The brief outlines different perspectives on the past performance of the EU Emissions Trading System (ETS) in terms of its allowance price (Section 1), analyses how the recent reform responded to related challenges (Section 2), and considers the case for introducing a carbon price floor in the EU ETS (Section 3). The main part of the brief (Section 4) identifies five myths in the debate of an EU ETS price floor and critically confronts them. Section 5 concludes by discussing potential entry points for introducing a carbon price floor in the context of the upcoming EU climate policy process. While the brief draws on insights from workshop discussions, its views are solely those of the authors. ; This policy brief builds on the workshop EU ETS Reform: Taking Stock and Examining Carbon Price Floor Options, held at the Centre for European Policy Studies (CEPS) in Brussels on July 3, 2018.
Carbon pricing regimes are often preceded and accompanied by companion policies, which can include regulatory standards, subsidies, and additional carbon pricing policies. While carbon pricing programs hold the advantage of identifying least-cost means of reducing carbon emissions, non-price based companion policies provide other advantages, such as addressing other externalities besides the social cost of carbon emissions, targeting specific technologies, addressing impacts on disadvantaged communities, and providing additional incentives for behavioral changes when carbon prices are too low to adequately do so. Companion policies therefore do play an important role in meeting climate goals, but some inefficiencies are expected when carbon pricing and companion policies interact. The two North American carbon pricing programs we discuss, the Regional Greenhouse Gas Initiative (RGGI) and the Western Climate Initiative (WCI), are cap-and-trade programs composed of individual states and provinces that pursue their own climate objectives and policies in addition to participating in emissions trading. RGGI affects the electricity sector in nine eastern US states, and virtually all allowances are auctioned in this program. The WCI is an economy-wide program covering California, Quebec and Ontario, where most allowance are auctioned. The companion policies in those jurisdictions are challenged by the waterbed effect, in which emissions reductions by one facility in a capped system are offset by increased emissions by another facility, leaving total emissions unchanged at least in the short run. Both trading programs reduce the waterbed effect by implementing a price floor in allowance auctions, below which emissions allowances are not sold. RGGI also plans to adopt an Emissions Containment Reserve (ECR), an additional price step above the price floor, applying to about 10 percent of allowances that will not sell at prices below this level. The auction price floors have been binding in both programs, and subsequently prices have risen off the price floor. These mechanisms cause the supply of allowances to decrease in response to lower demand, allowing the trading programs to capture some of the emissions reductions from companion policies through price suppression, but also maintain the buoyancy of the programs by supporting the price despite lack of allowance scarcity and guarantee a stream of revenue for programs supported by auction revenue. Companion policies have been fundamental to the design of the RGGI and WCI programs. In RGGI, most auction revenues are invested in energy efficiency, which by design pushes down electricity demand and allowance prices. In this context, the price floor and ECR provide guardrails for the allowance price path. In California, the largest jurisdiction in the WCI, over 80 percent of emissions reductions under the cap are attributable to regulatory measures. California estimates that these measures have a cost per ton of avoided carbon emissions that is greater than the cap-and-trade allowance price. However, these companion policies achieve essential ancillary benefits such as air quality improvements and investments in low carbon infrastructure. An important part of California's policy is the focus of companion policies and spending of auction revenues to address emissions outcomes in disadvantaged communities. The European Union's Emissions Trading System (ETS) faces the same challenge from the waterbed effect. The EU and its member states have pursued companion policies that reduce emissions at specific facilities in their jurisdictions but do not affect the volume of emissions allowances in the market. This effect contributes to the large surplus of allowances and the low allowance price that the EU ETS market has experienced over the past years. The EU has hence adopted a mechanism called a Market Stability Reserve (MSR), in which allowances are temporarily withheld from auction based on the number of (surplus) allowances in circulation. Beginning in 2023, when the MSR reaches a certain volume, some allowances can be permanently cancelled. This mechanism provides some responsiveness of allowance supply to reduced demand. We find through our modeling of MSR outcomes from 2018-2030 that the waterbed effect is diminished but still exists to some extent. We also find that additional emissions reductions have a greater impact on allowance supply the sooner they are taken. Our analysis of the North American and European Union cap-and-trade experiences provide a number of insights that are useful to Sweden in achieving its commitment to reach net-zero greenhouse gas emissions by 2045. ; Carbon pricing regimes are often preceded and accompanied by companion policies, which can include regulatory standards, subsidies, and additional carbon pricing policies. In this report, we discuss the mechanisms of companion (overlapping) policies, describe the experiences in North America and the European Union with cap and trade and companion policies, and suggest a conceptual framework to address the complications raised by companion policies.
The objectives of this study are to: 1. Give an overview of the current discussion concerning competition distortion in relation to climate policy, 2. Describe results from some studies estimating the actual competition situation for selected activities, 3. Describe what sector agreement models are suggested/ discussed by EU, 4. Describe what sectors are most interesting to target with a sector agreement from a Swedish point of view, 5. Analyse what parameters are important for reducing competition distortion for Swedish Industry. Two studies, for the United Kingdom (Hourcade et al 2008) and Germany (Graichen et al 2008), have recently assessed the potential cost impact for different industrial sectors of CO2-prices due to the EU ETS. Maximum value at stake was used as metrics. The sectors with high potential impact, with a maximum value at stake larger than 10%, are in the United Kingdom Lime and cement, Basic iron and steel, Starches, Refined petroleum, Fertilizers and Nitrogen compounds and Aluminium. In Germany, the sectors with a maximum value at stake larger than 10% are: Cement and lime, Fertilizers and nitrogen compounds, Basic iron and steel, Aluminium, Paper and board, Other basic inorganic compounds and Coke, refined petroleum and nuclear fuels. Ex-ante studies of the impacts of competitiveness and carbon leakage due to the EU ETS fail to find actual impacts. However, that does not mean that there will be no impact in the future, which hold changes both in the EU ETS (method for allowance allocation, allowance prices etc) and possibly also other important circumstances (global demand for certain products and global product prices). In this study, based on official Swedish statistics, the maximum value a stake has been calculated for 52 Swedish sectors. Seven sectors have a maximum value a stake of more than 4%: Coke and refined petroleum (21%), Pulp and paper (11%), Basic metals (10%), Non-metallic mineral (9%), Metal ore mines (6%), Air transport (5%) and Electricity, gas and heat (4%). If Air transport and Electricity, gas and heat are omitted, the five remaining sectors account for 22% of Sweden's carbon emissions. In the Swedish Non-metallic mineral sector (including Cement and lime) the maximum value at stake is considerably lower than for Cement and lime in the UK and Germany. This is most likely due differences in system boundaries. In the Swedish statistics, the Cement and lime industry is a minor part (in terms of value added) of the Non-metallic mineral sector, a sector that also includes Stone, sand and soil industry. The calculated maximum value at stake for Non-metallic mineral is therefore a poor proxy for the Cement and lime sector since other sub sectors may 'dilute' the maximum value at stake. Differences in system boundaries may also explain the significant difference in maximum value at stake between the Swedish steel industry and UK and German steel industries. Other possible explanations may be a higher value added per unit, differences in how value added is calculated, different years applied for the analysis and lower CO2-intensity for Swedish products. In late 2008, the EU proposed three types of sector approaches to be discussed under the Ad-hoc Working Group on future commitments for Annex I Parties under the Kyoto Protocol (AWG-KP): i) Sector CDM - a CDM crediting mechanism with a previously established baseline ii) Sectoral no-lose mechanism - Sectoral crediting against a previously established no-lose target iii) Sectoral emission trading based on a sector emissions cap Based on these three sectoral models, we have analysed what parameters are important for reducing competition distortion for Swedish industry. We have assumed that these sector agreements are implemented in a developing country (DC). We conclude that if sector agreements are to reduce distortions on competition, it is important that the sector agreements create a real carbon price in the DC, i.e. that emissions of carbon dioxide are associated with a cost for the emitter. All three sector agreement-models suggested by the EU can potentially create a carbon price. The driver for emission reductions are in all three cases the international demand for offsets. As a potentially large buyer of off-sets, the EU demand for off-sets is likely to increase the carbon price in the DC sector. The choice of EU policy with respect to imports of off-set will therefore have great importance. Other buyers, such as other countries, emission trading systems or the voluntary credit market will of course also be important. Moreover, imports of off-sets may reduce the price on EU ETS allowances, thus further narrowing the carbon price gap between the two markets. If an important objective of a sectoral agreement is to reduce competition distortion it should be implemented in sectors where the corresponding Swedish industry has significant carbon related costs and where there is significant trade intensity between Sweden and regions outside the EU. Our preliminary analysis indicates that Swedish sectors with potentially high maximum value at stake (direct carbon and indirect electricity cost) are Refineries; Pulp and Paper; Iron and Steel;Cement and Lime; and Metal ore mining. The sectors Aluminium and Fertilizers may be important, but have not been assessed explicitly in this study. In addition, electricity production can be important to include in a sectoral agreement since the electricity price may be a significant cost for certain sectors exposed to international competition. Pass-through of costs - consumer incentives. If a sectoral agreement is to reduce competition distortion it is important that the sector participating in the sectoral agreement can pass through the additional carbon costs on the commodity so the carbon intensive products become more expensive for the consumer. A full pass through of the carbon cost could be compromised in countries with centrally regulated prices on carbon intensive commodities or other measures that shield the true price of carbon from the consumer. Target setting - producer incentives. The rules for setting the targets in the DC sector are crucial from a producer incentive point of view. There are two main options here: 1) absolute targets and 2) intensity targets. Absolute targets create high incentives for carbon reductions as long as the targets are not re-negotiated. The disadvantage is that they might be difficult to negotiate due to difficulties in finding an appropriate emission level, risk for hot air and the inflexibility to future adjustments. Intensity targets are based on output times an intensity factor (called benchmarking). But benchmarking leads to reduced incentives: i) as a production subsidy it encourages overproduction and ii) dis-incentivises the substitution to carbon efficient products. A third, theoretical, option would be absolute targets that are updated according to historic emissions. This model would, however, seriously undermine the incentives for emission reductions. In this study, we have argued that from a competition point of view, it's important to create a carbon price in the developing country. A different issue relates to how different sector agreement models influence the compliance costs of participating firms. We describe a situation where a DC industry sector is linked to the EU ETS, and where the EU industry pays for allowances (no free allocation). For a Sector emission trading system where the DC industry has to pay for allowances, the compliance costs could be compatible in the two regions. For Sector CDM and Sector no-lose mechanism, if the government implements a domestic carbon tax, the compliance costs may also be compatible in the two regions. However, if allowances are allocated freely to the DC industry and no tax is implemented, the DC industry would have no costs associated with the carbon emissions below the compliance level. There could here be a significant difference in compliance costs between the industries in the two regions. We have, however, not analysed if significant asymmetries in compliance costs can lead to competitive distortions between regions. ; The objectives of this study are to: 1. Give an overview of the current discussion concerning competition distortion in relation to climate policy, 2. Describe results from some studies estimating the actual competition situation for selected activities, 3. Describe what sector agreement models are suggested/ discussed by EU, 4. Describe what sectors are most interesting to target with a sector agreement from a Swedish point of view, 5. Analyse what parameters are important for reducing competition distortion for Swedish Industry. Two studies, for the United Kingdom (Hourcade et al 2008) and Germany (Graichen et al 2008), have recently assessed the potential cost impact for different industrial sectors of CO2-prices due to the EU ETS. Maximum value at stake was used as metrics. The sectors with high potential impact, with a maximum value at stake larger than 10%, are in the United Kingdom Lime and cement, Basic iron and steel, Starches, Refined petroleum, Fertilizers and Nitrogen compounds and Aluminium. In Germany, the sectors with a maximum value at stake larger than 10% are: Cement and lime, Fertilizers and nitrogen compounds, Basic iron and steel, Aluminium, Paper and board, Other basic inorganic compounds and Coke, refined petroleum and nuclear fuels. Ex-ante studies of the impacts of competitiveness and carbon leakage due to the EU ETS fail to find actual impacts. However, that does not mean that there will be no impact in the future, which hold changes both in the EU ETS (method for allowance allocation, allowance prices etc) and possibly also other important circumstances (global demand for certain products and global product prices). In this study, based on official Swedish statistics, the maximum value a stake has been calculated for 52 Swedish sectors. Seven sectors have a maximum value a stake of more than 4%: Coke and refined petroleum (21%), Pulp and paper (11%), Basic metals (10%), Non-metallic mineral (9%), Metal ore mines (6%), Air transport (5%) and Electricity, gas and heat (4%). If Air transport and Electricity, gas and heat are omitted, the five remaining sectors account for 22% of Sweden's carbon emissions. In the Swedish Non-metallic mineral sector (including Cement and lime) the maximum value at stake is considerably lower than for Cement and lime in the UK and Germany. This is most likely due differences in system boundaries. In the Swedish statistics, the Cement and lime industry is a minor part (in terms of value added) of the Non-metallic mineral sector, a sector that also includes Stone, sand and soil industry. The calculated maximum value at stake for Non-metallic mineral is therefore a poor proxy for the Cement and lime sector since other sub sectors may 'dilute' the maximum value at stake. Differences in system boundaries may also explain the significant difference in maximum value at stake between the Swedish steel industry and UK and German steel industries. Other possible explanations may be a higher value added per unit, differences in how value added is calculated, different years applied for the analysis and lower CO2-intensity for Swedish products. In late 2008, the EU proposed three types of sector approaches to be discussed under the Ad-hoc Working Group on future commitments for Annex I Parties under the Kyoto Protocol (AWG-KP): i) Sector CDM - a CDM crediting mechanism with a previously established baseline ii) Sectoral no-lose mechanism - Sectoral crediting against a previously established no-lose target iii) Sectoral emission trading based on a sector emissions cap Based on these three sectoral models, we have analysed what parameters are important for reducing competition distortion for Swedish industry. We have assumed that these sector agreements are implemented in a developing country (DC). We conclude that if sector agreements are to reduce distortions on competition, it is important that the sector agreements create a real carbon price in the DC, i.e. that emissions of carbon dioxide are associated with a cost for the emitter. All three sector agreement-models suggested by the EU can potentially create a carbon price. The driver for emission reductions are in all three cases the international demand for offsets. As a potentially large buyer of off-sets, the EU demand for off-sets is likely to increase the carbon price in the DC sector. The choice of EU policy with respect to imports of off-set will therefore have great importance. Other buyers, such as other countries, emission trading systems or the voluntary credit market will of course also be important. Moreover, imports of off-sets may reduce the price on EU ETS allowances, thus further narrowing the carbon price gap between the two markets. If an important objective of a sectoral agreement is to reduce competition distortion it should be implemented in sectors where the corresponding Swedish industry has significant carbon related costs and where there is significant trade intensity between Sweden and regions outside the EU. Our preliminary analysis indicates that Swedish sectors with potentially high maximum value at stake (direct carbon and indirect electricity cost) are Refineries; Pulp and Paper; Iron and Steel;Cement and Lime; and Metal ore mining. The sectors Aluminium and Fertilizers may be important, but have not been assessed explicitly in this study. In addition, electricity production can be important to include in a sectoral agreement since the electricity price may be a significant cost for certain sectors exposed to international competition. Pass-through of costs - consumer incentives. If a sectoral agreement is to reduce competition distortion it is important that the sector participating in the sectoral agreement can pass through the additional carbon costs on the commodity so the carbon intensive products become more expensive for the consumer. A full pass through of the carbon cost could be compromised in countries with centrally regulated prices on carbon intensive commodities or other measures that shield the true price of carbon from the consumer. Target setting - producer incentives. The rules for setting the targets in the DC sector are crucial from a producer incentive point of view. There are two main options here: 1) absolute targets and 2) intensity targets. Absolute targets create high incentives for carbon reductions as long as the targets are not re-negotiated. The disadvantage is that they might be difficult to negotiate due to difficulties in finding an appropriate emission level, risk for hot air and the inflexibility to future adjustments. Intensity targets are based on output times an intensity factor (called benchmarking). But benchmarking leads to reduced incentives: i) as a production subsidy it encourages overproduction and ii) dis-incentivises the substitution to carbon efficient products. A third, theoretical, option would be absolute targets that are updated according to historic emissions. This model would, however, seriously undermine the incentives for emission reductions. In this study, we have argued that from a competition point of view, it's important to create a carbon price in the developing country. A different issue relates to how different sector agreement models influence the compliance costs of participating firms. We describe a situation where a DC industry sector is linked to the EU ETS, and where the EU industry pays for allowances (no free allocation). For a Sector emission trading system where the DC industry has to pay for allowances, the compliance costs could be compatible in the two regions. For Sector CDM and Sector no-lose mechanism, if the government implements a domestic carbon tax, the compliance costs may also be compatible in the two regions. However, if allowances are allocated freely to the DC industry and no tax is implemented, the DC industry would have no costs associated with the carbon emissions below the compliance level. There could here be a significant difference in compliance costs between the industries in the two regions. We have, however, not analysed if significant asymmetries in compliance costs can lead to competitive distortions between regions.
On 1 January 2005 the European Union Emission Trading Scheme was launched. The launch was preceded by an allocation process in each of the Member States. The main objective of this study was to analyse the allocation in relation to CO2 efficiency for the mineral oil refining sector. A CO2 intensity index for mineral oil refineries was defined and calculated for the refineries within the EU15 and Norway. The IVL CO2 intensity index is based both on the Solomon Energy Intensity Index (EII), an assumed fuel mix and process-specific emissions. Due to uncertainties in input data, the determined values for the individual refineries are fairly uncertain, but the regional values can be used to identify trends. It was concluded that there are substantial differences in the CO2 intensity between refineries within different regions/countries in the EU and these differences have not been considered in the allocation process. However, there seems to be a correlation between allocation and CO2 efficiency for refineries in different regions. With some exceptions countries where the mineral oil refining industry has a low CO2 intensity index have allocated relatively more than countries with industries of high CO2 intensities. Only a few countries have mentioned energy efficiency or reduction potential due to CO2 intensity of fuels used. Only one country (Denmark) has explicitly given a benchmark that will be used for allocation to new mineral oil refineries. ; On 1 January 2005 the European Union Emission Trading Scheme was launched. The launch was preceded by an allocation process in each of the Member States. The main objective of this study was to analyse the allocation in relation to CO2 efficiency for the mineral oil refining sector. A CO2 intensity index for mineral oil refineries was defined and calculated for the refineries within the EU15 and Norway. The IVL CO2 intensity index is based both on the Solomon Energy Intensity Index (EII), an assumed fuel mix and process-specific emissions. Due to uncertainties in input data, the determined values for the individual refineries are fairly uncertain, but the regional values can be used to identify trends. It was concluded that there are substantial differences in the CO2 intensity between refineries within different regions/countries in the EU and these differences have not been considered in the allocation process. However, there seems to be a correlation between allocation and CO2 efficiency for refineries in different regions. With some exceptions countries where the mineral oil refining industry has a low CO2 intensity index have allocated relatively more than countries with industries of high CO2 intensities. Only a few countries have mentioned energy efficiency or reduction potential due to CO2 intensity of fuels used. Only one country (Denmark) has explicitly given a benchmark that will be used for allocation to new mineral oil refineries.
The aim of the project is to assess the overall design and consequences of including maritime transports in the EU ETS. An inclusion of shipping in the EU ETS would likely be built upon the data and scope of the current monitoring, reporting and verification system, which is covering the legs of a ship's route before and after a port call to one of EEA's states. The CO2 emissions captured by MRV was 141 Mtonnes in 2018, estimated to grow to approximately 178 Mtonnes by 2026 if no abatement measures are taken. Alternatively, only including emissions from intra-EEA shipping would limit the emission scope, estimated to reach approximately 75 Mtonnes in 2026. The costs for the shipping sector will be determined mainly by 1) the price of allowances and 2) if allowances are given for free or if they are auctioned. Based on our assumptions of 5 to 100 % of allowance auctioned, and a price of 25-70 EUR/tonne CO2 gives an estimated additional cost to the included shipping of 0.2 – 12.5 billion EUR. To set these cost increases into a context, it generates a price increase of between 0.6% and 33% per tonne marine gas oil. ; The aim of this project is to assess the overall design and consequences of including maritime transports in the EU emission trading system. The included aspects are geographical scope, allocation of allowances, time frame of implementation, as well as impacts on greenhouse gas emissions, economic impacts for the maritime sector as well as on early movers and modal split.
The EU Emissions Trading System (ETS) demonstrated the ability to design and launch a large-scale trading system in a short period of time. The path from initial reticence about emissions trading to implementation of the world's largest program is an important history. Three issues play a large role in the evaluation of the program to date and its on-going development: allocation plans, cost uncertainty, and leakage of emissions to abroad. Decisions in Phase I and II (2005–2012) were responsive to questions of political feasibility and implementation, but some of these decisions including allocation in particular will be substantially revised in Phase III (2013–2020).
In its guidance on National Allocation Plans (NAPs), the European Commission has discouraged Member States from adopting allocation methodologies that would provide incentives to firms affecting their compliance behavior. The purpose is to promote economic efficiency and to prevent strategic behavior that deviates from individual and collective cost-minimization. For example, some methodologies would reward one type of compliance investment over another. To discourage such actions, the EU Emission Trading System guidelines prohibit ex post redistribution of emission allowances within an allocation period based on behavior in that period. Similarly, the Commission has indicated that decisions about the initial distribution of allowances in the second phase (2008-2012) must depend on measures prior to 2005 so as not to give companies an incentive to adjust their behavior to receive a larger allowance allocation. However, two other aspects of the NAPs-the treatment of closures and new entrants-may also affect firm behavior. An undercurrent in these guidelines is the question of whether Member States should allow incumbent emitters to hold infinitely lived, once-and-for-all property rights to a share of the emission allowances in the future. This paper develops an approach for balancing efficiency considerations with perceived issues of fairness. We propose a ten-year rule to guide policy regarding closure of existing sources and the status of new sources and to guide the initial distribution of emission allowances in general. A ten-year rule would address issues of fairness and capture an important part of the potential gains that could be achieved through an efficient initial distribution of allowances. ; In its guidance on National Allocation Plans (NAPs), the European Commission has discouraged Member States from adopting allocation methodologies that would provide incentives to firms affecting their compliance behavior. The purpose is to promote economic efficiency and to prevent strategic behavior that deviates from individual and collective cost-minimization. For example, some methodologies would reward one type of compliance investment over another. To discourage such actions, the EU Emission Trading System guidelines prohibit ex post redistribution of emission allowances within an allocation period based on behavior in that period. Similarly, the Commission has indicated that decisions about the initial distribution of allowances in the second phase (2008-2012) must depend on measures prior to 2005 so as not to give companies an incentive to adjust their behavior to receive a larger allowance allocation. However, two other aspects of the NAPs-the treatment of closures and new entrants-may also affect firm behavior. An undercurrent in these guidelines is the question of whether Member States should allow incumbent emitters to hold infinitely lived, once-and-for-all property rights to a share of the emission allowances in the future. This paper develops an approach for balancing efficiency considerations with perceived issues of fairness. We propose a ten-year rule to guide policy regarding closure of existing sources and the status of new sources and to guide the initial distribution of emission allowances in general. A ten-year rule would address issues of fairness and capture an important part of the potential gains that could be achieved through an efficient initial distribution of allowances.
Klimaschutz ist eine globale Herausforderung, für deren Bewältigung alle Länder eine gemeinsame, aber differenzierte Verantwortung tragen. Einzelne Länder setzen in ihrem Politikmix jedoch unterschiedlich stark auf die Bepreisung von CO2, so dass sich die CO2-Preise in verschiedenen Ländern und Weltregionen noch auf längere Sicht unterscheiden können. Dann wären Maßnahmen zum Schutz vor der Verlagerung von CO2-Emissionen (Carbon Leakage) bei CO2-intensiven Materialien nicht nur für eine Übergangszeit, sondern auch für längere Zeiträume notwendig. Mögliche Fehlanreize, die sich durch Carbon-Leakage-Schutzmaßnahmen ergeben, hätten dann größere Auswirkungen. Wenn Emissionszertifikate als Carbon-Leakage-Schutz kostenlos zugeteilt werden, sei es "ex ante" auf Basis historischer Daten, oder "dynamisch" auf Basis des aktuellen Produktionsniveaus, dann werden CO2-Preisanreize für Zwischen- und Endverbraucher von CO2-intensiven Materialien unterdrückt. Es verbleiben lediglich Anreize für Effizienzverbesserungen und Brennstoffwechsel bei der Materialproduktion. Wenn es dagegen gelingt, das CO2-Preissignal entlang der gesamten Wertschöpfungskette zu bewahren, so werden auch Anreize geschaffen für die Nutzung innovativer Produktionstechnologien wie CO2-Abtrennung und -Speicherung (CCS), höherwertige Materialien, die leichter und weniger CO2-intensiv sind, klimafreundlichere Materialien und eine effizientere Nutzung von Materialien. Grenzausgleichsmaßnahmen könnten die freie Zuteilung ersetzen und das CO2-Preissignal entlang der gesamten Wertschöpfungskette bewahren. Sie sind allerdings politisch umstritten. Eine ähnliche Anreizwirkung könnte mit einer Kombination von dynamischer Zuteilung von Emissionszertifikaten und der Einbeziehung des Konsums in den Emissionshandel erreicht werden. Diese Einbeziehung des Konsums könnte als Verbrauchsabgabe gestaltet werden, so dass sie handelsrechtlich und politisch unkritisch wäre. ; Climate protection is a global challenge that all countries have a common but differentiated responsibility to address. However, not all governments are willing to commit to targets of equal stringency, and individual countries may put different emphases on carbon pricing in their policy mix. Carbon prices may thus continue to differ over longer time horizons. Therefore, measures to protect production of carbon-intensive materials from carbon leakage might be required not only as short-term transition instruments, but also for longer periods. Leakage protection measures therefore need to preserve carbon price incentives for emission mitigation across the value chain. If ex-ante or dynamic free allocation of emission allowances is used as a leakage protection measure, only the primary producers face the full carbon price signal for efficiency improvements. Accordingly, shifts to lower-carbon fuels and the carbon price signal for intermediate and final consumers are muted. Thus a large share of mitigation opportunities cannot be realized. Combining dynamic allocation of allowances with a consumption charge (Inclusion of Consumption into the European Union Emissions Trading Systems, EU ETS) or combining full auctioning with border carbon adjustment could reinstate the carbon price signal along the value chain and create incentives for breakthrough technologies, the use of higher-value products with lower weight and carbon intensity, alternative lower-carbon materials and more tailored use of materials. Border carbon adjustment is, however, politically contentious as it has often been discussed as an instrument to discriminate against foreign producers. Hence it is important to further explore design details to implement the combination of dynamic allocation with Inclusion of Consumption in the EU ETS.
Climate protection is a global challenge that all countries have a common but differentiated responsibility to address. However, not all governments are willing to commit to targets of equal stringency, and individual countries may put different emphases on carbon pricing in their policy mix. Carbon prices may thus continue to differ over longer time horizons. Therefore, measures to protect production of carbon-intensive materials from carbon leakage might be required not only as short-term transition instruments, but also for longer periods. Leakage protection measures therefore need to preserve carbon price incentives for emission mitigation across the value chain. If ex-ante or dynamic free allocation of emission allowances is used as a leakage protection measure, only the primary producers face the full carbon price signal for efficiency improvements. Accordingly, shifts to lower-carbon fuels and the carbon price signal for intermediate and final consumers are muted. Thus a large share of mitigation opportunities cannot be realized. Combining dynamic allocation of allowances with a consumption charge (Inclusion of Consumption into the The European Union Emissions Trading System, EU ETS) or combining full auctioning with Border Carbon Adjustment could reinstate the carbon price signal along the value chain and create incentives for breakthrough technologies, the use of higher-value products with lower weight and carbon intensity, alternative lower-carbon materials and more tailored use of materials. Border Carbon Adjustment is, however, politically contentious as it has often been discussed as an instrument to discriminate against foreign producers. Hence it is important to further explore design details to implement the combination of dynamic allocation with Inclusion of Consumption in the EU ETS.
We use economic analysis to evaluate grandfathering, auctioning, and benchmarking approaches for allocation of emissions allowances and then discuss practical experience from European and American schemes. In principle, auctions are superior from the viewpoints of efficiency, fairness, transparency, and simplicity. In practice, auctions have been opposed by important sectors of industry, which argue that carbon pricing without compensation would harm international competitiveness. In the European Union's Emissions Trading System, this concern led to grandfathering that is updated at various intervals. Unfortunately, updating gives industry an incentive to change behavior to influence future allocation. Furthermore, the wealth transferred to incumbent firms can be significantly larger than the extra costs incurred, leading to windfall profits. Meanwhile, potential auction revenues are not available to reduce other taxes. By circumscribing free allocation, benchmarking can target competitiveness concerns, incur less wealth transfer, and provide a strategy consistent with transitioning to auctions in the long run.
In 2009, the Swedish government proposed a vision of reaching zero net emissions of greenhouse gases in the year 2050. However, there are few details on concrete actions after 2020. In the light of the long investment cycles associated with energy, housing, transport infrastructure and heavy industry, we believe that the society now needs to start identifying possible pathways for reaching this vision. The pathways also need to be investigated in terms of their feasibility and consequences. The aim of our study has been to develop and elaborate on one potential future energy scenario where Sweden minimises the use of fossil fuels in 2050 and to identify opportunities and barriers. The scenario we present is one of several possible scenarios and is obviously not a forecast. Our purpose is not to show a likely development, but rather to illustrate, by example, a society that is largely independent of fossil fuels and what would be required to get there. In a next step, more detailed scenarios as well as accurate impact assessments are needed. For example, the impact of high bioenergy utilisation needs to be carefully examined. The results also show several cross-sectoral measures and/or effects that need further study. There is also a need for thorough cost analyses as well as analyses of what is required to implement these measures in practice. We have analysed potential fossil fuel reductions in the sectors industry, residential/service, transports and energy conversion. For these sectors, systematic investigations have been made on measures for replacing fossil fuels, improving energy efficiency and applying new technologies and industrial processes. Our scenario is to a great extent based on existing technologies. In addition to sector specific measures, we have applied cross-sectoral measures such as using industrial surplus heat in the residential sector or forest residues for producing heat and power. Furthermore, we have assumed a system change in transportation and limited use of carbon capture and storage (CCS). The applied measures influence the demand for electricity, heat/steam and fuels. The results indicate a very high demand for biofuels in the future. ; In 2009, the Swedish government proposed a vision of reaching zero net emissions of greenhouse gases in the year 2050. However, there are few details on concrete actions after 2020. In the light of the long investment cycles associated with energy, housing, transport infrastructure and heavy industry, we believe that the society now needs to start identifying possible pathways for reaching this vision. The pathways also need to be investigated in terms of their feasibility and consequences. The aim of our study has been to develop and elaborate on one potential future energy scenario where Sweden minimises the use of fossil fuels in 2050 and to identify opportunities and barriers. The scenario we present is one of several possible scenarios and is obviously not a forecast. Our purpose is not to show a likely development, but rather to illustrate, by example, a society that is largely independent of fossil fuels and what would be required to get there. In a next step, more detailed scenarios as well as accurate impact assessments are needed. For example, the impact of high bioenergy utilisation needs to be carefully examined. The results also show several cross-sectoral measures and/or effects that need further study. There is also a need for thorough cost analyses as well as analyses of what is required to implement these measures in practice. We have analysed potential fossil fuel reductions in the sectors industry, residential/service, transports and energy conversion. For these sectors, systematic investigations have been made on measures for replacing fossil fuels, improving energy efficiency and applying new technologies and industrial processes. Our scenario is to a great extent based on existing technologies. In addition to sector specific measures, we have applied cross-sectoral measures such as using industrial surplus heat in the residential sector or forest residues for producing heat and power. Furthermore, we have assumed a system change in transportation and limited use of carbon capture and storage (CCS). The applied measures influence the demand for electricity, heat/steam and fuels. The results indicate a very high demand for biofuels in the future.
Civil society involvement has grown to become an integral part of the UN negotiatingprocess. The side events at the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) are today the most visible componentof and the only formal avenue of civil society involvement in international climate negotiations. This study assesses the extent to which side events effectively: a) provide input to the negotiations and b) contribute to the construction of the climate regime. Through surveying organisers of and participants in side events as well as COP delegates, we have analysed i) who attends side events, ii) why they attend them, iii) why organisations arrange side events, and iv) the outcome of side events. We distributed a questionnaire to all organisers of side events at COP 13 and the participants in twenty of the 200 side events held in Bali in November 2007. In addition, we also surveyed a strategic sample of the 10,800 participants at COP 13, receiving a total of nearly 1,100 responses. This report concludes that the side events fulfil the broader official objective of benefitingCOP participants, as these events are rated of high value across all participant groups and geographical categories. Negotiators were by far the most important target audience of all categories of side events, followed by representatives of UN organisations and researchers. Organisers considered the G77 plus China to be the most important Party groupings to reachin all categories of side events. The average number of side event participants was 82. The attendance at mitigation side events was 42% higher than at adaptation events. However, more negotiators and governmentrepresentatives attended adaptation side events, whereas there was very little media andbusiness and even less NGO and researcher presence at adaptation compared with mitigationevents. If we up-scale the results of this survey, approximately 1,400 of the 3,500 Party participants attended side events. The study indicates high side event participation from countries with large economies,countries near the COP venue, and the host country. Three of eight side event participants were NGO representatives. About one quarter of the participantsconsisted of negotiators or government representatives. Each side event was attended by anaverage of seven negotiators, 14 government representatives, eight business representatives, seven UN/IGO representatives, and three media representatives. Business representatives.
The EU ETS is a Community-wide scheme established by Directive 2003/87/EC for trading allowances to cover the emissions of greenhouse gases from permitted installations. The first phase of the EU ETS runs from 1 January 2005 to 31 December 2007. Each Member State must develop a National Allocation Plan for the first phase stating: · the total quantity of allowances that the Member State intends to issue during that phase; and how it proposes to distribute those allowances among the installations which are subject to the scheme In this paper twelve of the national allocation plans have been analysed and compared to the criteria stated in the EU Directive. The twelve allocation plans analysed are: the Austrian, the Danish, the Finnish, the German, the Irish, the Lithuanian, the Luxembourg, the Dutch, the Swedish, the British and the draft Flemish (Belgium) and Portuguese. Generally most countries have allocated generously to the trading sector. The allocation has often been based on future needs. For most sectors the allocation is higher than current emissions. Many countries will have to make large reductions in the non-trading sector and/or buy credits through JI- and CDM- projects in order to fulfil their commitment according to the EU burden sharing agreement of the Kyoto Protocol. In many of the allocation plans the emission reducing measures in the non-trading sector is poorly described and the credibility of the measures are hard to determine. Two sectors have been analysed in more detail, the energy and the mineral oil refining sectors. Figures presenting allocation vs. current emissions for those sectors are given for those countries where data was available in the allocation plan. The energy sector has been considered to have the best possibilities to pass on costs for the allowances to the consumers and hence the allocation to this sector is often more restricted than the allocation to other sectors. The mineral oil refining sector is more exposed to competition from installations outside the system and hence more sensitive to extra costs. This sector is also affected by other Community legislation that will lead to higher emissions. Some allocation plans have clear infringements to the rules given in the Directive 2003/87/EC. Many countries have suggested ex post adjustment of allocation due to different circumstances, which might violate Article 11.1 to the Directive. This paper also contains a list on the status of the allocation plans as of 18 August 2004 and the comments to the allocation plans given in the Commission decisions taken upon them. As of today, 18 August 2004 not all Member States have submitted their final national allocation plan to the Commissions and not all of the plans submitted have been assessed by the Commission ; The EU ETS is a Community-wide scheme established by Directive 2003/87/EC for trading allowances to cover the emissions of greenhouse gases from permitted installations. The first phase of the EU ETS runs from 1 January 2005 to 31 December 2007. Each Member State must develop a National Allocation Plan for the first phase stating: · the total quantity of allowances that the Member State intends to issue during that phase; and how it proposes to distribute those allowances among the installations which are subject to the scheme In this paper twelve of the national allocation plans have been analysed and compared to the criteria stated in the EU Directive. The twelve allocation plans analysed are: the Austrian, the Danish, the Finnish, the German, the Irish, the Lithuanian, the Luxembourg, the Dutch, the Swedish, the British and the draft Flemish (Belgium) and Portuguese. Generally most countries have allocated generously to the trading sector. The allocation has often been based on future needs. For most sectors the allocation is higher than current emissions. Many countries will have to make large reductions in the non-trading sector and/or buy credits through JI- and CDM- projects in order to fulfil their commitment according to the EU burden sharing agreement of the Kyoto Protocol. In many of the allocation plans the emission reducing measures in the non-trading sector is poorly described and the credibility of the measures are hard to determine. Two sectors have been analysed in more detail, the energy and the mineral oil refining sectors. Figures presenting allocation vs. current emissions for those sectors are given for those countries where data was available in the allocation plan. The energy sector has been considered to have the best possibilities to pass on costs for the allowances to the consumers and hence the allocation to this sector is often more restricted than the allocation to other sectors. The mineral oil refining sector is more exposed to competition from installations outside the system and hence more sensitive to extra costs. This sector is also affected by other Community legislation that will lead to higher emissions. Some allocation plans have clear infringements to the rules given in the Directive 2003/87/EC. Many countries have suggested ex post adjustment of allocation due to different circumstances, which might violate Article 11.1 to the Directive. This paper also contains a list on the status of the allocation plans as of 18 August 2004 and the comments to the allocation plans given in the Commission decisions taken upon them. As of today, 18 August 2004 not all Member States have submitted their final national allocation plan to the Commissions and not all of the plans submitted have been assessed by the Commission
Several Nordic countries and the EU have adopted net-zero greenhouse gas emission targets. Achieving net-zero will necessitate CO2 removal from the atmosphere to offset residual emissions that are challenging to mitigate. Bioenergy with CO2 capture and storage (BECCS) is a technology that has the potential to generate large-scale CO2 removal and contribute to the attainment of net-zero targets. The report describes the status of BECCS in the Nordic countries and globally. Significant initiatives in the Nordic countries are mapped. Challenges on the market that inhibit BECCS development are analyzed and areas of cooperation and joint initiatives on the Nordic level that could promote the development and deployment of BECCS are proposed. The project has been carried out by IVL Swedish Environmental Research Institute in collaboration with CICERO (Norway) and VTT (Finland).
