Geoffrey J. Blanford, Ph.D. Ifo Institute for Economic Research, Germany. Electric Power Research Institute, USA. Autumn Seminar 2015. Climate change: Implications for technological developments and industrial competitiveness. Jornada organizada por FUNSEAM y la Cátedra de Energía de Orkestra-Instituto Vasco de Competitividad con la colaboración de Fundación Repsol. 4 de Noviembre de 2015- CAMPUS REPSOL. Madrid, España

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