Secretariat to track CBAM readiness of the Energy Community

  • Electricity
  • Renewable energy
  • Environment
  • Climate
  • Energy efficiency
  • Environment
5 July 2023

Today, the Secretariat published its CBAM Readiness Tracker. It provides comprehensive insights into significant developments in the energy sector’s  contribution to achieving the Energy Community 2030 climate and energy targets and the Contracting Parties’ progress in decarbonisation.

Following the adoption of the Regulation (EU) 2023/956 on the Carbon Border Adjustment Mechanism (CBAM) in the European Union, this new edition puts particular focus on the progress made in meeting the conditions for the CBAM exemption.

The CBAM Regulation makes it possible to have electricity imports in the EU exempted, if the Contracting Party’s electricity market is coupled with the EU internal electricity market, and meets certain conditions related to climate and energy legislation. These conditions include implementing an emissions trading system (ETS) by 2030 at least with regard to electricity. The close linkage that CBAM establishes between electricity market integration and decarbonization calls for a more aligned approach to energy and climate policy planning, implementation, and monitoring.

Furthermore, the Tracker

  • highlights progress in the development of electricity market and renewable energy sources;
  • monitors the implementation of "energy efficiency first principle” across the sectors; and
  • outlines the progress in meeting climate commitments taken by the Contracting Parties in light of the Paris Agreement

A dedicated section of the Tracker focuses on the developments in Ukraine. However, due to restrictions on the publication of certain data during the martial law, the full set of relevant data for 2022 is not disclosed.

KEY FINDINGS:

Reducing the carbon footprint

  • Electricity production dropped to the five-year minimum, however, the electricity production from all fossil-fuelled thermal power plants (coal, oil and natural gas) remained stable with a slight increase of total 1,3 TWh.
  • Carbon emissions from power plants, excluding Ukraine, increased by 2% in 2022 in comparison to 2021. Despite the increase, the emissions remained below the five-year average 2018-2022.
  • Based on the average price of EU ETS allowances of 82,11 EUR/ton in 2022, the avoided costs exceed EUR 3,6 bln from power production only (excluding Ukraine), amounting to an average 2,3% of the GDP in 2022 of the observed Contracting Parties.
  • Coal subsidies amounted to total EUR 88 mill in 2022 with an increase in comparison to 2021 observed in Kosovo* only.
  • Ukraine complied with the ceilings for SO2, NOx and dust in the 2022 year, while emissions in other Contracting Parties breached at least one of those.
  • None of the opted-out plants have stopped their operation yet despite some of them having reached the end of the opt-out timeframe.

Making the electricity market fit for the energy transition

  • The newly adopted Electricity Integration Package sets the ground for the Contracting Parties integration into the EU’s internal electricity market, including the single day-ahead and single intraday coupling (SDAC and SIDC). Coupling of the Contracting Parties’ into the EU’s single market by the end of 2025 is a pre-condition for CBAM exemption.
  • While the Contracting Parties are yet at an early stage of the transposition of the new Electricity Integration Package to be finalized by the end of 2023, the establishment of day-ahead markets advanced with go-lives in Albania, Montenegro and North Macedonia in 2023. In Georgia, the start of short-term markets was yet again postponed to 1 July 2024.
  • Average day-ahead market prices at SEEPEX more than doubled in 2022 in comparison to the 2021, similar to other day-ahead markets in Southeast Europe.
  • The energy crisis slowed down the development of retail markets - the price signal from wholesale has not yet been transferred to the retail market with end user prices lower than in the EU-27, almost two times for industry and three times for households.

Boosting deployment of renewables

  • Installations based on solar, wind and biofuels increased five times in five years, with the share of 1% in 2017 reached 5% of total installed capacities in 2022.
  • Self-consumption has taken off resulting in 58.487 active self-consumers across the Contracting Parties with installed capacity of 1.728 MW in 2022.
  • Albania continue with renewables auctions while Georgia, Kosovo* and Serbia initiated their first auctions in 2023.
  • Under the regional project implemented by the Energy Community Secretariat in 2022, electronic registries for guarantees of origin have been created for Albania, two entities in Bosnia and Herzegovina, Georgia, Kosovo*, North Macedonia, Moldova, Montenegro and Ukraine. Georgia led the way in the utilization of its registry, with Albania and the Republika Srpska entity of Bosnia and Herzegovina following suit.
  • Albania, Moldova and Montenegro achieved their 2020 renewables targets. Despite the granted one-year extension for reaching 2020 targets until the end of 2021, the other Contracting Parties were unable to meet them.

Making energy efficiency the first fuel

  • While the Energy Community has achieved the 2020 headline target for energy efficiency set by the Energy Efficiency Directive, the 2021 energy consumption continued to rise in all Contracting Parties in 2021. Most of Contracting Parties voluntarily extended their energy efficiency targets to cover the gap until 2030 for which targets were officially adopted in December 2022.
  • Investments in building renovations are increasing, but yet represent less than 40% of annual investments needs. To foster investments, Contracting Parties are working on finalisation of long-term building renovation strategies.

Reaching a decarbonized energy future

  • The planned round of new NDC submissions after the Global Stocktake will be a great opportunity to further strengthen the 2030 NDCs, by translating the 2030 Energy Community targets into new NDC updates in line with the NECPs.
  • Substantial progress was made with regard to long-term low emission development strategies (LT LEDS) as Georgia and Serbia have adopted their strategies setting the Energy Community an ambitious pathway to cut emissions.
  • Contracting Parties, with the exception of Albania, North Macedonia, Bosnia and Herzegovina and Serbia, are still to submit their draft NECPs.
  • MRVA Package should be transposed by the end of 2023. A well-functioning MRVA will be instrumental in better preparing for CBAM requirements.

NEXTS STEPS ON CARBON PRICING: 

CBAM locks the discussions on cap-and-trade system in the Energy Community at least for power sector in line with CBAM exemption criteria, resulting in prices equivalent to those of the EU ETS by 2030.