Real-world low-carbon policy packages for the energy sector Christina Hood, Head, Environment and Climate Change Unit Workshop on Economic Theories and Low-Carbon Transformation Policies, Cambridge 23 June 2017
My language United States Efficiency Inefficient coal plants Renewables Methane reductions Fossil-fuel subsidies GHG emissions reduction by measure in the Bridge Scenario, relative to the INDC Scenario, 2030 Latin America European Union Africa Russia Middle East India 2. Parties shall, where engaging on a voluntary basis in cooperative approaches that involve the use of internationally transferred mitigation outcomes towards nationally determined contributions, promote sustainable development and ensure environmental integrity and transparency, including in governance, and shall apply robust accounting to ensure, inter alia, the avoidance of double counting, consistent with guidance adopted by the Conference of the Parties serving as the meeting of the Parties to this Agreement. China Southeast Asia
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Past IEA work on energy-climate policy interactions
Putting together least-cost policy packages Price of CO 2 /tco 2 e MtCO 2 Carbon price mediates action economy-wide Source: Summing up the Parts, 2011 Costs to society can be reduced through a package of policies including energy efficiency and technology development and deployment, with carbon pricing as the cornerstone.
Effects of an economy-wide carbon price US example Source: US EPA Least-cost emission reductions and economic transformation are different challenges
Carbon prices in IEA scenarios Region 2020 2030 2040 European Union 20 37 50 NPS Chile 6 12 20 Republic of Korea 20 37 50 China 10 23 35 South Africa 7 15 24 United States and Canada 20 100 140 European Union 22 100 140 450 Scenario Japan 20 100 140 Republic of Korea 20 100 140 Australia and New Zealand 20 100 140 China, Russia, Brazil and South Africa 10 75 125 Currently expected carbon prices are well below those needed in a 2C scenario
Putting together least-cost policy packages Price of CO 2 /tco 2 e Infrastructure, Financing Reduced longterm marginal abatement cost Technology support policies to: reduce long-term costs Enable timely scale-up Policies to unlock costeffective energy efficiency potential that is blocked by non-economic barriers Carbon price mediates action economy-wide MtCO 2 Source: Summing up the Parts, 2011 Costs to society can be reduced through a package of policies including energy efficiency and technology development and deployment, with carbon pricing as the cornerstone.
Technology learning and carbon prices Price of CO 2 /tco 2 e Carbon price ambitious target Carbon price modest target (a) Existing Technologies New Technology Modest target Ambitious target MtCO 2 Carbon price ambitious target Carbon price modest target Price of CO 2 /tco 2 e (b) Modest target Ambitious target MtCO 2 Support for new technologies can lower carbon prices needed under ambitious targets
The time dimension Emission Reductions (a) Emission Reductions (b) New Technology New Technology Time Existing Technologies Existing Technologies 2050 Time 2050 An early start may be necessary for new technologies to scale up at the rate needed
Summing it all up: Online visualisation at www.iea.org/etp/tracking2017/
Policy interactions Supplementary policies and emissions trading systems have the potential to undermine one another - Interactions depend on ETS design (eg. output-based allocation) Other policy interactions; - Quantity-based measures (eg. tradeable certificates) - Subsidies or mandates - Fuel taxes and subsidies - Inter-jurisdictional interactions - Interactions with competitive electricity markets
Policy interactions can significantly impact ETS prices
Alignment of a carbon price with existing energy policies Mapping the energy and climate policy landscape Initial Integration alignment Design to when of energy Which agencies? maintain phasing-in policies What and levels alignment a carbon of government? the carbon What structure over time price for coordination? price Energy policy and carbon pricing policy reviews Reference to actual or How often? Insitutional co-ordination shadow between carbon climate price? Balancing certainty and and energy policymakers Avoiding lock-in? flexibility What would justify intervention outside scheduled reviews? There are many questions for policymakers to consider in energy-climate policy alignment
IEA work programme on low carbon policy packages: Workshop 27 June Scoping report for release in October 2017 (leading to a book in 2018) - Literature review on climate policy mixes and interactions - Clarifying the role of carbon pricing in IEA World Energy Model - Identify what supplementary policies are needed with sustained moderate prices, with a focus on avoiding lock-in and understanding major path dependencies - Canada case study: backstop national carbon price; interactions across jurisdictions and sectors 2018: - Work on China policy mix: national ETS and regulated electricity markets. Secondee from NDRC China to work in IEA Environment and Climate Change Unit. -? India: low-carbon policy packages in the context of other policy objectives - Longer publication in late 2018
Thank you christina.hood@iea.org