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Introduction to EU Climate Policy

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More than 20 years ago, the EU vowed to fight the newly identified danger of climate change. Over time, it has developed a policy which is two-fold: on one hand, it looks at ways to reduce greenhouse gas emissions inside EU borders and now has 2050 as horizon; on the other hand, it tends to lead by example and to push other big emitters to gather around similar emission reduction objectives.

Pursuing the idea of giving a price to carbon, the EU has put in place an instrument that would lead it towards decarbonisation: the Emissions Trading Scheme (ETS). Launched in 2005, it has today become a complex system which is being reproduced in other parts of the world. The ultimate vision is one of a global carbon market leading to a significant reduction of greenhouse gas emissions and thus mitigating the impact of climate change.

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Introduction to EU Climate Policy

  1. 1. INTRODUCTION TO EU CLIMATE POLICY EUROPEAN SUSTAINABLE ENERGY & CLIMATE POLICY 1.3 10th April 2015
  2. 2. Session contents: • EU climate policy vade mecum • Short history • EU internal climate policy • EU vision of climate policy at global level • Perspectives for development
  3. 3. EU CLIMATE POLICY VADE MECUM • Foreword: decision-making structure • Objective of EU climate policy • Coverage • Corollary: give impulse at global level
  4. 4. FOREWORD: DECISION-MAKING STRUCTURE Source: Plan Intl • The European Commission has the central role • Role of science: relative… • Lobbies are part of the game  For climate-related issues: green NGOs, power sector, manufacturing industries
  5. 5. OBJECTIVE OF EU CLIMATE POLICY TWO-FOLD OBJECTIVE: 1. ”Preventing dangerous climate change” as a strategic priority for the EU  Cut EU greenhouse (GHG) gas emissions  Encourage other nations/regions to do likewise 2. Adapting to climate change • “Dangerous”: endorsement by the EU of the international position to limit the temperature increase to 2°C compared to pre-industrial times (i.e. 1.2°C above today’s level)  Stop growth in global GHG emissions by 2020 at the latest  Reduce them by half of 1990 levels by 2050  Continue reduction thereafter • GHG emissions: EU policy covers CO2, N2O, PFCs
  6. 6. COVERAGE OF EU CLIMATE POLICY • Energy production • Industrial production • Transport • Buildings • Agriculture • Forestry (land use, land use change and forestry – LULUCF) • Waste • Role of innovation policy • Low carbon technologies – e.g. CCS N.B. Link to environment & energy policies but separate
  7. 7. COROLLARY: GIVE IMPULSE AT GLOBAL LEVEL INTERACTION BETWEEN EU INSTITUTIONS AND INTERNATIONAL BODIES • UNFCCC: the EU is endorsing its works • IEA: influence, e.g. on energy efficiency policy • OECD, e.g. Global Forum on Sustainable Development works on emissions trading, innovation • World Bank, e.g. studies on carbon market, price evolutions; advocacy aiming at “putting a price on carbon” POSITION OF THE EU AT GLOBAL LEVEL • Ardent fighter against climate change: we cannot afford waiting • But also: we can afford the fight… financially speaking • EU’s ambition: be a world leader in the fight against climate change • Has managed speaking with one voice at the latest international conferences on climate
  8. 8. SHORT HISTORY OF EU CLIMATE POLICY • Origins • Chosen direction
  9. 9. ORIGINS OF EU CLIMATE POLICY INSPIRATION FROM INTERNATIONAL LEVEL + PROGRESSIVE EUROPEANISATION OF ENVIRONMENT POLICY • 1986: first official EU document on climate change (parliamentary resolution) • Mid-1980s: EU funding targets research on climate change • 1988: establishment of the IPCC (Intergovernmental Panel on Climate Change) • 1988: Communication “The Greenhouse Effect and the Community” • 1990: discussion on the possibility of a carbon/energy tax at EU level; political agreement to stabilise emissions by 2000 compared to 1990 • 1991: starting point for climate-related initiatives, with first Community strategy to limit CO2 emissions and improve energy efficiency • 1996: the EU proposed 2°C as the policy target • 2000: European Climate Change Programme (ECCP) launched; vehicle for the implementation of Kyoto Protocol at EU level
  10. 10. CHOICE OF INSTRUMENTS • Principle: give a price to carbon • Cap-and-trade or carbon tax? • The EU chose to put in place a cap-and-trade scheme  Micro-economic computer simulation studies on cap-and-trade in the late 1960s in the US  Prototype as part of the US Acid Rain Program in Title IV of the 1990 Clean Air Act  Designed as the means of achieving the "least cost solution" for a given level of abatement: decision-makers set the cap and the market sets the carbon price  The European Emissions Trading Scheme (EU ETS) emerged in 2003
  11. 11. EU INTERNAL CLIMATE POLICY • GHG emission sources • Drivers of EU climate policy
  12. 12. SHARE OF EU GHG EMISSIONS PER SECTOR (2012) Source: EEA, EU greenhouse gas inventory, 2014 submission 33% 27% 20% 10% 7% 3% 0% Energy supply Energy use Transport Agriculture Industrial processes Waste Solvents and other
  13. 13. EU CLIMATE POLICY TODAY • EU climate policy is set until 2020 (adopted legislation goes until then)  3x20% targets: for emissions reduction, for renewable energies, for energy efficiency  For GHG emissions reduction: compared to 1990 level; 30% conditional target • The EU vision until 2050 is also (politically) set Source: Roadmap for a low carbon economy by 2050, European Commission
  14. 14. MAIN INSTRUMENT: EU ETS (1) SHORT PRESENTATION • Objective: reduce GHG emissions (+ incentivise low carbon technologies) • Design: limit on overall emissions from high-emitting industry sectors, reduced each year = cap; within this limit, companies can buy and sell emission allowances as needed = trade (N.B. participation is mandatory)  Allocation of allowances through auctioning (“polluter pays” principle); some allowances given for free to industries exposed to carbon leakage risk  Monitoring, reporting and verification mechanism • Coverage: more than 11,000 power stations and manufacturing plants in the 28 EU Member States + Iceland, Liechtenstein and Norway; aviation operators flying within and between most of these countries  In total, around 45% of total EU emissions are capped by the EU ETS • Trading periods: • 2005-2007: learning by doing • 2008-2012: ETS enlarged to the EEA + aviation; economic downturn • 2013-2020: EU-wide cap on emissions; auctioning is the principle
  15. 15. MAIN INSTRUMENT: EU ETS (2) • According to latest estimates, total EU GHG emissions in 2013 were around 19% below 1990 levels; projections show a reduction of 21% by 2020 • Decoupling between economic activity and GHG emissions achieved ACHIEVEMENTS Source: European Commission, report on progress, October 2014 Source: EEA, DG ECFIN (Ameco database), Eurostat • N.B. Influence of economic/financial crisis: reduction of industrial output (and energy consumption); to be balanced (e.g. Germany’s Energiewende and US shale gas revolution increased EU coal consumption)
  16. 16. MAIN INSTRUMENT: EU ETS (3) REDUCTION DRIVERS - ILLUSTRATION • European Environment Agency: analysis on basis of aggregate decomposition of the change in total CO2 emissions from fossil fuel combustion in the EU for the 2005-2008 and 2008-2012 periods Source: EEA
  17. 17. MAIN INSTRUMENT: EU ETS (4) CHALLENGES • Low flexibility • Surplus of allowances -> low prices • Credibility of the system harmed (quick fixes; long term objectives) Source: European Commission
  18. 18. MAIN INSTRUMENT: EU ETS (5) CARBON PRICE EVOLUTION Source: EEA, Bloomberg
  19. 19. RENEWABLE ENERGIES EU RENEWABLES POLICY • Directive 2009/28/EC • Requires the EU to fulfil at least 20% of its total energy needs with renewables by 2020 (through individual national targets) • All EU countries to ensure that at least 10% of their transport fuels come from renewable sources by 2020 WHERE WE STAND TODAY • Share of energy from renewable sources in the European Union (in % of gross final energy consumption) Source: Eurostat
  20. 20. ENERGY EFFICIENCY EU ENERGY EFFICIENCY POLICY • Directive 2012/27/EU • Set of binding measures to reach EU’s 20% target by 2020 • Over the period 1990-2010, energy efficiency increased by 20% in EU-27 countries at an annual average rate of 1.1%/year, driven by improvements in the industrial sector (1.7%/year) and households (1.6%/year) SPECIAL IMPORTANCE • Energy efficiency is a solution to several problems currently faced by the EU • But latest developments keep it in the shadow: European Council and Juncker investment plan Source: EEA
  21. 21. TRANSPORT IMPORTANT SHARE IN EU GHG EMISSIONS • Responsible of 25% of EU GHG emissions and 20% of EU CO2 emissions • N.B. Biofuels included in RES policy SEVERAL PIECES OF LEGISLATION • White Paper on Transport (2011)  Aims a.o. at cutting carbon emissions in transport by 60% by 2050 • CO2 emissions from cars and vans  Regulation (EC) 443/2009 + Regulation (EC) 510/2011; implementation completed • CO2 emissions from heavy duty vehicles fuel consumption  On-going discussion on basis of strategy adopted in May 2014 • CO2 emissions from maritime transport  Communication (2013) 479; political agreement in December 2014  1st step: report emissions
  22. 22. INNOVATION • Innovation’s role has increased over the years • Necessary to achieve the ambitious EU targets Source: McKinsey, 2009
  23. 23. EU VISION OF CLIMATE POLICY AT GLOBAL LEVEL • EU compliance with Kyoto Protocol • Comparison with other major countries • Analysis of EU’s position • EU vision of the 2015 Paris agreement
  24. 24. EU COMPLIANCE WITH KYOTO PROTOCOL Source: European Commission and EEA
  25. 25. EVOLUTION OF CO2 EMISSIONS - WORLD Source: Enerdata 0 5000 10000 15000 20000 25000 30000 35000 CO2 from fuel combustion CO2 from oil combustion CO2 from coal combustion CO2 from gas combustion CO2 in energy sector CO2 from industries CO2 from agriculture CO2 from transport 1990 2005 2013
  26. 26. EVOLUTION OF CO2 EMISSIONS – MAJOR COUNTRIES CO2 emissions (Mt); source: World Bank .0 1000.0 2000.0 3000.0 4000.0 5000.0 6000.0 7000.0 8000.0 9000.0 2005 2006 2007 2008 2009 2010 EU China US Russia India
  27. 27. EVOLUTION OF CO2 EMISSIONS/SECTOR – MAJOR COUNTRIES China United States European Union 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 1990 2005 2013 0 1000 2000 3000 4000 5000 6000 7000 1990 2005 2013 0 1000 2000 3000 4000 5000 1990 2005 2013
  28. 28. ANALYSIS OF EU’S POSITION WHAT DOES IT IMPLY TO BE A LEADER? • Balance is difficult to find  Energy price/cost increase has to be mitigated – e.g. in practice, coal still plays an important role today  Some protection of EU-based industry is necessary – e.g. carbon leakage regime in the policy design  Investment in innovation is crucial HAS THE EU BEEN A LEADER SO FAR? • Yes by its ambition • No by its influence
  29. 29. THE EU ON THE ROAD TO PARIS EU VISION OF 2015 AGREEMENT • Communication “The Paris Protocol - A blueprint for tackling global climate change” (25th February 2015)  Put the world on track to reduce global emissions by at least 60% below 2010 level by 2050  Criteria:  Common legal framework covering all countries  Clear, fair and ambitious targets for all countries  Regular review and strengthening of targets by country in view of the below 2°C target  Hold all countries accountable SOME MAJOR ISSUES • Importance of financing • EU funding (EU + Member States) to help developing countries fight climate change: 7.3 bn € in 2010-2012; 9.5 bn € in 2013 • Technology transfer from developed to developing countries
  30. 30. PERSPECTIVES FOR DEVELOPMENT • At EU level • At global level
  31. 31. PERSPECTIVES AT EU LEVEL CLIMATE POLICY BY 2030 • Communication of 22nd January 2013; legislative proposals in the making • Politically agreed targets: 40% GHG emissions reduction, 27% share of renewable energies; 27% improvement of energy efficiency (N.B. indicative and non binding target) LOW CARBON ECONOMY BY 2050 • Roadmap for moving to a competitive low-carbon economy in 2050 (2011) • Reduction of GHG emissions to 80-95% below 1990 levels through domestic reductions alone (almost full decarbonisation) THE EU IN THE GLOBAL PICTURE • 2012: EU responsible of around 10% of GHG emissions worldwide • Expectations for 2020: EU to be responsible of around 6%
  32. 32. PERSPECTIVES AT GLOBAL LEVEL (1) TOWARDS A GLOBAL CARBON MARKET? Source: World Bank
  33. 33. PERSPECTIVES AT GLOBAL LEVEL (2) PARIS COP21 • Climate protection is a quite consensual issue BUT do the crisis in “Western” world and the growth-oriented policies in emerging economies undermine this objective? • Milestones on the road to Paris:  Publication of Intended Nationally Determined Contributions (INDCs)  UNFCCC synthesis report by 1st November 2015 and analysis with regard to the below 2°C goal  Negotiations text agreed in Geneva in February 2015; other UN meetings in June, September, October 2015 in Bonn • INDCs published so far: Switzerland, EU, Norway, Mexico, US, Gabon, Russia  E.g. China: peak around 2030 + increase of renewables (20% in 2030)  E.g. US: reduction of 26-28% below 2005 levels by 2025… Kyoto targets?  E.g. Russia: “might” aim at 25-30% reduction by 2030 compared to 1990 (exactly the same target as for 2020…) • What to expect?
  34. 34. CONCLUSIONS
  35. 35. CONCLUSIONS • Ambitious policy at EU level  Emission reduction targets considered in line with the 2°C limit goal  The first and one of the most complex cap-and-trade systems  2020 targets on track to be achieved so far  But balance is difficult to strike  The EU ETS suffers from prototype syndrome  EU’s share of GHG emissions is declining as well as its impact • The EU wants to be leader at global level  But it is still isolated  The strategy used in Copenhagen did not work  Paris conference is not expected to deliver strong commitments  What will be the interpretation of its results by the EU institutions?
  36. 36. THANK YOU! Iva Ganev ganev@euroalliages.be

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