Transcript E3G

Managing risk:
Why the 30% GHG target is important for
GDP, political security and economic
growth.
Climate Summit, Budapest. 19 January, 2011
Sanjeev Kumar
[email protected]
+32 499 539731
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E3G
• Independent, non-profit European organisation working to
accelerate the transition to sustainable development. Based in
London, Brussels, Berlin, Washington and Beijing.
• Programmes of work on climate diplomacy, climate security and low
carbon economy
• Advises on international climate strategy to major EU governments,
Most Vulnerable Countries, International NGOs and charitable
foundations
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Contents
• What are the risks?
• The case for doing nothing
• Expectations from the Hungarian Presidency
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Risks facing the EU
Economic
External
Competitiveness
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Source: Climate Change impacts in Europe.
PESETA (2010).
Large Uncertainty around Climate
Sensitivity – mainly on negative side
Source: UK CCC, 2008
Source: NOAA, 2009
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Estimates of likely impacts have been
growing over time
2C
Source: Smith et al.,
2007 Dangerous Climate
Change: An Update of
the IPCC Reasons for
Concern
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Economic: Annual damage to GDP from
climate change impacts
Source: Climate Change impacts in Europe. PESETA
(2010).
Source: Climate Change impacts in Europe. PESETA
(2010).
Competitiveness: Innovation, markets
and wealth
• Producing products and services to satisfy demand.
Protectionism and delaying investment reduces gives
competitive advantage to the EU’s economic rivals.
• Global market for low carbon goods & services was
worth over €3.4 trillion in 2008/2009 (Source: UK
Business Dept for Business & Enterprise 2009).
• At €467 billion, climate revenues from the equity market
have now outstripped the aerospace and defense
sector, and could exceed $2 trillion (€1.76 trillion) by
2020 (Source: HSBC Annual review index 2009).
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Competitiveness: Investment drivers
Stimulus funding
Smart Grids
(Source: HSBC)
(Source: KEMA)
EU
€17 billion
€1.4 billion
US
€84 billion
€5.3 billion
China
€166 billion
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€5.6 billion
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Competitiveness: China’s importance
• 14% of EU GDP is dependent on Chinese imports.
(Chatham House 2008).
• China is major export market and greater value to EU
than US as of 2008.
• China plans to spend $300 billion into dedicated highspeed-rail corridors by 2020. (Business Green)
• 2010 target to create 1 million electric cars by 2020 from
10bn Yuan fund. (China Daily)
• China spending more than any other G20 on low carbon
energy (Pew Centre). Most attractive centre for
Renewables beating US and Germany.
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External: European security most at risk
than other OECD economies
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External: Africa is extremely vulnerable
2000
2050
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End of cheap conventional oil
mb/d
Oil production
in the Reference Scenario
120
NGLs
Unconventional oil
100
Crude oil – fields yet to be developed
or found
Crude oil – currently producing fields
80
60
40
20
0
2000
2008
2030
Sustained investment is needed mainly to combat the decline in output at existing fields,
which will
drop
by almost
two-thirds by 2030
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© OECD/IEA - 2009
External: Energy geopolitics
• Oil:
– EU is major importer of energy. IEA estimates EU energy
imports cost €54bn in 2010. OPEC agreed to produce more to
keep prices below $100 barrel (18 January 2011 – FT).
– EU produces 14% of oil that it consumes. 44% imported from
Russia (29%) and Norway (15%).
– Since 1998, diesel consumption growing and gasoline
consumption falling. Refining capacity has remained split since.
So diesel subsidy policy driving closure of gasoline refining
capacity increasing oil dependence.
• Gas:
– 26% of gas is imported. Main EU producers are UK and
Netherlands. Imports come from Russia (42%), Norway (24%),
Algeria (18%) and Nigeria (5%).
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Contents
• What are the risks?
• The case for doing nothing
• Expectations from the Hungarian Presidency
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The case against: It’s too costly
• 40-80% of the additional target can be delivered through
no cost measures (CE Delft). Additional 16MtCO2 can
come from lucrative and high-value electric car market
(Ecofys).
• Energy savings are immense: EU energy import savings
of €68bn per year (European Commission). Additional
€96bn per can be saved if oil price increases to $148
per barrel (E3G).
• High-value 30% target should generate €45bn.
Additional €30.5bn from health-related benefits (HEAL
and HWCH Europe).
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The case against: Our companies will
leave if no one else does anything….
•
•
•
•
•
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EU ETS is largest industrial subsidy in the history of the EU with all sectors
making windfall profits.
Commission estimates 2.4 Gt CO2 of banked allowances and unused
international credits in the system by 2020. So ETS not effective until after
2028. (European Commission, May 2010).
ETS 3rd Phase oversupplied by 99 MtCO2 of allowances. Even if the EU
moves to a 30% reduction target and imposes quality restrictions on CDM
credits, it would take until 2017 for the market to absorb the excess
allowances from 2nd Phase. (Societe General 2010).
PRIMES model estimates EUA price of €16 by 2020 and €18 by 2020.
Today’s is €14. (PRIMES 2010).
Cement, steel, power generation sectors subject to serious cartel abuse
which damages the rest of the EU economy. .
Other regions are implementing polices: China 5 year plan, Indian energy
efficiency scheme, Californian ETS.
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Contents
• What are the risks?
• The case for doing nothing
• Expectations from the Hungarian Presidency
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Expectations from the Hungarian
Presidency
Finance
Climate
Energy
Climate
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The priorities for the Hungarian
presidency
• Functioning internal market: liberalisation and competition in the
cement, steel and power generation sectors. New regulatory
system needed to reward energy savings, drive grid investment in
electricity markets.
• Financing transformation: Maximising use of EU Budget to
deliver transformative change.
• Low carbon industrial policy: Electric car market is vanguard of
low carbon world. Large source of green jobs, reduces oil
dependence, stimulates new regional infrastructure investments.
• Climate target: Identifying the optimal design of the climate target.
• Securing Head of State Commitment for unilateral move to a
domestic 30% GHG target in the March European Council
meeting.
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