Transcript EU ETS: four linked decision processes (so far)

ETS as the key driver
Strong innovation policy
MARKETS ARE FRAGMENTED AND POLICIES
ARE START/STOP
ENERGY MARKET INTEGRATION
AND (MORE) PREDICTABLE POLICIES
Today: internal energy market or x28 chaos?
UK carbon
price floor
NL coal
tax
National RES and EE schemes
National carbon price floors/taxes
National capacity mechanisms
What ambition, when?
Power Choices Reloaded – high cost of a Lost Decade
Power Choices Reloaded’s Lost Decade modelling
scenario assumes a complete lack of action in the decade
2020-2030, therefore the entire decarbonisation action
has to occur in the last two decades to 2050
Infrastructure, power sector decarbonisation, mobility
electrification and technology R&D, as well as energy
efficiency in the demand side sectors will have to develop
in a very short period of time post-2030
Average Price of Electricity, after tax
160
(Euro'10
per MWhe)
Lost Decade
155
150
The changes required in the system from 2030 to obtain
the necessary cumulative emissions reductions by 2050
result in this scenario being barely feasible in true life
145
Reference
140
Key failures involved in the Lost Decade case
135
•
•
130
•
•
•
•
Weak carbon market until 2030
Limited financing under uncertainty hampering
investment
Market coordination failures delaying infrastructure
Non-completion of IEM leading to low cross-border
energy trade
Slower pace of technology progress: learning curves
and build up of supply chains
Delays to energy efficiency persisting up to 2030,
especially on the demand-side and in electrification
28/11/2013
Power
Choices
Reloaded
125
120
115
2010
2020
2030
2040
2050
2
What’s driving price rises?
Global success of the ETS
Competitiveness, energy and climate
What’s at issue?
•
There is no such thing as a global level playing
field on energy
– Europe and the US have different energy
situations, so need different energy strategies
•
Competitiveness is a whole-economy issue
– Policies favouring/exempting one sector may
have a negative impact on other sectors
•
Intra-European tax/price/policy differentials
result in intra-European leakage
– Dutch and German steel compete in the same
market but under different renewables, carbon
and power prices
Paper and pulp
New technologies and new revenue streams
The paper industry and climate change: roll on the green revolution
A technological fix is proposed to combat global warming
Nov 30th 2013 | The Economist
…An effort by European pulp and paper companies to slash their emissions through technological change. This week
they announced some ideas which, if adopted by the whole industry, would cut its energy use by at least a quarter and
its output of CO2 by more than half by 2050. The ideas will test how far technology developed by companies can
reduce global warming.
…Pulp and paper is a big energy consumer—the world’s fifth-largest industrial user.
…Facing demands for deep cuts in CO2 emissions, CEPI decided to see if technological change could yield more than
just marginal improvements. It set up two teams of scientists and businesspeople, each under a former chief executive
(of Smurfit Kappa, the fourth-largest European papermaker, and Mondi, the fifth). The teams set up a common
knowledge base because the idea was to test creativity, not proprietary information. They also sought ideas from
outsiders with carbon-reduction programmes, such as Tata Steel. Each team came up with four ideas.
…The winning proposal would do away with all this grinding and chemical cooking. Instead, it would use things called
deep eutectic solvents to dissolve wood and separate out the lignin. These solvents occur naturally: plants produce
them during droughts. They would essentially turn papermaking into a biochemical business, cutting primary
energy use by 40%. They would also generate useful by-products, such as pure lignin, a raw material for bulk
chemicals, and a form of cellulose used in high-value chemicals. One of the requirements of the project was that
the ideas should add value, not just cut cost. Most of the energy now used in making paper goes on drying the
sheets. So making it without water would also cut energy consumption. The teams came up with two ways of doing
that. One would separate the fibres with steam (using less water). The other would suspend the fibres in a viscous fluid
and then expel the fluid by modifying the viscosity around the fibres. This idea has been pinched from penguins. To
escape from seals underwater, the birds release trapped air bubbles which form a thin layer of air around their plumage,
reducing friction.
…At the moment these ideas exist as pilot projects or in the laboratory, but not commercially. The most important test
of their usefulness is therefore yet to be passed. Even so, several lessons have emerged. The main one is that there are
technological solutions to climate change.
Back up
Levels of promotion
600
Technology
543.43
500
Hydro
400
Wind
300
Biomass
200
157.59
143.74
103.99
126.76
111.48
78.74
100
1.13
11.97
6.74
80
4.2
Wind
Biomass
Minimum Support (EUR/MWh)
Biogas and Waste
PV
Geothermal
0
Hydro
Biogas/Waste
PV
Geothermal
Maximum support (EUR/MWh)
Highly divergent promotion levels across technologies and
countries
* Source: Status Review of Renewable and Energy Efficiency Support Schemes in Europe
Min Max
RES support – implicit carbon prices
Italy
Spain
Germany
Wind
€ 169 /tCO2
€ 86 /tCO2
€ 56 /tCO2
Solar
€ 925 /tCO2
€ 539 /tCO2
€ 574 /tCO2
Implicit carbon price =
Net cost of RES
CO2 emission reduction
Source: Claudio Marcantonini, European University institute of Florence,
Climate Policy Research Unit, October 2013 (not yet published)
Four possible outcomes re the RES target
1: EU RES target delivered through national targets and support
schemes
Market fragmented and distorted
2: EU RES target with EU harmonisation of support
schemes (not yet clear how this would work)
Market distorted but not fragmented
3: EU RES target delivered through ETS (mature RES) and
innovation support (immature RES)
Fully market compatible
4: No EU RES target
Unlikely in light of Commission, German, and
European Parliament opposition….
Binding RES target at EU level
The Commission’s strategy (reading between the lines)
Step 1:
The 40% GHG target will in itself deliver at least 27% RES
Step 2:
The Treaty does not allow the Commission to prevent Member States from
having national RES policies
Step 3:
But the Commission can use EU market, competition, and state aids law to limit
what sort of policies the Member State can use
Step 4:
If, during 2014-15, Member States decide that neither the 40% GHG target, nor the
EU market-compatible national policy options, is sufficient to deliver 27% (or
higher) RES growth, then…
Step 5:
The Commission would consider additional measures at EU level
Step 6:
Likely the Commission’s preferred measures would be a stronger ETS plus more
RES innovation support
National energy policies / EU competition law
A different picture by autumn 2014?
Breaking news during spring-autumn 2014!
Brussels / DG COMP
Luxembourg / ECJ
•
New EEAG for 2015
•
Alands Vindkraft
case
•
Hinkley Point state
aid application
•
Essent case
•
EEG exemptions state
aid case
•
State aid definitions
consultation
Berlin / Federal Govt
•
EEG revision
€ carbon price
Getting to the goal on ETS
When can we get real changes?
Take-off?
Threshold carbon price which can impact opex + capex
2014
2015
2016
2017
2018
2019
2020
2021