The European Union (EU) should emit 40% less carbon dioxide than it did in 1990 and produce 27% of its energy from renewables by 2030, declares a new framework on climate and energy presented by the European Commission (EC) on Wednesday. 

The communication setting out the 2030 framework is now expected to be debated by the European Council at a meeting in late March, and later by the European Parliament. The measure will be paired with a legislative proposal for a market stability reserve for the EU emissions trading system (ETS) starting in 2021. The EC urged the council and European Parliament to agree by the end of 2014 that the EU should pledge the 40% reduction in early 2015 as part of a new global climate agreement to be concluded in Paris.

The framework calls for a binding greenhouse gas (GHG) reduction target of 40% emissions reduction below the 1990 level to be achieved by “domestic measures,” including gradual increases to an annual reduction in the “cap” on emissions from ETS sectors from 1.74% now to 2.2% after 2020.

It also sets a target for renewable energy of at least 27% in 2030 that would be binding at the EU level—but voluntary for member states. However, the framework does not call for a mandated energy savings target. “The Commission’s analysis shows that a greenhouse gas emissions reduction target of 40% would require an increased level of energy savings of approximately 25% in 2030,” it simply says, though it notes that the commission is due to review its energy efficiency directive this June.

The EU has set three targets to be attained by 2020: To slash GHG emissions below the 1990 level by 20%; to increase renewables’ share of its energy mix to 20%; and to improve energy efficiency by 20%. GHG emissions in 2012 had decreased 18% relative to 1990 and could fall to 24% by 2020 based on current policies, the EC said. The EU’s share of renewables in final energy consumed, meanwhile, was at 13% in 2012, and it was expected to surge to 21% in 2020 and 24% in 2030.

But these achievements were offset by a number of economic and financial shortfalls, the EC admitted. “Fossil fuel prices remain high, which negatively affects the Union’s trade balance and energy costs,” it said. In 2012, the EU’s oil and gas import bill amounted to more than €400 billion ($547 billion) or approximately 3.1% of the EU’s GDP.

Then, “[t]here has been a decisive shift in the centre of gravity of global energy demand towards emerging economies, notably China and India. At the same time, households and industrial users are increasingly concerned by rising energy prices and price differentials with many of the Union’s trading partners most notably the USA,” it said.  And, while an “internal energy market” has developed, “new risks for fragmentation have emerged,” foremost among them the static ETS, which failed to drive “investments in low-carbon technologies sufficiently well, increasing the likelihood of new national policies that undermine the level playing field the ETS was meant to create.”

Renewable energy technologies have matured and costs have fallen “substantially,” but “the rapid development of renewable energy sources now poses new challenges for the energy system,” the EC also said.

Even so, the EC touted the framework as the best means to “ensure regulatory certainty for investors and a coordinated approach among member states,” declaring it will drive progress toward a low-carbon economy and help develop new technologies.

In an associated communication on energy prices and costs in Europe, the EC said that the rise in electricity prices for both households and industry “is driven mainly by increases in taxes/levies and network costs,” noting that “the evolution of the energy component of prices was uneven; in countries with high penetration of wind and solar power there has been downward pressure on wholesale power prices, but not in other[s].”

One solution emphasized by the EC concerns the liberalization of the market, which it said could “deliver more competition and therefore more efficient and cheaper energy.” The EC also said it was committed to completing the internal energy market in 2014 and further developing energy infrastructure. Global fuel prices, on the other hand, are more “difficult to influence,” the EC said, but potential solutions lay in diversifying energy supplies and supply routes, as well as in increasing renewables and energy efficiency. Finally, to tackle energy policy levies, the EC called on member countries to “ensure the policies financed by such measures are applied as cost effectively as possible.”

Along with its new targets, the 2030 framework proposes a new governance framework based on national plans for “competitive, secure and sustainable energy,” the EC pointed out. Based on guidance soon expected from the EC, these plans—which the member states are to prepare under a “common approach”—would provide investors with more transparency, coherence, coordination, and EU surveillance. “An iterative process between the Commission and Member States will ensure the plans are sufficiently ambitious, as well as their consistency and compliance over time,” the EC said.

Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)