The new targets of Climate Change Policy in the European Union and the cost of mitigation strategy. Giuseppe Astarita Federchimica

Transcription

1 The new targets of Climate Change Policy in the European Union and the cost of mitigation strategy. Giuseppe Astarita Federchimica Milano, July 9, 2014

2 EU Climate and Energy Legislative Framework. The Kyoto period ( ) The 2020 framework (in force) The possible 2030 framework (under discussion) The 2050 Roadmap (GHG emissions: -(80 95)% vs 1990)

3 EUROPEAN UNION GHG EMISSIONS

4 EU GHG Emissions (including LULUCF). (Mt CO2eq./a) EU 15 EU

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7 EU ETS AN IMPORTANT POLICY TOOL

8 Activities: ETS and non-ets

9 EU ETS: difference between distributed allowances and verified emissions

10 ITALY : GHG EMISSIONS AND KYOTO OBJECTIVE

11 Italy: energy consumption, GHG emissions and GDP

12 ITALY GHG emissions

13 Conditions for Kyoto objective Did Italy emit less than Kyoto objective (2012)? YES Did Italy comply with Kyoto objective ( )? NO Why: 2012 emissions (460.1 Mt CO 2 eq) are lower than Kyoto objective (483.3 Mt CO 2 eq), but the condition has to be fulfilled over 5 years (plus further parameters).

14 Distance from Kyoto objective

15 Italy: distance from Kyoto objective

16 2020 FRAMEWORK

17 Climate and Energy Package 2020 Initially proposed in 2007 and adopted by 2009, the Climate and Energy Package is a set of EU legislative measures, designed to reach three core targets by 2020 (known as the " by 2020"): 20% reduction in EU greenhouse gas emissions from 1990 levels; 20% increase in the share of EU energy consumption produced from renewable resources; 20% improvement in the EU's energy efficiency It contains four core legislative acts: The revised Emissions Trading System (EU ETS) Directive the Effort Sharing Decision (ESD) the Renewable Energy Directive and the Carbon Capture and Storage Directive

18 EU: changes after 2012

19 EU ETS

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21 EU ETS Total amount free allocations Country Free allowances Austria Belgium Bulgaria Croatia Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Iceland Ireland

22 EU ETS Total amount free allocations Country Free allowances Italy Latvia Liechtenstein Lithuania Luxembourg Netherlands Norway Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom

23 Italy: Chemical Industry and ETS About 70 sites involved, with 9 Mt/y emissions 6 Mt/y emissions with the first 10 sites However, ETS influences much more than its scope, through electricity prices, also much influenced by other climate policy tools, like incentives to renewable sources

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26 CARBON MARKET PRICE LEVELS

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28 EUA value

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30 Carbon prices and ETS reform Experimented low carbon prices have triggered a discussion about EU ETS reform, with the main (Commission) purpose of price level recovery. Main Commission proposals based on definitive (set aside) or temporary (backloading) elimination of available allowances. (Chemical) Industry actions for discussion to include important "chapters" like allocation criteria (actual production instead of ex-ante) and competitiveness protection (e. g. fighting Carbon Leakage)

31 2030 FRAMEWORK - POSSIBLE, UNDER DISCUSSION - BASED ON JANUARY 22, 2014 PROPOSAL

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38 2030 package: other components. Manufacturing industry contribution to GDP by 2020: 20% (from present 15-16%) Introduction of a post 2020 strategic reserve for ETS allowances Comunication on shale gas development Industrial sectors confirmed in Carbon Leakage (CL) list

39 EU Energy Climate policy. Considerations. EU is the only region with binding objectives (2020) No significant driving effect on other countries has yet taken place. No global agreement is expected before COP 21 (Paris, December 2015). EU contribution to global GHG emissions, now at 10-11%, is expected to be around 4-5% by Do further EU unilateral commitments make sense?

40 EU Energy Climate policy. Considerations/2. EU policy clearly based on energy costs increase, to get resources for GHG emissions reduction Other areas "careful" in avoiding climate policies with significant impact on costs. Further advantages as a result of independent circumstances for those areas, with very important results (shale gas in USA).

41 EU and Climate-Energy policy. Pending criticalities. Separate objectives on RES (Renewable Energy Sources) and consequent incentive policies (in particular for electricity) have hampered the transition toward energy market completion, in some cases (Italy, Germany) with very high costs for consumers (also with non uniform EU effects), and taking away the corresponding energy (now regulated) from the market. Consequences (negative): - on EU competitiveness (vs other regions) - on intra EU competitiveness (because of different impact of incentive costs, and the different distribution among economic sectors, and inside industry) - on the functioning of electricity market, with "baseload" production displacement, and insufficient rules to control the same situation - on proposals to compensate for "economic displacement" of traditional power stations, originating further costs (e.g. capacity payment)

42 Other negative consequences. The very strong RES development contributed (in conjunction with economic crisis) to EUA allowances surplus on ETS market. With RES costs development "outside" of ETS, the ETS allowances market price reduction (although without threatening the fixed objective of emissions reduction) prevented the possibility of making intensive sources more "accountable": - e.g. electricity production from coal, also in inefficient power stations, is cheaper than from efficient gas-fired power stations, losing occasions in limiting emissions, with incentive costs charged (with no offset) on energy consumers.

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44 40% GHG emissions reduction by Very ambitious (and unilateral) objective Differentiated between ETS (-43% vs 2005) and non- ETS (-30% vs 2005) Due to different 2005 performance, important differences result among sectors (referring to implicit 2030 objectives: - Energy Industry -41 % - Manufacturing (MIC+Ind.Proc.) - 50 % - Chemical Ind. (MIC+Proc. Ind.) -60 % - Agriculture -38 % - Transport -14 %

45 CREDITS FROM INTERNATIONAL PROJECTS

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49 Share of CDM projects in the pipeline All CDM Projects in the Pipeline in Brazil + Mexico + India + China as a fraction of all projects

50 Accumulated CERs issuance Accumulated issuance of CERs over time

51 Growth of total expected accumulated 2012 CERs Growth of total expected accumulated 2012 CERs

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53 Top countries by issued CERs Top countries by issued CERs

54 Buyer countries Buyer countries

55 USE OF CREDITS IN EU ETS. LIMITATIONS

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57 EU REGULATION 1123/2013 Eligibility of international credits Limitations for the use of international credits Old plants in EU ETS (with free allowances) Use of credits ( ) below the higher of two limits - all credits allowed % ot total allocation Limits for plants in EU ETS from 2013: 4,5% of verified emissions

58 Kyoto credits demand between private entities, EU and non EU States as at May 1, 2013

59 Exchange rates for CER/ERU into EUA Below expectations Tax year 2013: instead of expected quantity of up to 400 Mt (EU wide), only Mt (one third) was exchanged. (EU Commission communication, May 2, 2014)

60 Exchange rates for CER/ERU into EUA General estimate. - Against a figure of M CER/ERU available for exchange ( ), only Mt were exchanged - Balance: 393 M available for exchange - Corresponding to a financial benefit for EU companies of 1.75 billion.

61 VOLUNTARY CARBON MARKETS

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63 2050 TRENDS (FROM 2013 REFERENCE SCENARIO)

64 EU 28: evolution of CO2 emissions

65 CO2 emissions. Energy and process related.

66 EU 28. non-co 2 GHGs of EU ETS sectors

67 THANKS FOR YOUR ATTENTION! QUESTIONS?