ETS and ESD: the EU framework for GHG emissions reduction

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The development of renewable energy at the European level is built on the need to reduce greenhouse gas emissions from fossil energy combustion, in order to avoid the worst impacts of climate change and maintain the global average temperature increase of temperature below 2°C, and if possible below 1.5°C as the EU and its Member States agreed to during the COP21 in Paris.

To that end, the EU laid out emission reduction objectives: minus 20% in 2020 compared to 1990, minus 40% in 2030 (possibly more considering the increased ambition of the Clean Energy for All European package), with a 2050 objective of carbon neutrality.

The Emission Trading Scheme and the Effort Sharing Decisions are the instruments of the EU when it comes to GHG emissions. The ETS, where the GHG emission from installation from more than 11,000 heavy energy-using installations are exchanged, covers 45% of the EU’s emissions.

The Effort Sharing Decision is the instrument covering the “non-ETS sector”, which notably includes emissions from the buildings sector (for instance for heating and cooling), transports and agriculture. Emissions in this sector should fall by 10% (compared to 2005) in 2020, and by 30% in 2030. Under the ESD, Member States were allocated national targets up to 2020, with some aiming up to 20% emission reduction, others being allowed to increase theirs, based on GDP per capita. Uncertainties remain for the 2020-2030 period, as there are no national targets. The ESD allows Member States to trade their emission reduction in the non-ETS sector, with the objective to favour least cost emissions reductions.

Geothermal energy enters in both sides of the ETS/ESD division. Power installations and district heating plants correspond to the ETS sector, and as such can benefit from facilities such as the NER300. Ground source heat pumps, when integrated to a building are not part of the ETS.

Relevant Publications:

- European heating sector urges Members of the European Parliament to support EU ETS reform
- Non-paper on the Innovation Fund
- Consultation on revision of the EU Emission Trading System (EU ETS) Directive

For more of EGEC's position on this topic and on others, go to the Position papers section of the website

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