IMPACT ASSESSMENT PROCESS

Transcription

1 IMPACT ASSESSMENT PROCESS

2 OUTLINE. Problem definition. Reference scenario. Policy options, scenarios & main impacts» CO2 emissions» Energy system impacts» Non CO2 emissions» Macro-economic impacts on GDP and employment» Impacts on energy intensive industries. Capacity and distributional aspects among Member States 2

3 I. Problem definition Present policy not sufficient to reach the EU's long-term climate objective (80-95% GHG reduction in 2050). Security of energy supplies remains an issue. Need for significant investment in energy infrastructure, non-economic barriers and market failures require clear and coherent framework => predictability and reduced risk. Policies can increase costs in the short term to decrease costs in the long term. More focus needed to achieve them cost efficiently.

4 II. Reference scenario The Reference scenario was elaborated jointly by DG ENER, CLIMA and MOVE and published in December It evaluates consequences of policies adopted by spring 2012 (20/20/20 targets and EED) and is the starting point for various policy scenarios for the 2030 Framework. GDP and population growth projections based on work of DG ECFIN and the EPC. Continued increase in fossil fuel energy prices. Main assumptions and draft results for each step consulted with MS.

5 II. Reference scenario key results Significant decoupling of energy consumption from GDP: Final energy demand reduces slightly and gross energy consumption reduces by 9% in the period The primary energy savings represent a 21% decrease in 2030 compared the projection made in Significant energy decarbonisation, renewable share of 24% of final energy consumption in Growth of electricity share, restructuring of the fuel mix. Declining EU GHG emissions: GHG reduction 24% in 2020 and 32% in 2030 compared to 1990.

6 III. Policy options A. GHG targets of between 35 and 45 % (compared to 1990 GHG emissions levels) B. Pre-set RES targets of 30 and 35% (or no preset target) as share of gross final energy consumption C. Different level of ambition (moderate, ambitious and very ambitious) for energy efficiency policies (additional to Reference) In order to qualitatively assess the impacts of policy options a series of scenarios was developed.

7 III. Policy options Table 1: Scenarios to assess main policy options with respect to targets and measures Scenario GHG reduction in 2030 (wrt 1990) RES 2030 (% final En. Cons.) Energy Savings in 2030 Reference Scenario -32.4% 24.4% -21.0% Reference scenario conditions GHG35/EE 35% No pre-set target (25.5%) No pre-set target (-24.4%) GHG37 (37%) No pre-set target (24.7%) No pre-set target (-22.9%) 40% No pre-set target (25.5%) No pre-set target (-24.4%) Enabling conditions 40% No pre-set target (26.5%) No pre-set target (-25.1%) /EE 40% No pre-set target (26.4%) No pre-set target (-29.3%) / EE/RES30 40% 30% No pre-set target (-30.1%) GHG45/ EE/RES35 45% 35% No pre-set target (-33.7%) For energy savings the same metric is used for the 2020 energy savings target

8 III. Scenarios & impacts - CO2 emissions 2030 compared to 2005 in % Ref. GHG35 /EE GHG37 /EE / EE/ RES30 GHG45 / EE/ RES35 Power generation, CHP and district heating (CO2) Industry (energy + processes) (CO2) Residential &tertiary (mainly buildings) Transport (CO2) Highest reduction potential in power sector and buildings. Lowest reduction potential transport.

9 III. Scenarios & impacts (energy system) Energy system: fossil fuels import value and savings Value of imports - GHG 40 Value of imports - GHG 40+EE Value of imports - GHG 40+EE+RES Savings in imports bill GHG 40 Savings in imports bill GHG 40+EE Savings in imports bill GHG 40+EE+RES Value of imports - Reference

10 III. Scenarios and impacts: GDP GEM E3, E3MG achieve 40% GHG reduction through introduction carbon value: depending on if revenues are raised and recycled towards lower labour costs, or not, different impacts. GEM E3: E3MG: Auctioning in ETS Power sector Power sector Power sector All sectors Tax in Non ETS No No Yes Yes Labour Labour Recycling revenues Subsidy for cost cost carbon pricing consumers reduction reduction Labour cost reduction GDP % change compared to Reference -0,45% -0,40% -0,21% -0,10% Auctioning in ETS Only Power sector All sectors ETS Tax in Non ETS No Yes Recycling revenues carbon pricing Labour cost reduction all sectors GDP % change compared to Reference 10 0,0% 0,2%

11 IV. Capacity and distributional aspects among Member States Two key elements: (i) dealing with the investment challenge (capacity) (ii) dealing with efficiency and equity (distributional aspects) The challenges are real, but various options exist to tackle them. The IA gives scenario results relative to Reference for: reductions in total GHG, non-ets GHG, increase in RES share system costs, investments and electricity price rises monetised health benefits and reduced pollution prevention costs, savings on energy purchase costs

12 Next steps Investment Plan for Europe (with Energy dimension) EU Energy Union (greater collaboration) Greenhouse gas reductions: Implementation EU ETS/targets for non ETS 2030 governance system pathway to 27/27 European Energy Security Strategy (reverse flows, stocks, infrastructure, diversification (new reference scenario )

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14 III. Scenarios and impacts - Energy system costs Ref. GHG35 /EE GHG37 /EE / EE/ RES30 GHG45 / EE/ RES35 Total System Cost as % of GDP vs Reference in Investment Expenditure changes compared to reference (avg , bn ) Energy Purchases compared to reference (avg , bn ) 1,

15 III. Scenarios and impacts: Employment GEM E3: Depending on use of carbon pricing, better impacts employment if recycled towards lower labour costs. Auctioning in ETS Power sector Power sector Power sector All sectors Tax in Non ETS No No Yes Yes Labour Labour Labour Recycling revenues Subsidy for cost cost cost carbon pricing consumers reduction reduction reduction 2030 Employment change compared to Reference % change employment -0,61% -0,44% -0,02% 0,20% E3ME: Use of carbon pricing to pay for investments in RES (power sector) and EE (building sector), remaining (net) revenues transferred to citizens (increasing or decreasing wealth) Employment change compared to Reference EERES % +0.5%

16 250 III. Scenarios & impacts (energy system) Impacts of scenarios with 40% GHG reduction Energy consumption and energy intensity (2000=100) 200 Range of energy consumption 150 Range of energy intensity GDP Reference scenario - energy consumption Reference scenario - energy intensity

17 III. Scenarios & impacts (energy system) Overall share of RES in final energy consumption and share of RES in electricity 80,00% 70,00% 60,00% 50,00% Range of RES-E shares 40,00% Range of RES shares 30,00% 20,00% Reference RES-E Reference RES 10,00% 0,00%

18 III. Scenarios and impacts - Energy system costs Ref. GHG35 /EE GHG37 /EE / EE/ RES30 GHG45 / EE/ RES35 ETS carbon price ( /t of CO2-eq) Average Price of Electricity ( /MWh) Share of energy costs in energy intensive industries

19 Non-CO2 GHG reduction in 2030 compared to 2005 (%) Total non- CO2 Non Agriculture Ref. GHG35 /EE GHG37 /EE / EE/ RES30 GHG45 / EE/ RES Agriculture Carbon price ( /tco2) ETS: 35 Non- ETS: 0 ETS: 27 Non- ETS:

20 III. Scenarios and impacts: GDP E3ME achieve 40% GHG reduction through auctioning and carbon tax which pays for investments in RES (power sector) and EE (building sector), as simulated in PRIMES, any remaining net revenues are used to lower labour costs: EE EERES30 GHG45EE RES change compared to Reference +0.55% +0.46% +0.53% Conclusions: Negative impacts of 40 GHG target are contained or reverted: - if revenues used to lower labour costs - higher levels of investments could result in positive GDP impacts 20

21 III. Scenarios and impacts: Energy Intensive Industries : auctioning vs free allocation If companies can include the opportunity cost of free allocation in their prices, then there is no benefit from free allocation (actually the opposite when auctioning revenues are used to lower labour costs). GEM E3 Scenario 1 Scenario 2 Auctioning in ETS Only Power All sectors Free allocation Sectors other than Power No Tax in the Non ETS sectors No No Change in 2030 production compared to Reference Ferrous metals -3,3% -2,8% Non-ferrous metals -0,1% 0,6% Chemical Products -0,6% -0,1% Non-metallic minerals -2,8% -2,6% 21

22 III. Scenarios and impacts: Energy Intensive Industries: auctioning vs free allocation If companies cannot or do not want (for instance to ensure future allocations) to include the opportunity cost of free allocation in their prices, then there is a benefit from free allocation. GEM E3 Scenario 1 Scenario 2 Auctioning in ETS All sectors Only Power Free allocation No Sectors other than Power Tax in the Non ETS sectors No No Change in 2030 production compared to Reference Ferrous metals -6,1% -1,6% Non-ferrous metals 0,2% -0,5% Chemical Products -1,1% -0,4% Non-metallic minerals -4,5% -0,8% 22

23 IV. Capacity and distributional aspects among Member States: Equity and Efficiency The scenarios implement a cost-effective distribution of effort at the EU level. This leads on average to higher efforts relative to GDP in lower-income MS, due to (i) higher cost-effective potential (ii) the denominator effect of having a lower GDP/capita This is (partly) compensated by higher energy savings and health benefits in those same MS

24 IV. Capacity and distributional aspects among Member States: investment challenge For the 40%GHG scenarios: Investment expenditures (relative to Reference) in states with GDP/cap 2010 < 90% EU average: 11-21billion / year between Extra investments in countries with "GDP/cap 2010 < 90% EU average" in so far as they are above the additional EU-average investments: billion / year between

25 IV. Capacity and distributional aspects among Member States: investment challenge A variety of financial instruments could in principle be used to address the investment challenge, e.g. EIB Bonds Project Bonds Initiative Refinancing Guarantees Public-Private Risk Sharing Arrangements, etc. Instruments need to leverage private investment flows. Targeted at different capabilities of Member States to finance investments. EU already provides investment support, at least 20% of the Multiannual Financial Framework will be spent on climate action. For the year 2014 alone this represents approximately 28billion.

26 III. Policy options scenarios and their assumptions Reference vs enabling conditions. Key focus is on 2030 but showing impacts in 2050 is also important (impact of enabling settings). Scenarios are stylised (to various extent) to achieve a given GHG reduction cost-effectively (equalisation of marginal abatement cost ETS/non-ETS). EE policies: eco-design, BAT, buildings, energy savings obligation, CHP, energy management systems, smart grids, CO2 standards for cars/vans different modelling tools RES target/share

27 II. Reference scenario key results Increase in energy costs and prices compared to 2010, in particular until 2020 Due to increasing fossil fuel prices (if fossil fuels would not have increase, system costs in 2030 would have represented 12.9% of GDP) And increased investment needs: to replace ageing infrastructure meet growing demand for energy services existing policies Energy system costs as % of GDP % 14.8% 14.0%