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Opinion of the European Economic and Social Committee on ‘Energy and climate change as an integral part of the renewed Lisbon Strategy’

On 17 June 2008 the European Economic and Social Committee decided, under Rule 29(2) of its Rules of Procedure, to draw up an own-initiative opinion on

The Committee Bureau instructed the Section for Economic and Monetary Union and Economic and Social Cohesion (Lisbon Strategy Observatory) to prepare the Committee's work on the subject.

Given the nature of the work, the European Economic and Social Committee appointed Ms Sirkeinen as rapporteur-general at its 457th plenary session, held on 4 and 5 November (meeting of 4 November), the European Economic and Social Committee adopted the following opinion by 164 votes to 6 with 12 abstentions.

1.1. Climate change and security of energy supply are two of the biggest challenges of this century. Consumption and production structures need to change towards decreased greenhouse gas emission and energy use. Some production will fall out and others develop and grow. Existing jobs will be lost and new ones created; support measures will be needed. Skill and knowledge needs will change. Research and massive investments have to take place.

1.2. Moving finally from political statements to practical measures is necessary and urgent, but it will not be easy. Our political leaders have to make these challenges and their implications clear to citizens and plan carefully the measures needed. Without the support of citizens and the civil society change will not happen. Many questions concerning consequences of EU policy decisions remain open and need further study and information from the Commission.

1.3. Concrete moves towards a low carbon society must not be postponed because of the present economic downturn, however serious. The crisis could and should also be seen as an opportunity for a fresh start with a different approach to achieving growth. The EESC in particular stresses the importance of an international agreement in Copenhagen.

1.4. The renewed Lisbon Strategy has to include an action plan for a low carbon economy. This must be achieved while respecting the three pillars of sustainable development – economic, environmental and social - and without losing sight of the overall goal of competitiveness, growth and jobs. A competitive economic framework is a prerequisite for achieving climate and energy goals, and climate and energy policies can, with the right approach, support the creation of growth and jobs.

1.5. Key areas of action are technology development and investments, awareness and behaviour, societal and educational aspects and the international dimension. Achieving real, sustainable results will require both time and resources.

2.1. EU energy policy has three parallel objectives: security of supply, competitiveness and environmental protection, including mitigation of climate change. If necessary, the first priority is to be given to security of supply. Lack of energy, incl. electricity generation, is an increasingly real risk, in particular when the economy starts to recover.

2.2. The environmental and climate effects of energy production and large-scale use are targeted by EU regulation. New caps in the emissions trading system, covering energy production, energy-intensive industries and air transport, have been approved by the EU. The practical effects of these proposals are still unknown in spite of impact assessments on aggregate level.

2.3. Efficiency and saving in all sectors of energy use as well as in energy production is the key and highly potential building bloc for energy security and lower emissions The EU has several policies in place for this and further policy measures are being prepared. Practical measures in Member States are, however, still scarce.

2.4. The sources and routes of European energy supply have to be diversified and the energy mix directed towards low carbon and low emission alternatives, such as renewable energy and nuclear power. Optimisation and decisions on the energy mix are in the hands of Member States, but EU policies on renewables as well as environmental and climate legislation direct choices.

2.5. Europe needs to be a stronger player in international energy relations and markets. The problems of gas supply encountered again in 2009 may finally lead to a long overdue determination to act together.

2.6. The Energy and climate package of 2008 comprises measures in all sectors to reach the well known targets of 20-20-20 by 2020. The main target of greenhouse gas emissions would be increased to 30 % in the context of a sufficiently ambitious and comprehensive international agreement.

2.7. A big part of the measures to cut emissions are to be put in place by Member States. Many details of the legislation, in particular as regards the emissions trading system and the problem of ‘carbon leakage’ still need to be decided at EU level.

2.8. How the whole system will work in practice is still unknown. Questions of great importance are, for instance, the price of carbon dioxide, energy price increase as a result of policies for renewables and the cost to households of action in the non-ETS-sectors. More studies and information is needed from the Commission.

2.9. Negotiations on an international climate agreement will culminate in Copenhagen in December 2009. The EESC has presented its views on this in a separate Opinion. The European Council has agreed on main lines for preparing for the Copenhagen meeting, including preparation of a burden sharing between Members States to support the poorest countries.

3. Issues to be taken up in the renewed Lisbon Strategy on energy and climate policies

3.1. A low carbon economy implies big industrial changes. Emissions have to decrease and the use of energy and natural resources have to be decoupled from economic growth. Consumption and production structures need to change. Some production will fall out and others develop and grow, jobs will be lost and new ones created. Skill and knowledge needs will change. Massive investments are needed, as well as necessary social support measures.

3.2. Our political leaders have to make this and its implications on our everyday life clear. Governments have to make clear what is needed, like how much fossil energy has to be substituted and by what, or how much energy each of us has to save. Without the support of and acts by citizens the change will not happen. The role of civil society is central.

3.3. Measures to combat climate change and secure Europe's energy supply must not be postponed because of the present economic downturn. Policies for easing the economic crises should support the goals of a low carbon economy, and vice versa. The crisis could and should also be seen as an opportunity for a fresh start with a different approach to achieving growth.

3.4. The bulk of policies and legislation on energy and climate issues for some years ahead are in place, with the very important exception of an international agreement. Much has now to be done on the national level, and we do not know yet how this all will work. Changes in targets or legislation must now be avoided in order to make it possible for all actors to prepare and execute their measures with as much foresight and certainty as possible. Efforts must now be targeted towards practical implementation.

3.5. An action plan for a low carbon economy has to be incorporated into the renewed Lisbon Strategy. This must be achieved while respecting the three pillars of sustainable development – economic, environmental and social – and without losing sight of the overall goal of competitiveness, growth and jobs.

3.6. Appropriate measures, carefully planned and assessed for most cost effective, real results, should be integrated into structural policies to be covered by the integrated guidelines, the country specific recommendations and national reform plans. The Commission should enforce its monitoring of implementation. In addition to GDP other indicators need to be used to track the development towards sustainability.

3.7. The change is driven by technology development on the one hand and change in attitudes and behaviour on the other. Both take time in order to give real, lasting results. Other important issues are investments, social and educational aspects and the international dimension.

3.8. Technological competition is strong globally. The US have allocated significant resources to R&D of technologies to mitigate climate change. The same trend is to be seen in other developed economies and increasingly in big, fast developing economies.

3.9. Europe must be able to realise the potential of first mover in the ‘clean’ technologies of renewable energy and climate change. This is a very urgent and demanding task, as, for instance, Japan is ahead on hybrid and electric cars and China may soon bypass the EU on wind technologies and the US on photovoltaic. A price on carbon dioxide cannot alone be expected to provide enough incentive for technological change.

3.10. The Commission has presented several initiatives to enhance clean/renewable and climate technologies. More resources from the EU budget should be allocated to these purposes.

3.11. The most efficient technologies emerge only from diversity and healthy competition between the various approaches, innovations and methods. This means that no useful technology, like 4th generation fission energy and fusion, should be abandoned prematurely but be persistently further developed.

3.12. The vast potential of the development and deployment of ICT technologies should be tapped.

3.13. Renewable energy technologies that are still a long way from being economically viable should not be prematurely forced upon the market through expensive subsidies (or artificial purchase prices). Instead, this money should go into R&D in sustainable and CO2-avoiding technologies until these approach viability.

3.14. The EU's share of R&D and innovation financing is small in comparison with the resources of the Member States. Presently the level of efforts of Member States varies widely. It is crucial that they increase resources, including from ETS auctioning revenues, to R&D in clean technologies in particular, and that critical mass and world-level excellence be sought through efficient cooperation. These measures must be tangibly incorporated into the guidelines and national action plans of the reformed Lisbon Strategy.

3.15. New technologies and innovations come into use only through investments, which take place in households, companies and the public sector. Investments are necessary for economic development and employment as well as for reaching climate and energy goals.

3.16. Investment needs in energy production and transport infrastructure are massive and urgent. For instance, to replace outgoing electricity capacity some EUR 1 000 billion are needed within a decade even if demand would not increase. Transport networks, in particular cross-border and connecting renewable electricity to the grid, need substantial upgrading. The standstill of investments in the recession and its potential longer term effects raise serious concerns.

3.17. Investments require certain framework conditions. These include a healthy economic framework, market demand and access to markets. The regulatory framework has to be stable and predictable and avoid heavy administrative and financial burdens on companies. Only profitable companies can invest in technology development and uptake of new technologies.

3.18. Consequently, a competitive economic framework is a prerequisite for achieving climate and energy goals. And, with the right policy approach, climate and energy policies can create growth and jobs.

3.19. Financial resources will come under strain, when R&D and investment needs within the EU will compete with the need to finance climate change mitigation and adaptation in developing countries. Member States will have at their disposal revenues from the auctioning of emission allowances, but these cannot cover all relevant needs. Decision makers have to be careful about increasing the burdens on enterprises and thereby putting their investments in new technologies at risk.

3.20. In order to act and change their behaviour, people need to know what’s at stake and what needs to be changed. Awareness of what people can do themselves must be reinforced and relevant education be provided. This is a task for both governments and civil society organisations. One useful tool would be a list of good practices, to be provided by the Commission.

3.21. While it is very positive that energy consumption and greenhouse gas emissions now are in the forefront of marketing and advice to consumers, it is to be deplored that also misleading information is provided. This has to be counteracted by relevant actors.

3.22. The EU is, rightly, relying to a large extent on market instruments in its climate policies. Price signals should change the behaviour of both citizens and businesses. However, this alone will not deliver the full potential of changes. In some cases, such as the building sector, regulation is needed, and for some other purposes positive support is required.

3.23. Better energy efficiency usually leads to financial savings. Incentives are needed in particular in cases where payback periods are relatively long, or when the person who bears the cost does not reap the benefit. The Committee has earlier proposed to the Commission to study the feasibility of sectoral targets for energy efficiency, especially in sectors with internal market implications.

3.24. To avoid distorting competition in the internal market, the EU applies mandatory common rules on public support.

3.25. Consumption patterns will change over time, and consequently so will production. According to a study by ETUC and SDA (1), the net effect on employment of measures to decrease greenhouse gas emissions by some 40 % by 2030 is slightly positive; this result and approach is, however, seen by others as too optimistic (2). The study concludes that there will, however, be considerable changes in job structures and skill requirements. The changes will be bigger within sectors than between them. For example, a transfer of jobs is expected from power generation to activities related to energy efficiency or from jobs related to road transport to rail and waterways.

3.26. Education and training is in big demand to make companies, public sector services and the workforce able to cope with changes. Education and training, including lifelong learning, was the main subject of an earlier EESC opinion on climate change and the Lisbon Strategy.

3.27. The Commission has recently made proposals for enhancing foresight of skill needs, which is essential to enable timely reactions by education and training. Better foresight, improved matching of supply and demand of skills and enhanced lifelong learning measures are natural parts of the renewed Lisbon Strategy.

3.28. As almost everyone in the labour market will be affected by the changes, education has to be available to all so that they can adapt to changed requirements. For those who still may face problems, comprehensive social security networks must be maintained in the Member States.

3.29. People are also affected by changing cost structures following energy and climate policies. Particularly close monitoring is needed of the effects of changing energy prices. Energy prices fluctuate strongly for different reasons and one of the objectives of EU energy policies is to curb these fluctuations as far as possible.

3.30. Environmental and in particular climate policies drive energy prices upwards with the aim of reducing energy use. The downside of this policy approach is, that it drags down the competitiveness of European industry and constitutes a risk of energy poverty among citizens. Reacting to higher prices by decreasing energy use usually requires investments in new equipment which may take time. A very balanced approach to energy prices, taking into account these time spans, is needed in order to achieve good, sustainable results instead of creating economic and social problems.

3.31. Measures to mitigate climate change in Europe alone have little impact as Europe's greenhouse gas emissions represent 14 % of global emissions, and the share is decreasing. Without actions by all big economies, emissions will not be curbed in line with the warming limit of 2 °C, and Europe will lose competitiveness and thereby risk the well-being of its citizens. Therefore an agreement in Copenhagen is of crucial importance, and the EU has to continue taking the lead.

3.32. The goal in Copenhagen must be, as the Commission itself puts it, ‘a sufficiently ambitious and comprehensive international agreement that provides for comparable reductions by other developed countries, and appropriate actions by developing countries’. An important element is an international trading system, or at least compatible systems, in order to ensure both effective emissions reductions as well as a competitive level playing field.

3.33. It is evident that poor developing countries will need economic assistance to cope with both mitigating and adapting to climate change. Development of and clear rules for technology transfer, including protection of intellectual property rights, and the Clean Development Mechanism are important elements.

3.34. The international agreement is also necessary for Europe to be a real frontrunner in better climate and energy technologies. Demand for these technologies would otherwise be much weaker.

3.35. The EU must strengthen its position and activity at international level in order to secure Europe's energy supply. A wider foreign policy context, as envisaged by the Union, would be highly supportive. As the EESC has stated in earlier opinions, the EU must also take the lead on a responsible and sustainable global approach to energy.

Brussels, 4 November 2009.

The President of the European Economic and Social Committee

Mario SEPI

(1) The study on climate change and employment, commissioned by the European Commission, DG Environment, has been carried out by a consortium led by the European Trade Union Confederation (ETUC) and the Social Development Agency (SDA), which includes Syndex, the Wuppertal Institute and ISTAS. Study is available at http://www.etuc.org/a/3676.

(2) Hans Werner Sinn, ‘Das Grüne Paradoxon’, Econ-Verlag, ISBN 978-3-430-20062-2.