Curbing Climate Change by Global Trade an outline from Vattenfall

Transcription

1 Curbing Climate Change by Global Trade an outline from Vattenfall Low stabilisation Scenarios Strategies, Technologies and Costs Joint Workshop of PIK and FEEM Potsdam March 2006 Göran Svensson Vice President Vattenfall AB

2 The Vattenfall Group 2004 Net sales Electricity Heat M TWh TWh Nordic 4, Germany 7, Poland Total , Hydro Nuclear Fossil Heat 2

3 Vattenfall s approach to Climate Change Industrial initiatives for global actions World Economic Forum, Global Round Table for Climate Change, Alliance for Global Sustainability etc. Improvements in existing plants and systems Upgrading hydro and nuclear, upgrading district heating systems, co-combustion, waste R&D and investments for long term sustainable solutions Bio energy, off-shore wind, system operation R&D on low or zero CO 2 emitting technologies for fossil fuels Increased efficiency, CO 2 capture and storage 3

4 Carbon dioxide scenarios and effects on the global average temperature 4

5 Real long-term global governance is needed to combat CO 2 Vattenfall has proposed a global scheme covering: An outline of an adaptive global burden-sharing model The need for a global price on carbon dioxide emissions and how markets can contribute Aspects on implementation of a global market-based regime regarding carbon dioxide? 5

6 Overriding principles of the proposed emission allocation model (1): All countries should participate participation is a part of being a member of the global community No poor country shall be denied their right to economic development No rich country shall have to go through disruptive change Richer countries pull a larger weight (emission caps do not embrace countries until they have reached a certain economic level; poorer countries with caps get higher allocations compared to richer countries) There shall be a level playing field. The proposed framework shall aim at minimising changes in relative competitiveness 6

7 Overriding principles of the proposed emission allocation model (2): The system shall be robust. As new knowledge is accumulated parameters may change, but not the principles underlying the system Emission caps should be binding Emission allowances are allocated to each country in relation to its share of GGP (Gross Global Product) The final allocation to individual companies or facilities will be made at the national level The mechanism should be able to achieve wide acceptance as being fair and balanced 7

8 Allocation mechanism Global target cap of 550-ppm CO 2 -equivalent Deduction of emissions from developing countries that do not face any emission restrictions Remaining room for emissions is divided between all countries facing restrictions according to their share of the total global GDP Mechanisms adjusting minimum and maximum reduction 8

9 Two scenarios Early-peak Global emissions from fuel combustion are allowed to increase until 2025, thereafter gradually decrease towards the long-term target of 12,000 Mt CO 2 in the year 2100 Late-peak Global emissions from fuel combustion are allowed to increase until 2040, thereafter gradually decrease towards the long-term target of 8,000 Mt CO 2 in the year Countries that face restrictions get higher allocation up until 2060 compared to the early-peak scenario. 9

10 Emission path scenarios, % change relative to 2002 Global emission path: Change relative ,00 % 20,00 % Global increase relative 2002 peak 2025 Global increase relative 2002 peak ,00 % % -20,00 % -40,00 % Early peak -60,00 % -80,00 % Late peak 10

11 Results Early-peak scenario Developing countries are allowed to increase their emissions in the beginning For the USA, the imposed restriction on the maximum speed of emission reductions allows relatively high level of emissions for a period while others (such as Sweden) are forced to reduce due to demanded minimum reductions In the model the emissions per GDP unit converges for all countries in the long run. 11

12 Results Early-peak scenario Allocation of emissions Mton CO CO 2 Emissions from fuel combustion Emission peak China (Peopls rep+hong Kong) Asia Latin America Former USSR Non-OECD Europé Middle East Africa OECD Pacific Actual Actual OECD North America OECD Europé World (cap)

13 Results Late-peak scenario USA hardly affected at all, compared to early-peak - restriction on the speed of adjustment protects USA from too drastic reductions in the first half of the period the speed of adjustment towards lower emissions will primarily be handled through the restriction on the maximum speed of adjustment rather the increasing the global cap and letting emissions grow for a longer period of time for real high emitters Substantial shift in reduction requirements for some developing countries i.e. China, India and Brazil will be allowed to continue with relatively high emissions for a longer period of time, but larger reductions in the future Fast growing developing countries and newly industrialised countries seems to gain most from the latepeak. 13

14 Regional allocation of emissions late-peak Mton CO CO2 Emissions from fuel combustion Emission peak China (People's rep+hong Kong) Asia Latin America Mt CO Former USSR Non-OECD Europe Middle East Africa OECD Pacific OECD North America OECD Europe 0 Actual Actual 0 World (cap) Actual Actual

15 Results late-peak vs early-peak, Accumulated emissions Countries Accumulated emissions in early peak scenario Accumulated emissions in late peak scenario "Gain" from late peak % "gain" China ,5 % Tanzania ,7 % Iran ,7 % Brazil ,7 % South Africa ,7 % India ,7 % Poland ,7 % USA ,5 % Sweden ,9 % Korea ,6 % Mexico ,9 % Total above ,1 % 15

16 Evaluation of policy instruments Environmental effectiveness: How effective is the program in meeting its emissions reduction target? Cost-effectiveness: Will the program design permit costeffective compliance? Administrative feasibility: Can the program be administered effectively? Distributional equity: Are the burdens shared in a fair way? Political acceptability: Will the program be politically acceptable? 16

17 Climate change an international problem demanding international solutions Curbing greenhouse gas emissions seems to be particularly well suited for emissions trading. The locations of the emissions are unimportant and an international trading system is therefore possible from an environmental point of view. The opportunities for cost savings are furthermore greater when the abatement costs differ more. There are strong reasons for believing that the costs of reducing greenhouse gas emissions vary widely among sources (and countries) and the cost savings will thus be larger the wider the trading scheme is. International trade can thus provide the flexibility needed to achieve the lowest-cost abatement options. This is a very important argument in favour of forming a common system. 17

18 Transatlantic dialogue needed On the political level, Europe and USA have diverged. This is not a sustainable situation and there is great need for a transatlantic dialogue. This responsibility lies primarily on the political system, but the business community has a vital role to play in contributing to such a dialogue. All company executives, but primarily those on either side of the Atlantic, must commit themselves to working for a global emissions trading system. Industry should unite to facilitate joint political leadership, first of all from Europe and USA, on this issue. 18

19 Climate Change - What must be done? A solution will only be found step by step and will thus take time Economic policy instruments are necessary aiming at cost effectiveness and fairness We need a correct price on emissions on the global scale A global emissions trading systems looks most favourable Increased R&D and with stronger focus will be needed Vattenfall is taking a leading role within industry in the international dialogue 19

20 Thank you for your attention 20