The EU as a climate leader
The European Union (EU) is among the world’s largest emitters, alongside with China, the United States and India. At the same time, the EU has proactively contributed to the establishment of an international legal regime on climate change, playing a leading role in the negotiations of the 1992 United Nations Framework Convention on Climate Change (UNFCCC), as well as the subsequent Kyoto Protocol (1997) and Paris Agreement (2015). EU’s external commitments on climate change have been paralleled by the adoption of numerous cross-sectoral policies in the EU sphere, aimed at reducing greenhouse gas (GHG) emissions and fostering compliance with international climate commitments.
EU competence for climate action
The EU competence to legislate at the supranational level is based upon the principle of conferral, enshrined in Article 4 of the Treaty on the European Union (TEU), which provides that the Union has the power to legislate only insofar as such power has been conferred by its Member States. EU competences, which can be of exclusive or shared character, are respectively listed under Articles 3 and 4 of the Treaty on the Functioning of the European Union (TFEU).
While such catalogues do not specifically foresee an EU competence for climate action, the EU has a shared competence in environmental matters (Articles 4.2(e) and 191 ff. TFEU), which has largely served as a legal basis for the adoption of climate legislation. Moreover, since the adoption of the 2009 Treaty of Lisbon, the EU also relies upon a shared competence in energy matters (Articles 4.2(i) and 194 TFEU), which is similarly relevant for the adoption of climate policies.
From 2020 Package to 2030 Framework
Following the ratification of the UNFCCC in 1993, the EU has implemented numerous sectoral climate and energy policies. Examples are given by the introduction of mechanisms to monitor GHG emissions (Council Decision 93/389/EEC) or to increase the share of renewable energy in electricity consumption (Directive 2001/77/EC). After the ratification of the Kyoto Protocol, in 2002, the EU further expanded its normative framework on climate change, adopting its first emissions trading scheme, also known as EU ETS (Directive 2003/87/EC). This is based on a ‘cap-and-trade’ system, setting a cap on emissions by certain sectors and establishing a market for the trade of emissions allowances. The establishment of the EU ETS has further been accompanied by legislation mandating a reduction of GHG emissions from non-ETS sectors (Effort Sharing).
In 2009, the EU set a new course for the pursuit of climate policies with the deployment of the 2020 Climate & Energy Package, a comprehensive set of legislative instruments setting targets and introducing new commitments with regard to decarbonization, energy efficiency and renewable energy. Such model has been more recently ratcheted up with the adoption of the 2030 Climate & Energy Framework, which sets the following targets to be reached by the year 2030:
- 55 % GHG emissions reduction from 1990 levels;
- 32 % share of renewable energy in final energy consumption;
- 5 % increase in energy efficiency, compared to 2030 projections.
Beside increasing the ambition level of the targets, the 2030 Climate & Energy Framework has also amended numerous of the legal instruments aimed at facilitating the achievement of such targets.
With regard to decarbonization, the EU ETS system has been amended by Directive (EU) 2018/410. This regulates the allocation and trading of allowances for phase 4 of the EU ETS, in force between 2021-2030, increasing the linear reduction factor, so that the EU-wide issuance of new allowances will decrease more rapidly.
With regard to renewable energy, the 2030 Framework features a recast Renewable Energy Directive (Directive (EU) 2018/2001), which introduces new mechanisms aimed at facilitating the permit-granting process, the deployment of joint projects across Member States, as well as self-consumption of renewable energy, also through the establishment of domestic and cross-border renewable energy communities of self-consumers, also known as ‘prosumers’. As of July 2022, an increase to 45% of the EU-wide renewable energy target for 2030 is being discussed, also due to the energy security challenges caused by the war in Ukraine.
For what concerns energy efficiency, an amendment of the previous legal framework has been carried out by the amended Energy Efficiency Directive (Directive (EU) 2018/2002), which, besides increasing the energy efficiency target, also introduces additional rules on metering and transparency for consumers.
Importantly, the achievement of the objectives pertaining to the three areas of decarbonization, renewable energy and energy efficiency is now also supported by the pledge-and-review system introduced with the 2018 Governance Regulation. This requires the submission, by each Member State, of National Energy and Climate Plans (NECPs), laying out the national targets and the intended policies for their achievement. NECPs are subject to a periodic review process by the European Commission, assessing the adequacy of national targets and of domestic implementation measure
[photo credit: Christian Lue on unsplash]
European Green Deal and the EU Climate Law
The European Green Deal, proposed in 2020 with a view of expanding the time horizon of EU climate policies to 2050, complements the 2030 Framework in several ways.
First, it led to the adoption of the first European Climate Law, i.e. a Regulation setting a carbon neutrality target for 2050. Enshrining in a legally binding act a net-zero target for the EU serves the twofold purpose of setting a yardstick against which to assess shorter-term climate policies, as well as providing certainty to the investors for what concerns the EU’s commitment to emissions reductions. However, the time frame of 2050 has been criticized as inconsistent with the achievement of the 2°C target set under Article 2.1(a) of the Paris Agreement.
Supplementing the 2030 Framework, the European Green Deal also has the ambition of more directly involving the private sector in the pursuit of climate action. This is achieved, on one hand, through policies aimed at aligning capital flows with climate objectives, such as the Taxonomy Regulation, providing screening criteria for investments in environmentally sustainable activities, and the proposal for a Green Bond Standard, to facilitate transparency in investment decisions and their consistency with the EU’s long-term climate objectives. On the other hand, the European Green Deal also addresses the challenges and opportunities that climate action entails for the labor market by establishing a Just Transition Mechanism, which serves the purpose of creating new jobs in the green economy and supporting research and innovation in low-carbon sectors.
Climate in EU trade policy
The Treaty of Lisbon has enabled the European Union to autonomously negotiate and conclude international trade agreements on behalf of its Member States. As part of the Trade for All strategy, the EU has negotiated and concluded free trade agreements (FTAs) with numerous third country parties, whereby specific consideration has often been given to climate change. In this sense, EU’s FTAs pursue a wide range of different approaches, ranging from the inclusion of general references to climate commitments in non-enforceable Trade and Sustainable Development chapters (e.g. in the EU-Korea FTA), to more specific commitments fostering trade in climate technologies (e.g. provisions on non-tariff barriers to trade in renewable energy technologies in the EU-Vietnam FTA).
A further widely debated topic at the intersection between EU climate and trade policies are the potential risks that international trade may determine in terms of carbon leakage, which arises when businesses respond to the higher costs related to compliance with climate policies by relocating their production to countries with laxer emissions constraints. As the EU increases its level of domestic climate ambition, the risk of carbon leakage may also increase. In order to respond to such challenges, in 2022 the European Commission and the European Parliament have been discussing the introduction of a Carbon Border Adjustment Mechanism (CBAM), which would ensure that a carbon price is applied to certain goods imported from outside the EU. The effective implementation of such mechanism, currently much debated in legal scholarship but not yet deployed in practice, will require careful coordination with international trade rules, due to the potential risk of WTO disputes.
