 

-11% 

-23% 

-7% 

-23% 

-17% 

-45% 

-45% 

5% 
-1% 

6% 

13% 

-12% 

-1% 

-4% 

-17% 

34% 

13% 

2% 

22% 

9% 

-2% 

0% 

2% 

8% 

19% 

-50% 

-2% 

-11% 

20% 

19% 

8% 

8% 

14% 

0% 

6% 

Source: Commission Services – MIX55 scenario 

10.5.2. Overview  Member  States  with  GDP  per  capita  below  or  above  the  EU 

average(s) 

High  income  Member  States  are  for  the  purposes  of  this  impact  assessment  defined  as 
Member States with a GDP per capita above the 2017-2019 EU average.  

Table  29:  Overview  of  Member  States’  GDP  data  used  for  calculating  high  income 
Member States 

EU MS 

EU-27 

Belgium 

EU MS 

2013 GDP/Cap163 

EU 

BE 

26.700 

35.400 

Avg. 2017-2019 
GDP/Cap164 
30.227 

40.293 

163 2016 Impact Assessment - SWD (2016) 247 final. 
164 Eurostat, Nama_10_pc [Downloaded 31.05.2021, 23h00]. 

156 

 
 
                                                 
Bulgaria 

Czechia 

Denmark 

Germany 

Estonia 

Ireland 

Greece 

Spain 

France 

Croatia 

Italy 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Hungary 

Malta 

Netherlands 

Austria 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Finland 

Sweden 

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 

5.800 

14.900 

45.500 

35.000 

14.400 

39.000 

16.500 

22.100 

32.100 

10.200 

26.500 

21.000 

11.300 

11.800 

85.300 

10.200 

18.100 

38.700 

38.100 

10.200 

16.300 

7.200 

17.400 

13.600 

37.400 

45.400 

8.057 

19.723 

52.363 

40.477 

19.670 

67.360 

16.777 

25.723 

35.103 

12.653 

29.503 

24.437 

14.973 

16.220 

98.670 

13.940 

25.950 

44.907 

43.457 

13.010 

19.923 

10.530 

22.040 

16.390 

42.320 

46.793 

10.6. Further  information  on  related  policies  impacting  notably  energy  system 

emissions in the ESR 

Any  changes  to  the  policy  architecture  that  are  under  consideration  in  this  impact 
assessment  evidently  would  not  take  place  in  a  policy  vacuum  but  are  rather  bound  to 
interact  with  existing  pricing  and  non-pricing  mechanisms  to  reduce  GHG  emissions. 
Assessing  the  interplay  of  various  elements  of  a  changed  policy  architecture  –  in 
particular the option of an expanded ETS  – with existing related EU-level and national 
level  policies  is  key.  Overall,  these  policies  will  have  to  see  updates  and  ambition 
increases  to  contribute  to  increased  greenhouse  gas  emission  reductions  in  the  ESR 
sectors.  The  ESR  can  be  an  incentive  at  national  level  to  undertake  this  additional 
ambition. Most EU policies are also under review in the fit for Fit for 55 package.  

10.6.1. Related policy initiatives on the EU-level 

Next to the Effort Sharing Regulation (ESR), the Emissions Trading System (ETS) and 
the  Land-Use,  Land-Use  Change  and  Forestry  regulation  (LULUCF),  which  together 
provide the direct regulation of emissions reductions, there are a range of relevant other 
regulations indirectly affecting GHG emissions. 

In 2018 and 2019, the EU adopted the Clean Energy for All Europeans Plan, consisting 
of eight legislative acts setting the European energy targets for 2030 and paving the way 

157 

 
 
 
 
 
 
for their achievement. The new legal framework sets a binding EU target of at least 32% 
for  renewable  energy  sources  in  the  EU’s  energy  mix  and  of  at  least  32.5%  energy 
efficiency by 2030. The EU headline target of 32.5% of energy efficiency to be achieved 
by  2030  requires  Member  States  to  undertake  common  efforts  to  ensure  to  the  target 
achievement  on  EU-level  by  committing  to  ambitious  national  commitments.  For  the 
period  2021  to  2030  Member  States  have  set  their  contributions  to  the  Union  target  in 
their National Energy and Climate Plans and to establish Long-term building renovation 
strategies165.  

The  binding  EU-level  32%  renewable  energy  target  to  be  achieved  by  2030  signifies  a 
move away from nationally binding targets agreed for the 2020 framework. For the next 
decade Member States have set their contributions to the Union target in their National 
Energy  and  Climate  Plans.  In  addition,  a  renewable  energy  target  for  transport  of  14% 
has been set with a sub-target to promote advanced biofuels. A specific indicative target 
to increase the share of renewables by 1.3 pp. a year has been defined for the heating and 
cooling sector. 

The EU headline  target  of  32.5%  of energy efficiency to be  achieved by  2030 requires 
Member States to undertake common efforts to ensure to the target achievement on EU-
level  by  committing  to  ambitious  national  commitments.  For  the  period  2021  to  2030 
Member States have set their contributions to the Union target in their National Energy 
and Climate Plans.  

The Clean Energy for all Europeans Plan also includes legislation to adapt the electricity 
market design to increasing shares of decentralised and variable generation assets.  

In  the  transport  area,  the  Commission  adopted  in  December  2020  a  Sustainable  and 
Smart Mobility Strategy together with an action plan with 82 initiatives for the next for 
years166,  following  a  European  strategy  for  low-emission  mobility  in  2016167.  This 
acknowledges that achieving deep emissions reductions will require an integrated system 
approach that includes promoting (i) overall vehicle  efficiency, low-  and  zero emission 
vehicles  and  infrastructure;  (ii)  a  long-term  switch  to  alternative  and  net-zero  carbon 
fuels  for  transport;  (iii)  increased  efficiency  of  the  transport  system.  In  2019,  the 
European  Parliament  and  Council  adopted  Regulation  (EU)  2019/631,  setting  CO2 
emission  performance  standards  for  new  passenger  cars  and  for  new  vans  in  the  EU. 
Expected  benefits  of  the  new  targets  include  a  23%  reduction  of  GHG  emissions  from 
road  transport  in  2030  compared  to  2005,  supporting  Member  States  in  meeting  their 
national targets under the Effort Sharing Regulation. Furthermore, Directive 2014/94/EU 

165  The  EPBD  requires  Member  States  to  establish  a  long-term  renovation  strategy  to  support  the 
renovation of their national building stock into a  highly energy efficient and decarbonised building stock 
by 2050.  
166 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52020DC0789  
167 https://ec.europa.eu/transport/themes/mobilitystrategy_en  

158 

 
 
                                                 
on the deployment of alternative fuels infrastructure requires Member States to develop 
National  Policy  Frameworks  for  the  development  of  alternative  fuel  markets  and 
infrastructure in the transport sector.168 

The  Energy  Taxation  Directive,  which  was  last  updated  in  2003,  provides  important 
context to any policy architecture reform regarding emission reductions. Energy taxes are 
decided  on  a  Member  State  level;  however,  there  are  minimum  excise  duty  rates  that 
Member States must apply to energy products for motor, heating and electricity fuels.  

it 

is  worth  highlighting 

regards  energy  poverty, 

As 
the  Energy  Poverty 
Recommendation169  and  the  Renovation  Wave  Communication170,  as  well  as  the 
assessment of energy poverty and other distributional aspects in the NECPs, tackling at 
these  elements  at  Member  State  level  in  accordance  with  the  country-specific 
recommendations on just transition.  

10.6.2. National measures in the building and transport sectors 

Emissions  currently  under  the  scope  of  the  ESR  and  its  binding  emission  reduction 
targets  are  primarily  regulated  through  national  measures.  National  regulations  are 
diverse.  They  reach  from  outright  command-and-control  instruments,  such  as  bans,  to 
pure price-based measures such as the national carbon-trading system coming into force 
in Germany.   

Whilst  administratively  costly  double  coverage  should  be  avoided,  national  measures 
must  not  be  changed  or  abandoned  in  ways  contravening  EU-level  measures  and 
objectives. Also the ESR targets will impact how Member States plan to further develop 
their policies, next to EU policies. 

Member  States  have  multiple  regulatory  instruments  in  place  for  reducing  GHG 
emissions  in  the  buildings  and  transport  sectors.  Table  30  below  aims  to  categorize 
groups of key measures currently in place or planned in Member States.  

Table 30: Examples of Member State level policies in buildings and transport 

Instrument Group  Member States 

National carbon 
trading system, 
including transport 
and building 

Germany  
(the German national emissions trading system in place from 2021 starts 
as a fixed-price system and turns into a traditional volume-based trading 
system from 2026 onwards) 

168  Directive  2014/94/EU  of  the  European  Parliament  and  of  the  Council  of  22  October  2014  on  the 
deployment of alternative fuels infrastructure 
169 Commission Recommendation (EU) 2020/1563 of 14 October 2020 on energy poverty 
170 COM/2020/662 final 

159 

 
 
                                                 
emissions 

Explicit national 
carbon price for 
transport and/or 
building fuels 

Energy efficiency 
obligations (EEOs) 

  Denmark 
  Finland 
  France 
  Germany 
 
Ireland 
  Portugal 
  Slovenia 
  Sweden  

  Austria 
  Bulgaria 
  Denmark 
  Spain 
  France 
 
Ireland 
 
Italy 
  Malta 
  Poland 
  Slovenia 
  UK 
  Luxembourg 
  Greece 
  Latvia 
  Cyprus 
  Croatia 
  Hungary 
  Portugal 
  Czech Republic notified an EEOS in its NECP for the next 

energy savings obligation period 

EEOs allowing 
trading in the form 
of White Certificates 
implemented under 
Article 7 EED 

  France 
 
Italy 
  Poland 

160 

 
 
Command & 
Control regulation 
(standard setting, 
bans) 

Announced ICE bans: 

  Denmark (2030) 
 
Ireland (2030) 
  Netherlands (2030) 
  Slovenia (2025-2030) 
  Sweden (considered 2030) 
  France (2040) 
  Spain (2040) 

Announced oil boiler bans: 

  Denmark ban of new where district heating or gas is available 

(2016) 

  Germany ban of new if alternative available (2026) 
  Other 

Source: Commission Services 

10.6.3.  Untapped potential for additional emissions reductions in EU level policy 

as per National Energy and Climate Plans 

Building  on  the  four  specific  objectives,  there  is  an  untapped  potential  for  emission 
reductions  in  a  set  of  measures  mentioned  in  the  Member  States’  National  Energy  and 
Climate Plans (NECPs). These are the circular economy measures, and as outlined in the 
Long Term Strategy for 2050171 in the scenarios for climate neutrality by 2050172 and to 
achieve  net  greenhouse  gas  (GHG)  removals  thereafter,  a  highly  circular  economy 
scenario is described as being also one of the most cost-efficient. As the NECPs are part 
of the planning, monitoring and reporting requirements in the context of the Governance 
of  the  Energy  Union,  the  framework  for  following  up  these  additional  emissions 
reductions is in place. 

Circular  economy  (CE)  contributes  to  climate  neutrality  while  creating  jobs  and 
increasing  GDP173,  as  well  as  net  savings  for  businesses174.  The  increased  recycling 
targets adopted in May 2018 as a result of the first Circular Economy Action Plan avoids 
477  million  tons  of  greenhouse  gases  emissions175  between  2015  and  2035176,  while 
creating  140,000  direct  jobs.  For  key  sectors,  the  circular  economy  can  cut  CO2 

171 The European Commission (2018), The Long Term Strategy for 2050, A Clean Planet for All  
172 p 7: The eighth scenario builds upon the previous scenario but assesses the impact of a highly circular 
economy and the potential beneficial role of a change in consumer choices that are less carbon intensive. It 
also explores how to strengthen the land use sink, to see by how much this reduces the need for negative 
emissions technologies. 
173 700 000 new jobs to 2030 and increase of GDP with 0.5% with circular economy measures. Impacts of 
circular economy policies on the labour market, Cambridge Econometrics, Trinomics, and ICF (May 2018) 
174 Net savings in businesses in the EU of up to €600 billion of their annual turnover. AMEC Environment 
& Infrastructure and Bio Intelligence Service, 2014 
175 Thus avoiding emissions from landfilling municipal waste 
176 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52015SC0259 

161 

 
 
 
                                                 
emissions  by  61%177  in  the  construction  and  building  sector,  by  70%  in  the  mobility 
sector and by 49% in the agri-food sector178.   

The majority of the Member States  addressed  circular economy in their  NECPs, but  to 
different degrees, from a full integration in the narrative and quantification of impacts, to 
just an acknowledgement of relevance without further details. Some Member States have 
calculated the climate change mitigation potential of certain circular economy measures. 
Examples from Member States’ CE actions include cuts of GHG emissions by 11% by 
2030 in the agri-food sector, by 40% by 2050 in the forestry sector, by 69% by 2050 in 
the waste sector and by 4% by 2040 in the residential sector. Circular agriculture, circular 
buildings  and  new  concepts  of  mobility  are  particularly  mentioned  alongside  circular 
business  models,  as  well  as  recycling  rates,  green  public  procurement  and  economic 
incentives such as taxes.  

National  Circular  Economy  and  Climate  scenario  modelling  is  variable  and  uses  either 
available  commercial  models  or  own  models.  Nonetheless,  current  models  assess  the 
benefits  of  specific  CE  scenarios  rather  than  a  comprehensive  assessment  of  the  full 
potential  of  CE-related  intervention.  A  comprehensive  scenario  representing  the  whole 
CE quantifying the actual impact on decarbonisation is still under development, both by 
individual Member States179, the EC180 and the European Environmental Agency181.  

A first step to uncap the potential would be to foster exchange of best practices between 
Member States,  which  would support the model  developments  and future target  setting 
and policy developments. 

10.7. Starting  point  and  trajectory  of  annual  emission  allocations  –  further 

analysis 

177  EEA  (2020)  Quantification  methodology  for,  and  analysis  of,  the  decarbonisation  benefits  of  sectoral 
circular economy actions 
178 Ellen MacArthur Foundation and Material Economics (2019), Completing the Picture, How the Circular 
Economy Tackles Climate Change 
179 The Netherlands and Portugal have included CE measures in their climate modelling for their NECPs, 
and the Netherlands are developing their CE-climate model further.  
180  DG  CLIMA  modelled  the  circular  economy  scenario  of  the  EU  LTS  2050.  DG  GROW/  EASME  is 
leading  a  study  called  “Study  on  the  contribution  of  the  circular  economy  to  EU  climate  policies”  in 
collaboration  with  DG  CLIMA  and  DG  ENV.  The  aim  of  the  study  is  to  establish  a  LCA-based 
methodology to model CE contribution to climate change  mitigation. DG RTD will be launching a study 
under Horizon Europe/ climate sciences, focusing on the modelling of CE contribution to climate change 
mitigation. 
181  The  EEA  has  performed  a  study  on  Quantification  methodology  for,  and  analysis  of,  the 
decarbonisation  benefits  of  sectoral  circular  economy  actions,  with  the  Construction  and  Building  sector 
exemplified. Next sector to be explored is the Food sector. 

162 

 
 
 
                                                 
Table 31: Characteristics of alternative trajectories for option 1.2

Source: Commission services’ own calculations. 

163 

Option 1.2Possible new AEA trajectoriesABCCurrent trajectory applies2021-252021-222021-22New trajectoryPeriod2026-302023-302023-30Trajectory starting valueCurrent AEA Current AEA2016-1820252022emissionsTrajectory starting time202520222019+5/12Total AEAs (Mt CO2eq)19 45319 20819 068Current10 5344 3684 368New8 55414 29214 700Evaluation in REFMIX scenario: unused AEAs, annual average, Mt CO2eq2021-2030744935% of 2005 ESR base year2.92.01.4Current trajectory433535% of 2005 ESR base year1.71.41.4New trajectory1045335% of 2005 ESR base year4.12.11.4Evaluation in MIX scenario: unused AEAs, annual average2021-20301169177% of 2005 ESR base year4.63.63.1Current trajectory1038383% of 2005 ESR base year4.13.33.3New trajectory1289376% of 2005 ESR base year5.13.73.0Evaluation in LOW scenario: unused AEAs, annual average2021-2030148123109% of 2005 ESR base year5.94.94.3Current trajectory152141141% of 2005 ESR base year6.15.65.6New trajectory143119101% of 2005 ESR base year5.74.74.0 
 
 
Table 32: Alternative AEA trajectories and total emission allowances for option 2.1  

Source: Commission services’ own calculation.  

164 

Option 2.1Possible new AEA trajectoriesABCCurrent trajectory applies2021-252021-222021-22New trajectoryPeriod2026-302023-302023-30Trajectory starting valueCurrent AEA Current AEA2016-1820252022emissionsTrajectory starting time202520222019+5/12Total AEAs (Mt CO2eq)14 76011 41211 086Current10 5344 3684 368New4 2267 0436 717Evaluation in REFMIX scenario: unused AEAs, annual average, Mt CO2eq2021-20304121-12 % of 2005 ESR base year3.51.8-1.0Current trajectory433535% of 2005 ESR base year3.83.03.0New trajectory3817-23 % of 2005 ESR base year3.31.5-2.0Evaluation in MIX scenario: unused AEAs, annual average2021-2030825623% of 2005 ESR base year7.14.92.0Current trajectory1038383% of 2005 ESR base year9.07.27.2New trajectory60498% of 2005 ESR base year5.24.30.7Evaluation in LOW scenario: unused AEAs, annual average2021-20301107744% of 2005 ESR base year9.56.73.9Current trajectory152141141% of 2005 ESR base year13.212.212.2New trajectory676120% of 2005 ESR base year5.85.31.8 
 
 
 
 
Table 33: Key characteristics of emission allocations for option 2.2 

Source: Commission services’ own calculations.  

165 

Option 2.2Possible new AEA trajectoriesABCCurrent trajectory applies2021-252021-222021-22New trajectoryPeriod2026-302023-302023-30Trajectory starting valueCurrent AEA Current AEA2016-1820252022emissionsTrajectory starting time202520222019+5/12Total AEAs (Mt CO2eq)15 03711 82711 580Current10 5344 3684 368New4 5027 4597 211Evaluation in REFMIX scenario: unused AEAs, annual average, Mt CO2eq2021-2030686238% of 2005 ESR base year5.95.43.3Current trajectory433535% of 2005 ESR base year3.83.03.0New trajectory936938% of 2005 ESR base year8.16.03.3Evaluation in MIX scenario: unused AEAs, annual average2021-20301099773% of 2005 ESR base year9.58.56.3Current trajectory1038383% of 2005 ESR base year9.07.27.2New trajectory11510170% of 2005 ESR base year10.08.86.1Evaluation in LOW scenario: unused AEAs, annual average2021-203013711894% of 2005 ESR base year11.910.38.2Current trajectory152141141% of 2005 ESR base year13.212.212.2New trajectory12211382% of 2005 ESR base year10.69.87.1 
 
 
 
10.8. Climate Target Plan policy conclusions  

The Communication on stepping up Europe’s 2030 climate ambition - the Climate Target 
Plan  (CTP)182  and  its  underpinning  impact  assessment  are  the  starting  point  for  the 
initiatives under the Fit for 55 package.  

The plan concluded on the feasibility - from a technical, economic and societal point of 
view  -  of  increasing  the  EU  climate  target  to  55%  net  reductions  of  greenhouse  gases 
(GHG)  emissions by 2030 compared to  1990.  It also  concluded that all  sectors need to 
contribute to this target.  

In particular, with energy supply and use responsible for 75% of emissions, the plan put 
forward  ambition  ranges  for  renewables  and  energy  efficiency,  which  correspond  in  a 
cost-efficient  manner  to  the  increased  climate  target.  The  climate  target  plan  also 
established that this increase in climate and energy ambition will require a full update of 
the current climate and energy policy framework, undertaken in a coherent manner.  

As  under  the  current  policy  framework,  the  optimal  policy  mix  should  combine,  at  the 
EU and national levels, strengthened economic incentives (carbon pricing) with updated 
regulatory  policies,  notably  in  the  field  of  renewables,  energy  efficiency  and  sectoral 
policies  such  as  CO2  standards  for  new  light  duty  vehicles.  It  should  also  include  the 
enabling  framework  (research  and  innovation  policies,  financial  support,  addressing 
social concerns).  

While  sometimes  working  in  the  same  sectors,  the  policy  tools  vary  in  the  way  they 
enable  the  achievement  of  the  increased  climate  target.  The  economic  incentives 
provided  by  strengthened  and  expanded  emissions  trading  will  contribute  to  the  cost-
effective  delivery  of  emissions  reductions.  The  regulatory  policies,  such  as  the 
Renewable  Energy  Directive  (RED),  the  Energy  Efficiency  Directive  (EED),  the 
Regulation  on CO2 standards for vehicles supported by the Directive on the alternative 
fuels  infrastructure,  and  the  Re(FuelEU)  aviation  and  maritime  initiatives,  aim  at 
addressing  market  failures  and  other  barriers  to  decarbonisation,  but  also  create  an 
enabling  framework  for  investment,  which  supports  cost-effective  achievement  of 
climate target by reducing perceived risks, increasing the efficient use of public funding 
and  helping  to  mobilise  and  leverage  private  capital.  The  regulatory  policies  also  pave 
the way for the future transition needed to achieve the EU target of the climate neutrality. 
Such a sequential  approach from the CTP  to  the Fit for 55 initiatives was necessary in 
order to ensure coherence among all initiatives and a collective delivery of the increased 
climate target.  

182 

COM (2020) 562 final. 

166 

 
 
 
                                                 
With the “MIX” scenario, the impact assessment included a policy scenario that largely 
reflects the political orientations of the plan. 

The  final  calibration  between  the  different  instruments  is  to  be  made  depending,  inter 
alia on the decision on the extension of emissions trading beyond the maritime sector and 
its terms. 

The Table 34 below shows the summary of the key CTP findings: 

Table 34: Key policy conclusions of the Climate Target Plan 

POLICY CONCLUSIONS IN THE CTP 

GHG emissions 
reduction 

  At least 55% net reduction (w.r.t. 1990) 
  Agreed by the European Council in December 2020 
  Politically agreed by the European Council and the European Parliament in 

the Climate Law 

ETS 

ESR 

LULUCF 

  Corresponding targets need to be set in the EU ETS and the Effort Sharing 
Regulation to ensure that in total, the economy wide 2030 greenhouse gas 
emissions reduction target of at least 55% will be met. 
Increased climate target requires strengthened cap of the existing EU ETS 
and revisiting the linear reduction factor.  

 

  Further expansion of scope is a possible policy option, which could include 
emissions  from  road  transport  and  buildings,  looking  into  covering  all 
emissions of fossil fuel combustion. 

  EU should continue to regulate at least intra-EU aviation emissions in the 
EU ETS and include at least intra-EU maritime transport in the EU ETS. 
  For aviation, the Commission will propose to reduce the free allocation of 
allowances,  increasing  the  effectiveness  of  the  carbon  price  signal  in  this 
sector, while taking into account other policy measures.  

  Corresponding targets need to be set in the Effort Sharing Regulation and 
under  the  EU  ETS,  to  ensure  that  in  total,  the  economy  wide  2030 
greenhouse gas emissions reduction target of  at least 55% will be met. 

  Sink needs to be enhanced. 
  Agriculture  forestry  and  land  use  together  have  the  potential  to  become 
rapidly  climate-neutral  by  around  2035  and  subsequently  generate 
removals consistent with trajectory to become climate neutral by 2050. 

CO2 standards 
for cars and 
vans 

  Transport  policies and standards will be revised and, where needed, new 

policies will be introduced.  

  The Commission will revisit and strengthen the CO2 standards for cars and 

vans for 2030. 

  The  Commission  will  assess  what  would  be  required  in  practice  for  this 
sector  to  contribute  to  achieving  climate  neutrality  by  2050  and  at  what 
point in time internal combustion engines in cars should stop coming to the 
market. 

Non-CO2 GHG 

  The  energy  sector  has  reduction  potential  by  avoiding  fugitive  methane 

167 

 
 
emissions 

emissions.  The  waste  sector  is  expected  to  strongly  reduce  its  emissions 
already  under  existing  policies.  Turning  waste  into  a  resource  is  an 
essential  part  of  a  circular  economy.  Under  existing  technology  and 
management options, agriculture emissions cannot be eliminated fully but 
they  can  be  significantly  reduced  while  ensuring  food  security  is 
maintained in the EU. Policy initiatives have been included in the Methane 
Strategy.  

Renewables 

  38-40% share needed to achieve increased climate target cost-effectively.  
  Renewable  energy  policies  and  standards  will  be  revised  and,  where 

needed, new policies will be introduced.  

  Relevant  legislation  will  be  reinforced  and  supported  by  the  forthcoming 
Commission  initiatives  on  a  Renovation  Wave,  an  Offshore  Energy 
strategy, alternative fuels for aviation and maritime as well as a Sustainable 
and Smart Mobility Strategy. 

  EU  action  to  focus  on  cost-effective  planning  and  development  of 
renewable energy technologies, eliminating market barriers and providing 
sufficient incentives for demand for renewable energy, particularly for end-
use  sectors  such  as  heating  and  cooling  or  transport  either  through 
electrification  or  via  the  use  of  renewable  and  low-carbon  fuels  such  as 
advanced biofuels or other sustainable alternative fuels. 

  The  Commission  to  assess  the  nature  and  the  level  of  the  existing, 
indicative  heating  and  cooling  target,  including  the  target  for  district 
heating  and  cooling,  as  well  as  the  necessary  measures  and  calculation 
framework  to  mainstream  further  renewable  and  low  carbon  based 
solutions, including electricity, in buildings and industry. 

  An updated methodology to promote, in accordance with their greenhouse 
gas  performance,    the  use  of  renewable  and  low-carbon  fuels  in  the 
transport sector set out in the Renewable Energy Directive. 

  A comprehensive terminology for all renewable and low-carbon fuels and a 
European  system  of  certification  of  such  fuels,  based  notably  on  full  life 
cycle  greenhouse  gas  emissions  savings  and  sustainability  criteria,  and 
existing provisions for instance in the Renewable Energy Directive. 
Increase the use of sustainably produced biomass and minimise the use of 
whole trees and food and feed-based crops to produce energy through inter 
alia  reviewing  and  revisiting,  as  appropriate,  the  biomass  sustainability 
criteria in the Renewable Energy Directive, 

 

  Energy  efficiency  policies  and  standards  will  be  revised  and,  where 

needed, new policies will be introduced.  

  Energy efficiency improvements will need to be significantly stepped up to 

around 36-37% in terms of final energy consumption183. 

  Achievement of a more ambitious energy efficiency target and closure of 
the collective ambition gap of the national energy efficiency contributions 

Energy 
Efficiency 

183 The Impact Assessment identifies a range of 35.5% - 36.7% depending on the overall design of policy 
measures underpinning the new 2030 target. This would correspond to a range of 39.2% - 40.6% in terms 
of primary energy consumption.  

168 

 
 
                                                 
in the NECPs will require actions on a variety of fronts. 

  Renovation Wave will launch a set of actions to increase the depth and the 
rate  of  renovations  at  single  building  and  at  district  level,  switch  fuels 
towards  renewable  heating  solutions,  diffuse  the  most  efficient  products 
and  appliances,  uptake  smart  systems  and  building-related  infrastructure 
for charging e-vehicles, and improve the building envelope (insulation and 
windows). 

  Action will be taken not only to better enforce the Energy Performance of 
Buildings Directive, but also to identify any need for targeted revisions. 
  Establishing  mandatory  requirements  for  the  worst  performing  buildings 
and  gradually  tightening  the  minimum  energy  performance  requirements 
will also considered. 

169 

 
 
 
 
 
 
 
10.9. Glossary 

Table 35: Glossary 

Term or acronym 

Meaning or definition 

Land Use 

BACS 

Biofuels 

EU Agriculture, Forestry and Land Use. Also known as 
Land Use instrument.  

Building Automation and Control Systems 

Biofuels are liquid or gaseous transport fuels such as 
biodiesel and bioethanol which are made from biomass. 

Biofuels (conventional) 

Biofuels are produced from food and feed crops. 

Biofuels (advanced) 

BOE 

CAP 

CAPRI (model) 

CCS 

CCU 

CEDEFOP 

CEF 

CGE 

CHP 

Biofuels produced from a positive list of feedstock 
(mostly wastes and residues) set out in Part A of Annex 
IX of Directive (EU) 2018/2001. 

Barrels of oil equivalent 

Common Agricultural Policy 

Common Agricultural Policy Regionalised Impact 
model: a global multi-country agricultural sector model, 
supporting decision making related to the Common 
Agricultural Policy and environmental policy. 

Carbon Capture and Storage: a set of technologies aimed 
at capturing, transporting, and storing CO2 emitted from 
power plants and industrial facilities. The goal of CCS is 
to prevent CO2 from reaching the atmosphere, by 
storing it in suitable underground geological formations.  

Carbon Capture and Utilisation: the process of capturing 
carbon dioxide (CO2) to be recycled for further usage. 

European Centre for the Development of Vocational 
Training 

Connecting Europe Facility: an EU funding instrument 
to promote growth, jobs and competitiveness through 
targeted infrastructure investment at European level. 

Computable General Equilibrium: a family of economic 
models. 

Combined Heat and Power: a combined heat and power 
unit is an installation in which energy released from fuel 
combustion is partly used for generating electrical 

170 

 
 
 
CH4 

CO2-eq 

COP 

CORSIA 

COVID-19 

DG ECFIN 

E3ME  

ECB 

EE 

EEA 

EED 

E-fuels 

E-gas 

EIB 

EII 

energy and partly for supplying heat for various 
purposes. 

CH4 is the chemical formula for methane, a greenhouse 
gas. CH4 is used as shorthand to refer to methane. 

CO2-eq stands for carbon dioxide-equivalent. This is a 
measure used to compare quantities of different 
greenhouse gases in a common unit on the basis of their 
global warming potential over a given time period. 

Conference of the Parties: decision-making body of the 
United Nations Framework Convention on Climate 
Change (see UNFCCC) 

Carbon Offsetting and Reduction Scheme for 
International Aviation 

Global pandemic caused by a coronavirus unknown 
before the outbreak began in Wuhan, China, in 
December 2019.  

Directorate General Economic and Financial Affairs 

Energy-Environment-Economy Macro-Econometric 
Model: a model for macroeconomic analysis. 

European Central Bank 

Energy Efficiency 

European Environment Agency 

Energy Efficiency Directive: Directive 2012/27/EU and 
amending  Directive 2018/2002/EU 

Liquid fuels produced on the basis of hydrogen obtained 
from electricity via electrolysis 

Gaseous fuels produced on the basis of hydrogen 
obtained from electricity via electrolysis 

European Investment Bank 

Energy intensive industries 

Energy system costs 

EPBD 

EPC 

Sum of fixed and variable costs for the energy system, 
including investments, operations and maintenance, as 
well as fuels. 

Energy performance of buildings directive: Directive 
2010/31/EU and amending Directive 2018/844/EU 

Energy Performance Certificates 

171 

 
 
 
ERDF 

ESOS 

ESR 

ETD 

EU ETS 

EU, EU-27 

EU-28 

EUTL 

FAO 

FEC 

F-GASES 

FRL 

G20 

GAINS (model) 

(see also EPBD) 

European Regional Development Fund 

Energy savings obligation scheme 

Effort Sharing Regulation: Regulation 2018/842/EU 

Energy Taxation Directive:  Directive 2003/96/EC 

European Union Emissions Trading System as 
established under Directive 2003/87/EC 

European Union with 27 Member States since 1 
February 2020 

European Union with 28 Member States from 1 July 
2013 to 31 January 2020 

European Union Transaction Log: central transaction 
log, run by the European Commission, which checks, 
records and authorises all transactions between accounts 
in the Union Registry (see also EU ETS, NIMs) 

Food and Agriculture Organization 

Final Energy Consumption: all energy supplied to 
industry, transport, households, services and agriculture, 
excluding deliveries to the energy transformation sector 
and the energy industries themselves (see also GIC, 
PEC) 

Fluorinated greenhouse gases, including 
hydrofluorocarbons (HFCs) perfluorocarbons (PFCs) 
and sulphur hexafluoride (SF6). 

Forest Reference Level (see also LULUCF) 

Group of 20: international forum for the governments 
and central bank governors from 19 countries and the 
European Union (EU)184. 

Greenhouse gas and Air Pollution Information and 
Simulation 

GDP 

Gross Domestic Product 

GEM-E3-FIT (model) 

General Equilibrium Model for Energy Economy 
Environment interactions: a computable general 

184 The Group of Twenty (G20) is a forum made up of the European Union and 19 countries: Argentina, 
Australia, Brazil, Canada, China, Germany, France, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi 
Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States. 

172 

 
 
                                                 
GHG 

GIC 

equilibrium model, version operated by E3Modelling, a 
company (see also JRC-GEM-E3). 

Greenhouse Gas 

Gross Inland Consumption: the quantity of energy 
necessary to satisfy inland consumption of the 
geographical entity under consideration, i.e. the Total 
Energy Supply, plus the international aviation (see also 
FEC, PEC). 

GLOBIOM (model) 

Global Biosphere Management Model: a model for land 
use of agriculture, bioenergy, and forestry. 

GtCO2 

GW 

HBS 

Hydrogen 

Hydrogen (GHG neutral) 

Giga tonnes of CO2 

Gigawatt 

Household Budget Surveys: national surveys of 
households focusing mainly on consumption 
expenditure. 

A feedstock for industrial processes and energy carrier 
that can be produced through a variety of processes from 
fossil fuels or electricity via electrolysis.  

Hydrogen from GHG neutral sources, mainly through 
electrolysis using GHG neutral electricity. This includes 
renewable hydrogen, which is from renewable electricity 
via electrolysis. 

Hydrogen (Clean, Renewable)  Hydrogen, which is from renewable electricity via 

IA 

IATA 

ICAO 

ICT 

IEA 

IIASA 

IMO 

IPCC 

IRENA 

JRC 

electrolysis. 

Impact assessment 

International Air Transport Association 

International Civil Aviation Organisation 

Information and Communication Technology 

International Energy Agency 

International Institute for Applied Systems Analysis 

International Maritime Organization 

Intergovernmental Panel on Climate Change 

International Renewable Energy Agency 

Joint Research Centre of the European Commission 

JRC-GEM-E3 

General Equilibrium Model for Energy Economy 

173 

 
 
Environment interactions: a computable general 
equilibrium model, version operated by the JRC (see 
also GEM-E3-FIT)  

JTF 

Just Transition Fund 

Land Use instrument 

LULUCF + agriculture.  

LRF 

LTS 

Linear Reduction Factor (see also ETS) 

COM(2018) 773: A Clean Planet for all - A European 
strategic long-term vision for a prosperous, modern, 
competitive and climate neutral economy  

LULUCF 

Land Use, Land-Use Change, and Forestry 

LULUCF regulation 

Regulation on emissions and absorptions of the 
LULUCF sector: Regulation (EU) 2018/841 

MFF 

MRV 

MSR 

MtCO2 

Mtoe 

MWh 

N2O 

NDC 

NECP 

NGEU 

NIMs 

NOX 

‘No Debit rule’ 

Multiannual Financial Framework 

Monitoring, Reporting and Verification scheme 
implemented in Regulation (EU) 2015/757 on the 
monitoring, reporting and verification of CO2 emissions 
from maritime transport 

Market Stability Reserve (see also EU ETS) 

Million tonnes of CO2 

Million tonnes of oil equivalent 

Megawatt hour 

N2O is the chemical formula for nitrous oxide, a 
greenhouse gas. N2O is used as shorthand to refer to 
nitrous oxide. 

Nationally Determined Contributions (as required by the 
Paris Agreement) 

National Energy And Climate Plan 

Next Generation EU 

National Implementation Measures, submitted under 
Article 11 of the ETS Directive (see also ETS) 

Nitrogen Oxide(s) 

Under EU legislation adopted in May 2018, EU Member 
States have to ensure that greenhouse gas emissions 
from land use, land use change or forestry are offset by 
at least an equivalent removal of CO₂  from the 

174 

 
 
NZEB 

OECD 

atmosphere in the period 2021 to 2030. 

Near Zero Energy Building 

Organisation for Economic Co-operation and 
Development 

PDF (indicator) 

Potentially Disappeared Fraction of global species 

PEC 

PHS 

PM 2.5 

POLES-JRC (model) 

PRIMES (model) 

Primary Energy Consumption: Gross Inland 
Consumption (GIC) minus the energy included in the 
final non-energy consumption 
(see also, FEC, GIC) 

Pumped Hydropower Storage 

Particulate Matter with a diameter of 2.5 micrometre or 
less 

Prospective Outlook on Long-term Energy Systems: a 
global long-term energy system model operated by the 
JRC 

Price-Induced Market Equilibrium System: an energy 
system model for the European Union. 

PRIMES-TREMOVE (model)  Model for the transport sector, integrated in the PRIMES 

model. 

PtG 

PtL 

QUEST / E-QUEST (model) 

Power to gas: technologies for the production of E-gases 
(see also E-gases) 

Power to liquids: technologies for the production of E-
fuels (see also E-fuels)  

Quarterly Economic Simulation Tool: a global 
macroeconomic model used by the Directorate General 
for Economic and Financial Affairs (DG ECFIN) 

RED / RED II 

Renewable Energy Directives 2009/28/EC and 
2018/2001/EU 

RES 

RES-E 

RES-H&C 

RES-T 

RFNBO 

Renewable Energy Sources 

Renewable Energy Sources in the generation of 
Electricity 

Renewable Energy Sources in Heating and Cooling 

Renewable Energy Sources in Transport 

Renewable Fuels of Non-Biological Origin: liquid or 
gaseous fuels which are used in the transport sector other 
than biofuels or biogas, the energy content of which is 

175 

 
 
SET-Plan 

Sink 

derived from renewable sources other than biomass 

EU Strategic Energy Technology Plan 

Any process, activity or mechanism that removes a 
greenhouse gas, an aerosol, or a precursor to a 
greenhouse gas from the atmosphere 

SME 

Small and Medium-sized Enterprise 

Synthetic fuels and gases 

See E-fuels, E-gases 

TEN-E 

TEN-T 

TFEU 

TWh 

UN 

UNFCCC 

VAT 

ZELV 

ZEV 

Trans-European Networks for Energy 

Trans-European Networks for Transport 

Treaty on the Functioning of the European Union 

Terawatt-hour 

United Nations 

United Nations Framework Convention on Climate 
Change 

Value Added Tax 

Zero and low emissions vehicles 

Zero emissions vehicles 

176