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CO 2 in other sectors: Power generation In the EU, the emissions from public heat and power generation are approximately 15 per cent less than the levels in 1990. More efficient power plants and a changing power mix help to cover the overconsumption. Power generation underlies European emissions trading. Emissions trading consists of two components: A prescribed cap on emission volumes that will continuously decrease up to the year 2020. A tool for distributing the burden (trade). The market for carbon credits ensures that the EU will meet the prescribed emission volumes at low costs. 2
The reduction can be credited to Eastern Europe in particular. CO 2EQ emissions of public heat and power generation, 1990 = 100 120 CO 2 Regulation in Europe 110 108,5 100 97,3 90 80 80,2 70 74,3 60 1990 1995 2000 2005 2010 2015 EU 28 EU 15 Eastern european access countries 62,4 Source: EEA, 2017 (V20) Page 3
Power generation: Consumption of fossil primary energy declining. In terawatt hours (TWh) of primary energy use; changes from 2000 to 2015 260.6-132.5-83.0 CO 2 -Regulierung in Europa CO 2 Regulation in Europe Electricity consumption in Europe is persistently increasing. -580.6-618.6 Yet fewer fossil primary energy carriers are being consumed. Electricity consumption More efficient fossil power plants Power mix -490,5 Overall impact Power generation is not an end in itself; it facilitates production and consumption in the industrial sector and in homes. Source: Odyssee Database, 2017 Page 4
Cap: A government-prescribed reduction CO 2 Regulation in Europe Volume of carbon credits in the EU Emissions Trading System (ETS), in millions of tonnes 2400 1st trade period cap 2nd trade period cap 3rd trade period cap 2200 2000 1800 1600 1400 1200-21% Reduction rate by 2020-1.74% Discussed reduction rate after 2020-2.2% Target 2030 1000 2005 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2030 Specific: The emissions target of -21 per cent is sure to be met on account of the decreasing cap. Apportioned: The initial auctioning of 20 per cent is expected to increase to 60 per cent by 2020. Flexible: It is not stipulated which trade participant will bring about the reduction. Sources: EU, DIW Page 5
Trade: Emissions trading ensures an efficient distribution of the reduction burden. Case 1: Emission restrictions Case 2: Emissions trading: Carbon credit price at 30 euros per tonne Exhaust up to now, in tonnes Permissible exhaust in the future, in tonnes Reduction costs per tonne Total costs Plant 1 Exhaust up to now, in tonnes Permissible exhaust in the future, in tonnes Carbon credits received, in tonnes Reduction costs per tonne Achieved reduction, in tonnes Cost for the reduction Trade, in tonnes Trade in euros Total costs by trade 5,000 4,500 20 10,000 5,000 4,500 50 25,000 Plant 2 5,000 9,000 total 4,500 20 1,000 20,000 500 15,000 5,000 5,000 4,500 50 0 0 15,000 10,000 9,000 35,000 Total 10,000 9,000 9,000 1,000 20,000 500 15,000 20,000 In the example above, Plant 1 renders the entire reduction but has three-fourths of the costs reimbursed through emissions trading. The example shows that both plants save thousands of euros compared to a restriction on emissions. The specific distribution of the reduction burden arises from the carbon credit price and the particular reduction costs. Participants with high abatement costs help to finance other participants reduction efforts. Page 6
Germany s energy transition: Unexpected results The subsidisation of renewable energies leads to an increasing export of electricity. Power mix 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 31.1% Rest Renewables Natural gas Hard coal Nuclear energy Lignite 3.6% 6.6% 16.6% 30.1% 25.7% 23.0% 23.8% 1990 2000 2010 2016 Power generation and trade in Germany 40 35 30 25 20 15 10 5 0-5 -10 427 CO 2 emissions in millions of tonnes Balance of trade in TWh 357 356 346 18 36-1 -3 1990 2000 2010 2013 Power generation: CO 2 emissions are still on the rise, in spite of the increasing share of renewable energies. The reason: Renewable energies are, in particular, replacing natural gas and coal-fired power plants; nuclear energy use is also declining. Lignite is filling the resulting base load gap. The subsidisation of renewable energies has resulted in an increased volatility of supply. This frequently results in surplus power that has to be exported outside the country at a cheap rate. 450 400 350 300 250 200 150 100 50 0 Source: Working Group on Energy Balances (Arbeitsgemeinschaft Energiebilanzen), 2017; Umweltbundesamt Page 7
CO 2 in other sectors: Industry The CO 2 emissions of the industrial sector have declined by one-fourth in the last 20 years. Increased efficiency: Emissions in the industrial sector decreased by one-third per euro of added value. The industrial sector is governed by various regulations: Electricity consumption is subject to emissions trading and a high rate of taxation. In the USA, industrial energy costs only about half as much as the EU average. The EU Ecodesign Directive sets maximum tolerances for the energy consumption of consumer products such as lamps and household appliances. Products that do not meet the standard have to be removed from the market. The most noticeable target: light bulbs. 8
Industry in the EU 28: Decreased emissions, greatly improved efficiency CO 2 emissions in the industrial sector are declining: -25% since 1995 in millions of tonnes of CO 2 1.600 1.400 1.200 1.000 800 600 400 200 0 1990 1998 2006 2014 * For information only Source: Odyssee Database, 2014 Through power consumption* Other Steel Chemicals Food Paper Improved efficiency: One-third fewer emissions per euro of added value since 1995 in kg CO 2 /euro 2005 0,6 Regulation: The largest share of CO 2 emissions caused by industrial activities is subject to emissions trading. Increased efficiency: The emissions per unit of gross value have decreased by a good third since 1995. Deindustrialisation: The movement of industrial activities out of many European countries has resulted in a decrease of CO 2 emissions in the EU. 0,5 0,4 0,3 0,2 0,1 0,0-41% -39% 1995 2005 2014 CO 2 Regulation in Europe CO 2 intensity CO 2 intensity incl. electricity Page 9
Industrial energy prices in the second half of 2016: Much less expensive in the USA. In cent pro kwh for companies with a consumption of 20 to 70 gigawatt hours United Kingdom Italy Germany Portugal Belgium Spain Austria Hungary Poland Czech Republic France Netherlands Sweden EU 28 China* India* USA* 0 2 4 6 8 10 12 14 16 18 Product price Non-recoverable tax Recoverable tax Industrial energy prices in Europe are much higher than those of international competitors. The biggest difference is in comparison to the USA, where a kwh costs approximately 45 per cent less than in Europe. The highest prices apply in the UK and Germany. But for totally different reasons. Recoverable taxes such as VAT are viewed as transitory items for the company. * For information only Sources: Eurostat, BDI Page 10
The EU Ecodesign Directive: Ban on energy-guzzling products The energy consumption of household appliances decreased substantially between 1999 and 2014 Decrease in energy consumption up to per cent -80% -60% -40% -20% 0% Distribution in Europe number of appliances per 100 households The EU Ecodesign Directive is leading to a ban on energy-guzzlers Electricity consumption of vacuums in watts 2000 The EU Ecodesign Directive specifies requirements for products that consume a significant amount of energy. Products that consume too much energy can no longer be distributed. The efficiency of this approach is debated. Electricity is already subject to emissions trading, and the contribution of more efficient household appliances is low. The sale of existing warehouse stock is still permissible. This loophole led to a stockpiling of light bulbs. Sources: Bosch, Odyssee Database 2016 Refrigerators Freezers Washers Dish washers Dryers 105 64 92 56 34 1500 1000 500 0 Average for 2013-44% Threshold for 2014 Threshold for 2017 Page 11
CO 2 in other sectors: Households Household CO 2 emissions have decreased by 13 per cent since 1990. In the same reporting period, the number of households and the living space per person increased substantially. The key to future emission reductions is in the area of heating. Heating constitutes 70 per cent of a household s total energy consumption. In spite of the EU Ecodesign Directive, consumption has greatly increased through the use of electric appliances, since households contain an increasing number of them. The installation of new heating units results in very low CO 2 abatement costs, but it rarely pays off for home owners without subsidisation. 12 Political framework Transportation sector electricity Industry Households
Households: Decreasing CO 2 emissions despite higher demands in living spaces CO 2 emissions, in millions of tonnes 1.000 900 800 700 600 500 400 300 200 100 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014-15% -18% Emissions from household electricity consumption Direct CO 2 emissions from households (heating, hot water) Nearly half of household emissions fall under emissions trading. Changes in household energy consumption between 2000 and 2015 in terawatt hours (TWh) Climatic factor More households More electric appliances per household Larger living spaces Energy savings Overall impact 474.5503,7 The trend is leaning towards more households and larger apartments, which increases emissions. Besides emissions trading, households are impacted by electricity taxes and energy consumption regulations for buildings. Other -242.4 18,6-200,84 CO 2 Regulation in Europe 12,6 210,9-923.8-1.203,8 257,1 Source: Odyssee Database, 2017 Page 13 Political framework Transportation sector electricity Industry Households
Energy consumption: The potential lies in the heating market. The heating system is the key to lower emissions in terawatt hours (TWh) Significant progress per square metre of living space 1990 = 100 3.500 3.000 2.500 2.000 1.500 1.000 500 0 1990 2000 2014 Heating Hot water Cooking Electric appliances 110 100 90 80 70 60 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Energy consumption for light per m2 Energy consumption for heating per m2 Heating systems consume about 70 per cent of the final energy in households. Advancements in heating efficiency are almost entirely eaten up by increased living space. Electric appliances only play a minor role; however, due to the increasing number of appliances per household, overall energy consumption has risen by 45 per cent since 1990. Source: Odyssee Database, 2014 Page 14 Political framework Transportation sector electricity Industry Households
Strong potential at a relatively low cost Example Block of flats Built in 1972 Area: 62,030 m 2 Financing: Interest rate 4% over 15 years Abatements costs are determined on a case-by-case basis. The principle of declining marginal returns applies: The more a person saves, the more expensive the next step will be. Problem: Complete renovations rarely pay off with subsidisation. Even energy-saving measures often fail in terms of cost savings. Result: The pace of energy-related renovations is too slow. It would need to be approximately doubled to achieve the EU policy targets by 2020. Source: Hochtief, 2012 Abatement costs per tonne of CO 2 in euros CO 2 reduction -54% 13-61% 37 223-74% Measure Measure Measure 1 1 2 1 2 3 1 Conversion from storage heaters to central heating 2 Central domestic water heating 3 Complete building renovation Page 15 Political framework Transportation sector electricity Industry Households