Transcript EU Climate Package: consequences for the Polish economy

EU Climate Package:
consequences for the Polish
economy
Warsaw, 8 September 2008
Agenda
1.
2.
3.
4.
5.
EU climate package – what is it?
Main obligations for Poland
Who should pay for that?
Price of the carbon emission allowances – main risk factor
Forecasts of the impact on Polish economy
Page 2
EU Climate package – what is it?
European Union’s „Climate action and renewable energy package” strategic
objective is to limit the global average temperature increase to not more
than 2°C above pre-industrial levels.
According to the European Council, in the area of Energy Policy for Europe it
should pursue the following objectives:
► Increasing security of supply;
►
Ensuring the competitiveness of European economies and the
availability of affordable energy;
►
Promoting environmental sustainability and combating climate change.
Page 3
Source: European Council, 8-9 March 2007: Presidency Conclusions, Brussels.
EU Climate package – what is it?
To achieve these objectives, European Council proposed the following
measurable targets:
►
At least a 20% reduction of greenhouse gas emissions in EU by 2020
compared to 1990
►
20% share of renewable energies in overall EU energy consumption by
2020
►
Saving 20% of the EU's energy consumption compared to projections for
2020, as estimated by the Commission
►
10% minimum target to be achieved by all Member States for the share
of biofuels in overall EU transport petrol and diesel consumption by 2020,
to be introduced in a cost-efficient way.
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Source: European Council, 8-9 March 2007: Presidency Conclusions, Brussels.
EU Climate package – what is it?
Main instruments that can be used to achieve those targets:
►
European Emission Trading Scheme (EU ETS);
►
Binding emission targets for non ETS sectors;
►
Binding targets for the renewable energy development
►
Support of the development of the Carbon Capture and Storage
Technology (CCS)
►
Revised guidelines on state aid for environmental and climate protection
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Source: European Council, 8-9 March 2007: Presidency Conclusions, Brussels.
EU Climate package – main obligations for
Poland
Main EU Climate package obligations for Poland:
►
Revision of the EU ETS:
►
Introduction of the single EU-wide emission cap and central EU
emission allocation (instead of National Allocation Plans)
►
Gradual replacement of free allocation of emission allowances by the
auctioning of allowances from 2013, reaching full auctioning by 2020
(in case of power stations full auctioning already in 2013)
►
Emission cap for the non-ETS sectors at the 114% of the 2005 emission
level
►
20% share of renewable energy in overall energy consumption by 2020
►
CCS installation obligation for 330 MW and above units
Page 6
Source: ‘Raport 2030’, EnergSys, 2008.
-80
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Source: Annual European Community greenhouse gas inventory 1990-2006 and inventory report 2008.
-43.7
-32.1
-31.9
-55.7
-55.1
-53.0
-8.9
-6.0
-4.0
-2.7
-18.5
-28.9
-60
-16.0
-40
-46.2
-20
-23.7
0
-2.6
24.4
25.5
1.2
1.2
1.7
9.9
13.1
15.2
20
38.3
40
49.5
60
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EU Climate package – who should pay for that?
New Member States are much more advanced in fulfilling Kyoto targets than
EU-15 countries :
Reduction of carbon emissions between Kyoto Protocol base year and 2006
Price of the carbon emission allowances in ETS –
main risk factor
Limited quantity of allowances determines its above-zero price.
► Upper-boundary of CO2 price will determined by the expected cost of penalty
► Relation between CO2 market price and investment decisions is complex:
►
SUPPLY AND DEMAND
coal/gas price ratio, existing infrastructure, etc.
short-term
CO2 MARKET PRICE
medium-term
ENTERPRISE SECTOR
investment decisions
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Source: Voorspools K., ‘CO2 market price logic in 2020’, Fortis.
longer-term
Price of the carbon emission allowances in ETS –
main risk factor
Summary of main forecasts
Publication
CO2 price per tone
European Commission
39 EUR in 2020
FORTIS Bank
30-70 EUR in 2020
50 EUR – the most probable
Deutsche Bank
40 EUR in 2008; 67 EUR in 2020
price above 100 EUR also possible
PointCarbon
43-70 EUR in the years 2013-2020
55 EUR – the most probable
Prof. Żmijewski
price above 100 EUR possible in case of
allowance shortages
Source: ‘Annex to the Impact Assessment’, European Commission, 2008; Voorspools K., ‘CO2 market price logic in 2020’, Fortis;
‘Carbon Emissions’, Deutsche Bank, 2008; Sikorski T., ‘Post 2012 price assessment: Phase 3 Prices’, PointCarbon; Żmijewski K.,
‘CO2 potrzeba przełomu negocjacyjnego – wyzwania dla Polski’, 2008.
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Economic impact
Enterprises
higher production
costs (due to
higher energy and
intermediate goods
prices)
► lower international
competitiveness of
enterprises
► lower production in
the energy
intensive sectors
►
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Households
higher share of
energy in the
consumer
expenses basket
► higher growth of
consumer prices
► lower personal
disposable
incomes
► lower employment
►
Gen. Government
►
►
►
higher incomes
due to allowance
sale
lower incomes
due to slower
economic growth
higher social
transfers and
subsidies or
lower taxes (?)
Whole economy
►
►
►
►
lower GDP level
and growth
higher level and
growth rate of
prices
lower level and
productivity of
new investments
in the production
capacities
deterioration of
trade balance
Economic impact – energy costs
The cost of energy production will rise due to:
►
obligation of allowance purchases or low-carbon investments;
►
investments in the renewable energy sources.
Summary of main forecasts
European Commission
Increase of energy production costs by 23-33% and of
average energy price in the EU by 10-15% in 2020
(assumption about CO2 price: 30-47 EUR).
No estimates for single EU countries available.
ENERGSYS
Increase of energy price by 43-60% (assumption about
CO2 price: 39 EUR)
Prof. Żmijewski
Increase of energy wholesale price by 55% in case of CO2
price at 30 EUR and by more than 100% in case of CO2
price at 47 EUR
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Source: ‘Annex to the Impact Assessment’, European Commission, 2008; ‘Raport 2030’, EnergSys,
2008; ‘CO2 potrzeba przełomu negocjacyjnego – wyzwania dla Polski’, Żmijewski K., 2008.
Economic impact – enterprises
Impact on enterprises through:
►
increase of energy costs – the more severe, the more energy intensive
industry is;
►
CO2 allowance purchases in case of some sectors.
Output changes in comparison to baseline scenario
EUROPEAN
COMMISSION
EU
2020
ENERGSYS
Poland
2020
Poland
2030
Ferrous metals
-8.0%
-20%
-24%
Paper products
-1.1%
-7%
-8%
Mineral products
-2.8%
-16%
-14%
Chemicals output
-4.3%
-10%
-15%
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Source: ‘Raport 2030’, EnergSys, 2008; ‘Annex to the Impact Assessment’, European Commission, 2008.
Economic impact – enterprises
Energy costs changes in comparison to baseline scenario in 2020 (%)
CO2 price
39 EUR
Iron & Steel
35 EUR
30 EUR
18.2%
16.0%
12.5%
Non-ferrous metal
3.9%
3.7%
3.5%
Chemical
6.3%
5.8%
4.9%
Non-metallic minerals of which:
9.2%
7.9%
6.0%
cement
8.9%
7.6%
5.7%
ceramics
8.8%
7.6%
5.8%
glass
8.9%
7.8%
6.1%
14.0%
13.1%
10.5%
Paper and Pulp
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Source: ‘Annex to the Impact Assessment’, European Commission, 2008.
Economic impact – households
Impact on households mainly through:
►
Larger share of energy expenses in total household expenses;
►
Lower energy usage increases and thus slower catching-up process;
►
Lower disposable income increase due to lower GDP growth.
Economic impact on households in Poland
2005-2030 change
without package
2005-2030
change
with package
Electricity price for households
+80%
+123%
Households disposable incomes
+136%
+111%
Electricity use per capita
+97%
+80%
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Source: ‘Raport 2030’, EnergSys, 2008.
Economic impact – households
Social transfers financed by the incomes from auctions are not sufficient to fully
eliminate the adverse impact of climate and energy package on households
Structure of households expenses in Poland
2005
2010
2020
2030
EU ETS without social transfer of incomes from auctions
Housing, water, electricity, gas and
other fuels, of which:
energy, of which:
electricity
19.6
21.6
24.2
23.3
11.0
13.2
16.2
16.2
3.7
5.2
7.5
7.1
EU ETS with social transfer of incomes from auctions
Housing, water, electricity, gas and
other fuels, of which:
energy, of which:
electricity
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Source: ‘Raport 2030’, EnergSys, 2008.
19.6
21.6
22.2
21.4
11.0
13.2
14.1
14.4
3.7
5.2
6.6
6.2
Economic impact – whole economy
Aggregated costs of climate and energy package for the Polish economy
2010
2015
2020
2025
2030
Direct costs
Additional investment in the energy
sector (annual, in mln PLN)
162
2 262
8 536
Average cost of CO2 emission
reduction (in PLN/tone)
81
126
190
164
133
12 801 14 381
Indirect costs – impact on GDP
Change in GDP level compared to
baseline scenario (in bln PLN)
16
71
154
368
503
Change in GDP level compared to
baseline scenario (in %)
-1.3
-4.3
-7.6
-13.6
-14.8
Average annual GDP growth rate
difference (in 5 year periods)
-0.3
-0.7
-0.7
-1.4
-0.3
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Source: ‘Raport 2030’, EnergSys, 2008.
Conclusions
►
EU climate and energy package hinders the pace of economic growth of
the Polish economy and impedes the convergence process.
►
Analysis of the economic costs of the package conducted by the
European Commision are strongly underestimated.
►
The adverse economic consequences of the package may be higher
than the benefits for the environment.
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Thank you for your Attention!