Under the current legislation, EU Member States have binding annual greenhouse gas emission targets for 2021-2030 for those sectors of the economy that fall outside the scope of the EU Emissions Trading System (EU ETS). These sectors, including transport, buildings, agriculture, non-ETS industry and waste, account for almost 60% of total domestic EU emissions.
On 14 July 2021, the European Commission adopted a series of legislative proposals setting out how it intends to achieve climate neutrality in the EU by 2050, including the intermediate target of an at least 55% net reduction in greenhouse gas emissions by 2030. The package proposes to revise several pieces of EU climate legislation, including the EU ETS, Effort Sharing Regulation, transport and land use legislation, setting out in real terms the ways in which the Commission intends to reach EU climate targets under the European Green Deal.
30% emissions cut in non-ETS sectors by 2030
In October 2014, EU leaders set a binding economy-wide domestic emission reductions target of at least 40% by 2030 compared to 1990.
They specified that sectors of the economy not covered by the EU ETS must reduce emissions by 30% by 2030 compared to 2005 as their contribution to the overall target.
The Effort Sharing Regulation translates this commitment into binding annual greenhouse gas emission targets for each Member State for the period 2021–2030, based on the principles of fairness, cost-effectiveness and environmental integrity.
The Regulation was adopted on 14 May 2018.
Member States' targets
The Regulation continues to recognise the different capacities of Member States to take action by differentiating targets according to gross domestic product (GDP) per capita across Member States.
This ensures fairness because higher income Member States take on more ambitious targets than lower income Member States.
However, an approach for higher income Member States based solely on relative GDP per capita would mean that some would have relatively high costs for reaching their targets.
To address this, the targets are adjusted to reflect cost-effectiveness for those Member States with an above average GDP per capita.
The resulting 2030 targets range from 0% to -40% compared to 2005 levels.
In addition to EU Member States, Iceland and Norway have agreed to implement the Effort Sharing Regulation and commit to binding annual greenhouse gas emission targets for the period 2021–2030. They will apply the same rules and have the same obligations and flexibilities as EU Member States, to allow for a fair and cost-efficient achievement of their targets. Moreover, they also intend to develop national climate plans describing their existing and planned policies and measures and how they intend to meet the requirements of the Effort Sharing and LULUCF Regulations.
Trajectory for emission reductions
For each Member State the 2030 target is the end point of a linear reduction trajectory defining annual emission reductions for the years 2021-2030. The annual limits for greenhouse gas emissions per Member State under the ESR are set out in a December 2020 implementing decision.
The trajectory is drawn from a point defined by two elements:
- average 2016-2018 emissions of each Member State as value,
- placed on the time axis at five twelfths of the distance from 2019 to 2020 (or at 2020 if this makes the reductions stricter for that Member State).
To address challenges which might be faced by certain lower income Member States, an additional adjustment of in total 41 million tonnes is provided in the year 2021. A safety reserve of maximum 105 million tonnes has also been added.
The reserve is subject to the achievement of the EU' s target of a 30% reduction by 2030 and only available ex post in 2032 as a last resort under strict conditions (e.g. only if the 2013-2020 targets have been overachieved).
Ensuring fair and cost-effective achievement of targets
The Regulation maintains existing flexibilities under the current Effort Sharing Decision (e.g. banking, borrowing and buying and selling between Member States) and provides two new flexibilities to allow for a fair and cost-efficient achievement of the targets.
Flexibility to access allowances from the EU ETS
The Effort Sharing Regulation allows nine Member States the choice to use a limited amount of ETS allowances for offsetting emissions in the effort sharing sectors in 2021 to 2030. It concerns Member States that have national reduction targets significantly above both the Union average and their cost-effective reduction potential or did not allocate any EU ETS allowances for free to industrial installations in 2013. This flexibility was not available under the Effort Sharing Decision in the period 2013 to 2020.
The Member States having this option are Austria, Belgium, Denmark, Finland, Ireland, Luxembourg, the Netherlands, Malta and Sweden.
Eligible Member States needed to notify the Commission by 31 December 2019 how much of the maximum amount of this flexibility they intend to use during the Effort Sharing compliance period in 2021 to 2030.
Iceland and Norway are also eligible as they have agreed with the EU to implement the Effort Sharing Regulation.
The maximum limit that can be used annually in 2021-2030 is set at 2% of each country’s Effort Sharing emissions in 2005, except for Ireland, Luxembourg and Iceland that are allowed up to a limit of 4%. The total maximum amount for all eleven eligible countries is limited to 107 million tonnes.
Six Member States, as well as Iceland and Norway, have notified that they intend to use their full amount of this flexibility, whereas Belgium intends to use 1.89%. Netherlands and Sweden have decided not to use the flexibility. Member States may request downward revisions of their percentages for later years in the compliance period in 2024 and 2027, respectively.
The allowances notified to be used for compliance under the Effort Sharing Regulation will be deducted as of 2021 from the amounts that would normally be auctioned under the EU ETS. The deductions/cancellations are not taken into account for calculating feeds into the ETS market stability reserve.
Exact figures per Member State opting to use the flexibility will be known later in 2020, when the Commission has completed the comprehensive inventory review and determined the 2005 effort sharing emissions.
New flexibility to access credits from the land use sector
To stimulate additional action in the land use sector, Member States can use up to 262 million credits over the entire period 2021-2030 to comply with their national targets.
All Member States are eligible to make use of this flexibility if needed for achieving their target, while access is higher for Member States with a larger share of emissions from agriculture. This recognises that there is a lower mitigation potential for emissions from the agriculture sector.
Banking, borrowing, buying and selling
The Regulation maintains these flexibilities available under the Effort Sharing Decision.
In years where emissions are lower than their annual emission allocations, Member States can bank surpluses and use them in later years. For high cumulative surpluses, banking limits have been added.
In years where emissions are higher than the annual limit, Member States can borrow a limited amount of allocations from the following year.
This gives Member States the flexibility to deal with annual fluctuations in emissions due to weather or economic conditions.
Member States can also buy and sell allocations from and to other Member States. This is an important vehicle to ensure cost-effectiveness. It allows Member States to access emissions reductions where they are the cheapest, and the revenue can be used to invest in modernisation.
Project-based mechanisms within the EU are a possible way to underpin these transfers.
*Estimate, limit is expressed in absolute million tonnes over 10 years.
Clear rules for reporting and following up progress
The Commission will evaluate and report annually on progress towards achieving the targets.
If any Member State is not on track, they will be required to make an appropriate action plan.
To reduce administrative burden and allow for the potential contribution from the land use sector (which has a 5-year compliance period), a comprehensive review of Member States' emissions reports and a more formal compliance check will be organised every 5 years. This closely aligns the proposal with the 5-year review cycle set out in the Paris Agreement.
Where a Member State still does not meet its annual obligation in any year, taking into account the use of flexibilities, the shortfall is multiplied by a factor of 1.08 and this penalty is added to the following year's obligation.
Stakeholders were involved at various stages in the development of the Regulation, e.g. through:
- Written stakeholder consultation on the Green Paper: A 2030 climate & energy framework
- Stakeholder consultation on the preparation of a legislative proposal on the effort of Member States to reduce their emissions to meet the EU's greenhouse gas emission reduction commitment in a 2030 perspective.
The results are summarised in Annex 8.2 of the Impact assessment.
The public had the possibility to provide feedback on the legislative proposal after it was adopted by the European Commission. Feedback was received from 11 stakeholders and a summary was presented to the European Parliament and the Council.
- 01/2021 - Final review reports from the 2020 comprehensive review covering Member States' emission estimates for the years 2005, 2016, 2017 and 2018
- 16/12/2020 - C/2020/8865 - Commission Implementing Decision (EU) 2020/2126 - on setting out the annual emission allocations of the Member States for the period from 2021 to 2030 pursuant to Regulation (EU) 2018/842 of the European Parliament and of the Council (Text with EEA relevance)
- 13/03/2019 - Commission Delegated Regulation (EU) 2019/1124 - Amending Delegated Regulation (EU) 2019/1122 as regards the functioning of the Union Registry under Regulation (EU) 2018/842 of the European Parliament and of the Council
- 30/05/2018 - Regulation (EU) 2018/842 - Binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 contributing to climate action to meet commitments under the Paris Agreement and amending Regulation (EU) No 525/2013
- 20/07/2016 - MEMO-16-2499 - Factsheet on the Commission's proposal on binding greenhouse gas emission reductions for Member States (2021-2030)
- 20/07/2016 - COM/2016/482 - Proposal for a Regulation on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 for a resilient Energy Union and to meet commitments under the Paris Agreement and amending Regulation No 525/2013 of the European Parliament and the Council on a mechanism for monitoring and reporting greenhouse gas emissions and other information relevant to climate change