Irish Company Expenditure on Carbon Abatement Technologies: An Overview of Project Findings

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1 Irish Company Expenditure on Carbon Abatement Technologies: An Overview of Project Findings Dr. Bernadette Power, School of Economics, Cork University Business School. Dr Ellen O Connor, School of Accounting and Finance, Cork University Business School. EU ETS Reform, Emissions Trading and Brexit 1 st May 2018

2 Agenda 1.Has spending on carbon abatement increased since the onset of EU ETS? 2.Has spending on carbon abatement affected the competitiveness of companies? 3.What are the lessons for corporates and policymakers? 2

3 Clean Tech Pollution Control GSK s installation of a 3 MW wind turbine in 2014 Reduce cost & emissions via heat recovery & oven control 3

4 Data on Green Expenditure Measures Current Expenditure e.g. monitoring, reporting and verifying costs Capital Expenditure Pollution control e.g. end of pipeline pollution abatement Clean Tech e.g. optimises natural resources & transitions to low carbon operations Data Source: CSO Micro Data, Census of Industrial Production ( ) 4

5 Sectorial Breakdown Very low emitters 14% Very high emitters 3% High emitters 12% Low emitters 39% Medium emitters 32% 5 Very high Emitters (>5,000) High emitters (2,000-4,999) Medium emitters (1,000-1,999) Low emitters ( ) Very low emitters (1-100)

6 Industry Spending on Carbon Abatement Technologies

7 % of Enterprises Undertaking Green Expenditure Phase 1-3 EU ETS Measure Phase 1 Phase 2 Phase Capital Spend (%) Clean Tech (%) Pollution Control (%) Current Spend (%) Total Spend(%) (Capital and Non Capital) The percentage investing in carbon abatement is low. Increases are seen in current spending on environmental protection rather capital spending. 7

8 % of Enterprises Undertaking Green Expenditure Phase 1-3 EU ETS Measure Phase 1 Phase 2 Phase Capital Spend (%) Clean Tech (%) Pollution Control (%) Current Spend (%) Total Spend(%) (Capital and Non Capital) The percentage investing in carbon abatement is low. Increases are seen in current spending on environmental protection rather capital spending. 8

9 % of Enterprises Undertaking Green Expenditure Phase 1-3 EU ETS Measure Phase 1 Phase 2 Phase Capital Spend (%) Clean Tech (%) Pollution Control (%) Current Spend (%) Total Spend(%) (Capital and Non Capital) The percentage investing in carbon abatement is low. Increases are seen in current spending on environmental protection rather capital spending. 9

10 % of Enterprises Undertaking Green Expenditure Phase 1-3 EU ETS Measure Phase 1 Phase 2 Phase Capital Spend (%) Clean Tech (%) Pollution Control (%) Current Spend (%) Total Spend(%) (Capital and Non Capital) The percentage investing in carbon abatement is low. Increases are seen in current spending on environmental protection rather capital spending. 10

11 Average Percentage Spent on Green Expenditure Phase 1-3 EU ETS Measure Phase 1 Phase 2 Phase Capital Spend (%) Cleaner Tech (%) Pollution Control (%) Current Spending (%) Total Spend(%) (Capital and Non Capital) The investments in environmental protection were modest. 11 On average investment in clean tech represents 1-5% of total capital expenditure by firms across OECD countries (Pasurka, 2008).

12 Average Percentage Spent on Green Expenditure Phase 1-3 EU ETS Measure Phase 1 Phase 2 Phase Capital Spend (%) Clean Tech (%) Pollution Control (%) Current Spend (%) Total Spend (%) (Capital and Non Capital) The investments in environmental protection were modest. 12 On average investment in clean tech represents 1-5% of total capital expenditure by firms across OECD countries (Pasurka, 2008).

13 Average Percentage Spent on Green Expenditure Phase 1-3 EU ETS Measure Phase 1 Phase 2 Phase Capital Spend (%) Clean Techn(%) Pollution Control (%) Current Spend (%) Total Spend(%) (Capital and Non Capital) The investments in environmental protection were modest. 13 On average investment in clean tech represents 1-5% of total capital expenditure by firms across OECD countries (Pasurka, 2008).

14 Average Percentage Spent on Green Expenditure Phase 1-3 EU ETS Measure Phase 1 Phase 2 Phase Capital Spend (%) Clean Tech (%) Pollution Control (%) Current Spend (%) Total Spend(%) (Capital and Non Capital) The investments in environmental protection were modest. 14 On average investment in clean tech represents 1-5% of total capital expenditure by firms across OECD countries (Pasurka, 2008).

15 % of EnterprisesCapital Spending on Clean Tech Phase 1-3 EU ETS ETS Phase 1 ETS Phase 2 ETS Phase VERY LOW LOW MEDIUM HIGH VERY HIGH Sectorial Emissions HIGH CARBON HIGH CARBON & HIGH EMITTERS

16 % of Enterprises with Capital Expenditure on Clean Tech ETS Phase 1 ETS Phase 2 ETS Phase HIGH EMITTERS HIGH CARBON HIGH EMITTERS HIGH CARBON 16 MEDIUM ENTERPISES MEDIUM ENTERPISES LARGE ENTERPRISES LARGE ENTERPRISES

17 Average % Spent by Large Enterprises ETS Phase 1 ETS Phase 2 ETS Phase POLLUTION CLEAN TECH POLLUTION CLEAN TECH HIGH CARBON HIGH CARBON HIGH EMITTERS HIGH EMITTERS 17

18 Expenditure on Carbon Abatement Technologies and Business Competitiveness

19 Impact of EU ETS Regulation on Business Competitiveness Regulation Stage 1 Green Investment - Carbon Abatement Resource Efficiency Stage 2 Performance Stage 3 Test of Porter s Hypothesis -See Porter (1991), Porter and van der Linde (1995) 19

20 Impact of EU ETS Regulation on Business Competitiveness Regulation Stage 1 Green Investment - Carbon Abatement Resource Efficiency Stage 2 Performance Stage 3 20

21 Key Findings I Green Investment Clean Tech Probability of investing in clean tech from Phase 1 to Phase 2 of EU ETS. Pollution Control No change in the probability of investing. Current Spending Probability of current spending from Phase 1 to Phase 2 of EU ETS. 21 Early phases of the EU ETS have not been strict enough to promote capital investment in clean tech solutions.

22 Impact of EU ETS Regulation on Business Competitiveness Regulation Stage 1 Green Investment - Carbon Abatement Resource Efficiency Stage 2 Performance Stage 3 22

23 Key Findings II Resource Efficiency Capital Expenditure Clean Tech Positive Impact Pollution Control No Impact Current Expenditure Negative Impact Capital investment in cleaner technological solutions raises resource efficiency. 23

24 Key Findings II Resource Efficiency Green Expenditure Full Sample Sectorial Emissions Low Medium High Very High High Carbon High carbon& High Emitters Clean Tech Pollution Control + + Current Spending

25 Impact of EU ETS Regulation on Business Competitiveness Regulation Stage 1 Green Investment - Carbon Abatement Resource Efficiency Stage 2 Performance Stage 3 25

26 Key Findings III Competitiveness Resource Efficiency Positive Effect on Competitiveness 26

27 What lessons can we take from this? 27

28 Early phases of the EU ETS and policy instruments have not been strict enough to promote investment in clean tech. Capital investment in innovative clean tech can improve firm competitiveness. Incentivising capital investment on pollution control may be more appropriate in high carbon users. 28

29 Thank you for Listening Any Questions? Contact Details: Dr. Bernadette Power: Dr. Ellen O Connor: ellen.oconnor@ucc.ie

30 Sectorial Breakdown Category of Emitter (000s CO2 Equivalent GHG) Sector Very high Emitters (>5,000) High emitters (2,000-4,999) Medium emitters (1,000-1,999) Low emitters ( ) Very low emitters (1-100) Electricity gas steam and air supply Rubber, plastics, non-metallic mineral products Food and Beverages Tobacco Metals & fabricated metals Water, Sewage and Waste management Mining and quarrying Pharmaceuticalproducts Wood & paper products Reproduction of recorded media Manufacture of coke, refined petroleum, chemicals and chemical products Computers & electronic products Furniture, other manufacturing, repair and installation of machinery Textile, apparel & leather Electrical Equipment, machinery& equipment and transportation equipment Source: CSO Environmental Accounts Air Emissions survey