Greenhouse gas emissions

Transcription

1 Greenhouse gas emissions Million tonnes metric tons Germany United Kingdom France Source: European Environmental Agency. Italy

2 EU greenhouse gas emissions with Kyoto Protocol goal Index 100 = base year level EU EU-27 New members EU-15 Kyoto Protocol (-8%) Source: European Environmental Agency

3 Energy Consumption Quadrillion Btu Germany France United Kingdom Source: Energy Information Administration. Italy 2001

4 Chicago Climate Exchange 2008 $ / ton Chicago Climate Exchange Jan Feb Mar April Source: Chicago Climate Exchange.

5 European Climate Exchange 2008 / ton ECX Emissions Index Jan Feb Mar April Source: European Climate Exchange.

6 World nuclear generating capacity (Gigawatts) OECD North America OECD Europe OECD Asia Non-OECD Asia Non-OECD Europe and Eurasia Other non-oecd Source: Energy Information Administration.

7 Kyoto costs on energy prices above baseline Electricity in percent Natural gas in percent OECD North America OECD Europe OECD Asia Other non-oecd Source: International Council for Capital Formation (ICCF).

8 Renewable electricity costs Wind Solar photovoltaic Solar thermal Large hydropower Small hydropower Geothermal Biomass Coal 2001 energy costs / kwh Potential future energy costs / kwh Source: World Energy Assessment, 2004 Update.

9 Kyoto Protocol (2005) Ratified Declined Pending No position Source: Wikipedia.

10 Six key lessons from the pilot phase ( ) The European Emission Trading Scheme (EU ETS) has: 1. Become the leading carbon market in the world. 2. Established an effective carbon price signal. 3. Led to some emissions abatement. 4. Had a limited impact on industrial competitiveness. 5. Driven the development of the Kyoto project-based mechanisms. 6. Great potential to link with future US cap and trade schemes.

11 Main features of the EU ETS Coverage: 11,000 industrial sources; annual cap of 2.2 billion tco2 Emissions represent approx. 40% of all European GHG emissions Each installation receives allowances corresponding to its cap Most allowances are allocated for free (including investments in new capacities) Two market periods: : Pilot phase : Kyoto phase Metals 10% Cement 9% Allocation by industry Glass and ceramics 2% Other 0% Paper 2% Combustion 69% Free banking and borrowing during each period, no banking between Refineries 8% No safety valve or cap price Source: National Allocation Plans.

12 1. The EU ETS has become the leading carbon market in the world The EU ETS accounts for 80% of the value of the world carbon market. EU ETS: $ 38.3 billion in 2007 $ 24.4 billion in 2006 $ 7.9 billion in 2005 US SO 2 program: $ 1-2 billion per year Global carbon market (2006) Other ETS 1% CDM 17% Other projectbased 1% US carbon trading potential: $ billion per year (U.S. National Commission on Energy Policy, 2007) EU ETS 81% Source: World Bank (2007)

13 2. The EU ETS has established an effective carbon price signal /t Phase II Allowances ( ) ECX Dec-08 Futures Dec-04 Jan-05 Feb-05 Apr-05 May-05 Jul-05 Aug-05 Sep-05 Nov-05 Dec-05 Jan-06 Mar-06 Apr-06 Jun-06 Jul-06 Aug-06 2 Oct-06 Nov-06 Jan-07 Phase I Allowances ( ) OTC and BlueNext Spot Feb-07 Mar-07 May-07 Jun-07 Aug-07 Sep-07 Oct High volatility: price shock in April-May 2006 (compliance data release). 2. Phase I price converges towards zero: surplus of allowances and no banking between periods. 3. Higher prices for Phase II allowances due to expected scarcity resulting from stricter NAPII decisions and European Council commitments. Dec-07 Source: Mission Climat of Caisse des Dépôts.

14 3. The EU ETS has led to some emissions abatement Preliminary results indicate that the EU ETS did in fact induce emissions abatement during 2005 and 2006 (between 50 Mt and 100 Mt per year). Evidence indicates abatement of approximately 73Mt during 2005 (3.5% of the 2005 allocation) Emissions abatement is likely to have mostly taken place in the power sector. Fuel switching: from brown coal (lignite) to lower-emitting hard coal Enhanced CO 2 efficiency of coal plants: biomass use, improved energy efficiency Source: Sijm (2006).

15 4. The EU ETS has had a limited impact on industrial competitiveness Carbon prices had a limited effect on electricity prices. The windfall profits enjoyed by the power industry in 2005 and 2006 were primarily due to market restructuring and high fossil fuel prices. No evidence of market share losses in industries like cement and steel Period of Correlation Natural Gas Electricity, fuel and CO 2 prices 100 Electricity Coal 20 CO 2 0 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Coal CIF ARA 1st, /tonne PowerNext Month ahead Peak, /MWh Natural Gas Zeebrugge, /Btu EUA Spot Powernext, /tonneco2 Source: Ellerman and Joskow, 2008.

16 5. The EU ETS has driven the development of Kyoto project-based mechanisms The Kyoto Protocol provides for two types of project-based mechanisms: Clean Development Mechanism (CDM) projects that generate CERs JI projects that generate ERUs Starting in 2008, CERs and ERUs can be used by EU installations for a portion of their compliance (13.6% on average for EU 27). Anticipated emissions reductions from registered CDM projects Cumulative number of registered CDM projects Source: UNEP-Risoe database, March 2008.

17 6. The EU ETS has great potential to link with future US cap-and-trade schemes CO2 intensity (kg CO2 / 1990 US$) Carbon intensity in developed countries 2 USA 1,5 EU 15 1 Japan 0, Source: Mission Climat. US carbon intensity continues to exceed that of other developed nations. A national cap and trade system in the US would create huge new opportunities for CO 2 emission reductions. A link between EU and US emissions schemes would contribute to the development of a global emissions market.

18 Market Solutions to Climate Change: Effects of the German and European Laws on RE

19 The German EEG and European Laws on RE are Success Stories Similar laws have been introduced to 45 Countries worldwide Strong Impact to increase efficiency and reduce costs 20 years fixed income for investors to promote financing Priority access to the power grid and obligation of grid operators to purchase the electricity Annual decrease due to technical development

20 Feed-in tariffs (2007) 2007 Cent/kWh Degression Hydropower Biomass (<20 MW) Geothermal Energy (<20MW) Wind energy (onshore) Wind energy (offshore) Solar energy % 1.5% 1.0% 2.0% 2.0% 5% - 6.5% 9 % in 2009 Sources: BMU. Stand: September 2006

21 Renewables in Germany Contribution of renewable energy sources to energy supply in Germany Electricity * 2005* 2006* [%] Heat ** Fuels Share of RE in total PEC Share of RE in total gross electricity consumption Share of RE in total FEC for heat 0.4 Share of RE in fuel consumption for road traffic RE - renewable energies, PEC - primary energy consumption, FEC - final energy consumption * All figures provisional ** From 2003, new data from the Energy Statistics ACT (EnStatG) incorporated Source: BMU-Brochure " Renewable energy sources in figures national and international development-" Version: June 2007 Share of RE in total FEC (electricity, heat, fuels)

22 Huge PV Market Growth it started in Germany Now Spain, Italy, Greece, Bulgaria, France and others follow ,000 roofs programme EEG Yearly installed capacity [MWp/a] Yearly installed capacity [MWp/a] Total installed capacity [MWp/a] Total installed capacity [MWp/a] Year

23 More then 50 % of all PV installations are in Germany A new PV industry emerged within a few years 2007/2008: >1 billion euros investments 10 new thin-film production sites (360 MW): for example, Johanna Solar, First Solar, Schott Solar, Ersol Solar 37% growth in production capacities Concentration in eastern Germany for example, Freiberg, Thalheim, Frankfurt/O, Prenzlau

24 Overview of PV production sites Source: IIC,

25 Achievements (2006) Share of RE in power production: about 12 % in 2006, 20 % in 2010 [1998: 4.7%] 214,000 jobs in RE industries in Billion Euro turnover, 100 Billion in Mill. tons of CO2-reduction, 200 mill in 2010 Total costs are levied on electricity consumer: average only 2.00 per month/household

26 Further Achievements: Strong trend to cut costs: Prices for power plants are lowest in Europe Strong R&D position and market leader in equipment supply Shift to new technologies Trend to large installations with considerable contribution on the power supply in peak demand hours Innovations in grid-design are imposed on utilities 40 % contribution of RE to total electricity in % contribution of RE can be achieved by 2040!

27 PV reaches Grid Parity in Europe 7 c/kwh

28 Future Project: Worlds Largest PV Power Plant Briest The PV power plant will be built on 4.6 mill. m area of a former Russian military airport. Construction will start Q4/08. Total power will be MWp depending on the type of modules being used. It will produce electricity for up to households.

29 MILKEN INSTITUTE GLOBAL CONFERENCE 2008 Los Angeles, April 28, 2008 Panel Market Solutions to Climate Change : The European Experience Dr. Jean-Yves CANEILL, EDF Direction du Développement Durable

30 The largest and most competitive generation fleet in Europe with a low CO2 profile Installed capacity 124 GW in Europe (2007) Nuclear 53% Thermal 27% Other renewable energies <1% Hydro 19% GW of installed generation capacity in Europe, of which 53% is nuclear 82% of output CO2 emission free 58 nuclear reactors in France with an average age of 22 years

31 A leading player among European utilities United Kingdom: EDF Energy # 1 distributor # 5 electricity supplier 4.9 GW installed capacity 5.5m customers 39.6 TWh gas activity Germany: EnBW # 3 utility company in sales and customers 15.0 GW installed capacity 6 m customers 75.2 TWh gas activity France: EDF S.A. Largest customer base and generation fleet 98 GW installed capacity 28 m customers Italy: Edison Second operator on the electricity market and third on the gas market 12.5 GW installed capacity 0.2 m customers 13.8 Gm3 gas activity Switzerland: Atel Integrated electricity company Very active in European electricity market 3.7 GW electric installed capacity 0.8 GW thermal installed capacity Size of fleet unrivalled in Europe Positioned on 4 main European markets

32 Basics : electricity in a CO2 constrained world A «lieu commun» : the responsibility of the electricity sector in the CO2 emissions A less publicised fact : the role of electricity in displacing emisssions at end use What does mean CO2 regulation for the electricity sector? What are the basic pillars for a safe implementation of such a constraint? How to be efficient and fair?

33 Basics : electricity in a CO2 constrained world Rely on the long term marginal costs rather than on the short term marginal costs? EU ETS signal needs to give an economic signal of arbitrage for the full costs of technology At what CO2 price CO2 gas and pulverised coal technologies will compete? But one has no to forget that the price is driving the arbitrage not the technology itself Therefore, having a high price on the short term would be of no use if the «arbitrage technology» does not exist at the right time

34 How to make sure that existing technologies, future technologies and R&D come on the scene? Create successful deployment conditions of already existing technologies Address barriers to investment in mature but emerging technologies Address particular policies oriented to appliances Organise and support R&D process Nuclear generation 4 Renewables (photovoltaic, biofuels, ) CCS Networks Appliances Address the time frames appropriately Building progressively the right international architecture taking what is right in what has emerged already : CDM programmes with extension in scope Collaborative research between developed and developing countries

35 + RIGHT in the EU ETS design Setting the scene : a mandatory cap-and-trade system based on absolute emissions levels determined in advance A learning by doing approach : setting an initial phase (caveat?) Monitoring emissions : harmonised emissions monitoring and reporting requirements were set An inter state trading system and stringent penalties were set for non-compliance, to ensure environmental integrity: a «premiere» in Europe for an environmental regulation and in the world as far an environmental market concept is concerned Scheme open to external credits : the so called «linking directive»

36 - WRONG in the EU ETS design Length of the commitment periods and repeated, sequential cap-setting and allocation. : the EU ETS has been set up in discrete commitment periods New entrant and closure provisions : free allowances from a new entrant set-aside which distort long-term investment decisions and create over-capacity (closure provisions not an incentive to retire old investments) + non harmonisation across EU Limits on banking : the carry-over of unused allowances from the period into the period is prohibited in almost all countries Reflecting the costs in the operations : imbalances in the allocation process between the industry and the power sector, and differences of behaviour between the two communities in front of this new market, led to a significant volatility in the carbon price with all kinds of consequences

37 EDF Key Messages for EU ETS Finding the right framework to undertake efforts towards long term reduction of greenhouse gas emissions at an affordable cost for the European economy EU ETS needs to be maintained and has to be adapted to impact less heavily on operation now, and focus on influencing generators and clients long term investment choices towards carbon efficiency This needs reasonably low carbon prices in the short term, but clear predictable and stable economic signals in the longer term Giving long term visibility to players, and specifically to electricity suppliers on the evolution of constraints and rules of allocations : increasing gradually the volume of allowances allocated through auctions and not giving wrong incentives for new assets

38 Are we going in the right direction with the January 23 proposal? Cap setting at EU level : necessary step for an EU harmonisation; provided it is done in collaboration with EU MS, it will ensure minimisation of distortions Targets visibility : the proposal gives a first indication of 8 years after 2012 so an improvement and a next indication of a similar decrease for 8 years more. We are approaching realism. Questions : affordable by the power sector? Uncertainty on the future (in case of an international agreement?) Allocation by auctions : is going in the right direction for taking into account CO2 value in full investment costs; need to manage an appropriate framework for harmonisation and learning phase for actors; under what conditions? Features of the proposal on : extension of the scheme, domestic projects, linking with other schemes, CDM credits : clearly a difficult point with risk of desinterest from developing countries and lack of safety mechanism in case of unexpected situation; if the power sector has to buy all the allowances it should do it with the largest flexibility to insure least costs mitigation

39 MAIN DRIVERS OF OUR CARBON POLICY 1 Objective to remain the company releasing the least amount of CO 2 of the 7 major European electricity companies through:. optimisation of our energy mix. our investment choices (development of proven RES) 2 3 Creation and promotion of commercial offers and advice for energy efficiency (including RES) for all our customers = eco efficiency Preparing for the future through:. long-term preparation for the replacement of current power plants by competitive facilities producing little or no CO 2,in line with national policies (EPR, emerging renewable energies, clean coal, etc.). R&D actions with regard to generation technologies and to the highperformance use of electricity in homes, industry and transport.

40 EDF Group and the Carbon Market - The corporate level draws the overall strategy taking into account national circumstances - Carbon constraint is integrated within the risk policy of each entity of the Group in order to optimise at the best, the use of the generation units - Synergies are activated appropriately - A Carbon Fund managed by EDF T, our trading company, has been set up in order to cover a part of the CER s needs - The carbon constraint is integrated in the analysis of investments portfolios

41 CONCLUSION Climate change challenge is becoming an important driver of the economic activity, and «carbon» has to be included in any long term strategy EDF has a long-standing commitment to sustainable development. As one of the world s premier energy firms, EDF wants to be part of the solution to the climate/energy challenge the world is facing through : Appropriate investments Improving energy efficiency Acting on a global scale and motivating all employers and clients to contribute