To improve understanding of the EU ETS and share experiences to help IMO discussions on MBM

Transcription

1 Experience with the EU ETS and the carbon market IMO GHG WG3 Side event 29th March :45 Committee Room 10 Damien Meadows Head of Unit B3 (International Carbon Market, Aviation and Maritime) DG Climate Action, European Commission 1

2 Introduction Purpose: To improve understanding of the EU ETS and share experiences to help IMO discussions on MBM Presentation on: EU climate policy EU experience of EU-ETS and broader carbon market ETS vs other measures Presentation is not: Indicating a EC or EU preference for an ETS for maritime transport (not covered) There is no EC or EU decision on preferred IMO MBM

3 EC Information submissions MEPC 56 Inf. 13 : Key design elements for designing a cap and trade greenhouse gas Emissions Trading Scheme (ETS) GHG WG 3/INF.3 : Information on experience with the European Union Emissions Trading Scheme (EU-ETS) and the carbon market

4 To limit global climate change is a major challenge Climate change impacts threaten future growth More frequent and severe extreme weather - floods, storms, heatwaves, droughts impacts many sectors (agriculture, tourism, transport, health..) The global objective is to keep average global temperature increase below 2 C (confirmed in the Copenhagen Accord and again at the Cancun COP) To attain this goal, science says global emissions to be cut by -50% by 2050 compared to 1990 The global emissions pathway in the next 40 years will determine likely warming by the end of the century 4

5 Significant emission reductions need to be made globally EU objective: 80 to 95% reductions largely through domestic measures: around -80% internal reductions in 2050 compared to % 80% 60% EU Developed Countries: similar effort 40% 20% Developing Countries: -5% compared to % Baseline Global action Equivalent to - 80% compared to business as usual 100% 80% 60% Developed Countries 500% 400% 300% Developing Countries 40% 200% 20% 100% 0% Baseline Global action 0% Baseline Global action All sectors need to contribute (or other countries/ sectors do more) 5

6 A cost-efficient pathway for the EU to 2050 An EU 80% domestic reduction in 2050 is feasible with currently available technologies 100% 80% Power Sector Current policy 100% 80% with behavioural change coming through appropriate pricing If all economic sectors contribute to a varying degree & pace. Efficient pathway: -25% in % in % in 2040 Residential & Tertiary 60% Industry 40% Transport 20% Non CO 2 Agriculture Non CO 2 Other Sectors 0% % 40% 20% 0%

7 How to square the circle? The EU s objective is to reduce greenhouse gas emissions by 80-95% by 2050 below 1990 levels, in the context of necessary reductions by other countries EU existing legislation is in place to achieve a 20% cut in GHG emissions by 2020 below 1990, including the emissions from aviation that have doubled All other emissions covered by a binding Effort Sharing Decision setting differentiated caps State-by-State (except land use and maritime ) 7

8 Europe uses a variety of policies to cut greenhouse gas emissions Command and control (e.g. phase out of HFC-134a in automobile air conditioning, product standards, building regulations) Voluntary agreements (e.g. with car manufacturers) Product labelling, information campaigns, targets Action by individuals and local authorities congestion charging, planning policy guidance Market-based mechanisms: ª Taxes - eg differential road taxes ª Charges eg air passenger duties in Germany and UK ª Subsidies eg on building insulation, on electric vehicles ª Cap and Trade Systems

9 The EU Emissions Trading System (EU ETS Directive 2003/87/EC) Mandatory system in place since January 2005 Binding cap on the absolute emissions from around 11,500 of the most energy-intensive installations across EU (30 countries 27 MSs+ 3 EEA) Covering around half of EU s total CO 2 emissions Cornerstone of Europe s strategy to meet its Kyoto commitments Major structural element for the post-2012 EU climate strategy

10 EU ETS design fundamentals Simple downstream cap-and-trade system for major emitting industries Comprehensive policy including other measures Initially, largely free allocation based on historical emissions moving to benchmarks and auctioning Monitoring rules for direct emissions, independent verification Robust penalties to ensure compliance ( shortfall) Electronic registry system to record holding, transferring and surrending allowances Market development driven by the private sector

11 Coverage

12 Related to other commodities

13 Starting point: 1974 Mt in 2013 Climate and Energy Package post Mt/yr Gradient: -1.74% 1720 Mt -20% Linear factor to be reviewed by 2025 Aviation to be included; will change figures correspondingly, but cap not reduced Disclaimer: all figures are provisional and do not account for new sectors in third period

14 Increased scope New sectors Aluminium Basic chemical production New gases: PFCs from aluminium Nitrous oxide (N2O) from certain chemicals Combined effect: ca. 6-7% increase of scope Confirmation that all sectors should contribute to emission reduction commitments Aviation Maritime: future action foreseen to have maritime contribute (COM proposal in 2012 if no international agreement)

15 Strengthened monitoring, reporting and verification Monitoring and Reporting Regulation To replace current guidelines COM proposal by 31 December 2011 Verification and Accreditation Regulation Rules for accreditation is new COM proposal by 31 December 2011 Harmonised 100 penalty for non-compliance inflation-linked non-libératoire (requirement to surrender shortfall of allowances remains) Single Community registry Amendment of Registries regulation (comitology): adopted in CCC in Feb 2010

16 Use of auction revenues Member States should use 100% of revenues for climate and energy related purposes including in Developing Countries New Monitoring Mechanism Decision, to be adopted, will include requirement for Member States to report on use of auction revenues Revenue from auctioning allowances can be used for technology development/demonstration ª e.g. 4.5 billion for investment in Carbon Caputure and Storage and Renewable Energy projects

17 Quantitative use of JI/CDM Companies can use CDM/JI credits for compliance for Kyoto period, other than nuclear and temporary credits from forestry Rights to use credits in can be used up until 2020: total 1.4 billion tons for Supplementarity: use of CDM should not exceed 50% of reduction below 2005 Automatic increase of the use of credits (CDM/JI/other) by 50% of the additional reduction effort in case of a new international agreement But credits from H2O and HFC23 cannot be used for the third trading period (i.e. from 2013)

18 Use restrictions for international credits Full use restrictions for credits from HFC23 and adipic acid N2O projects ª 23 out of about 2700 projects ª Strong environmental concerns: incentive to increase emissions undermine the Montreal Protocol disincentivise appropriate action in LDCs ª Low value for money: other instruments can reduce these emissions much more cost-efficiently ª Need to limit distortions of competition Climate Change Committee agreed the proposal on 21 January 2011

19 Aviation included from 2012 Directive 2008/101/EC on inclusion of aviation in EU ETS agreed in summer 2008 adding appr. 10% of the annual EU ETS cap Cap 2012: 97% of emissions From 2013 onwards: 95% Auctioning: 15% as from 2012 Scope: EU internal as well as inbound/ outbound aviation

20 Lessons learned from EU experience The difficulty to agree measures in the UN process is not a barrier to getting started - there is a lot you can do. Measures can be agreed collectively covering 30 countries and over 450 million people. Tackling climate change also helps: ª Improve air quality ª Diversification of energy sources ª Stimulate green growth (innovation, R&D, green jobs) ª Improve energy efficiency

21 Lessons learned from EU ETS experience Keep emissions trading simple Need for strong regulator to ensure environmental integrity Cover installations/ gases where accurate monitoring is feasible, extend in line with technical progress Central cap setting, no more national allocation plans Auction large share of allowances is fairest allocation method Use revenues from auctioning in fight against climate change Ensure further harmonisation of monitoring, reporting and verification Maximize transparency and legal certainty no ex-post regulatory intervention Restrict use of offsets (CDM/JI) to drive investments in low carbon technologies in sectors

22 Key differences between emissions trading and taxation With emissions trading, emissions can grow in return for verified reductions in other sectors EU ETS allows actors to acquire allowances from other sectors/actors within EU, and use Clean Development Mechanism (CDM) credits, e.g. 25% of which are in India (with a value of credits issued by August 2010 amounting to US$790 million) Free allocations of emission allowances can be used for investment by companies Majority of EU ETS allowances are allocated for free Any government revenues should be used to tackle climate change As regards the allowances to be auctioned, EU governments have agreed that 100% of the auction revenues should be used to tackle climate change, including in the transport sector and in developing countries 22

23 Additional differences between EU ETS and other measures A predictable framework for industry to operate: Emissions trajectory and allocations fixed up to 2020 (only exceptions if EU moves to greater reduction commitments, relating to non-co2 climate impacts which are not covered Not prone to sudden changes in course: EU law proposed in 2006, agreed in 2008, first monitoring in 2010, first responsibility for emissions in 2012 Similar application across 30 countries (EU 27 + Norway, Iceland, Liechtenstein) Incentive for all methods of emission reduction (e.g. biofuels considered as zero-emission, technologies etc.) Prices set by the market (EU ETS and Clean Development Mechanism): Carbon price not fixed by governments but relating to stringency of greenhouse gas reduction commitments EU ETS now in seventh year of operation, less price volatility than oil, coffee, cocoa etc. Achieving the same reductions through other measures would be more costly 23

24 Possible EU action on maritime emissions Full EU support for agreement on global measures in IMO / UNFCCC EU Member States and European Parliament request for proposal if no agreement in IMO/UNFCCC in 2011 EU maritime transport emissions should be - 40% by 2050 (from 2005) Transport White Paper 28th March 2011 Preparations for a possible proposal in 2012 ongoing: Stakeholder consultation please contribte Technical analysis No decision yet on policy or measure / scope

25 Thank you for your attention! at/emission.htm