Rhein on Energy and Climate

The EU is about to legislate ambitious targets for CO2 emissions from the power and automobile industries. The power sector will have to reduce CO2 emissions by 20 percent before 2020, and automobile manufacturers will have to streamline their car fleets so that the average car will not emit more than 120 g of CO2 per km, as early as 2012.

Even well before these targets will have become mandatory by EU legislation in early 2009, industry is preparing for them.

All European utilities have started going renewable, with a substantial share of their new investments being directed towards off-shore wind-parks. The latest company to announce plans to that end is the German ENBW. It intends to invest € 3 billion in off-shore wind-parks with a total capacity of 1000 MW aiming at doubling the share of renewable power to 20 percent of its total installed capacity.

Belgium has finally also discovered renewable energy. Plans for a major 300 MW off-shore wind park, the biggest so far ever realised, have been announced recently. This project will be part of the Belgian strategy to reach the EU-wide target of generating 20 percent of total energy from renewables.

Peugeot plans to develop a new car engine that would be able to emit less than 100 g of CO2 per km. This is part of Peugeot’ks strategy to substantially reduce the CO2 output of its fleet, in line with the EU 120 g/km target for 2012.

There is a simple lesson to be drawn from these examples:

If governments fix ambitious but feasible long-term targets that are credible, economic operators will act by anticipation, improving technology and undertaking the necessary investments. More than ever, good governnance requires the setting of the right incentives. Too often governments fail to do so. The EU Commission deserves praise for having proposed targets that are realistic but ambitious enough to make a difference.

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