Présentation du projet "EU ETS structural reform" par le chef de projet Frédéric Dinguirard Ateliers du Shift du 11 décembre 2014

1. www.theshiftproject.org
EU ETS Structural Reform
Dec. 2014 – Frederic DINGUIRARD

2. Frédéric Dinguirard,
Project Manager
frederic.dinguirard@theshiftproject.org
EU ETS Structural Reform

3. EU long term ambition
to tackle climate change
2050 Roadmap
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
-80%
(baseyear 1990)

4. EU Climate and Energy framework:
Energy Efficiency – Renewables - ETS
Overlapping and complementary
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform

5. A price on carbon is needed to trigger low-
carbon investments and innovation
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
Low-carbon
Investments
&
Innovation

6. Cap
Supply Demand
Trade
EU ETS: a Cap and Trade to
put a price on carbon
2014 Dec. 11thwww.theshiftproject.org
Principle:
Polluters pay
(with exceptions, compensations,
subsidies, state aids, thresholds, free
allocations…)
EU ETS Structural Reform
CO2

7. But currently…
…we are at a standstill
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform

8. What is the appropriate price for carbon?
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
30 €
100 €
Never
Again
ASAP 2030
6 €
time
How to obtain that price?

9. Reduce the supply of allowances
will lead to what price?
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
30 €
100 €
2014 ASAP 2030
6 €
Supply
GHG emissions
=
Demand
RenewablesEconomic
Downturn EE&
Others….
Allocation
Price
A too generous
supply, however:
The price is not
coupled to
quantities in
circulation.

10. Current reform:
a reserve to reduce the supply
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
30 €
100 €
2014 ASAP 2030
6 €
Supply
RenewablesEconomic
Downturn Others….
Reduced
Allocation
The Market Stability
Reserve
GHG emissions
=
Demand
Price

11. We could have them all: a rebalanced market, a
fat reserve but still low carbon price
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
30 €
100 €
2014 ASAP 2030
6 €
Supply
RenewablesEconomic
Downturn Others….
Scarced
Allocation
GHG emissions
=
Demand
A fat reserve and reduced supply.
Rebalanced supply and demand.
Price Low Prices

12. Our proposal: an auction reserve price
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
30 € 100 €
Never
Again
ASAP 2030
6 €
Still market Price but… at a certain price
Price Support
MSR-Bag
(cap neutral)
Overlap in
peace !

13. Discretionary price management
mechanism? NO!
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
• Predictable Price Trajectory
• Stable
• Rule-Based
• Some fine-tuning by the European
Commission from time to time, as usual
30 €
100 €
2021 2030

14. How not to hurt competitiveness?
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
Currently, free allocation =
reduced carbon costs
but few to no emission reductions
100% EU-based domestic projects (no
international credit) =
reduced carbon costs
and massive emission reductions
 Both: Competitiveness and cc mitigation

15. Closer to a Tax rather than
a quantity-based mechanism? No!
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
• Similar price management mechanisms
are in place in other “quantity-based
mechanisms”:
o California, Quebec, some Chinese Pilot ETS…
• The market would still determine the price,
above a certain price

16. Impact on Member States budget
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
Increase in auction revenues

17. Impact on relatively low GDP Member
States
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
Increase of the increase in auction
revenues, thanks to EU 2030 climate
framework redistribution mechanism and
associated climate finance
+

18. Impact on relatively low GDP Member
States with CO2 intensive energy mix
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
+ +
• EU 2030 climate framework redistribution mechanism
+ associated climate finance
= Increase of the increase in auction revenues
• Very high carbon price could trigger low-carbon
innovative technologies (CCS…)

19. Conclusions: move the ETS from
« Quantity Only » mechanism to a « Price Also »
2014 Dec. 11thwww.theshiftproject.orgEU ETS Structural Reform
An appropriate auction reserve price combined with
domestic projects could :
 Trigger low carbon investments
 Coordinate overlapping climate policies in an
efficient manner
Ensuring fairness among all Member States
In a simple, predictable, and stable way

20. Thank you for your attention!
www.theshiftproject.org
#AteliersduShift