European Union Council Meeting: a timid regulatory approach to the EU objective of increasing energy efficiency by 20% by 2020

The Council of the European Union, at its May 17th Economic and Financial Affairs meeting in Brussels,[1] discussed the status of the Commission's 2050 Roadmap,[2] the implications of the Commission's Energy Infrastructure Communication[3] and the follow-up to the Commission's Energy Efficiency Plan.[4] 1. Status of the Commission's 2050 Roadmap When commenting on the content of the 2050 Roadmap, the Council acknowledges the merits of moving towards a competitive low carbon economy by 2050, of further developing energy security and of ameliorating the cost-effectiveness of energy supply. In this context, it also stresses the budgetary restrictions prevailing in the majority of EU Member States ("EU MS"). The Council is aware of the substantial investments needed to achieve a low carbon economy. Such investments require consideration of all possible avenues for mobilizing private and public finance, which leaves the door open for innovative financial instruments. The Council here encourages the Commission to continue undertaking cost-benefit and sector-specific analyses of strategies towards reducing the level of greenhouse gas (GHG's) emissions. 2. Implications of the Commission's Energy Infrastructure Communication In response to the Commission's Energy Infrastructure Communication, the Council has indicated that the establishment of a European energy market was central to addressing the EU climate change objectives. The market should continue holding the central role in funding energy infrastructure investment. In the presence of specific market failures, measures designed to ameliorate market functioning (e.g. adaptation of the regulatory framework or planning reforms) should be prioritized. Should the market options prove insufficient to achieve these climate change objectives, limited public finance may be called for so as to "leverage private funding". Nevertheless, the granting of public funding ought to be premised on clear and transparent criteria, and be based on a comprehensive cost benefit analysis. The leverage of private funding may also be achieved through recourse to "innovative financing instruments", although their effectiveness will be conditional upon EU MS making their respective budgetary rules more consistent with each other. 3. Follow-up to the Commission's Energy Efficiency Plan As far as the Commission's Energy Efficiency Plan is concerned, the Council concedes that the 2020 20% energy efficiency target is presently not ready to be achieved. Although it encourages EU MS to consider measures for cost-effective energy savings, it takes the view that imposing binding national targets for energy efficiency (on the model of the Renewable Energy Directive)[5] would not be in line with the necessary flexibility underlying the cost-effective approach to the implementation of the GHGs reduction target. The Council here makes a particular point that subsidiarity and proportionality are to govern EU decision-making in this area of climate change law. The principle of subsidiarity insists on the EU political institutions acting, in respect of non-exclusive areas of competence, "only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States " and provided that this action can "be better achieved at Union level" due to its scale or effects.[6] Pursuant to the proportionality principle, the form and content of the proposed measure need not go beyond what is necessary to achieve the EU objective.[7] The Council also posits that the measures suggested in the Commission's Energy Efficiency Plan (e.g. national measures making regular and independent energy audits binding on large companies; national rules imposing energy performance or eco-design requirements on producers of standard industrial equipment) may be adequate so long as they are underpinned by a clear economic justification and are in accordance with the Commission's Communication on Smart Regulation in the EU.[8] The latter soft law instrument calls for the adoption of EU legislation that is clear and accessible enough to those affected by it.[9] It also recommends that EU institutions pay sufficient attention to and duly consider (e.g. through consultation or stronger forms of procedural involvement) stakeholders' and European citizens' voice in their decision-making.[10] The Communication on Smart Regulation suggests, furthermore, that future EU legislation be simplified and its administrative burdens be lessened.[11] 4. Conclusion It is clear that the EU views energy efficiency increase not only as an end in and of itself but also as a means towards achieving the 2020 20% GHGs reduction goal. Notwithstanding the importance of energy efficiency, the Council is hereby propounding a more decentralized approach to this area of climate change than in respect of the promotion of renewables (at least as far as the question of national targets is concerned). A comprehensive hard law instrument regulating energy efficiency in the EU is still missing from the EU legal framework. As it transpires from the press,[12] the Commission is due to publish a proposal for a generic energy-efficiency directive, which would, for instance, require energy customers to install individual meters, compel public authorities to renovate their buildings, and empower competent authorities to fine companies which fail to assist customers in diminishing their energy use.[13] The draft proposal, as it currently stands, would nevertheless avoid imposing binding national targets in the implementation of the EU-endorsed 2020 20% energy efficiency target.[14] [1] Council conclusions on economic aspects of EU energy and climate change issues [2] "A Roadmap for moving to a competitive low carbon economy in 2050", COM(2011) 112 final, Brussels 8.3.2011. Text available at: http://ec.europa.eu/clima/documentation/roadmap/docs/com_2011_112_en.pdf [3] "Energy infrastructure priorities for 2020 and beyond – a blueprint for an integrated European energy network" COM(2010) 677/4, available at: http://www.energy.eu/directives/com-2010-0677_en.pdf [4] "Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Energy Efficiency Plan 2011", COM(2011) 109 final, Brussels 8.3.2011. Text available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0109:FIN:EN:PDF [5] Directive 2009/28/EC of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC, 2009 OJ L 140/16 (Article 3(1)). [6] Article 5(3) of the Treaty on European Union. [7] Article 5(4) of the Treaty on European Union. [8] Commission communication – COM(2010)543 (8 October 2010). [9] Id. at 2.4. [10] Id. at 4. [11] Id. at 2.1. [12] http://www.europeanvoice.com/article/imported/power-firms-could-face-energy-efficiency-fines/71026.aspx (issue of 12 May 2011). [13] This draft proposal would fit within the framework of the Commission's November 2010 Communication titled "Energy 2020 – A strategy for competitive, sustainable and secure energy" in which the Commission promised to "present most of the proposals to achieve the 2020 goals in the coming 18 months". The text of this Communication can be viewed at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0639:FIN:EN:PDF [14] See European Council's March 2007 summit.

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