Transcript Economic Analysis of EU-wide Emissions Trading of CO2

Reducing GHG from international shipping – a
European perspective
Shipping and the Environment: GHG Emissions from Ships
2Oth May 2009
Limassol
Mark Major
European Commission
DG Environment
European Commission: 1
Structure
1.
2.
3.
4.
5.
6.
7.
EU position
UNFCCC process
IMO Process
EU action on transport GHG
Aviation and EU-ETS
Preparation of EC measures
Conclusions
European Commission: 2
Environment Council Conclusions
IS CONCERNED that emissions from
international aviation and maritime transport
represent growing sources of greenhouse gas
emissions – October 2007
CALLS UPON all Parties to agree clear,
meaningful targets also for these sectors within
the framework of a future global climate
agreement for the post-2012 period - October
2007
European Commission: 3
‘Climate and Energy’ Directives
(December 2008)

The European Council has made a firm commitment to
reduce the overall greenhouse gas emissions of the
Community by at least 20% below 1990 levels by 2020, and
by 30% provided that other developed countries commit
themselves to comparable emission reductions

By 2050, global greenhouse gas emissions should be
reduced by at least 50% below their 1990 levels.
European Commission: 4
‘Climate and Energy’ Directives
(December 2008)

All sectors of the economy should contribute to
achieving these emission reductions, including
international maritime shipping and aviation.

Aviation is contributing to these reductions through
its inclusion in the Community scheme.
European Commission: 5
‘Climate and Energy’ Directives
(December 2008)

In the event that no international agreement including international maritime
emissions in its reduction targets through the IMO has been approved by the
Member States and/or no such agreement through the UNFCCC has been
approved by the Community by 31 December 2011, the Commission should
make a proposal to include international maritime emissions according to
harmonised modalities in the Community reduction commitment with the aim of
its entry into force by 2013. Such proposal should minimise any negative impact
on EU competitiveness, taking into account the potential environmental benefits

IMO should agree measures in 2010, adopt in 2011 – measures should enter into
force in 2013

EU Legislation!!
European Commission: 6
UNFCCC negotiations



Launched in December 2007 – Bali Roadmap
Comprehensive post 2012 Climate Change regime
Scope:












Enhanced commitments / new commitments
Mitigation
More states
Financing
New gases,
New sectors
Adaptation
Legal issues
Response measures
Flexible mechanisms
Reporting
MEM, G8
European Commission: 7
Negotiation tracks




Kyoto Protocol and its review (AWG-KP)
Long Term Co-Operative Action (AWG – LCA)
SBTA
SBI
Merging into one process during 2009
European Commission: 8
Global process - UNFCCC







29th March - 8th April, Bonn
2nd-12th June, Bonn
10th -14th August, Bonn
28th September – 9th October, Bangkok
4th-10th November, Barcelona
7th-18th December 2009, Copenhagen
Council WP International Environmental Issues
(WIPIE) – Expert Group Bunker Fuels (EGBF)
European Commission: 9
EU UNFCCC Submissions
Parties should take action
 Targets
 IMO / ICAO should act by 2011
 Financing potential



Maldives proposal
India proposal
European Commission: 10
Global process - UNFCCC

Mitigation from maritime (and aviation) very difficult topic

Financing from maritime transport (Indian proposal)

Key element of EU negotiation position (1/8) for Copenhagen 2009

‘Global’ does not necessary mean 100% coverage (possible
exclusions for small vessels, LDC, search and rescue etc.)

UNFCCC agreement is only binding on states not other bodies e.g.
IMO

COP 15 - Will not deliver reduction measures
European Commission: 11
IMO Process







Excellent report in 2000
MEPC 55 – MEPC 59 - WP
No reporting
Operational index – voluntary
Best Practice
Management Plan
Energy Efficiency Design Index formula




Application?
Legal instrument?
What reductions
Which vessels?
European Commission: 12
IMO Process

Market Based Measures


First discussion at MEPC 59
ETS / Levy
 Link to carbon price
 Registry
 Reporting of fuel purchased / fuel used
 Port state control
 Economic incentive
 Offsetting ‘gap’
 Fund (destination / management)

Differences
European Commission: 13
CBDR!

Rio principle:
‘common but differentiated
responsibilities and respective capabilities’
of states/countries.

‘No more favourable treatment’ – avoid
distortions of competition between ships
European Commission: 14
USA developments
‘Cap and Trade’ – same as EU ETS
 - 83% by 2050
 Waxman-Markey Bill - includes ‘bunker
fuels’
 Revenues in budget from 2012!


NZ, AUS, Canada?
European Commission: 15
Possible EC action on maritime
GHG emissions
European Commission: 16
Comprehensive action on transport



All sectors need to make a contribution
Comprehensive (and fair) approach
EC action on transport GHG
Aviation proposed 2006, agreed 2008
 Fuel Quality Directive proposed 2007, agreed 2008
 CO2 and cars proposed 2007, agreed 2008
 Car Labelling (under preparation)
 Heavy Duty Vehicles (under preparation)
 Maritime Transport (if required)

European Commission: 17
Regional action
Sub optimal solution – preference for
global measures
 More difficult to design/implement than
global action
 Less effective
 No distortion of competition
 Not disadvantage EU maritime interests
 Step towards ‘global’ action

European Commission: 18
Inclusion of aviation activities in the EU
Emissions Trading Scheme
European Commission: 19
EU-ETS - Overview







Applicable since 1 January 2005, for EU 25
Permit requirement for CO2
Mandatory caps on absolute emissions from around
10,000 installations across EU
Energy intensive sectors covered
Covers currently around 2 billion tonnes of CO2
emissions, around half of EU’s total CO2 emissions!
Linking with other emissions trading systems
Credits from emission-reducing projects in 178 parties of
KP useable
European Commission: 20
EU-ETS - Overview




Market-based instrument which allows for most
cost-effective and targeted environmental policy
- no market intervention!
EU ETS is driver for carbon market: in 2007
valued at around €40 billion (EU ETS: € 28
billion)
Cornerstone of Europe‘s strategy to implement
Kyoto Protocol - major structural element for
the post-2012 climate strategy
Flexibility to link to other mandatory schemes
European Commission: 21
Aviation in the EU-ETS - timeline
European Commission Proposal 2006
 EP / Council agreement in 2008
 Legislation published 2009
 Obligations from 2010
 Signal of EU ambition / political will
 Aviation Global Deal – BA/Air
France/KLM/ Cathay Pacific/ Qatar etc. –
calling for UNFCCC coverage of aviation.

European Commission: 22
Aviation in the EU-ETS


Legislation covers all flights to and from EU airports (plus Norway,
Iceland and Lichtenstein)
Excluded (de minimis) provision:

operators operating on average less than 2 flights per day and;

operators with total annual emissions of less than 10,000 tonnes
p.a.

Small aircraft and certain flights excluded

Scheme can be amended to take into account equivalent measures
taken by other countries

Allowances can be freely traded
Aircraft operators can buy and use allowances from other sectors
Limited use of CDM credits


European Commission: 23
Aviation in the EU-ETS

Airlines will be required to monitor emissions from 2010

Airlines can apply for a free allocation of allowances in 2011

Airlines will be fully included in the scheme from 2012

Total quantity of allowances allocated to the aviation sector
equivalent to 97% of average annual emissions 2004-6 = ‘cap’

From 2013 the total quantity of allowances to be allocated will be
equivalent to 95% of average annual emissions 2004-6 = ‘cap’
European Commission: 24
Aviation in the EU-ETS
Free allocation based on share of historic
passenger/km performance
 Rewards operators who have efficient
operations
 Based on historic data
 Allocation of operators to one Member
State
 Equal treatment of all operators

European Commission: 25
Aviation in the EU-ETS

15% of allowances auctioned

Auctioning proceeds should be spent on tackling climate change in
the EU and third countries (including ‘low emission transport’)µ

MS must report on how they use revenues

Aircraft operators must monitor and report emissions to competent
authority

Reports must be verified by an independent verifier

Guidelines for the monitoring, reporting and verification of
emissions from aviation being prepared
European Commission: 26
Preparation of EC proposal on GHG
emissions from ships
European Commission: 27
Current status of EC work

External technical support



Contract started October 2008
12 months lead by CE Delft (NL)
Scope of work:









Policy options,
MAC,
Impact analysis,
Some stakeholder involvement (2009)
Mode shift issue (separate contract)
Inter Service Group within EC
Formal stakeholder process (timing undecided)
No decision on measures (possible ‘package’ approach)
Proposal ready for beginning of next Commission
European Commission: 28
EU Policy Options for further
development

5 selected from ‘long list’ of 27

Detailed design and analysis in second stage of
study

Selection criteria: Environmental effectiveness,
cost effectiveness, legal analysis,
‘implementability’
European Commission: 29
EU Policy Options selected for further
development
Selection:

Emissions trading, either (1) inclusion of shipping in the EU ETS or (2)
emissions trading for shipping under a separate directive but linked to the EU
ETS

(3) An emission tax (levy) with hypothecated revenues.

Mandatory (4) operational efficiency index or (5) design index.

(6, 7)) A baseline and credit system, (8,9) including differentiated harbour
dues, based on an operational efficiency indicator or a design index.

A mixed 'package' of measures including operational improvements, technical
improvements, speed reduction, voluntary actions, R&D funding and
subsidies to improve maritime infrastructure, ships and innovation.
European Commission: 30
European Commission - planning

Formal consultation of stakeholders

Impact assessment

EC proposal (for new European Commission e.g. 2010)

EP and Council Decision + 2 years

Entry into force + 1 year (e.g. 2013)
European Commission: 31
Broad climate impact
Black carbon – especially in the Arctic
(Albedo effect)
 Refrigerant gasses? Small but cost
effective?

European Commission: 32
Some comments (1/2)
GHG Reductions are possible (many with
savings, others at reasonable cost)
 Very high energy efficient mode
 Customers and consumers want action
 No alternative (for majority of intercontinental freight)
 Possible regional mode shift to be avoided)
 Costs can be passed on to consumers
 Very marginal impact on demand

European Commission: 33
Some comments (2/2)









Emissions need to peak in next decade
Fairness - other EU sectors reducing since 2005
Cost – whatever target is agreed, starting late costs more
Image - emissions from EU aviation activities capped
below 2005 levels from 2012!
Impact – causing dangerous climate change
Complexity – designing and participating in multiple
schemes
Contributes to a negative image of shipping
EU shipyards, EU equipment manufacturers – leaders in
related technology/systems
Position of US (?)
European Commission: 34
Conclusion








All that is required is a fair contribution
Win / win for shipping – lost opportunity
Prepare for a mixed solution – UNFCCC / EU /
IMO
Maximise effort to help IMO adopt effective
measures in next 2 years
Engage non EU states in fostering a solution
Global = no action
EC action being prepared
No decision taken on EC measures
European Commission: 35
Thank you for your attention
Mark Major
European Commission
DG Environment
B-1049
Brussels, Belgium
[email protected]
+32 2 295 0927
European Commission: 36