**2. Energy trends**

According to projections of the Reference Scenario (which gives economic and environmental assessments of a world in which the economy continues on its current course without polluting emission reductions policies), energy demand should increase by 1.5% per year between 2007 and 2030 and fossil fuels remain the main sources of energy. They represent three quarters of global energy consumption during the same projection period and the dirtiest fuel, i.e. coal, is expanding its share to face the raising in energy consumption mainly driven by developing countries, such as China and India. Actually, non-OECD countries are the main drivers in the increase of energy demand as a result of their economic and population growth.

The first part of the chapter is then devoted to a critical review of the main international agreements to reduce climate change and their implementation in the EU environmental policy. The search for a consensus among EU governments is tricky since energy policies advocated by EU members differ. Some of them urge on the implementation of nuclear power, while others advocate the use of renewables instead of nuclear technologies; anyway, all of them are convinced that the economy cannot rely on fossil fuels anymore

The second part of the chapter evaluates the range of strategies implemented in different EU countries to tackle climate change. The primary objective of these strategies is to increase the use of renewable energy in order to enjoy the environmental benefits and for energy security reasons (Held et al., 2006). The analysis reviews the EU climate-change package and the main policy instruments contained in it. We categorize policy instruments through the most frequently used typology, i.e. price-oriented or quantityoriented (Dinica, 2006). Some of them are claimed to be more market friendly than others, while other schemes are claimed to be more efficient in promoting the development of renewable energy (Meyer, 2003). Currently, there is no general agreement on the effectiveness of each scheme. By analyzing the different schemes that have been used in EU Member States in order to achieve the 20-20-20 targets, the research takes into account the extent of financial support given by each EU member region by considering some exogenous factors, as the availability and distribution of renewable resources, and the institutional context. The strategies planned by governments imply different costs that might be prohibitive if other countries are not

Finally, the research highlights the problem of coordination among policy makers that undermines the achievement of the 20-20-20 Climate and Energy Package targets, using a theoretic model of Nordhaus (2009). It is well-known that EU countries should take complementary and coordinated actions to green themselves by implementing their own national plan (Böhringer et al., 2009). Every country would want to spur new activities, new investment, more employment in its own territory, by using an appropriate mix of local taxation and subsidies, in conjunction with other command and control instruments. However, EU countries have the incentive to free-ride, or to impose as few costs as possible on their home economy while enjoying the benefits created at the other countries' cost (Barrett, 1994). So, the research highlight the formidable problems of opportunistic behavior

According to projections of the Reference Scenario (which gives economic and environmental assessments of a world in which the economy continues on its current course without polluting emission reductions policies), energy demand should increase by 1.5% per year between 2007 and 2030 and fossil fuels remain the main sources of energy. They represent three quarters of global energy consumption during the same projection period and the dirtiest fuel, i.e. coal, is expanding its share to face the raising in energy consumption mainly driven by developing countries, such as China and India. Actually, non-OECD countries are the main drivers in the increase of energy demand as a result of

(Nordhaus, 2006).

making comparable efforts.

and inefficient outcomes.

their economic and population growth.

**2. Energy trends** 

Fig. 1. Gross Inland Consumption in 2007. Source: Eurostat (2009).

Renewable energies, including hydroelectric, geothermal, biomass, solar energy and wind energy, grow at a fast pace relative to electricity production, but their share in energy consumption is still low.


Table 1. Gross income consumption by country in 2007. Source: Eurostat (2009)

Almost 18% of total electricity in 2007 was generated by renewable energy and, according to the Reference Scenario, it is supposed to rise to 22% in 2030. Actually energy production from renewables is more expensive than fossil fuel based technologies, and the reasons for

EU Energy Policies and Sustainable Growth 7

agreement with manufacturers. Electricity and heat generation constitute the largest polluting sectors in 2008, by making a 41% contribution to the world CO2 emissions in 2008,

relying on carbon fuel, especially in developing countries such as China and India.

Fig. 2. Top 10 emitting countries in 2008 (Gt CO2). Source: IEA, 2010.

Fig. 3. World CO2 emissions by sector in 2008. Source: IEA, 2010.

security reasons.

We deem imperative that a global response to face climate change is needed at the European level. The EU energy portfolio relies strongly on fossil fuels, and it has important consequences both in terms of "importing" CO2 emissions and for energy

such disadvantages are several. Methods used by economic engineering to evaluate costaccounting of energy technology projects are outdated; as a consequence, renewable technology projects seems more expensive (Awerback, 2003). Moreover, it has to be taken into account that production costs of energy from fossil fuels do not internalize both the environmental and human health externalities. A higher penetration of renewable resources in the energy mix would lead to both environmental and economic benefits, as a reduction of polluting emissions and a mitigation of energy import dependency.

The concentration of greenhouse gases (GHG) in the atmosphere was at 438 parts per million (ppm) of CO2 equivalent in 2008, that is almost twice the pre-Industrial Revolution level (IEA, 2009). Mostly of the world emissions originates from China and United States, which together produce about 12.1 Gt CO2 that is 41% of world CO2 emissions. The relation between GHG emissions and economic growth may be well understood through the Kaya identity, which expresses CO2 emissions of the energy sector in terms of GDP, energy intensity of output, and carbon intensity of energy consumption (Stern, 2007):

Carbon Dioxide Emissions population per capita GDP energy intensity carbon intensity

From this identity it is clear that the increase in world GDP tends to increase global emissions, unless increase in income stimulates a reduction in carbon intensity or total energy (Nakicenovic et al., 2006).


Table 2. Rate of growth of CO2 emissions **(%)**. Source: Stern (2007)

The contribution to global warming by countries is controversial. The United States represent the second largest CO2 emitter. On the one hand, the high share of CO2 emissions is related to the share of GDP that is the largest in the world. On the other hand, the United States generates around 20% of global CO2 emissions while the population is only 5% of the total world population. China produces 22% of world polluting emissions but it accounts for 20% of the population of the world (Kawase et al., 2006).

The sectors that contribute more to CO2 emissions are transport and electricity and heat generation, that together account for two-thirds of global emissions in 2008 (IEA, 2010). The former represents 22% of CO2 emissions in 2008 worldwide, and the World Energy Outlook 2009 projections reveal that the share is estimated to grow to 45% by 2030. Actually, the level of passengers travel is growing according to population growth, and only the EU is encouraging fuel economy (as a response to high fuel price as well) through voluntary

such disadvantages are several. Methods used by economic engineering to evaluate costaccounting of energy technology projects are outdated; as a consequence, renewable technology projects seems more expensive (Awerback, 2003). Moreover, it has to be taken into account that production costs of energy from fossil fuels do not internalize both the environmental and human health externalities. A higher penetration of renewable resources in the energy mix would lead to both environmental and economic benefits, as a reduction

The concentration of greenhouse gases (GHG) in the atmosphere was at 438 parts per million (ppm) of CO2 equivalent in 2008, that is almost twice the pre-Industrial Revolution level (IEA, 2009). Mostly of the world emissions originates from China and United States, which together produce about 12.1 Gt CO2 that is 41% of world CO2 emissions. The relation between GHG emissions and economic growth may be well understood through the Kaya identity, which expresses CO2 emissions of the energy sector in terms of GDP,

energy intensity of output, and carbon intensity of energy consumption (Stern, 2007):

**GDP per capita**

Table 2. Rate of growth of CO2 emissions **(%)**. Source: Stern (2007)

20% of the population of the world (Kawase et al., 2006).

USA 1.4 1.8 0.0 -1.5 1.2 EU 0.2 1.8 -0.7 -1.2 0.3 UK - 0.4 2.4 -1.0 -2.3 0.2 Japan 0.7 0.7 -0.5 0.2 0.3 China 3.7 8.5 1.1 -6.4 0.9 India 4.3 3.9 -0.3 -2.5 1.7 **World 1.4 1.9 -0.1 -1.7 1.4**

The contribution to global warming by countries is controversial. The United States represent the second largest CO2 emitter. On the one hand, the high share of CO2 emissions is related to the share of GDP that is the largest in the world. On the other hand, the United States generates around 20% of global CO2 emissions while the population is only 5% of the total world population. China produces 22% of world polluting emissions but it accounts for

The sectors that contribute more to CO2 emissions are transport and electricity and heat generation, that together account for two-thirds of global emissions in 2008 (IEA, 2010). The former represents 22% of CO2 emissions in 2008 worldwide, and the World Energy Outlook 2009 projections reveal that the share is estimated to grow to 45% by 2030. Actually, the level of passengers travel is growing according to population growth, and only the EU is encouraging fuel economy (as a response to high fuel price as well) through voluntary

Carbon Dioxide Emissions population per capita GDP energy intensity carbon intensity

From this identity it is clear that the increase in world GDP tends to increase global emissions, unless increase in income stimulates a reduction in carbon intensity or total

> **Carbon intensity**

**Energy** 

**intensity Population**

of polluting emissions and a mitigation of energy import dependency.

energy (Nakicenovic et al., 2006).

**CO2 emissions (Gt CO2)**

**Country**

agreement with manufacturers. Electricity and heat generation constitute the largest polluting sectors in 2008, by making a 41% contribution to the world CO2 emissions in 2008, relying on carbon fuel, especially in developing countries such as China and India.

Fig. 2. Top 10 emitting countries in 2008 (Gt CO2). Source: IEA, 2010.

Fig. 3. World CO2 emissions by sector in 2008. Source: IEA, 2010.

We deem imperative that a global response to face climate change is needed at the European level. The EU energy portfolio relies strongly on fossil fuels, and it has important consequences both in terms of "importing" CO2 emissions and for energy security reasons.

EU Energy Policies and Sustainable Growth 9

Afterwards, the Kyoto Protocol, an international agreement adopted in Kyoto on December 1997, has committed (instead of encouraging) 37 industrialized countries and the European Union (EU) to reduce a basket of six greenhouse gases. The Kyoto Protocol entered into force in February by committing contracting parties as a group to achieve an overall reduction in polluting emissions of 5% in the period 2008-12 with respect to 1990 levels(IEA, 2010). The Protocol has helped sensitive public awareness of problems related to climate change. Despite the Protocol has detailed commitment for each country member in terms of GHG reductions, it is limited in its potential to climate change mitigation since not all major emitters as United States were included in reduction commitments. In March 2001, the United States explicitly declared their non-participation in the Kyoto Protocol, because of the too high potential compliance costs and the domestic voters' low willingness to pay

The European Community has taken part in the Kyoto Protocol through positive measures. Between 2008 and 2012, countries that were already EU members, have to cut 8% off GHG emissions. Countries that have joined EU later undertake to cut emissions for the same amount, apart from Poland and Hungary (6%). Kyoto Protocol suggests tools of

 strengthening of national policies to reduce emissions, as improvement of energy efficiency, promotion of sustainable forms of agriculture, development of renewable

cooperation with other contracting parties, as exchange of experience and information,

During the period 1990-2007 the European Commission has recorded emission reductions as

The EU results should be interpreted not only in the light of Kyoto and all following agreements. The emission reductions are likely to be attributed to two factors as well: the global economic and financial crisis that has reduced industrial production, and the new member States entered in the European Union that have decreased on average the EU level

Actually, the European environmental and energy policy is represented by the so-called "20- 20-20 Climate and Energy Package", through which the EU is showing to be ready to assume the global leadership to face climate change, tackle the challenges of energy security, making Europe a model of sustainable development for the 21st Century. The EU aims to

 a commitment to reduce by at least 20% greenhouse gas emissions compared to 1990 levels by 2020, and the goal of reducing emissions by 30% by 2020 if other developed

a binding target for the EU of 20% of energy from renewable sources by 2020, including

coordination of national policies through the right to emit.

11% in agriculture (reduced use of mineral fertilizers);

of emissions because of their less productive economies.

**3.1 The European climate and energy package** 

countries make comparable efforts;

a target for biofuels.

(Böhringer and Vogt, 2004).

energies etc.,

 7% in the energy sector; 11% in the industrial process;

39% in the waste sector.

achieve by 2020:

action:

follows:


Table 3. Crude oil imports in the EU27 (in Mt) in 2007. Source: Eurostat (2009)


Table 4. Gas imports in the EU27 (in TJ) in 2007. Source: Eurostat (2009)


Table 5. Coal imports in the EU27 (in kT) in 2007. Sources: Eurostat (2009)
