Executive summary

8

1

Introduction

11

2

The Current Climate Policy Mix – Composition, Achievements and Limitations, and Requirements for the Future

11

2.1

The Current Climate Policy Landscape

11

2.1.1

Composition, Effects and ‘Lessons Learned’

11

2.1.2

Overarching Targets and Initiatives

15

2.1.2.1

2030 Climate and Energy Package

15

2.1.2.2

The ‘Energy Union’

16

2.1.2.3

The Innovation Union

16

2.2

Basic Requirements for the Future

18

2.2.1

Basic Requirements for GHG Reduction

18

2.2.2

Basic Requirements for Climate Policy

19

3

Key Decarbonisation ‘Challenges’

20

3.1

Systemic ‘Challenges’  - Description and Status Quo

21

3.1.1

Establish a Meaningful Carbon Price

21

3.1.2

Complete the EU-Wide Electricity Market Reform and System Integration

23

3.1.3

Make Sound Infrastructure Choices Despite Technological Uncertainty

28

3.1.4

Provide Finance and Mobilise the Investments Necessary for a Low-Carbon Economy

29

3.1.5

Encourage Low-Carbon Lifestyles

30

3.2

Sectoral ‘Challenges’ - Description and Status Quo

30

3.2.1

‘Fully’ Decarbonise the Power Sector

30

3.2.2

Facilitate Low-Carbon Transport

33

3.2.3

Tackle the Energy Consumption of the Housing Stock

36

3.2.4

Stimulate Radical Low-Carbon Innovation in Industry

40

3.2.5

Address non-CO2 Greenhouse Gas Emissions, Particularly from Agriculture

41

4

Options and Pathways for Policy Instrumentation and Institutions in the Short-Term

42

4.1

‘Framework’ Conditions, and Reform and Operation of Public Institutions

43

4.1.1

‘Framework’ Conditions, Processes and Actions

43

4.1.1.1

Maximise Benefits of the 2030 Climate and Energy Package, ‘Energy Union’ and ‘Innovation Union’

43

4.1.1.2

Establish Enabling Rules and Guidance for Public Investments and other Financial Market Actors and Investments

47

4.1.1.3

Remove Barriers to Integrated Electricity Grid and Single Electricity Market

49

4.1.1.4

Leverage Subnational and Regional Governance Institutions and Initiatives

52

4.1.1.5

Increase Monitoring and Application of Enforcement Mechanisms

53

4.1.2

Reform and Operation of Public Institutions

53

4.1.2.1

‘Mainstreaming’ of Low-Carbon Objectives

53

4.1.2.2

Regular Review and Dissemination of ‘Best-Practice’ Approaches

54

4.1.2.3

Ensure Clear and Appropriate Spatial Planning Regimes and Administrative Competence

56

4.1.2.4

Produce Long-Term Infrastructure Plans

57

4.1.2.5

Provide Dedicated Funding Sources for Low-Carbon Infrastructure, Deployment and Innovation

57

4.1.2.6

Enhance the use of Green Public Procurement

59

4.2

Policy Pathway One – ‘Incentive-Based’

60

4.2.1

Structural Reform and Expansion of the EU ETS

60

4.2.2

Introduce and Harmonise Carbon Price Signal in the Road Transport Sector

66

4.3

Policy Pathway Two – ‘Technology-Specific’

72

4.3.1

Structural Reform of the EU ETS

72

4.3.2

Introduce Power Sector CO2 Intensity Limit

72

4.3.3

Reform and Extend Minimum Performance Standards and Energy Efficiency Requirements for Buildings

74

4.3.4

Extend Ambition of the Ecodesign Directive

75

4.3.5

Reform and Extend CO2 Intensity Regulations for Road Transport

76

4.4

Cross-cutting Policy Instrumentation Options

76

4.4.1

Ensure Renewable Electricity Support and Capacity Mechanisms are ‘Sustainable’

77

4.4.2

Reduction and Removal of Market Distortions

79

4.4.3

Reform Key Existing and Introduction of New Information Instruments

80

5

Discussion

83

5.1

Addressing Short-Term Requirements

83

5.1.1

‘Systemic’ Challenges

84

5.1.2

‘Sectoral’ Challenges

85

5.2

How ‘Optimal’ are these Options?

87

5.2.1

Effectiveness

88

5.2.2

Cost-Effectiveness

90

5.2.3

Feasibility

91

6

Summary and Conclusions

95

7

References

98