SWP. Stiftung Wissenschaft und Politik German Institute for International and Security Affairs Berlin

Transcription

1 Stiftung Wissenschaft und Politik German Institute for International and Security Affairs Berlin

2 EU Climate Policy in a world of fragmented unilateral approaches Dr., Stiftung Wissenschaft und Politik 15th Meeting of the REFORM Group Salzburg, September 6-10, 2010 Folie 2

3 Outline I EU s Climate Policy 2010 II The international dimension III An international strategy? Folie 3

4 I EU s Climate Policy Cornerstones I EU Cornerstones targets, Emissions Trading until 2020, and beyond (Energy and Climate Package 2008) 30 per cent as a bargaining chip: turned upside down (Copenhagen 2009) and leadership lost Communication May 2010: Impact of economic crisis Slump in emissions 2009 (-11.6% below 2008), leading to -14% since 1990 Carbon price reaction: down to 8 from 25 Achieving 20% target became less costly ( 22 bn) Folie 4

5 EU s Communication (cont) I EU Cornerstones Is 30 percent achievable and affordable after 2008/9 crisis? Projections assume a carbon price of 30/t 30% target: 11 bn cost difference (2020) Main tool to achieve extra mitigation: the ETS (34% share, while 16% instead of 10% for Non-ETS) Major potential: electricity use and generation Carbon Leakage risk reduction: free allocation to industry identified as being at risk of carbon leakage ; banking of allowances from economic downturn; access to international credits Carbon tax for non-ets sectors Sectoral crediting as substitute for CDM, using exchange rate Co-benefits: restore investment incentives in green technologies, reduce oil and gas imports, less pollution Interpretations and row over 30% target Folie 5

6 Unilateral Action by the EU external issues Even 30% unilateral action until 2020 will not live up to the global challenge (defined by 2 C target) target the actions by major emitters Carbon pricing and carbon leakage: the international competitiveness challenge International negotiations and the EU s lost leadership I EU Cornerstones Folie 6

7 The international dimension of the EU s climate policy Folie 7

8 National approaches - ETS around the globe Folie 8

9 Levelling carbon costs the options for the EU No mechanism Price without carbon cost Levelise at non-carbon costs Flexible Conditional allocation/ Border revenue recycling adjustments Value of allocation cancels out cost of CO2 Fiscal, process standard or allowance adjustment at border Globalise carbon costs Full-cost sectoral Agreements Price with carbon cost Sectoral agreement with CO2 cost in all major production Inside EU ETS Outside EU ETS Inside EU ETS Outside EU ETS Little substitution to low carbon products/services Distorts investment May constrain innovation Risk of lock-in Inside EU ETS Outside EU ETS Potential problems with WTO/trade relations Requires at least informal international cooperation Inside Outside EU ETS EU ETS Requires strong policies of developing countries Risk of CO2 price set by lowest common denominator Folie 9

10 Competitiveness and Leakage: Dimensions II International dimension Carbon leakage describes a situation where reduction of CO2 within the EU is caused by a shift of emissions to third countries. This could happen via increased imports from, or a relocation of trade-exposed energy intensive industries to countries that don t face equivalent carbon costs. The emission reduction from leakage thus does not reduce global emissions environmental effectiveness is reduced. Folie 10

11 Leakage is a sector-specific issue: three examples Study Country Level of aggregation CO 2 price Indicator of carbon cost impact Ranking of sectors along Denominator Process emissions Electricity carbon cost impact Hourcade et al (2007) Houser et al. (2008) Graichen et al. (2008) GVA Yes Yes 1. Lime UK 4 Digit SIC 20/t CO 2 2. Cement 3. Basic Iron & Steel 4. Refined petroleum 5. Fertilizers & Nitrogen 6. Aluminium USA 2 digit SIC - Final sales value Yes No 1. Alkalis & chlorine 2. Lime 3. Pulp mills 4. Primary aluminium 5. Smelters 6. Nitrogenous fertilizers 7. Newsprint Mills GVA Yes Yes 1. Cement Germany 4 digit NACE 20/t CO 2 2. Lime 3. Fertilizers & nitrogen compounds 4. Basic iron & steel 5. Aluminium 6. Paper Folie 11

12 Drivers of competitiveness and leakage effects II International Dimension 1) Impact of CO2 pricing on cost structure E.g. Energy intensity of production and emissions E.g. Total value at stake E.g. International transport costs 2) Cost pass through ability of a sector E.g. Profit margins E.g. Demand growth E.g. Elasticity of substitution between imported and domestically produced goods (Armington) E.g. Extra EU trade intensity 3) Abatement potential E.g. Substitutability of fuels E.g. Profitability of technical change E.g. Technical abatement opportunities 4) Regulatory and Legal Framework E.g. Subsidies and import restrictions E.g. Legal and political environment E.g. Infrastructure quality Folie 12

13 III A New/Different International Strategy? III A New Strategy? No international negotiations without national action leading by example? Framework for international mitigation post 2012? Solving the carbon market problem International agreements as building blocks of global framework (sectoral, adaptation, technology, finance) Strategic partners and alliances: with whom and about what? Longer term issue: carbon pricing and carbon flows - rethinking the ETS approach Folie 13

14 Thanks for your attention! Folie 14

15 Sectoral Approaches Thorough assessments: risk of lowest common denominator, need for state engagement OECD 2005 on sectoral crediting schemes (COM/ENV/EPOC/IEA/SLT(2005)1): It may be more feasible, from a policy, institutional and economic standpoint, for many countries to start on a sectoral basis, than to engage in a country-wide approach. Folie 15

16 Sectoral shares in global emissions 2005 Source: CAIT 2009 Folie 16

17 Carbon Flows Folie 17

18 Share of large countries in global CO2- emissionen in 2005 IV International Negotiations Source: CAIT 2009 Folie

19 and from 1850 to 2005 IV International Negotiations Source: CAIT 2009 Folie

20 and per Capita, ,9 8,4 4,3 4,3 1,1 11 1,9 7,2 Folie Südafrika Brasilien China Indien Russland Tonnen CO2 pro Kopf Weltdurchschnitt EU USA Source: CAIT 2009 IV International Negotiations

21 IV Key issues for international climate negotiations under the UNFCCC Emission targets, base years, sinks Burden sharing, historical vs. future emissions Role of market mechanisms Adaptation help Technology transfer MRV: measurement, verification, finance NAMAs: nationally appropriate mitigation actions Processes Folie

22 EU goals and the Copenhagen Accord IV International Negotiations Folie

23 2010 open issues IV International Negotiations The Copenhagen Accord and (a) the Kyoto Protokoll, (b) a new international agreement? Next Conference of the Parties (COP16) in Cancun; 2011 in South Africa (COP17) Top-Down Approach only an EU priority? US: national climate bill not in sight China: living up to the expectations? Folie

24 Thank you! Folie