7 takeaways on the Commission’s emissions-cutting package

Brussels’ Effort Sharing Regulation divides the pain among 28 member countries.

The European Union made big promises during the Paris climate summit, and on Wednesday the European Commission spelled out how the bloc’s 28 members will share in some of the pain to meet those targets.

The proposal is the result of months of fraught political negotiations that saw Climate Action and Energy Commissioner Miguel Arias Cañete and the vice president in charge of the energy union, Maroš Šefčovič, crisscrossing the continent to build support.

Despite that, there was immediate blowback from governments including Italy and Finland, upset at the cost of making the cuts. Environmental groups, meanwhile, felt that the reduction weren’t ambitious enough to meet the EU’s Paris pledge and  domestic target of reducing total greenhouse gas emissions by at least 40 percent by 2030.

Wednesday’s Effort Sharing Regulation sets out how much each member country will have to reduce greenhouse gas emissions in sectors not covered by the Emissions Trading System. These are areas including transportation, agriculture, waste and buildings, and together they account for about 60 percent of the bloc’s emissions.

Under those proposals, big and wealthy countries would have to cut their emissions the most, while Bulgaria, the poorest member, will even be able to pollute a little more.

Agriculture and forest-rich members such as Ireland, Denmark and Lithuania, as well as wealthy but tiny Luxembourg, get more ability to offset their pollution with trees and credits from the bloc’s emissions trading market.

But the significance of the proposal isn’t just the size of each target, it’s also the amount of give and take each country gets to hit that goal — in Brussels-speak called “flexibilities.” That’s why the Commission also spelled out if and how members can count their land use, land-use change and forestry — grouped under the acronym LULUCF — towards their efforts to reduce emissions.

“As always, it’s very easy to agree a global target,” Arias Cañete told reporters on Wednesday. “When you have national binding targets, it’s quite difficult that the 28 countries are happy with them. The important thing is that the target is balanced and fair.”

The Commission’s proposal is part of a target EU leaders had already agreed to in 2014 under the bloc’s energy and climate goals. It will now go on to the European Parliament and EU countries, which will have to agree on their own versions before the three negotiate the final version — which would then become binding EU law. The process is likely to drag out for years.

A third part of the package is a strategy for decarbonizing transport that aims to curb CO2 emissions for trucks, coaches and buses by 2019.

Here are POLITICO’s seven takeaways on the plan:

1. Who gets what

Bulgaria will actually be able to increase emissions by 1.5 percent thanks to concessions EU leaders agreed in 2014 allowing countries to compensate emissions with credits from trees and land use that absorb CO2.

Formally Bulgaria gets a target of zero percent, which means it must keep its emissions at 2005 levels. That’s already a big shock to the country as under the current plan, which covers the period up to 2020, Bulgaria was allowed to increase emissions by 20 percent.

Romania, which formally needs to cut emissions by 2 percent, also benefits from the ability to offset them through trees.

Meanwhile, Luxembourg and Sweden will have to slash their emissions by 40 percent between 2021 and 2030, while Denmark and Finland must cut them by 39 percent.

But all countries will have some cushion for the high targets: They can use credits from the Emissions Trading System (ETS) and trees. The biggest winner in that category is agriculture-heavy Denmark. Ireland, another farming superpower, is given considerable flexibility to use trees and ETS credits to make up for the emissions produced by its cows — one of the country’s leading causes of greenhouse gases. Lithuania also benefits.

Richer, smaller countries like Belgium, Austria, Luxembourg, Sweden and Malta will gain from the ability to use ETS credits in meeting their goals.

The hardest-hit are the big, rich countries like Germany, the U.K. and Italy which barely got any space to meet their targets and consequently will have to undertake the deepest cuts.

To make sure countries are doing what they pledged, Brussels plans to assess their progress every year and do a “more formal compliance check” every five years starting in 2027.

2. The politics of reducing emissions

Less wealthy members were allowed to increase emissions by up to 20 percent under the 2020 targets — in which the bloc agreed to cut emissions by around 10 percent in total. This time around, no country is supposed to be able to actually increase pollution.

EU leaders agreed in 2014 that poorer states will have to at least prevent their emissions from rising from 2021, while wealthier ones will have to cut them by as much as 40 percent. The targets are based on each country’s relative GDP per capita. But in an effort to counter-balance the higher burden on richer members, leaders also agreed to take into account the cost of those reduction efforts. The Commission will also propose new measures to boost renewables and energy efficiency this autumn, aimed at further complementing emissions-reduction work.

That said, even countries with a target of zero percent will be in for a shock compared with the freedom to spew more emissions. “If you say zero, it means you have to limit your emissions,” Arias Cañete told POLITICO this week.

Brussels knows member countries won’t be enthusiastic about the targets, but Arias Cañete argued they were “realistic, fair and flexible.” He called the months-long process of cajoling all the members to share the pain “unbelievably difficult.”

Finland came out swinging after its 39 percent target was published. “It is tougher than we expected, as we were preparing for a 37 to 38 percent target,” said Environment Minister Kimmo Tiilikainen. Italy’s environment minister, Luca Galletti, lamented that the proposal doesn’t take into account the work it has done to overshoot its 2020 target and cut pollution from agriculture.

German Environment Minister Barbara Hendricks instead welcomed the proposal. “We are ready with our existing national target to go beyond the proposed target,” she said. “But this has to benefit the climate and cannot lead to other European states doing less.”

3. Effort sharing: Why it matters

The Effort Sharing Regulation might be more obscure than the EU’s better known Emissions Trading System, but it actually covers some of the bloc’s biggest emitters — transport, followed by buildings and agriculture.

“This is the flagship instrument. Everyone has always talked about the ETS being the European flagship instrument. It’s a lie, it’s not. The ESR covers 60 percent of EU emissions,” said Hannah Mowat, a forest and climate campaigner at the NGO Fern.

Road transport, the subject of a separate strategy issued Wednesday, contributes around 20 percent of the EU’s total carbon dioxide emissions, and is the only major non-ETS sector where greenhouse gases have gone up since 1990.

4. One country’s flexibility, another’s loophole

When EU leaders agreed on the outlines of the bloc’s 2030 climate and energy targets in 2014, they also laid down a number of flexibilities to reduce the pain.

Members can bank their emissions allocations from one year to another and borrow from a following year if emissions are higher than the annual limit. That’s already the case today, and is aimed at helping countries hit with unexpected economic, weather or other turbulence.

Countries can also trade emissions allocations among themselves.

But there’s more. A number of high-income, smaller countries will be able to use a limited number of CO2 allowances — 100 million over the decade — from an oversupplied ETS to help them offset emissions from sectors like transport or buildings. They will also be able use credits from the CO2 that’s absorbed out of the atmosphere by the land use and forestry sectors.

“The system provides more flexibility than in the past,” said Arias Cañete.

Environmentalists, however, worry that these flexibilities are in fact loopholes, which will weaken the EU’s overall climate target.

“Rather than cutting emissions by at least 30 percent, the use of fake forestry credits and surplus ETS permits would lower the target for the non-traded sectors to merely 27 percent actual reductions,” said Femke de Jong, EU policy director at the NGO Carbon Market Watch.

5. The battle over trees

Trees and other land uses will play a major role in determining just how painful emission cuts will be. Forests are a hugely valuable resource at a time when the world is trying to meet the emissions goals set by last year’s Paris climate agreement of keeping global temperature rises to well below 2 degrees Celsius, and eventually 1.5 degrees.

Land use — including soil use, biomass generation and timber — produce emissions, but forests absorb nearly 10 percent of the EU’s CO2 output each year, according to the Commission.

EU countries are required to ensure the sector absorbs as much as it emits. However, if a country’s land use and forestry sector absorbs more, then a member will also be allowed to use some surplus credits to hit national targets in other sectors.

But there is a limit to how much trees will count.

It will be a capped at 280 million tons of CO2 over the period across the EU. In an effort to further limit countries’ ability to game the system, that cap will be further broken down to benefit the countries that need it the most.

That’s “good for Ireland and bad for Finland and Sweden,” said Hannes Boettcher, a senior researcher at the German think tank Oeko-Institut. “This is a hit in the face of those countries that lobbied for recognition of forest management.”

The run up to Wednesday’s proposals saw forest-rich countries like Austria, Finland and Slovenia pitted against farming hubs like Ireland and Denmark. While the former wanted to make sure they get credits for maintaining existing forests, the latter were keen to benefit from planting new trees to help offset emissions from agriculture — and they got their way.

Brussels proposes that countries can gain credits only from land use management like crop or grassland and afforestation. Unclear accounting rules means that managing forests won’t be recognized.

6. Brexit looms large

Brussels had no choice but to divide the bloc’s emissions targets by 28 — until the U.K. leaves the EU, it’s still a member.

But if the U.K. does quit, that creates problems for the remaining 27 because Britain has done better in cutting emissions than many other countries. A Brexit would particularly hurt countries in the middle of the emissions-cutting pack.

Spain’s target would likely be bumped by 1.7 percent, the NGO group Climate Action Network (CAN) Europe calculated based only on national GDP per capita rates. Italy and Cyprus would have to take on another 1.4 percent each, followed by Slovenia, Malta and Greece.

“The emissions reduction in the U.K. has been quite significant over the years,” said Donald MacDonald, chair of the climate-focused investors’ network IIGCC. “That means that the remaining parts of the EU will still have to meet the targets that the EU has signed up for, and will therefore put pressure onto the other members, and it’s not going to be easy.”

That said, national targets will have to be hiked, Brexit or no Brexit, said Wendel Trio, director of CAN Europe. The Paris climate agreement urges countries to revise and raise their targets in 2018, and then requires them to do so in 2023 and every five years after that.

“So both can happen at the same time, because very likely by then we will know for sure whether the U.K. will be in the EU or not,” Trio said.

7. Where the Paris deal comes in

The bloc’s 2030 targets are inseparable from the EU’s commitments under the Paris climate agreement, where it pledged to cut total emissions by at least 40 percent by 2030.

“The main issue is how countries will react to the targets they get. After all, they all agreed to the Paris agreement,” Trio said, adding that Wednesday’s proposals don’t go far enough to meet that target.

That’s also why the starting point for the amount of carbon emitted between 2021 and 2030 “really matters,” he added.

Brussels proposes a “middle ground,” calculation that uses a country’s average emissions between 2016 and 2018 to set the amount of CO2 it should be allowed in the next decade. Lower-income countries that can increase their emissions until 2020 will get a bit more leeway.

Central and Eastern European countries might well benefit from this, by counting their emissions for 2030 from a lower starting-off point, Trio said. “For Bulgaria their target will be zero percent, but in reality in 2020 they might be at minus 3 percent — they may still benefit.”

Now that the proposal is on the table Brussels and EU countries will start the difficult process of negotiating a compromise. And while the final outcome isn’t clear, one thing certainly is: Nobody will like the targets they’ve been given, Trio said.

“Officially all countries will say the proposal is too hard for them. There will not be a single country that will say we can do more than what the Commission proposes.”