23 Jan 2007

Looking for the cure-all? Targets and the EU’s New Energy Strategy

Christian Egenhofer

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One of the most controversial issues in the European Union’s ‘energy and climate change vision’, has been the nature of long-term targets, especially for specific sectors such as renewables as a share of electricity generation. The discussion about the need for these additional sectoral targets is likely to continue and come to the fore again in the negotiations in the Energy and Environment Councils in February, to be finally settled in the European Council on 8-9 March 2007. In this new Policy Brief, Christian Egenhofer identifies a number of key conditions that are crucial to make indicative or ‘aspirational’ targets work in the EU. If these are met, he argues, targets can be useful in steering investment in a desirable direction while avoiding the most important risks: market segmentation, rent-seeking, lack of credibility or reversal of a policy leading to stranded investment.