Maximising the synergies between carbon pricing and Article 7 of the Energy Efficiency Directive (EED)

Panel: 2. Policy innovations to ensure, scale and sustain action

This is a peer-reviewed paper.

Authors:
Ivana Rogulj, The Institute for European Energy and Climate Policy (IEECP), Croatia
Samuel Thomas, Regulatory Assistance Project (RAP), Belgium
Vlasios Oikonomou, Institute for European Energy and Climate Policy (IEECP), The Netherlands

Abstract

The European Union (EU)’s Energy Efficiency Directive (EED) will be reviewed in line with the revised climate goal of 55% emissions reductions by 2030. Article 7 EED imposes an obligation on Member States (MS) to make new energy savings of 0.8% of final energy consumption each year for the 2021-2030 period through policy measures. Energy and CO2 taxes designed to achieve end-use energy savings are eligible measures. 15 MS have used taxes to achieve Article 7 objectives in the 2014-2020 obligation period. Nine Member States indicated in their National Energy and Climate Plans that they will continue using taxation. At the same time, the EU is considering extending the Emissions Trading System (ETS) to the buildings and transport sectors, placing a carbon price on virtually all of the energy consumption covered by the EED.

This paper argues that, if a carbon price is imposed on buildings and transport, taxation measures should be excluded from the list of eligible measures for Article 7 EED compliance. This would allow Article 7 EED to focus on the market failures and barriers that carbon pricing will not address. If carbon pricing is not introduced through the updated climate architecture, we make suggestions on policy design and the reporting requirements for taxation measures, based on research and inputs from MS using taxation through the ENSMOV H2020 project. For MS to use taxation measures effectively, it is crucial that they are designed carefully, as part of a package of measures that can stimulate investment in new energy efficiency measures. Energy savings reported from taxation measures should be subject to more rigorous analysis, based on relevant data.

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