SEE and the Green Deal: catching up or falling behind?

By Liliya Goranova, Head of SeeNews Insights

In mid-December 2019, the newly appointed President of the European Commission, Ursula von der Leyen, unveiled the bloc’s plans to reach carbon-neutrality by 2050 under a set of initiatives known as the European Green Deal. A few months later, policymakers and experts throughout the continent voiced fears that the ambitious goal will be forsaken in the wake of the COVID-19 pandemic and the related unprecedented restrictions that limited business activity globally, triggering an economic crisis. In response, the Commission proposed a recovery package that puts a special emphasis on the green objectives and von der Leyen touted the Green Deal as the “motor” for the EU’s economic recovery after the pandemic. In her State of the Union speech in September, she noted that 30% of the planned 750-billion euro package will be raised through green bonds and that 37% of the funding will be invested in achieving the objectives of the Green Deal. She also signalled the EU’s intention to raise the target for reduction of greenhouse gas emissions by 2030 to 55% of the 1990 levels from the previously targeted 40%. The Green Deal will obviously be pivotal for Europe in the next decade and not catching up with an increasingly ambitious EU creates a risk for any member state’s economy. Where does Southeast Europe (SEE) stand in this context?

Though renewable energy, hydropower and bioenergy in particular, already plays a significant role in SEE, most countries in the region find it challenging to phase out their obsolete fossil fuel plants and increase the share of renewables in their energy mix. This is evident by the final National Energy and Climate Plans (NECPs) that each member state submitted to the Commission earlier in 2020.

In their individual NECP each member state had to determine its national contribution towards the energyclimate targets and the objectives of the Energy Union over the ten years to 2030. The Commission published its individual assessment of each plan in mid-October. A quick glance at the NECPs of the 27 member states reveals obvious ambition gaps between the four SEE members of the Union – Bulgaria, Croatia, Romania and Slovenia-and the rest of the Union.

The most staggering finding is that none of these four countries has committed to a coal phase-out over the next ten years. Slovenia, for example, is currently only considering a phaseout and has committed to presenting a strategy for just and fair transition in 2021 at the latest as well as to reducing the use of coal for electricity generation by at least 30% until 2030. However, the NECP does not outline a date by which the country will stop using coal altogether. Notably, Slovenia launched in 2015 the controversial unit 6 of the Sostanj coal-fired power plant, which is currently expected to operate at least until 2050. The rest of the SEE member states do not plan a coal phase-out at all, along with Poland. For comparison, seven EU members are already coal-free while 14 others plan to finalise their energy transition between 2020 and 2038.

The SEE countries’ reluctance to transition away from fossil fuels is not without a foundation. Coal and lignite on average accounted for about 22% of electricity production in the four SEE EU member states in 2018, according to the latest available Eurostat data. In the case of Bulgaria, the share of coal and lignite in electricity production was as high as 37.7% in 2018. What is more, companies active in coal and lignite mining or production of energy from coal alone employ some 52,000 people in the region which, some would argue, makes for a compelling case to keep the industry going. Yet, apart from Slovenia, none of the other three countries has put forward plans to at least present a strategy for what the Commission calls a just and fair transition. Moreover, Bulgaria, Croatia and Romania discussed only briefly the social, employment and skills issues arising from the expected transition and largely failed to outline measures to mitigate negative effects. Such an approach might prove dangerous for the coal regions in these countries – even if there is no phase-out, the coal industry is projected to continue shrinking amid competition from natural gas, cheaper renewable energy and stagnant electricity demand.

When it comes to energy efficiency, all four counties are similarly unambitious. While the EU’s collective goal for a reduction in primary and final energy consumption has been increased to respectively 29.7% and 29.4% in 2030 thanks to an increase of the national targets by several countries, SEE member states have either left their targets unchanged from their draft plans or increased them only marginally. Thus, Bulgaria and Romania’s ambition to reduce primary energy consumption is described as “low” by the Commission, while Slovenia’s level of ambition is considered “modest”. As for final energy consumption, the level of ambition among the four countries varies between “low” and “very low”. On the positive side, all four NECPs put some emphasis on buildings renovation, with Bulgaria and Romania even indicating intentions to go beyond the 3% annual renovation target required under EU legislation.

In the area of greenhouse gas (GHG) emissions, Bulgaria, Croatia and Romania have set targets that are in line with the respective country targets outlined in the EU’s Effort Sharing Regulation (ESR). Slovenia is a bit more ambitious and has set itself a goal of GHG emissions not covered by the EU Emissions Trading System (non-ETS) of -20% compared to 2005. The ESR target is -15%. Worryingly, two of the countries – Romania and Croatia – have not presented targets for emission reductions in the transport sector, which is the largest effort sharing sector under the ESR. Bulgaria has set a target of 0% for emission reductions in the transport sector by 2030 while Slovenia aims to limit emission increases in the transport sector to 12% by 2030 compared to 2005. All countries put emphasis on electromobility but provide scant details on future policies in that area, with the exception of Slovenia.

Perhaps the biggest divergence between the four SEE EU member states comes in the national targets for the share of energy from renewable sources in gross final consumption in 2030. Bulgaria’s target of 27.09% (a considerable increase from the 25% outlined in the draft NECP) is in line with the result from the formula used in the Regulation on the Governance of the Energy Union and Climate Action. This formula calculates and distributes the efforts across all EU member states towards the common EU goal for a share of energy from renewables of 32% in gross final consumption in 2030. Croatia’s target of 36.4% is above the 32% resulting from the aforementioned formula and the country is thus among those member states facilitating the EU’s increased climate targets at least with respect to the energy mix. Romania and Slovenia are both unambitious with regard to the share of renewables in their energy mix. The first aims for 30.7% of gross energy consumption to come from renewables in 2030, which is below the 34% resulting under the RES formula. The latter is even less ambitious with a target of 27% or 10 percentage points less than the result from the RES formula.

The published NECPs and the Commission’s assessments highlight the ever-growing gap between EU member states in SEE and the rest of the Union. It seems that the European Green Deal will be yet another area where a “twospeed Europe” will emerge, creating new points of contention. Given the low ambition in some of the NECPs, the EU is now at a decisive point. While the new multinational financial framework for the period 2021-2027 puts emphasis on climate action, individual instruments for effectively promoting and encouraging green investments would be of key importance. Whether SEE countries will take advantage of those instruments and catch up remains to be seen.

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