CE Delft has studied the question of what might happen if in 2015 and 2020 it transpires that European renewable energy and climate policy targets have not been met. More specifically, CE Delft has examined (1) the degree to which the various European energy and climate targets are ‘firm’ in the sense that they bring about accountable result obligations for member states that are binding, (2) the risks affecting the probability of the targets not being met, (3) the penalties the European Commission might demand if the targets are not met, and (4) the likely deterrent effect of such penalties. The main conclusions of the analysis are the following:
- Almost all the European renewable energy and climate targets are formulated as binding result obligations for member states. In the field of energy saving and energy efficiency, however, binding targets are lacking, despite member states having a statutory obligation to take (cost-effective) measures to promote energy saving and energy efficiency.
- To meet their national renewable energy targets member states need to step up their efforts, especially when it comes to energy end-use efficiency. So far the European Commission provided no indication of how it values the quality, i.e. anticipated effectiveness, of the measures proposed by member states to (further) promote renewable energy generation and consumption.
- Member states failing to meet their renewable energy or climate policy targets may face a penalty in the form of a lump sum payment and/or periodic penalty payments. The magnitude of such penalties will depend on (a) the severity of the infringement, (b) its duration and (c) the desired deterrent effect. At the moment it is unknown if and how the Commission will make use of its penalty-imposing powers. However, if at some point in the future the Commission wishes to exercise this right, it will have to indicate in a timely and transparent manner that efforts to comply have been insufficient.
- It is unclear how the deterrent of possible penalties might weigh up against the benefits of not complying with agreed targets, in terms of both costs saved and profits made by choosing ‘cheap’ fossil-fuelled options for power generation instead. Further study can shed light on the magnitude and type of penalty required to act as sufficient incentive for member states to meet their targets. If insufficient action is taken the (internal) market could suffer, e.g. if one country considers the targets to be binding (and invests accordingly) while another opts not to because this is deemed economically favourable.