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Without immediate action, twelve EU countries will miss their national climate targets under the Effort Sharing Regulation (ESR), a new study analysing national climate plans finds. Seven more countries are at risk of not meeting their goals. Germany and Italy are the two worst performing countries. France will only meet its target by a very close margin - but any backtracking of policies, or even a very cold winter pushing higher energy consumption, means it could fall in the red zone. There is still time to rectify government policies in order to meet the 2030 targets, T&E says.
Germany and Italy will fail to meet their climate targets by a substantial gap (10 and 7.7 percentage points respectively), the study finds. As a result, they could eat up all the available carbon credits left for other countries. Germany alone will be in need of 70% of the available credits [1]. The other under-compliant countries could be left with no allowances to purchase and face court cases.
Sofie Defour, climate director at T&E, explains: “Germany and Italy are eating up all available carbon credits from their neighbours, leaving them stranded and at risk of legal proceedings. The German government will soon have to face its citizens asking for even more money and deepening the budget crisis yet further, to make up for their weak policies.”
If allocations were to be traded at €129, the carbon price projected by Bloomberg in the ETS sectors in 2030, Germany will have to pay over-achieving countries as much as €16.2 billion to buy credits. This at a time when the country is reeling from a budget crisis and where the government will have to fill a €40 billion hole in its budget in 2025 [2]. For its part, Italy is currently on track to fail its target by 7.7 percentage points, equivalent to a €15.5 billion bill. But the two countries can still achieve their targets by implementing new measures to increase the uptake of electric vehicles, insulate buildings, and more.
Countries missing their targets can purchase carbon credits from those that do meet them. The price of credits is decided bilaterally between countries. But T&E warns that without immediate action, there will be a scarcity of credits, due to the fact that so many countries are set to miss their targets. This could lead to a bidding war for the credits in 2030, which could drive up their prices.
Sofie Defour continues: “The sheer amount of penalties countries might need to pay in 2030 is mind blowing. Countries face a clear choice: pay billions to their neighbours for their carbon debt, or implement new policies that improve the life of their own citizens, such as insulating houses. There are still six years to course correct. We call on the new Commission to gather an action group, where measures such as electrification targets for company cars are proposed and laggard countries get the needed guidance.”
The countries that will accumulate the most surplus are Spain, Greece and Poland, the analysis also shows. Spain is likely to overachieve on its 2030 target by 7 percentage points. The Spanish government could receive 10 billion from countries that are not on track. Five countries, amongst them France and the Netherlands, have submitted plans that are only just sufficient to meet their goal - but any weakening of policies means these countries could fall into the red zone and have to pay carbon credits, T&E warns.
Under the Effort Sharing Regulation, Member States have to meet climate targets for five key sectors: road transport, buildings, small industry, waste and agriculture. Targets were designed according to a country’s GDP, with richer countries having to meet higher emissions reduction targets. The overall goal for the EU is -40% by 2030 (compared to 2005 levels) across the five sectors. Countries have to submit National Energy and Climate Plans (NECPs) outlining how they intend to meet the target by the 30th of June.
T&E analysed the draft NECPs and more recent projections to calculate the potential emissions reductions of all 27 EU countries. When aggregating the national plans submitted by countries, emissions in the ESR sectors are projected to decrease by only 35.5% in 2030 (compared to 2005). This is 4.5 percentage points short of the -40% EU target.
Notes to editors:
[1] The latest emission projections released by the German Environment Agency show the country will miss its target by 10 percentage points. The German government will need to purchase 126 million allowances from other countries, to make up for the shortfall.
