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20 September 2007 - Point Carbon estimates that meeting the 20 per cent emissions reduction target in 2020 will cost around €16bn ($22.32bn), rising to €43bn with a 30 per cent target.

However, the total costs of meeting these targets are low, as they are only 0.2-0.45 per cent of GDP in EU-27 in 2006.

The EU-27 needs to emit 585 MT CO₂e less in 2020 than in 2010 to meet the 20 per cent emission reduction target. This is about 11 per cent of expected total emissions in 2010. Reaching the 30 per cent reduction target requires a GHG emission reduction of close to 1200 MT (22 per cent) from 2010 to 2020.

The shortfall in the EU ETS Phase III depends on how the total GHG reduction burden is split between the traded and non-traded sectors, the coverage of the traded sector and the level of growth in the economy.

The marginal abatement cost is estimated to be €33.5/tonne CO₂ to meet the 20 per cent reduction target in 2020, and €70/tonne CO₂ to meet the 30 per cent reduction target. The costs would be reduced by importing carbon credits generated from Clean Development Mechanisms (CDM) and Joint Implementation (JI) projects.

The European Commission (EC) also aims at having 20 per cent energy consumption from renewable sources by 2020. Assuming a new renewable target for the power sector is met (suggested by the EC to be around 34 per cent of total power production), CO₂ emissions would be reduced by roughly 350 MT in 2020.

"If the share of renewables in the power sector remains at forecasted 2010 level, around 80 per cent of thermal generation would need to come from gas plants, twice as much as current level, in order to meet its part of the 20 per cent emission reduction target", said Kjetil Røine, manager at Carbon Market Research Services at Point Carbon.

"The EC must therefore either ensure that the renewable target is met or that the share of thermal generation from gas plants are doubled to meet the 20 per cent emission reduction target by 2020".

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