Sandbag’s new report shows the EU’s biggest climate instrument – the Effort Sharing Decision (ESD)[1] – is a lumbering dinosaur, suffering many of the same problems as the better known Emissions Trading System (ETS).
Like the ETS, a huge surplus blights the ESD, which we estimate will reach 2.6 billion tonnes of carbon (in the form of Annual Emission Allowances) by 2020.
Like the ETS, the ESD is driving few emissions reductions. We calculate that the ESD will deliver no emissions reductions beyond business as usual until after 2030. However, a simple change can fix this, by setting the next phase of the ESD going at the level of real emissions, not at the level of a long obsolete calculation.
Like the ETS and EU climate policy in general, ambition is to weak to keep the ESD functioning or to meet the EU’s longterm targets. The ESD’s 30% emissions reduction target for 2030 (from a 2005 baseline) is too low, and puts the EU as a whole on a path to missing its 2050 goals.
Hot air on the ESDSandbag has modelled the scale of the cumulative surplus of AEAs in 2020, assessed what baseline should be used for emission levels for Phase II after 2020 so that ‘hot air’ is not built in and real emission reductions take place, and considered the interaction with the ESD target for 2030, assessing where the target should be set to get the EU on the trajectory to the upper end of its 2050 target.
Oour forecasts show that emissions will already be 28% lower than 2005 levels in 2021, creating a surplus of 320MtCO2e in the first year of ESD Phase II alone, if the endpoint of the Phase I trajectory is used as the starting point for Phase II. A new baseline, based on actual emissions, is therefore needed.
Sandbag is calling for the following to incentivise emission reductions beyond business as usual:

  1. Ensure no surplus AEAs are carried over to Phase II
  2. Re-base the ESD post 2020 at actual average emission levels (e.g. by averaging 2018, 2019 and 2020 emission levels)
  3. Increase the ESD target for 2030 to at least 40% and ideally 50% to be in line with the Paris Agreement and the European Council Conclusions from 2014, which call for “at least” a 40% target by 2030
  4. Introduce more flexibility within the ESD so emissions reductions take place in the most costeffective way across Europe 5. Include five-year review clauses in the revised ESD to respond to implementation of the Paris Agreement.

Debbie Stockwell, Sandbag’s Managing Director, commented:

The review of the ESD provides a real opportunity for the EU to show that it is up for the challenge of delivering the Paris Agreement. Through a small number of changes it will be possible to deliver real emission reductions to 2030 and beyond, rather than just a decade of hot air and business as usual”


The ESD is a key instrument for delivering the EU’s 2050 target of 80-95% emission reductions below 1990 levels and was introduced in the EU 2020 Climate and Energy Package in 2009 to guide decarbonisation in the sectors that are not part of the EU Emissions Trading System. It covers more than half of the EU’s greenhouse gas emissions. 
The European Commission is expected to publish proposals for revisions to the Effort Sharing Decision in June.
Dinosaur image with thanks to Jordan on Flickr. Used under a Creative Commons Non Commercial Use license.