EU's new energy and climate policies - implications for Norway

Topical and contentious issues such as the recent ‘winter package’ from the EU on renewable energy, the EU effort sharing regulation and not least the Market Stability Reserve (MRS) of the EU emissions trading system were all on the table today at our breakfast meeting.

By Karoline H. Flåm (FNI)

More than 70 people from various parts of government, business stakeholders, NGOs and media were present and eager to hear answers to the overarching question: what do all these policy proposals mean, and what are likely implications for Norway as an extended ‘EU climate member’?

Recent budget crisis

Research Professor Jon Birger Skjærseth from the Fridtjof Nansen Institute first reminded everyone of the major backdrop of EU’s current proposals, a backdrop which is key also for understanding the recent budget crisis in Norway, namely the EU goal to reduce EU’s carbon emissions with 40 per cent before 2030 (from 1990 levels). Skjærseth went on to explain the basics of the EU effort sharing regulation (ESR), which essentially means that each state gets an emission target and a carbon budget for the non-ETS sectors (transport, agriculture, buildings and waste), with flexible mechanisms providing substantial leeway to reach their targets before the ‘deadline’ in 2030. The Commission has proposed a 40 per cent cut target for Norway in these sectors.

Interestingly, Skjærseth argued for the possibility for new and untraditional alliances between EU member states in the negotiations that now will follow - a process which Norway surely will follow closely. He also added that whatever outcome of these negotiations, Norway will have to do more to cut its climate emissions if an agreement with the EU materializes.

Critical of 'renewable platform'

Knut Kroepelien from Energi Norge continued with a presentstion on the recent winter package from the EU Commission. The package being more than 4000 pages long, Kroepelien highlighted various parts of the package. The package addresses problems of competitiveness, cost efficiency and security of energy supply, and thus proposes a number of reforms, including changes in the market design and changes in both renewable energy and energy efficiency policies.

He highlighted, with criticism, the proposal of a new ‘renewable energy platform’, which essentially will entail a form for financial sanctioning of member states that don’t do their share in increasing the use of renewable energy.

"This proposal is a way of upholding the notion of separate, binding member state goals on renewable energy, whereas the 2030 package decided that the road ahead is instead to operate with one, common EU-wide goal of 27 per cent,” said Kroepelien.

We have to cooperate on renewable energy – if every state just focuses on supporting new production and its own target, and solving capacity-issues nationally, we will end up with large overinvestments, Kroepelien added.

From Blues to Optimism

Finally Research Professor Jørgen Wettestad held a presentation on recent developments and reforms of what has been labelled the ‘flagship’ of EU’s climate policy, i.e. the EU emissions trading system (ETS). He explained the basics of the key Market Stability Reserve (MRS), essentially a kind of market ‘thermostat’, from 2019 to release more emission permits when the market gets too ‘hot’, and withdraw permits when the market is too ‘cold’.

He also argued, perhaps surprisingly for some, that there now might be reasons for (conditional) optimism regarding the future effectiveness of the ETS, which no doubt has had a rough and troublesome journey so far. Both internal developments (e.g. possible leadership from Germany again; compensation measures to Eastern Europe) and external developments (such as Paris Agreement follow-up) may help bring about a strengthened MSR and ETS overall. But Brexit and Trump remind us about the current uncertainty and possibilities for surprising turn of events.

Presentations

Jon Birger Skjærseth

Knut Kroepelien

Jørgen Wettestad