1. “Strengthen the EU ETS to cost- effectively decarbonise the EU economy” Giuseppe Montesano Chair of EURELECTRIC’s Environment & Sustainable Development Committee Brussels, 18 February 2016

2. → The declining pace of RES capacity additions is accompanied by a decommissioning and mothballing of coal and gas capacities. → Not only the depressed state of wholesale markets, but also the depressed state of the carbon market is undermining future investments. Includes data from 24 European countries: Belgium, Bulgaria, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Iceland, Lithuania, Luxembourg, Malta, Netherlands, Norway, Portugal, Serbia, Spain, Sweden, Slovenia, Turkey and the United Kingdom Source: EURELECTRIC The context: all new capacity is green with continued capacity growth in a stagnating market

3. STRENGTHEN THE SIGNAL - EU ETS should be the main driver for RES investments in the electricity sector. Strengthening the EU ETS is therefore a no-regret option. With a reinforced carbon price signal and an accelerated cap reduction additional measures to promote RES can be minimised within the ETS sectors. A EUROPEAN APPROACH - A non-harmonised national approach to reduce GHG emissions is counter-productive leading to significantly higher overall energy and decarbonisation costs. It will not only further distort, but also fragment the internal energy market. A CONSISTENCT POLICY APPROACH - Adopt a coherent approach in the targets and accompanying measures. Assess the interlinkages between the EU ETS and other support mechanisms. A strengthened ETS to ensure cost-effective, technology-neutral and market-based delivery of the decarbonisation agenda

4. Linear Reduction Factor of 2.2% In line with the 2050 decarbonisation perspective Explicit definition of share of auctioning at 57% Predictability and certainty on amount of allowances at beginning of Phase IV Continuation of free allocation to industrial sectors at risk of carbon leakage Periodically revised to take account economic and technological developments  If subsequent to the Paris Agreement, the EU decides to go beyond a 40% GHG reduction target, there is potential (surplus of allowances) to achieve further ambition. However the non-ETS sectors should contribute in a balanced manner to any increase in ambition. EU ETS should be built around strong & transparent architecture

5. Targets compared to 1990 levels Transportation case based on average electricity mix: CO 2 emissions already lower than the EU target As electricity becomes increasingly low carbon (more generation means no additional emissions because of the ETS cap), replacing fossil based systems with electric technologies provides a cost- effective way to decarbonise Electrification of non-ETS sectors enables decarbonisation of transport, heating and cooling Source: EC Roadmap Source: EURELECTRIC

6. PROMOTING LOW CARBON INVESTMENTS – Renewables and decentralised technology investments driven by market signals and supported by a strong EU ETS. STRENGTHENING THE EU ETS – The main instrument to achieve greenhouse gas emission reductions. DECARBONISING THE NON-ETS – Revealing electricity as the key energy carrier to decarbonise the non-ETS sectors. ENSURING CONSISTENCY – Adopting a coherent approach in the targets and measures to cost- effectively achieve the EU climate and energy policy objectives. EURELECTRIC’s Priorities and Policy Recommendations EFFECTIVE GOVERNANCE – Ensuring achievement of the EU climate and energy policy targets. IMPROVING ENERGY EFFICIENCY – Cost-efficient and market-based policy instruments to leverage the role of decarbonised electricity.

7. For further information: http://www.eurelectric.org Thank you for your attention