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Summary of IEA Energy Policies Review: The European Union 2008

Core Content

The IEA Energy Policies Review: The European Union 2008 is a comprehensive analysis of the EU's energy policies, focusing on internal energy market development, security of supply, renewable energy, energy efficiency, and technological innovation. It was prepared based on a visit to the European Commission in February 2008 and published between March and late June 2008. The report highlights the EU's global influence and the need for a balanced and effective implementation of its ambitious energy and climate policies.

Main Policy Objectives

The EU has set out several key energy policy goals:

• Completing the internal energy market to ensure a competitive and transparent energy system.
• Increasing renewable energy supply to reduce dependency on fossil fuels and cut greenhouse gas (GHG) emissions.
• Reducing CO₂ emissions through policies like the EU Emissions Trading Scheme (EU-ETS).
• Improving energy efficiency across all sectors to support both environmental and economic objectives.
• Enhancing energy security by diversifying supply sources, improving infrastructure, and strengthening relationships with external suppliers.

Key Policies and Initiatives

1. Energy and Climate Package (2008)

• A highly ambitious policy aimed at reducing GHG emissions and increasing the share of renewables.
• The EU aims to achieve a 20% reduction in GHG emissions by 2020 compared to 1990 levels.
• Includes renewable energy targets and energy efficiency targets.

2. 3rd Liberalisation Package (2007)

• Aims to create a true single, fully competitive, and transparent internal energy market.
• Includes unbundling of energy production and distribution to prevent market distortions.
• The Commission is encouraged to continue pushing for its adoption to ensure market openness.

3. EU Emissions Trading Scheme (EU-ETS)

• The first cross-border emissions trading system in the world.
• Initial phase had issues with low-quality data, over-allocation of allowances, and free allocation.
• A major revision was proposed to start in 2013 to address these issues and ensure smoother operation until 2020.
• The Commission is urged to clarify and adopt these changes to provide investor certainty.

4. Energy Efficiency Action Plan

• The EU aims to achieve a 20% improvement in energy efficiency by 2020.
• The Commission has proposed fleet-wide emission limits and revised energy efficiency directives.
• However, binding targets are still lacking, which may hinder effective implementation.

5. Renewable Energy Targets

• The EU has set 2010 targets for renewable energy, renewable electricity, and renewable transport fuels.
• These targets are unlikely to be met and may need to be increased and made binding.
• The report recommends revising the Guarantees of Origin system to enhance enforceability and reduce costs.

Energy Security and Market Reform

• The EU is increasingly reliant on energy imports, with 64% of energy supply expected to come from imports by 2020 and 67% by 2030.
• Oil imports are expected to reach 95% by 2030, while gas imports will rise to 84%.
• The EU must diversify its supply sources, invest in critical infrastructure, and manage supplier relationships.
• Market reform is a key priority, with the Commission urged to ensure market compatibility and transparent investment frameworks.

Energy Technology and R&D

• Carbon capture and storage (CCS) is highlighted as a key technology for post-2020 climate challenges.
• The Commission has proposed legislation to support CCS, but funding for demonstration projects remains a challenge.
• Energy R&D is critical for achieving the 2050 vision of significant GHG emission cuts.
• The Framework Programme 7 (FP7) has increased energy funding, but the report suggests a misallocation of funds within the energy sector.
• The Commission is advised to rebalance the energy R&D budget, especially in non-nuclear and energy efficiency areas.

Recommendations

The report makes several key recommendations for the European Commission:

• Vigorously implement the Energy & Climate Package of 2008, with a focus on:
  • Energy efficiency across all sectors.
  • Market compatibility and policy implementation.
  • Investor certainty in energy infrastructure and production.
• Continue to push for the adoption of the 3rd Liberalisation Package to ensure a competitive internal energy market.
• Increase funding for energy R&D to match the scale of energy and climate challenges.
• Rebalance energy R&D funding to prioritize non-nuclear and energy efficiency projects.
• Reconsider the energy efficiency target to make it binding and ensure effective implementation.
• Revise the Guarantees of Origin system to support renewable energy growth and reduce costs.

Key Figures and Data

• The EU has 27 member states, with 500 million citizens and a GDP of EUR 11 trillion in 2005.
• Energy intensity has decreased significantly since 1990, with the EU27 now a leader in energy consumption per GDP.
• CO₂ emissions from non-trading sectors are 52% of total emissions, and national governments must address this.
• Renewable energy as a percentage of total primary energy supply in the EU27 was around 8% in 2005.
• Fossil fuels will continue to play a significant role in the EU energy mix even by 2020.
• Nuclear energy is expected to decline, with two new reactors under construction and some member states considering a return to nuclear power.

Conclusion

The report concludes that while the EU has made significant progress in energy policy, there are still implementation gaps and structural challenges that need to be addressed. The Commission must ensure regular reviews, strong enforcement, and clear policy signals to achieve the ambitious goals set out in its energy and climate strategies. A balanced approach between supply-side and demand-side technologies, as well as coordinated international efforts, is essential for a sustainable and competitive energy future.