Climate Change - Emissions Trading and Policy Frameworks
Upcoming SlideShare
Loading in...5
×
 

Climate Change - Emissions Trading and Policy Frameworks

on

  • 1,455 views

This slide-deck explains the role that emissions trading can play in a policy framework aimed at addressing climate change.

This slide-deck explains the role that emissions trading can play in a policy framework aimed at addressing climate change.

Statistics

Views

Total Views
1,455
Slideshare-icon Views on SlideShare
1,452
Embed Views
3

Actions

Likes
0
Downloads
49
Comments
0

1 Embed 3

http://www.linkedin.com 3

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Climate Change - Emissions Trading and Policy Frameworks Climate Change - Emissions Trading and Policy Frameworks Presentation Transcript

  • Emissions Trading
    • Emissions Trading in an energy &
    • climate change policy framework
    • Directions to 2050
    • Where to use emissions trading
    • Key design elements
    • Global considerations
    David Hone Group Climate Change Adviser Shell International B.V.
  • A new direction is needed The way we produce and use energy today is not sustainable
  • Pathways to 2050 for Australia 0 50 100 150 200 250 300 350 400 $0 $20,000 $40,000 $60,000 $80,000 GDP per capita, US$ 2000 (ppp) Energy per capita, GJ A significant shift required in both “energy per GDP” and “CO 2 per unit of energy used” 1971 Improving energy efficiency 2025 2050 1990 2004 CO 2 per energy unit used, t / TJ Slope = Energy per GDP
  • Australia 2004 Solar (5 GW) Wind (5 GW) Coal / CCS (5 GW) Hydro (5 GW) Biomass (5 GW) Coal (5 GW) Gas (5 GW) Direct use (0.2 EJ) Vehicle (2 million) High efficiency vehicle Alternative fuel vehicle ~ 2GW capacity 20 million people 3.25 EJ Final Energy GDP $US 30 K per capita* 350 MT energy CO 2 * USD 2000 (ppp)
  • Australia 2025 Solar (5 GW) Wind (5 GW) Coal / CCS (5 GW) Hydro (5 GW) Biomass (5 GW) Coal (5 GW) Gas (5 GW) Direct use (0.2 EJ) Vehicle (2 million) High efficiency vehicle Alternative fuel vehicle ~ 2GW capacity 25 million people 3.45 EJ Final Energy GDP $US 45 K per capita* 300 MT energy CO 2
  • Australia 2050 Solar (5 GW) Wind (5 GW) Coal / CCS (5 GW) Hydro (5 GW) Biomass (5 GW) Coal (5 GW) Gas (5 GW) Direct use (0.2 EJ) Vehicle (2 million) High efficiency vehicle Alternative fuel vehicle ~ 2GW capacity 28 million people 3.27 EJ Final Energy GDP $US 74 K per capita* 168 MT energy CO 2
  • Pathways to 2050 for the USA (illustrative) 0 50 100 150 200 250 300 350 400 $0 $20,000 $40,000 $60,000 $80,000 $100,000 GDP per capita, US$ 2000 (ppp) Energy per capita, GJ A significant shift required in both “energy per GDP” and “CO 2 per unit of energy used” 2025 2050 1971 CO 2 per energy unit used, t / TJ 1990 2004 Slope = Energy per GDP Improving energy efficiency
  • USA 2004 Solar (50 GW) Wind (50 GW) Coal / CCS (50 GW) Hydro (50 GW) Biomass (50 GW) Nuclear (50 GW) Coal (50 GW) Gas (50 GW) Direct use (5 EJ) Vehicle (20 million) High efficiency vehicle Alternative fuel vehicle 294 million people 66.5 EJ Final Energy GDP $US 36 K per capita* 5.8 billion tonnes energy CO 2 * USD 2000 (ppp)
  • USA 2025 (illustrative) Solar (50 GW) Wind (50 GW) Coal / CCS (50 GW) Hydro (50 GW) Biomass (50 GW) Nuclear (50 GW) Coal (50 GW) Gas (50 GW) Direct use (5 EJ) Vehicle (20 million) High efficiency vehicle Alternative fuel vehicle 335 million people 65.5 EJ Final Energy GDP $US 57 K per capita* 4.9 billion tonnes energy CO 2 * USD 2000 (ppp)
  • USA 2050 (illustrative) Solar (50 GW) Wind (50 GW) Coal / CCS (50 GW) Hydro (50 GW) Biomass (50 GW) Nuclear (50 GW) Coal (50 GW) Gas (50 GW) Direct use (5 EJ) Vehicle (20 million) High efficiency vehicle Alternative fuel vehicle 400 million people 60.1 EJ Final Energy GDP $US 88 K per capita* 2.4 billion tonnes energy CO 2 * USD 2000 (ppp)
  • Key Sectors in the “energy and CO 2 economy” Oil Biomass Gas Coal Nuclear Renewables Primary Energy Liquids Direct combustion Industry and Manufacturing Mobility Final Energy Agriculture and Land Use Energy Energy Energy Buildings Power Generation
  • A structured policy approach is needed A simple, high profile and credible target for the renewables’ share of power generation, supported by a range of incentives to encourage investment. Measures to incentivise new fuels based on their “well-to-wheels” CO 2 reduction potential, implementation of vehicle efficiency standards and vehicle/road-use programs targeted at drivers A series of robust energy standards for buildings, appliances etc. with incentives for retrofit of existing infrastructure. "Cap and trade" emissions trading systems for power generators, most industrial facilities and large fleet transport such as aviation.
  • Emissions Trading or “Cap-and-trade” Initial emissions 100 Mt p.a. Year 5 at 95 Year 15 at 80 Year 10 at 88 Offsets Allowance trading between facilities $ CO 2 Government issues 88 million allowances into the economy CCS Project Efficiency Project
  • Key principles of an Emissions Trading System
    • The aim of an ETS is to direct investment capital towards lower CO 2 emission projects, via a market price for CO 2 emissions.
    • Therefore, the trading system should not remove that capital from the industries or firms covered by the system.
    • Design Features to be Discussed
    • The point of regulation
    • Allocation of allowances
    • Recognition of technologies
    • Constraints and limitations
    • External projects mechanisms (or offsets)
  • The point of regulation
    • The preferred design for cap-and-trade is to have the point of regulation the same as the point of emissions.
    • This means the emitter:
      • Is directly responsible for emissions;
      • Is required to hold one allowance for each tonne of CO 2 emitted;
      • Clearly sees the CO 2 price.
      • Can implement and directly benefit from emission reduction projects.
  • The CO 2 price and allocation Points of regulation Resource Power Generation Factories Heavy industry Light industry Consumer Electricity Time CO 2 price impact
    • Over time, the CO 2 price will impact the entire value chain.
    • The rate at which this happens varies considerably.
    • It can be very fast for electricity.
    • It will be very slow for some products where the price is established outside the capped market.
  • Global competition issues $ US product price € EU product price (+ € C) EU installation – carbon constrained ME Installation – no carbon constraint The facility without a CO 2 constraint has a competitive advantage into both domestic and export markets, leading to either or both CO 2 leakage and profit leakage.
  • The CO 2 price and allocation Points of regulation Resource Power Generation Factories Heavy industry Light industry Consumer Electricity Time CO 2 price impact Free allocation early on as little / no price pass through Progressive shift to auctioning as the CO 2 price impacts the economy Full auctioning as the CO 2 price impacts the entire value chain Auction funds recycled to consumers through the tax system
  • A profit neutral approach CO 2 allowances a $ = b $ a $ % $ CO 2 + Product b $ % auctioning Some pass-through $ Recycled, e.g. through the tax system
  • How to allocate - Approaches
    • A measured approach over time:
    • Allowances granted free (grandfathering) at the start based on historical emissions. This minimises disruption and allows a smooth transition for the capped sector.
    • Longer term, allocation should not withdraw capital from the firms and industries covered by the scheme, nor should it grant windfall profits.
    • Allocation design and the use of auctioning should consider the ability of the sector to pass through costs to the consumer.
  • Abatement technologies
    • Certain abatement technologies will be key to the long term viability of the emissions trading system. Carbon Dioxide Capture and Storage is one of these.
    • Such technologies must be recognised early by the legal framework of the trading system.
  • Artificial limits within the trading system
    • Although created entirely by policy makers and legislation, an emissions trading market is still a market . As such, it should not be subject to;
      • Price caps;
      • Price floors and / or reserve prices;
      • Arbitrary price management by oversight bodies or parliament;
      • Imposition of trading limits (e.g. offsets);
      • Unexpected rule changes;
  • External Projects (or offsets)
    • Emission reduction projects executed outside the capped sector can offer important benefits;
      • An inflow of compliance units (credits) can offer further flexibility in meeting the cap.
      • Access to external projects can act as an efficient cost control mechanism within the capped sector.
      • Projects can help developing countries begin managing emissions.
      • The flow of project credits can help build a global CO 2 market.
    • All national emission trading systems should recognise the same global project mechanisms.
  • Going global ! 2000 2005 2010 2015 2020 2025 Pre-Kyoto Kyoto Post 2012 Linkage framework Linkages develop between all systems and more systems appear Danish-ETS UK-ETS Australian ETS US National “cap-and-trade” Norwegian ETS EU-ETS CDM CDM evolves to includes sectors Expanding EU-ETS Japan technology standards New technology mechanisms evolve (e.g. for CCS) China adopts CCS standard New Zealand ETS
  •