The EU‘s post 2012 Climate Change strategy Towards a comprehensive climate change agreement in Copenhagen Thomas Bernheim, DG Environment European Commission Mo-Magazine, 22 April 2009 Zuiderpershuis Antwerpen

Mo-Magazine, 22 April 2009 Zuiderpershuis Antwerpen

The global scientific consensus IPCC Fourth Assessment Report (2007): Global temperature is rising: +0.76°C (1.37°F) since 1850 (+1°C in Europe) and the rate is accelerating >90% certainty man-made GHG caused most of this rise Rate of sea level rise has doubled in recent decades If we take no action average global warming will increase further by between 1.1° and 6.4°C this century best estimate +1.8-4.0°C (3.2°-7.2°F) regional rises could be much greater (e.g. Arctic +6°- 8°C) Good news! Deep cuts in global emissions can be achieved at relatively low cost using existing technologies and those in pipeline

IPCC Fourth Assessment Report (2007):

Global temperature is rising: +0.76°C (1.37°F) since 1850 (+1°C in Europe) and the rate is accelerating

>90% certainty man-made GHG caused most of this rise

Rate of sea level rise has doubled in recent decades

If we take no action average global warming will increase further by between 1.1° and 6.4°C this century

best estimate +1.8-4.0°C (3.2°-7.2°F)

regional rises could be much greater (e.g. Arctic +6°- 8°C)

Good news! Deep cuts in global emissions can be achieved at relatively low cost using existing technologies and those in pipeline

A global pathway to stay below 2°C Global Peak by 2020 Global -50% by 2050 rel. 1990 Developed Countries to cut by 80-95% by 2050 rel. 1990 Recent Science ?

Why 2 ° C? Getting into the danger zone

Delay has serious impacts To achieve same long-term emission level requires steeper future reductions: 4% vs. 2.6%/yr in 2030-2050 Adds to cumulative emissions  increased risk of surpassing critical thresholds Leads to further carbon lock-in  more costly transition to low-carbon future  Call on all developed countries to commit to ambitious cuts by 2020 to avoid unrealistic pathways To achieve the same stabilisation goal : reduction rate doubles for every 10 years of delay

To achieve same long-term emission level requires steeper future reductions: 4% vs. 2.6%/yr in 2030-2050

Adds to cumulative emissions  increased risk of surpassing critical thresholds

Leads to further carbon lock-in  more costly transition to low-carbon future

To achieve the same stabilisation goal : reduction rate doubles for every 10 years of delay

DC need to participate over time ... If Annex I alone reduces emissions to zero ... Global emission path compatible with 2°C

EU vision for Copenhagen: targets and actions Targets and actions : Leadership by all developed countries: -30% emissions by 2020 with comparable national efforts based on set of agreed criteria Financial & technical support for mitigation and adaptation in DC For developing countries: Emissions growth 15-30% below business as usual by 2020 Draw up low-carbon development strategies (LCDS) covering key sectors as vehicle to identify needs for support from Annex I Say what can be done autonomously What actions require further support What actions can be undertaken by he global carbon market

Targets and actions :

Leadership by all developed countries:

-30% emissions by 2020 with comparable national efforts based on set of agreed criteria

Financial & technical support for mitigation and adaptation in DC

For developing countries:

Emissions growth 15-30% below business as usual by 2020

Draw up low-carbon development strategies (LCDS) covering key sectors as vehicle to identify needs for support from Annex I

Say what can be done autonomously

What actions require further support

What actions can be undertaken by he global carbon market

EU’s vision for Copenhagen: reductions are affordable but carbon markets key to cost-efficiency GDP effect for group in developed countries around 1% decrease in 2020 Baseline GDP grows by more than 40% between 2005 and 2020 (incl. economic crisis) Source: European Commission 39 bn € 81 bn € 166 bn € Total incremental costs in developed countries in 2020 (2005 prices) 22 € 43 € 72 € Carbon price per tonne CO 2 in developed countries ETS, 2020 Perfect global carbon market Gradual global carbon market No global carbon market 30% Annex I reduction below 1990 by 2020

GDP effect for group in developed countries around 1% decrease in 2020

Baseline GDP grows by more than 40% between 2005 and 2020 (incl. economic crisis)

EU’s vision for Copenhagen: Towards comparable QELROs 30% below 1990 levels by 2020 by Annex I on average and including domestic and international efforts Country B Comparability of QELROs based on balanced set of criteria, such as: Capability to pay (domestic and abroad) ‏ Mitigation potential Early action to reduce emissions Population trends and total GHG emissions Long-term: towards a gradual convergence of per capita emissions among developed and developing countries 2020 Average Country A

30% below 1990 levels by 2020 by Annex I on average and including domestic and international efforts

Comparability of QELROs based on balanced set of criteria, such as:

Capability to pay (domestic and abroad) ‏

Mitigation potential

Early action to reduce emissions

Population trends and total GHG emissions

Long-term: towards a gradual convergence of per capita emissions among developed and developing countries

Leading through example: The climate and energy package March 2007 EU summit Commitments Unconditional commitment to cut GHG emissions by at least 20% in any case and 20% of energy from renewable sources (8.5% today) Conditional commitment to reduce GHG emissions to 30% below 1990 levels if other developed countries make comparable cuts Further objectives 20% cut in projected energy use through energy efficiency improvements  10% renewables share in transport fuels (1% today) Deforestation: halt within two decades and then reverse Good for the climate, energy security, innovation, jobs and competitiveness!

March 2007 EU summit

Commitments

Unconditional commitment to cut GHG emissions by at least 20% in any case and 20% of energy from renewable sources (8.5% today)

Conditional commitment to reduce GHG emissions to 30% below 1990 levels if other developed countries make comparable cuts

Further objectives

20% cut in projected energy use through energy efficiency improvements

 10% renewables share in transport fuels (1% today)

Deforestation: halt within two decades and then reverse

Good for the climate, energy security, innovation, jobs and competitiveness!

The climate and energy package at a glance large industrial installations & aviation Carbon capture and storage Directive CO2&cars Renewable Energy Directive Fuel Quality Directive -20% / 30% technology specific & product policies cross-sectoral targets & instruments “ small emitters” EU ETS Effort Sharing Decision

Climate and energy package: Approach Cost-effectiveness and fair distribution Fairness : differentiate efforts for Member States according to GDP/capita national targets in sectors outside EU ETS national renewables targets redistribution of auctioning rights Cost-effectiveness: introduce flexibility EU ETS Guarantee of Origin trading for renewable energy

Cost-effectiveness and fair distribution

Fairness : differentiate efforts for Member States according to GDP/capita

national targets in sectors outside EU ETS

national renewables targets

redistribution of auctioning rights

Cost-effectiveness: introduce flexibility

EU ETS

Guarantee of Origin trading for renewable energy

Overall architecture GHG Target by 2020: -20% compared to 1990 -14% compared to 2005 EU ETS -21% compared to 2005 Non ETS sectors -10% compared to 2005 27 Member State targets, stretching from -20% to +20%

EU Emissions Trading System (EU ETS) Some basics Cap-and-trade system – reduces emissions at least cost Started in 2005 World’s largest ‘cap-and-trade system’ Large industrial emitters and power plants Reduce or buy allowances Cap gives environmental outcome Trading periods: 2005-7, 2008-12, 2013-20, … Annual compliance cycle with monitoring, reporting, verification, surrender Penalties for non-compliance Major source of demand for Clean Development Mechanism (CDM), thus channelling investment to DC

Cap-and-trade system – reduces emissions at least cost

Started in 2005

World’s largest ‘cap-and-trade system’

Large industrial emitters and power plants

Reduce or buy allowances

Cap gives environmental outcome

Trading periods: 2005-7, 2008-12, 2013-20, …

Annual compliance cycle with monitoring, reporting, verification, surrender

Penalties for non-compliance

Major source of demand for Clean Development Mechanism (CDM), thus channelling investment to DC

Strengthening EU ETS from 2013 (third phase) Limited expansion to further sectors and gases Aviation included as from 2012 Single EU-wide cap on emissions replaces national caps Cap cut in linear fashion annually (-1.74%) until at least 2025. This gives investors predictability By 2020 cap will be 21% below 2005 Much greater harmonisation of rules creates ‘level playing field’ across EU Auctioning becomes default allocation method for allowances: At least 50% auctioning from 2013, 100% by 2027 Offsets (JI/CDM) : Supplementarity maintained: 50% of reduction effort Quality: comitology to provide a harmonised approach

Limited expansion to further sectors and gases

Aviation included as from 2012

Single EU-wide cap on emissions replaces national caps

Cap cut in linear fashion annually (-1.74%) until at least 2025. This gives investors predictability

By 2020 cap will be 21% below 2005

Much greater harmonisation of rules creates ‘level playing field’ across EU

Auctioning becomes default allocation method for allowances:

At least 50% auctioning from 2013, 100% by 2027

Offsets (JI/CDM) :

Supplementarity maintained: 50% of reduction effort

Quality: comitology to provide a harmonised approach

Effort sharing outside EU ETS: Differentiated national targets for 2020 Principle of solidarity and growth National emission reduction targets determined as a function of GDP/capita MS with high GDP/capita to reduce emissions (in relation to 2005 emissions) MS with low GDP/capita may increase emissions But: No reduction of more than 20% No increase of more than 20%

Principle of solidarity and growth

National emission reduction targets determined as a function of GDP/capita

MS with high GDP/capita to reduce emissions (in relation to 2005 emissions)

MS with low GDP/capita may increase emissions

But:

No reduction of more than 20%

No increase of more than 20%

Effort sharing outside EU ETS: National targets for 2020

Effort sharing outside EU ETS: Linear reduction pathway… with flexibility for compliance Binding linear reduction pathway for each Member State Early overachievements in emission reductions can be banked Up to 5% can be borrowed from the year ahead Transfers of emission rights between MS ex post ex ante : limited to 5% CDM credits 3% of 2005 emissions each year (4% for 12 MS) Credits not used can be banked

Binding linear reduction pathway for each Member State

Early overachievements in emission reductions can be banked

Up to 5% can be borrowed from the year ahead

Transfers of emission rights between MS

ex post

ex ante : limited to 5%

CDM credits

3% of 2005 emissions each year (4% for 12 MS)

Credits not used can be banked

What happens after Copenhagen agreement? Three months following Community signature, Commission will submit a report If appropriate, proposal will be made covering among others Tightening of the targets Increased access to offset credits, but: restricted to ratifying countries Review of free allocation rules under EU ETS …

Three months following Community signature, Commission will submit a report

If appropriate, proposal will be made covering among others

Tightening of the targets

Increased access to offset credits, but: restricted to ratifying countries

Review of free allocation rules under EU ETS

…

Final remarks Agreed EU legislation Will deliver on the objectives set by the European Council (-20/-30%) Facilitates transition to the low-carbon economy of the future Confirms EU leadership and dedication to fighting climate change Frame ambitious domestic and international climate policy as : Good economic policy , since it avoids catastrophic damages (Stern) Good energy policy , since savings from fuel cost will pay back large part of necessary investment, increased energy security (IEA) Good development policy since 2 degrees and adaptation are necessary to provide for poor developing countries to develop Good security policy , since avoiding dangerous CC helps to avoid triggering of regional security implications

Agreed EU legislation

Will deliver on the objectives set by the European Council (-20/-30%)

Facilitates transition to the low-carbon economy of the future

Confirms EU leadership and dedication to fighting climate change

Frame ambitious domestic and international climate policy as :

Good economic policy , since it avoids catastrophic damages (Stern)

Good energy policy , since savings from fuel cost will pay back large part of necessary investment, increased energy security (IEA)

Good development policy since 2 degrees and adaptation are necessary to provide for poor developing countries to develop

Good security policy , since avoiding dangerous CC helps to avoid triggering of regional security implications

Next steps Domestic : Implement climate & energy package through comitology (e.g. auction design, setting benchmarks, determining sectors at risk of carbon leakage, etc…) Internationally: Aim for comparability of targets of developed countries Aim for nationally appropriate mitigation action by DC Agree on funding for DC , including technology and adaptation Global Carbon Markets : develop linking + CDM reform Submit to the UNFCCC secretariat additional texts as input to negotiating texts to be prepared by the Chairs Outreach to key developed and developing countries to discuss and develop those proposals ahead of next Bonn meeting

Domestic :

Implement climate & energy package through comitology (e.g. auction design, setting benchmarks, determining sectors at risk of carbon leakage, etc…)

Internationally:

Aim for comparability of targets of developed countries

Aim for nationally appropriate mitigation action by DC

Agree on funding for DC , including technology and adaptation

Global Carbon Markets : develop linking + CDM reform

Submit to the UNFCCC secretariat additional texts as input to negotiating texts to be prepared by the Chairs

Outreach to key developed and developing countries to discuss and develop those proposals ahead of next Bonn meeting

More… … on the climate and energy package: http://ec.europa.eu/environment/climat/climate_action.htm … on the international negotiations: http://ec.europa.eu/environment/climat/future_action.htm

… on the climate and energy package:

http://ec.europa.eu/environment/climat/climate_action.htm

… on the international negotiations:

http://ec.europa.eu/environment/climat/future_action.htm