EU May Soften Draft Energy Savings Law, Drop CO2 Option

The European Union may soften a planned energy efficiency law and drop references in that legislation to withdrawing permits from the bloc’s carbon market, according to EU officials.

Representatives of national governments and the European Parliament are scheduled to meet this evening in Strasbourg, France, for the last round of talks to iron out differences on the draft legislation proposed by the European Commission a year ago. The commission aimed to ensure that member states cut their primary energy consumption by 20 percent by 2020, enforcing what is currently a non-binding goal.

The final legislation will be less stringent because member states are ready to deliver a “significant contribution on energy savings” rather than close the gap between the goal and the current efficiency projections, said an EU official who declined to be identified because the talks are confidential.

The draft law put forward a year ago by EU Energy Commissioner Guenther Oettinger required more energy savings from utilities, energy distributors and public authorities. Without additional discipline the EU will be only half-way to the target at the end of this decade, according to the commission, the bloc’s regulatory arm.

The Energy Efficiency Directive, which would require member states to enact national rules in line with the provisions of the EU law, would save the region 152 million tons of oil equivalent by 2020, reducing the bloc’s fuel bill by about 38 billion euros ($48 billion) annually, the commission estimated. To become law, the draft needs approval by the European Parliament and national governments, which also have the right to propose amendments.

Pro-Growth

In a letter to EU officials, ministers and lawmakers, the Prince of Wales’s EU Corporate Leaders Group on Climate Change, which includes Unilever, the world’s second-biggest consumer goods company, called on negotiators to show “ambition” at today’s meeting.

“We believe that a low-carbon economy is a pro-growth strategy and central to avoiding locking ourselves into a high- carbon future, or losing fast-growing markets to China, India or the United States,” said the EU CLG, which also includes Acciona SA (ANA), the Spanish construction firm that transformed itself into the fifth-biggest wind-energy producer.

Deal-Breaking Issue

The key deal-breaking issue in the negotiations is the proposed obligation on energy distributors or retail energy companies to achieve annual energy savings equal to 1.5 percent of their sale volumes, according to a Parliament official, who declined to be identified because the talks are private.

While the Parliament insists on a more stringent target, member states want flexibility in the measures to be introduced. Governments are seeking options that will allow them for example to take into account actions taken up to date when calculating the achieved efficiency, the EU official said. Their caution is caused by concerns that costs for energy companies may surge at a time of an economic crisis, according to the official.

The energy-efficiency measures proposed by the commission would require investing a total of 24 billion euros annually on average by 2020 in areas including home insulation, energy management or control systems, according to the commission.

Carbon Target

Another provision that will probably be relaxed in a deal expected by the EU tomorrow is the planned requirement on public bodies to purchase energy-efficient services and products and refurbish at least 3 percent of their buildings to higher efficiency standards every year, according to the officials.

Instead of the obligation to refurbish public buildings member states can accept this requirement for central government property, the EU official said.

Meeting the 20 percent energy-efficiency target would enable the EU to exceed its 20 percent carbon-cut goal and reduce greenhouse gases by 25 percent domestically by 2020, according to a commission policy paper last year.

To highlight the potential impact of the new efficiencies on demand for permits in the EU emissions market, the Parliament voted earlier this year to enshrine in the draft law the commission’s right to set aside a certain number of allowances. Member states have repeatedly signaled they won’t back the Parliament’s amendment, opposing any link to the bloc’s carbon market in a law on a different policy area.

The final version of the legislation is unlikely to include any clear wording calling on the commission to reform the EU emissions trading system and the planned energy efficiency law was never expected to regulate the emissions market, according to the Parliament official.

The commission is planning to propose delaying sales of some carbon allowances as of 2013 in a separate process, with a regulatory proposal due before August, EU climate chief Connie Hedegaard said earlier this week.

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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