Blog Post

How to put cities at the heart of EU clean energy plans

As the European Commission releases its new energy package, “Clean Energy for all Europeans”, our authors argue that cities are the key to success. They propose a new governance mechanism where cities develop and implement ambitious City Climate Plans – with direct monitoring and financial support from the EU.

By: and Date: November 30, 2016 Energy & Climate Tags & Topics

This blog post summarises the main arguments from the Policy Contribution Going local: empowering cities to lead EU decarbonisation by Simone Tagliapietra and Georg Zachmann.

Four trends are reshaping the European energy system. Decarbonisation and digitalisation are leading to decentralisation and convergence. Thanks to strong public policy decisions, decarbonisation is reshuffling the European energy mix. Meanwhile, innovation in digital technologies is enabling disruptive changes in the management of energy systems. This is allowing Europe’s energy system to become more decentralised and enabling a greater interaction and convergence between services (electricity, heat, transport, data) that used to be largely separate.

In this new context cities emerge as the key arenas of decarbonisation. About 70% of EU citizens live in urban areas – around 365 million people. With the end of binding national-level targets, including cities in the governance of EU climate policy will help keep Europe on track. Moreover, certain decarbonisation options can be better, or only, implemented at city level (for example district heating and cooling, or co-generation of heat and power). It makes sense to focus on cities.

City decarbonisation faces specific challenges 

We need decisive action at city level to turn new decarbonisation options into reality. Cities are best placed to coordinate actors and infrastructure investments. However, there are many challenges.

City authorities are typically elected for limited periods and voters might not put much value on local greenhouse gas reductions. Indeed, there is a risk that citizens of ambitious cities might bear the cost of decarbonisation without receiving any particular benefit if other areas lag behind.

In addition, the budget constraints of local authorities are typically a consequence of complex intra-country transfer schemes. This – together with the short electoral cycles – leads local authorities to underinvest in infrastructure that pays off in the long term.

Decarbonisation is thus best implemented locally, with political and financial support from higher levels of government.

What role for Europe in cities?

At the moment, Europe’s climate and energy governance struggles to incentivise decisive action at city level. Indeed, it is difficult to use top-down mechanisms to directly implement change. For this reason, we propose a new process, with targeted bottom-up incentives to encourage effective decarbonisation at city level. It is up to cities how much they choose to engage with the system, but funding would be available to cities that participate. The big new idea here is for EU funding and evaluation to interact directly with city-level authorities (albeit with national governments in a coordinating role).

For each city, this mechanism can be set up in 4 steps.

Step 1: understand a city’s carbon footprint and create a baseline scenario.

A participating city should start by carrying out an emissions inventory that would quantify the amount of greenhouse gases emitted from energy consumption on its territory during a specific year. This should identify the principal sources of emissions and therefore enable prioritisation of reduction measures.

Step 2: understand a city’s carbon handprint (potential positive actions) and create a reference scenario.

With an emissions inventory in place, each city can identify the areas of its economy with the greatest decarbonisation potential and predict potential emissions reductions. Local governments can then prioritise decarbonisation policies accordingly.

Step 3: create a City Climate Plan.

The baseline and reference scenarios would form the basis of comprehensive City Climate Plans. To ensure consistency of national and municipal policies, City Climate Plans could be developed as a sub-component of member state National Energy and Climate Plans. This integration of local and national governance tools could simplify overall governance by use of a single template.

Step 4: track progress and allocate financial support.

Each city should submit biennial progress reports on implementation of its City Climate Plan to its national government. These documents should feed into the overall progress reports that national governments must submit every two years to the European Commission in line with the Energy Union governance system. City progress reports should also be used by the EU to determine the eligibility of local governments for EU grants. Grants would be key to the success of this scheme. If EU money is given to a city to implement a project listed in its City Climate Plan, it should be paid in in biennial tranches, conditional on positive progress reports. There is no need to create new financial structures for this, since the EU already has multiple channel through which to provide investment support (such as the EIB).

Fig 1. The Climate Plan system for cities

Source: Bruegel.

fig-9

Benefits for member states and citizens

A grant-based system would give the EU some control over the effective implementation of cities’ decarbonisation projects. EU member states could also use city progress reports to provide fiscal incentives to cities that successfully implement their City Climate Plans. This reward system would make economic sense for member states. Remember, the better cities perform in decarbonisation, the easier it will be to achieve national decarbonisation targets.

Smarter cities can also facilitate the functioning of national energy systems by helping grid operators to better plan and operate national power systems. In turn, this can increase the hosting capacity for renewable and decentralised energy technologies at a lower cost. Thus smarter cities can contribute to energy security and affordability at both national and EU levels.

Furthermore, reduced air pollution and traffic congestion should translate into lower costs for national healthcare systems. Increased job creation in local small and medium energy enterprises would have positive repercussions for the overall economy.

That is why we argue for the EU to refocus clean energy governance on cities. It is not only the most effective way for Europe to meet its emissions targets. It could also have wider positive implications in terms of energy security and affordability, environmental protection, health, job creation, economic growth and the relationship of citizens with the EU.

Fig 2. Current EU energy and climate governance vs our proposal

Source: Bruegel.

fig8


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

View comments
Read article More on this topic More by this author

Blog Post

Simone Tagliapietra

Global decarbonisation: a wake-up call for the Middle East and North Africa

Many countries in the MENA region are heavily dependent on oil and gas for exports and taxes. But global decarbonisation could undermine revenues, even though MENA exports are globally competitive. This threatens the MENA region's social contract, so economic diversification needs to start now.

By: Simone Tagliapietra Topic: Energy & Climate Date: April 11, 2017
Read article Download PDF More on this topic More by this author

Working Paper

WP 2017_05 cover

The political economy of Middle East and North Africa oil exporters in times of global decarbonisation

Middle East and North Africa (MENA) oil exporting countries are still not adequately equipped to prosper in a decarbonising world. Decarbonisation should therefore represent an incentive for MENA oil exporters to pursue structural processes of transition from rentier to production states.

By: Simone Tagliapietra Topic: Energy & Climate Date: April 11, 2017
Read about event More on this topic

Past Event

Past Event

Towards EU-MENA shared prosperity

The second edition of the "Platform for Advanced & Emerging Economies Policy Dialogue" will discuss global supply chains, energy and security.

Speakers: Abdelhak Bassou, Jean-Francois Dauphin, Maria Demertzis, Karim El Aynaoui, Larbi Jaidi, Marion Jansen, Giacomo Luciani, Rania Al-Mashat, Iverna McGowan, Jolana Mungengová, Francis Perrin, Francesco Presicce, Simone Tagliapietra, Valeria Talbot and Guntram B. Wolff Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 10, 2017
Read article Download PDF More on this topic More by this author

Policy Brief

PB 2017_03 cover

The carbon buyers’ club: international emissions trading beyond Paris

The effort to define rules for international emissions trading faces the strong desire of nation states to develop their own climate policies, which collides with the need for tradable units in one country to be equivalent to tradable units in another country. To overcome this dilemma Georg Zachmann proposes a club of carbon-buying countries that would regulate only imported mitigation outcomes.

By: Georg Zachmann Topic: Energy & Climate Date: April 4, 2017
Read article More on this topic More by this author

External Publication

securing the energy union

Securing the Energy Union: five pillars and five regions - Southern Europe

As a part of a publication on energy security, Simone Tagliapietra looks at the countries of southern Europe: Cyprus, France, Greece, Italy, Malta, Portugal and Spain.

By: Simone Tagliapietra Topic: Energy & Climate Date: March 30, 2017
Read about event More on this topic

Past Event

Past Event

Trump’s energy policy: America first, climate last?

This event seeked to discuss the potential way forward for the US energy and climate policy, and its implications for both global energy markets and global climate change mitigation efforts.

Speakers: Kristine Berzina, Tim Boersma, Connie Hedegaard, Simone Tagliapietra and Zhang Xumin Topic: Energy & Climate Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 7, 2017
Read article More on this topic More by this author

Blog Post

Simone Tagliapietra

Trump’s Energy Policy: America First, Climate Last?

What will the new US administration mean for the fight against global warming? Climate change is not even mentioned in the ‘‘America First Energy Plan’’, and Simone Tagliapietra fears a reversal of recent positive steps.

By: Simone Tagliapietra Topic: Energy & Climate Date: February 28, 2017
Read article More on this topic

Blog Post

unnamed
Simone Tagliapietra

Brexit goes nuclear: The consequences of leaving Euratom

The UK Government has confirmed that it will withdraw from Euratom. But what does Euratom actually do? And what will happen when the UK leaves? The authors find major risks, potential costs and open questions.

By: Enrico Nano and Simone Tagliapietra Topic: Energy & Climate Date: February 21, 2017
Read about event More on this topic

Past Event

Past Event

Different perspectives on Nord Stream II

At this event, we bruoght together key-experts that studied the regulatory and economic aspects of Nord Stream II

Speakers: Severin Fischer, Siobhan Hall, Alan Riley, Szymon Polak, Sebastian Sass, Simon Schulte, Borbála Takácsné Tóth and Georg Zachmann Topic: Energy & Climate Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: February 21, 2017
Read article More by this author

Blog Post

Silvia Merler

Climate change and financial markets

What’s at stake: Ever since the 2016 Paris Agreement to reduce emissions was signed, researchers have been looking at the impact that moves towards a low-carbon economy might have on financial markets and financial stability. We review these contributions here. 

By: Silvia Merler Topic: Energy & Climate, Finance & Financial Regulation Date: January 30, 2017
Read article More on this topic More by this author

External Publication

tagliapietra_pass-2

Energy Relations in the Euro-Mediterranean: A Political Economy Perspective

This book provides a detailed overview of the current status and future prospects of Euro-Mediterranean energy relations through analysis of those relations and pertinent case studies.

By: Simone Tagliapietra Topic: Energy & Climate Date: December 13, 2016
Read article Download PDF More on this topic

External Publication

screenshot-www-lse-ac-uk-2016-12-06-10-38-20

Climate policy in China, the European Union and the United States: Main drivers and prospects for the future

China, the European Union (EU) and the United States (US) are responsible for the majority of global emissions of greenhouse gases, and produce about half of global GDP. Hence, their climate policies not only determine the success of global efforts to curb future emissions of greenhouse gases, but also affect policy developments in other countries. The aim of this report is to assist policy-makers, climate change negotiators and analysts to understand the domestic constraints and opportunities facing each jurisdiction, and to identify areas of common interest or concern between the three jurisdictions.

By: Alina Averchenkova, Samuela Bassi, Keith J. Benes, Fergus Green, Augustin Lagarde, Isabella Neuweg and Georg Zachmann Topic: Energy & Climate Date: December 6, 2016
Load more posts