Understanding the Impacts & Limitations of the Current EU Climate Policy instrument Mix

Synthesis & Conclusion

This report synthesises the outputs from the series of sector‐specific and cross‐sectoral studies produced under Work Package 2 – ‘Understanding the Impacts and Limitations of the Current Instrument Mix in Detail’ of the CECILIA2050 project. Each publication of this series can be downloaded from the CECILIA2050 Website.

This report is structured using two framing tools developed and applied by the CECILA2050 project. The primary structure follows the three aspects of the CECILIA2050 concept of policy mix ‘optimality’; environmental effectiveness, economic efficiency and feasibility. Under each of these headings the discussion is delineated by climate policy instrument ‘type’, namely ‘Carbon Pricing’, ‘Energy Efficiency and Energy Consumption’, ‘Promotion of Renewable Energy’ and ‘Non‐CO2 GHGs’, based on the objective of the instrument or instrument mix under discussion. A discussion of the specific interactions present between climate policy instruments is also provided under each aspect of optimality. The report focuses on ex-post assessment and discusses only those climate policy instruments which are of highest importance. Thus, a number of instruments are excluded due to their recent introduction and minor importance.

The report draws the following conclusions:

  • The existing climate policy mix is uneven, lightly co‐ordinated and sometimes difficult to define, due to the fact that there is a deep divide between sectors and Member States concerning the number of instruments in place to tackle emissions, instrument design and implementation, and the level of ambition. The most coherent policy landscape exists for the power and industry sectors through the EU ETS. However, the degree of policy fragmentation is higher in other policy areas: the individual implementation of instruments to promote electricity from renewable sources varies significantly between Member States and the Energy Taxation Directive places uneven.
  • Despite this, the climate policy mix in the EU has been broadly effective in producing GHG abatement and according to calculations from the CECILIA2050 report on the impact of current economic instruments reduced European CO2 emissions by 12‐13% below the counterfactual in 2008. This suggests that, in the absence of these policies, CO2 emissions in 2008 would have been around 5% higher than 1990 levels, rather than the 7% reduction that was actually observed.
  • Whilst economic instruments have been important, they are not the only climate policy instruments to have produce abatement. In addition, they are not exploiting their full potential as a result of design flaws, imperfect implementation, and negative interaction with other climate and nonclimate policy instruments.
  • There is no evidence to suggest that ‘carbon leakage’ has occurred. Whilst much of the exante analysis predicted significant rates of carbon leakage, the ex‐post evidence suggests that no loss of competitiveness leading to carbon leakage has occurred amongst the Energy Intensive Trade Exposes (EITE) sectors as a result of the EU climate policy.
  • From a broad perspective, the climate policy mix may have produced net economic benefits to the EU. The introduction of the EU ETS, renewable electricity support mechanisms and environmental tax reforms overall did not reduce GDP in the EU, and likely had a positive impact. Employment is also likely to be higher than the counterfactual in most Member States, with the exception of some of the smaller transition economies.
  • Instrument mix ‘Optimality’ is difficult to achieve, but improvements are possible. Under the concept of optimality developed under the CECILIA2050 project and employed in this report, it is clear that the existing climate policy mix is sub optimal. It must be considered that the concept is a theoretical point of reference and that policy mixes in real‐world application are always faced with trade‐offs. However, based on the research summarised in this report, and the reports underlying it, the lessons learned can be used to enable improvements to the existing policy mix to be investigated and pursued.



Drummond, Paul. 2014. Understanding the Impacts & Limitations of the Current EU Climate Policy instrument Mix. CECILIA2050 WP2 Deliverable 2.10. London: University College London (UCL). 


European Commission


Paul Drummond, University College London

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Executive summary






Environmental Effectiveness of the EU’s Climate Policy Instrument Mix



Economic Impacts & Efficiency of the EU’s Climate Policy Instrument Mix



Feasibility Constraints & Impacts of the EU’s Climate Policy Instrument Mix