Transcript An IFIEC Europe Perspective - SVSE

Carbon Policy and Effect:
An IFIEC Europe Perspective
Presentation to AEM
by
David Gillett
IFIEC Europe Climate and Efficiency WG
IFIEC World Board Member
Prague
8 September 2004
The Politics of Carbon









1979 – 1st World Climate Change Conference
1988 – UN 43/53 “Protection of global climate for present
and future generations of mankind”
1988 – Intergovernmental Panel on Climate Change (IPPC) set
up
1990 – 1st IPPC Assessment Report – confirmed threat
1990 – 2nd World Climate Change Conference – call for global
treaty
1990 – UN 45/212 – called for a Convention & set up
mechanism
1992 – UN Framework Convention on Climate Change
(UNFCCC) agreed
1992 – UNFCCC opened for signing of the Rio Earth Summit
1994 – UNFCCC came into force and 188 States now signed &
ratified the Convention
IFIEC Europe
2
The Politics of Carbon
• That was the easy part!
• It became much more difficult!
IFIEC Europe
3
The Politics of Carbon
In 1988 the Board of IFIEC Europe decided an
environment focus was needed.
Why?
Links with the Commission were indicating the future
policies (Delors Presidency).
The European Commission was growing stronger and saw
climate change as a route to establishing itself globally.
Different standards were being discussed - dangerous
for energy reliant industries competing in global
markets.
IFIEC Europe
4
The Politics of Carbon
Issues
 Large Combustion Plant Directive (introduced
and revised)
 IPPC Directive and Horizontal BREF’s
 Air Quality Standards
 CHP (and Comitology Committee)
 Renewables
 Kyoto Protocol and EU burden sharing
 Emissions Trading
 Environment Taxes
IFIEC Europe
5
The Politics of Carbon
IFIEC and the Protocol
IFIEC Europe saw the UNFCCC process as a
major challenge to European manufacturing.
Action was taken to rebuild IFIEC’s elsewhere
as part of the IFIEC World structure and to
use the NGO status IFIEC World held with the
UN. This would give IFIEC access to the
meetings and rights in making interventions.
IFIEC Europe
8
The Politics of Carbon
 Much of the early 1990’s was spent with
detailed studies on climate
 Doubts were expressed widely over the
validity and independence of some of this
work, but this is now history. Climate change
is part of everyday talk.
 By 1995 the political pressure was on for all
Annex 1 countries to sign the Protocol with
substantial reduction commitments
IFIEC Europe
9
The Politics of Carbon
 IFIEC World attended the March SUBSTA meeting in Bonn in
1997. These meetings were meant to be technical, but the 2nd
part had become a senior political meeting with heavy pressure
applied.
 USA wanted trading built into any Protocol and were talking with
Russia.
 EU wanted to lead the world to agreement.
 In August 1997, IFIEC World “went it alone” at the Bonn
SUBSTA meeting. A booklet was produced and delegates invited
to a Workshop and Lunch. Over 100 attended.
IFIEC Europe
10
The Politics of Carbon
IFIEC World attended Kyoto. Every
delegate received an update leaflet to
go with the booklet.
IFIEC World was given an Intervention
and spoke to the full Convention. No
other consumer grouping had this.
IFIEC Europe
11
The Politics of Carbon
EU returned from Kyoto with a European commitment
to an 8% reduction in GHG in each Member State.
That 8% (336m tonnnes) was then re-assigned in an EU
“Burden Sharing” agreement in a range from +27%
(Portugal) to -28% (Luxembourg)
IFIEC Europe
12
The Politics of Carbon
The Kyoto Protocol was an agreement that
activated the Convention’s principles of:
– allowing economic development;
– the polluter paying.
This produced a mechanism where Annex 1
States (the long term industrialised economies
said to have caused historic damage) were
required to reduce GHG emissions, whilst
developing economies were not.
IFIEC Europe
13
The Politics of Carbon
 It was clear when the Protocol (KP) was signed
at COP 3 in Kyoto that persuading at least 55
signatory countries, representing 55% of the
1990 CO2 emissions, to ratify the Protocol
was going to be difficult.
 189 have ratified but these only represent
44.6% of the required emissions
IFIEC Europe
14
The Politics of Carbon
Since KP was signed, detailed meetings have been held
to define “sinks”, monitoring regimes, verification
procedures and baseline accounting.
IFIEC Europe not been involved in these. We decided
that our focus must be within EU, as the commitment to
carbon reduction means Europe “going alone”, regardless
of whether KP comes in force;
Increasingly that focus has moved to the Council and
Member States where the social and economic effects
of reducing competitiveness carry greater weight than
with DG ENV;
IFIEC Europe
15
The Politics of Carbon
IFIEC and the Protocol
IFIEC position in 1996 and 2004 is that:
 global problems need global responses.
 market measures based on voluntary agreements take
us forward
 taxes take us backwards
 only 16% of OECD emissions are from the
manufacturing sector and are declining steadily
 ultimately, technology is the only answer, so research
and promotion must be part of the “package”.
 polluter pays principle is supported, but obligations
must be linked to proven technologies.
 retaining competitiveness is essential
IFIEC Europe
16
The Politics of Carbon
Emissions Trading
 Politically, arguing against carbon reduction is futile. Climate
change is a political fact. It is the speed and extent of the
reduction where the debate lies.
 CDM and JI need company involvement and States need
credits to meet commitments, so companies must be able to
trade if there is to be market liquidity.
 Manufacturing is vulnerable, so argue:
– that targets are national and should be met by national
apportioning;
– the social and economic results of eroding competitiveness.
– that “cap and trade” schemes restrict growth;
– that viable trading needs open energy markets;
IFIEC Europe
17
The Politics of Carbon
Emissions Trading
IFIEC was in debate with:
 DG Energy (and as part of the Consultative
Committee);
 DG Industry
 DG Competition
….. and took part in DG Env Workshops and consultative
groups as well as making direct presentations
….. and made a presentation to the President’s Chef de
Cabinet
IFIEC Europe
18
The Politics of Carbon
Emissions Trading
Little progress was made, which was exactly
what other industry groups in the Brussels
lobby were experiencing!
What was meant by a “market mechanism” in
parts of the Commission differed from our
understanding.
Power of DG Environment vs other DG’s
IFIEC Europe
19
The Politics of Carbon
IFIEC moved the debate to Member
States ready for the debate on Council




How will credits be allocated?
How is growth included in a capped scheme?
How will new enterprises be included?
How will national credits link with international CDM
and JI schemes?
IFIEC Europe
20
The Politics of Carbon
IFIEC does not believe Kyoto is the correct tool or
that the EU burden sharing is deliverable without
severely affecting manufacturing and the wider
economies.
Do Member States believe this as well?
 Can National Allocation Plans “harmonise”?
 Can Governments act proportionately on carbon
producing sectors?
 What will be the value of a tonne of carbon?
IFIEC Europe
21
The Politics of Carbon
 IFIEC launched the results of its study into the costs of
emissions trading at its Forum in October 2003.
 This followed the change to annual allocation = 85% of
emissions.
 The results show the costs of trading probably is small, but
the effects on electricity prices and generator margins could
be dramatic.
 Other studies show the same potential effect.
 € 0.07/MWh added costs from trading rising to €17/MWh
@ €20/tonne CO2 on electricity prices;
 Windfall profits from excess allocation sales from coal
based generation.
IFIEC Europe
22
The Politics of Carbon
---- and the reality?




On all EU exchanges the forward prices of gas and
electricity are higher from 2005. The baseline cost
has moved already.
Gas demand will not be met and prices will increase.
During phase 1 of EUETS the carbon cost addition
could be €4/MWh.
Early in phase 2 of EUETS the projected carbon
cost addition could be €7-10/MWh and rising to
2012.
IFIEC Europe
23
The Politics of Carbon
And next?
Lobby EU during phase 1 of the Directive (to 2007) for
changes in the Directive’s structure for the 2nd period (to
2012).
Lobby EU against the electricity price effect.
Argue strongly for the Lisbon Strategy and competitiveness to
be at the core of the New Commission’s policies.
Decide a position with IFIEC World to support the move in
COP 10 to review whether the Kyoto Protocol principles can
be achieved in a way that is attractive to all nations.
IFIEC Europe
24
The Politics of Carbon
Carbon Policy and Effect:
An IFIEC Europe Perspective
David Gillett
IFIEC Europe