A New Paris Protocol? The EU’s Role in International Climate Negotiations

1. A New Paris Protocol? The EU’s Role in International Climate Negotiations Geoffrey J. Blanford, Ph.D. Ifo Institute for Economic Research, Germany Electric Power Research Institute, USA CLIMATE CHANGE: IMPLICATIONS FOR TECHNOLOGICAL DEVELOPMENTS AND INDUSTRIAL COMPETITIVENESS 4 November 2015, Madrid

2. 2 Outline of Talk • EU vision for a new climate agreement • EU commitments for domestic reductions • EU commitments in a global context

3. 3 EU vision for COP21 in Paris • Legally binding targets • “Fair and ambitious commitments” • Increasing ambition over time • Transparency Global emissions in 2050 reduced 60% from 2010

4. 4 “Paris Protocol” vs. Kyoto Protocol, 18 years later • Include all countries vs. Annex 1 only • Intended Nationally Determined Contributions (INDCs)  bottom-up vs. top-down target setting • Various instruments vs. harmonized emissions trading system • International cooperation not explicitly codified, but could arise through multi-lateral partnerships • More emphasis on “climate finance” to support both mitigation and adaptation measures in developing world

5. 5 EU commitments for domestic reductions By 2030: “at least” … • 40% reduction in greenhouse gas emissions relative to 1990 • 27% share of renewable energy in final consumption • 27% reduction in total energy consumption relative to BAU • Renewable and efficiency targets are viewed as energy security measures to increase fuel diversity and decrease imports • International crediting is viewed with skepticism

6. 6 Member States vs. EU on Climate Goals • Most member states agree with the overall binding target for total greenhouse gas emissions – Germany, Denmark, Portugal are most aggressive • Eastern European countries oppose binding targets for renewable energy and energy efficiency • UK favors more flexible approaches, for example renewable energy target applied across the EU rather than within each member state • Germany and others may adopt overlapping goals

7. 7 0 1000 2000 3000 4000 5000 6000 1990 1995 2000 2005 2010 2015 2020 2025 2030 MilliontCO2-e EU Greenhouse Gas Emissions and Targets Electricity/Heat (CO2) Covered Industry (CO2) Covered non-CO2 Aviation (CO2) Other Industry (CO2) Road/Rail Transportation (CO2) Buildings (CO2) Other non-CO2 45% of total ETS Effort Sharing Decision 40% below 1990 based on EU GHG Inventory, excludes LUC

8. 8 Which sectors will do the heavy-lifting? • Within ETS, abatement effort should be market driven – However, other policies like renewable energy targets could override market allocation, raising costs – Current proposals imply 32% reduction from 2012 by 2030 • Outside ETS, abatement is determined through a combination of national and EU-wide regulations, e.g. energy efficiency – No guarantee of cost-effectiveness, flexibility – Incentives for electrification could be distorted – Current proposals imply 22% reduction from 2012 by 2030

9. 9 Power Sector Under the EU-ETS 0 200 400 600 800 1000 1200 1400 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 MilliontonsCO2 CCGT / GT Hard Coal Brown Coal History Cap 43% 80% 95% Base Year Power Generation Emissions (Modeled) 2005 level

10. 10 EU-REGEN Model of Electricity Investment/Dispatch Scandinavia Great Britain France Iberia Italy EE-SE EE-SW EE-NW EE- NE Alpine N Germany S Benelux EE = Eastern Europe Net Transfer Capacities (ENTSO-E) > 4 GW 2 - 4 GW 1 - 2 GW < 1 GW Planned  Jointly developed by EPRI and Ifo Institute, Munich  Intertemporal optimization / equilibrium through 2050  Detailed representation of renewable profiles

11. 11 EU Generation Mix with 80% EU-ETS Target 0 1000 2000 3000 4000 5000 1990 2000 2010 2020 2030 2040 2050 TWh CSP PV Wind Gas-CCS Gas/Oil Coal-CCS Hard Coal Brown Coal Nuclear Bio-CCS Bio+ CHP-Gas/Oil Hydro Least-cost emissions reductions: no additional national targets or subsidies 45% renewables in 2030

12. 12 German renewable share target of 80% by 2050 Hydro CHP-Gas/Oil Bio+ Bio-CCS Nuclear Brown Coal Hard Coal Coal-CCS Gas/Oil Gas-CCS Wind PV CSP Energy for Load 0 200 400 600 800 2015 2020 2025 2030 2035 2040 2045 2050 EU-ETS target only 0 200 400 600 800 2015 2020 2025 2030 2035 2040 2045 2050 EU-ETS target plus DE renewable target Elec Price TWhinGermany CO2 Price

13. 13 • Europe’s mitigation targets are relatively stringent, but its share of global emissions is small (and shrinking) • Many others have made significant pledges for 2030 timeframe, in particular the US, China, and other G20 countries • India and other developing countries have more ambiguous targets, often conditional on international finance, but participation has been broad • Countries without pledges amount to roughly 15% of current emissions EU commitments in a global context

14. 14 Summary of INDC pledges 28% reduction from 2005 by 2025 USA 40% reduction from 1990 by 2030 EU Emissions peak by 2030 China 35% reduction in carbon intensity of GDP from 2005 by 2030 India AUS 28% reduction from 2005 by 2030 BRA 43% reduction from 2005 by 2030 CAN 30% reduction from 2005 by 2030 IDN 30% reduction from BAU by 2030 JPN 25% reduction from 2010 by 2030 KOR 37% reduction from BAU by 2030 MEX 40% reduction from BAU by 2030 NZL 30% reduction from 2005 by 2030 RUS 30% reduction from 1990 by 2030 ZAF Return to 2000 levels by 2030 TUR 21% reduction from BAU by 2030 Other G20 Most pledges are conditional on int’l finance Large former Soviet republics: UKR 60% reduction from 1990 by 2030 KAZ 25% reduction from 1990 by 2030 Large African countries: COD 17% reduction from BAU by 2030 CAF 5% reduction from BAU by 2030 ZMB 47% reduction from BAU by 2030 ETH 64% reduction from BAU by 2030 TZA 20% reduction from BAU by 2030 Large Asian countries: THA 25% reduction from BAU by 2030 VNM 25% reduction from BAU by 2030 BGD 20% reduction from BAU by 2030 Largest emitters with no pledges: BOL, IRN, SAU, SDN, PAK, EGY, NGA, MYS, VEN Other Developing

15. 15 EU = 12% of Global Emissions 12% 2010 emissions EU30

16. 16 EU + USA + China = 50% of global emissions USA China 50% 2010 emissions EU30

17. 18 All Major Pledges = 70% of global emissions USA China Other G20 2010 emissions 70% EU30

18. 19 0 10 20 30 40 50 60 70 80 90 1990 2000 2010 2020 2030 2040 2050 BillionTonsCO2-e World Emissions World BAU Global Emissions with INDCs and extensions to 2050 USA EU Other G20 China (less abatement) India and other developing (no targets) Reductions by Region MERGE model results Sensitivity range around contribution from China, India, others

19. 20 0 10 20 30 40 50 60 70 80 90 1990 2000 2010 2020 2030 2040 2050 BillionTonsCO2-e World Emissions World BAU USA EU Other G20 China (more abatement) India and other developing (peak by 2040) Reductions by Region Global Emissions with INDCs and extensions to 2050 EU Goal for Global Emissions MERGE model results Sensitivity range around contribution from China, India, others

20. 21 Summary • Europe envisions aggressive climate action globally • It has adopted overlapping domestic GHG targets – National renewable goals could raise costs in electric sector – Abatement effort across sectors may not be cost-effective – Opportunities for additional market flexibility • Pledges entering COP21 could result in a global peak of emissions by 2030, subject to uncertainty • Mitigation required during 2030-2050 timeframe to meet Europe’s stated global goal will be very challenging

A New Paris Protocol? The EU’s Role in International Climate Negotiations

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