The European Commission has presented an analysis of the costs, benefits and options for moving beyond the EU's greenhouse gas reduction target for 2020 from 20% below 1990 levels to 30% once the conditions are met. At present these conditions have not been met. This communication follows the Commission's Communication on "How to reinvigorate international climate negotiations" and the Council's request to present an assessment on the impacts of a conditional move to a 30% emissions cut.

The Commission has addressed to the EU institutions for consideration a communication on options to move beyond 20% greenhouse gas emission reductions and assessing the risk of carbon leakage. Since 2008 the absolute costs of meeting the 20% target have decreased from €70 billion to €48 billion (0.32% of GDP) per year by 2020. This is due to several factors: lower economic growth has reduced emissions; higher energy prices have spurred energy efficiency and reduced energy demand; and the carbon price has fell below the level projected in 2008 as EU ETS allowances not used in the recession are carried forward.

However, at the same time, this reduction in absolute costs comes in the context of a crisis which has left businesses with much less capacity to find the investment needed to modernise in the short run.

Since 2007 the EU is committed to move to a 30% emissions cut by 2020 if other major economies take on their fair share of the effort under a global climate change agreement. The cost of reaching the 30% target is now estimated at €81 billion per year by 2020, €11 billion higher that the price tag for the 20% target two years ago. The 30% target would cost €33 billion (0.2% of GDP) more than the 20% target is estimated to cost today.

Options for moving to 30%

The Communication sets out options for meeting the 30% target within the EU ETS and in the other sectors. These include: reducing the number of auctioned allowances under the EU ETS; regulation to promote greater energy efficiency; smart use of fiscal instruments; directing EU cohesion policy funding towards green investments; and improving the environmental integrity of the international carbon credits recognised in the EU ETS.

A measure that is attractive even ahead of a possible move to 30% would be to use some unallocated free EU ETS industry allowances to accelerate innovation in low-carbon technologies, in a similar way to the existing demonstration programme for innovative renewable energy and carbon capture and storage technologies funded with 300 million allowances.