EU climate and energy package,

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EU climate and energy package, December 2008
Nicholas HanleyEnergy Resources Group18 March
2009
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Achieving Kyoto the European Climate Change
Programme

• ECCP set up in 2000 to ensure Kyoto targets are
  reached
• Goal identify most cost-effective EU-level
  measures to reduce GHG emissions
• Brings together European Commission, national
  experts, stakeholders (business, NGOs, academics)
• Over 30 measures being implemented. Examples
• energy-performance standards for buildings
• restrictions/phase-out of fluorinated gases
• standards for CO2 emissions from cars (120g/km
  average)
• EU Emissions trading system

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EU Emissions Trading System (EU ETS)

• Emissions trading - cap-and-trade makes it
  possible to reduce emissions at least cost
• EU ETS is cornerstone of EU climate strategy
• Covers CO2 emissions from 11,000 installations
  (power generators and energy-intensive industry)
  responsible for 40 of total EU GHG emissions
• Launched 2005, learning phase till end-2007
• Strict cap for 2nd phase (2008-2012) - around
  6.5 below 2005 emission levels to help meet
  Kyoto targets
• Aviation to be included from 2012
• Major source of demand for Clean Development
  Mechanism (CDM) credits, thus channelling
  investment to developing countries

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EU commitments and targets for 2020 Leading
the way towards the low-carbon economy

• Commitments
• Reduce GHG emissions to 30 below 1990 levels
  provided that other developed countries make
  comparable cuts
• Commitment to transform Europe into a highly
  energy-efficient, low-carbon economy
• unconditional commitment to cut GHG emissions by
  at least 20 in any case
• 20 of energy from renewable sources (8.5 today)
• Further objectives
• 20 cut in projected energy use through energy
  efficiency improvements
• ?10 renewables share in transport fuels (1
  today)
• Good for the climate, energy security,
  innovation, jobs and competitiveness!

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EU climate and energy package key elements

• 1. Revision of EU Emissions Trading System from
  2013
• 2. Decision on effort-sharing to reduce emissions
  from sectors outside EU ETS
• 3. Directive setting national targets for
  renewable energy to reach EU share of 20 by 2020
• including renewable fuels for transport
• 4. Legal framework to promote safe use of carbon
  capture and storage technologies (CCS)

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A shared effort between sectors and MS
GHG target for 2020 -20 compared to 1990
-14 compared to 2005
EU ETS -21 compared to 2005 2/3 of total
reduction needed
Non ETS sectors -10 compared to 2005 1/3 of
total reduction needed
27 Member State targets, stretching from -20 to
20
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Ensuring fairness and cost-effectiveness

• Fairness differentiate national efforts
  according to relative wealth (GDP/ capita)
• national emission targets in sectors outside EU
  ETS
• national renewables targets
• redistribution of auctioning rights
• Cost-effectiveness allow flexibility and use
  market based-instruments including purchase of
  foreign emission credits

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EU climate and energy package

• Strengthening the EU ETS from 2013
• ETS covers /- 40 of total EU emissions

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EU ETSbroader scope, greater harmonisation,
single cap

• Limited expansion to further sectors and gases
  add main changes
• Much greater harmonisation of rules creates
  level playing field across EU
• Single EU-wide cap on emissions replaces system
  of national caps
• Linear annual reduction until at least 2025. This
  gives investors predictability
• By 2020 cap will be 21 below 2005

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Single EU-wide cap annual reduction to 2020 and
beyond
Starting point 1974 Mt in 2013
Gradient -1.74
2083 Mt/yr
1720 Mt
-20
2010 2011 2012 2013 2014 2015 2016
2017 2018 2019 2020 2021 2022 2023 2024
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EU ETS auctioning (1)

• Auctioning becomes default method for allocating
  emission allowances
• For power generation sector 100 auctioning from
  2013 but derogations possible for some until 2020
• For other sectors 20 auctioning in 2013, 70 in
  2020, 100 in 2027
• Carbon leakage If no satisfactory global
  climate deal, possible free allocation for
  vulnerable manufacturing sectors provided they
  use most efficient technology
• At least 50 auctioning from 2013, 100 by 2027

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EU ETS auctioning (2)

• Auctioning of 300 million allowances to fund
  demonstration projects for CCS or innovative
  renewables
• 50 of auction revenues should be used to combat
  climate change
• Rules for auctioning to be laid down by 30 June
  2010

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EU ETS auctioning (3)

• EU solidarity Redistribution of auctioning
  rights to less wealthy Member States or those
  with especially high costs
• 10 of total number of allowances to be auctioned
  will be redistributed to Member States with low
  per-capita income or high costs
• Eg Bulgaria
• Aim is to strengthen their capacity to invest in
  climate-friendly technologies
• Kyoto bonus 2 of total number of allowances
  to be auctioned redistributed to those MS which
  in 2005 had cut emissions by at least 20 since
  Kyoto base year
• Eg Bulgaria

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EU ETS foreign credits

• Foreign emission credits can provide up to 50 of
  ETS emission reductions between 2008 and 2020
• Lowers costs for EU
• Increases funding for sustainable development in
  developing countries

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EU ETS expanding the international carbon market

• Increasing likelihood of US federal emissions
  trading system from 2012
• ? would allow creation of transatlantic carbon
  market
• Emission trading systems also being set up in
  Australia, New Zealand, Canada
• ? could allow creation of OECD carbon market by
  2015

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EU ETS impact of reform

• Reform means that from 2013 ETS will be
• Stronger
• more effective
• more transparent
• more predictable
• more attractive for other emissions trading
  systems to link with

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EU climate and energy package

• 2. Effort-sharing in non-ETS sectors

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Effort sharing decision

• About 60 of the EUs GHG emissions are not
  covered by the EU ETS
• Very diverse sources transport, buildings,
  services, agriculture, waste
• Mostly small emitters
• National measures, regional and local action will
  be needed to address these emissions
• EU-wide measures also being taken, eg
• CO2 emission standards for cars
• energy efficiency standards and labelling
  requirements for products and equipment
• Energy performance standards for buildings

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Effort sharing National emission targets for
2020
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Effort sharing decision targets and flexibility

• Binding national emission targets are set for
  each year between 2013 and 2020
• The targets follow a straight line between 2013
  and 2020 but to limit costs Member States are
  allowed flexibility in meeting them
• Between years
• Overachievement in one year can be carried over
  to subsequent years, up to 2020
• Up to 5 of emission quota for following year can
  be brought forward to current year
• Between Member States
• Member States may sell up to 5 of their annual
  emission allocation to other Member States, which
  may use this emission allocation until 2020
• Through foreign emission credits
• Up to 80 of emission reduction can be achieved
  by buying foreign credits

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EU climate and energy package

• 3. Renewable energy

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Renewable energy

• Legislation sets differentiated national targets
  for increasing share of renewable energy in EU
  energy mix to 20 by 2020 (today c. 9)
• National targets based on wealth per capita and
  renewables potential range from 10 (Malta) to
  49 (Sweden)
• including renewable transport fuels (green
  electricity, hydrogen, biofuels) ?10 biofuels
  must comply with sustainability criteria

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EU climate and energy package

• 4. Carbon capture and storage (CCS)

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CCS Directive key elements

• Directive sets environmental rules and liability
  requirements
• Member States determine whether and where CCS
  will happen on their territory
• Companies decide whether to use CCS on the basis
  of conditions in the carbon market
• Emissions captured and stored are recognised
  under the EU ETS as not emitted
• For any emissions leakage, corrective measures
  and surrender of EU ETS allowances required
• No mandatory CCS at this stage
• Let the market work Revised EU ETS will ensure a
  robust carbon price and demonstration plants will
  bring CCS costs down
• Goal is up to 12 CCS demonstration plants by 2015
• review legislation once CCS demonstrated to be
  safe and economically feasible

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• Towards a new UN climate agreement

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Towards a new UN climate agreement

• UN negotiating process launched in Bali, December
  2007
• at least 4 UN negotiating sessions per year
• Parallel processes can support the UN
  negotiations G8, successor to US Major Economies
  Meeting
• Objectives
• agreement at Copenhagen UN climate conference,
  December 2009
• ratification and entry into force by end-2012 to
  avoid gap at end of Kyoto Protocol 1st commitment
  period

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EU vision for lt2Cglobal emissions peak before
2020, deep cuts by 2050
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EU vision for Copenhagen targets and actions

• Targets and actions
• Leadership by all developed countries
• -30 emissions by 2020 with comparable national
  efforts based on set of agreed criteria
• for developing countries draw up low-carbon
  development strategies covering key sectors,
  including forestry where relevant
• Emissions growth 15-30 below business as usual
  by 2020

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EU vision for Copenhagen technology adaptation

• Technology
• Framework for strengthened development and
  deployment of clean technology, including
  transfer to developing countries
• Global spending on RDD needs to be doubled by
  2012, quadrupled by 2020
• Adaptation
• Framework for stronger cooperation on adaptation
  to climate change providing support to poorest
  and most vulnerable

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EU vision for Copenhagen funding

• Additional funding to help developing countries
  adapt to climate change and curb emissions will
  be crucial
• no money, no deal
• Carbon Markets
• Link up EU ETS with future US ETS and other
  trading systems in developed countries to create
  OECD-wide carbon market by 2015
• - EU auctioning from 2013 will raise around 10
  billion per year at current (low) prices
• Reform CDM and create new sectoral crediting
  mechanisms to enhance environmental effectiveness
• Public funding
• Predictable flows needed country contributions
  to be based on national emissions and ability to
  pay
• Global Carbon Finance Mechanism to front-load
  funding until 2013

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EU vision for Copenhagen forests

• Deforestation and forest degradation cause c. 20
  of global GHG emissions more than all forms of
  transport!
• EU proposes
• Global targets reduce tropical forest area lost
  by at least half by 2020, halt global forest
  cover loss completely by 2030
• Establish Global Forest Carbon Mechanism at
  international level reward developing countries
  for cutting emissions by reducing
  deforestation/forest degradation
• EU to make significant levels of funding
  available in 2013-2020 to combat deforestation
  auctioning of EU ETS allowances could be main
  source
• Forest credits could be used in pilot phase from
  2013 by governments, from 2020 maybe in EU ETS

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Conclusions

• EU showing global leadership on combating climate
  change
• climate and energy package
• proposals for Copenhagen
• Package puts EU on track towards a low-carbon
  economy
• Cost-efficiency and fairness are at the heart of
  the package future benefits far outweigh the
  costs
• Package will also deliver major economic, energy
  security and environmental benefits

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More information on EU climate policyhttp//euro
pa.eu.int/comm/environment/climat/home_en.htm