Transcript Economic Analysis of EU-wide Emissions Trading of CO2

EU Climate policies
&
Bio-energy
Estonian conference on
“The contribution of agriculture to energy production”
Talinn, 7 Ocotber 2005
Erik Tang
Climate Change & energy
DG Environment
European Commission: Environment Directorate General Slide: 1
The state of play:
The Science is robust
• Most of the earth’s warming over
the last 50 years (0.6° C) can be
attributed to human activities
• Global temperature will increase
by 1.4 – 5.8°C over next 100 years
Source: IPCC TAR
European Commission: Environment Directorate General Slide: 2
Factual signs:
Impacts in Europe
• Terrestrial ecosystems and biodiversity
• Glaciers, snow and ice
• Marine ecosystems
• Agriculture
• Economy
• Human health
EEA (2004): Impact of Europe’s changing climate
European Commission: Environment Directorate General Slide: 3
Climate change impacts: Agricultural
yields will be affected
European Commission: Environment Directorate General Slide: 4
Where do we stand today now?
1990 emissions = 100
Impact of climate policies on emission trends in EU-15
('Bubble'), (most recent data of 2002)
110
108
106
104
102
100
98
96
94
92
90
1990
Business as usual
with actual policy
measures
with envisaged policy
measures
Linear Kyoto Path
1995
2000
2005
2010
year
European Commission: Environment Directorate General Slide: 5
Where do we stand today now- EU10
European Commission: Environment Directorate General Slide: 6
Where do we stand today now- EU25
Figure 1:Actual and projected emissions for EU-25 and EU-15
110
105
base year emissions=100
EU-25 emissions
EU-25 existing measures
EU-25 additional
measures
EU-15 emissions
100
EU-15 existing measures
EU-15 additional
measures
EU-15 target (Kyoto)
EU-15 target + Kyoto
mechanisms
Business as usual
95
Linear target path
Kyoto mechanisms
2010
2005
2000
1995
1990
90
Note: Data exclude emissions and removals from land-use change and forestry.The figure refers to a theoretical EU-25 base-year as 100 in
order to allow a consistent analysis of greenhouse gas emission trends and projections.This base-year for EU-25 has no legal status.It is 1990
for most Member States for CO2, methane (CH4) and nitrous oxide (N2O) but 1995 for fluorinated gases, with the following exceptions: The
base year for CO2, CH4 and N2O for Hungary is the average of 1985-1987, for Slovenia 1986 and for Poland 1988; the base year for
fluorinated gases is 1990 for France and Finland.This means that the value for 1990 is not exactly 100.Cyprus and Malta are not included due
to lack of data and because they do not have targets under the Kyoto Protocol. The linear target path shows the theoretical linear decrease in
GHG emissions up to the Kyoto target from the base year level until 2010, the mid-term year of the first commitment period.
Source: EEA, 2005
European Commission: Environment Directorate General Slide: 7
The 550ppm scenario: Cut global emission
by 15-20% by 2050 as compared to 1990
80
GHG Emissions (GtCO2-eq)
70
Baseline
60
50
40
S650e
30
S550e
20
10
0
1970
1990
2010
2030
2050
2070
2090
Source: GCNRS/LEPII-EPE/RIVM/MNP/ICCS-NTUA/CES-KUL study
European Commission: Environment Directorate General Slide: 8
major impacts on future energy systems
Source: GCNRS/LEPII-EPE/RIVM/MNP/ICCS-NTUA/CES-KUL study
European Commission: Environment Directorate General Slide: 9
Energy efficiency is key in reducing
global GHG emissions
European Commission: Environment Directorate General Slide: 10
ECCP: Most important EU legislation in
implementation relating to climate change
PAM
Reducion
potential (Mt
CO2-eq.)
Entry into force
Starting to
deliver
EU emission trading scheme
-
2003
2005
Link JI/CDM to emission trading
-
2004
2005/
2008
Revision of the Monitoring Decision
-
2004
-
Dir. on the promotion of CHP
65
2004
2006
Dir. on energy performance of buildings
35-45
2003
2006
Dir. on the promotion of transport bio-fuels
35-40
2003
2005
Dir. on the promotion of electricity from renewable energy
sources
100-125
2001
2003
Landfill directive
41
1999
2000
ACEA voluntary agreement
75-80
1998
1999
Energy labelling directives
European
11
20 Commission: Environment
1992 Directorate General Slide:1993
Develop new technologies: Reverse spending on
international R&D for energy
European Commission: Environment Directorate General Slide: 12
EU agricultural emissions decreased
8% in 1990 -2001
European Commission: Environment Directorate General Slide: 13
post 2012 : objective and process

EU goal : limit global warming to 2°C

European Spring Council March 2005:
“looks forward to considering medium and longer term emission
reduction strategies, including targets” / Commission is invited “to
prepare a report on benefits and costs taking account both of
environmental and competitiveness considerations”



ISC group on post 2012
stakeholder consultation (170 replies in total,
including CEPF, future forests, CEPI)
Commission report to be issued in January 2005
European Commission: Environment Directorate General Slide: 14
issues post 2012 & agriculture &
forestry sector
climate change impacts : EU & worldwide (costs of non action)
 adaptation : EU & world-wide
 LULUCF (deforestation, sinks)
 mitigation strategies : bio-energy as a CO2
neutral energy source

European Commission: Environment Directorate General Slide: 15
agricultural & forestry sector & climate
change
nitrates directive
 RES-E Directive
 biofuels directive
 Common Agricultural Policy – set aside and
energy crops scheme
 Rural Development Policy (forestry)
looking forward :
 Biomass action Plan
 Structural & Cohesion Funds 2007-2013
 Future 2020 targets for RES?

European Commission: Environment Directorate General Slide: 16
ETS & (biomass) renewables
one uniform price/ EU market for CO2
allowances…
 affecting the competitive situation of the
various primary energy sources
 renewables get cost advantage as they do
not need to surrender CO2 allowances
 liberalisation opens market for innovative
suppliers, eg. renewables

European Commission: Environment Directorate General Slide: 17
EU ETS: price and traded volumes
3 October 2005
EUA 2005 (€/tCO2)
€22.75
Traded Volumes, January 2004 - August 2005
million tons CO2
140
120
100
80
monthly
60
cumulative
40
20
Ja
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ar
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ay
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4
Ju
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M
ar
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ay
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Source: Point Carbon's Carbon Market DailyEuropean Commission: Environment Directorate General Slide: 18
ETS & (biomass) renewables


impact on improved competitiveness of bioenergy depends on allowance price (scarcity)
expected moderate prices in first trial period will
bring limited incentives, but :
can tip the balance for near competitive applications
 raises awareness of carbon constraint and search for
alternatives to fossil fuels
 comes on top of other dedicated instruments (eg. RESE) …
 and high oil prices

European Commission: Environment Directorate General Slide: 19
ETS & (biomass) renewables

short term direct impacts:
 increased use of co-firing in coal power plants
 increased use of biomass in pulp&paper

longer term : allowance price impacts on
 investments decisions;
 make or buy decision for energy users
 emergence of new “low carbon energy”
suppliers
European Commission: Environment Directorate General Slide: 20
JI/CDM link to ETS
An indirect link exists as of 2008 through
international emissions trading
 Linking proposal: to provide more flexibility
and certainty to legal entities
 In concrete terms, linking means that
JI/CDM credits can be used by operators to
fulfil their domestic obligation
 Linking implies the recognition of JI/CDM
credits as equivalent to allowances

European Commission: Environment Directorate General Slide: 21
JI/CDM link to ETS



avoiding double counting : no ERUs for installations
covered by the Directive
Baseline takes into account environmental acquis in
EU and accession countries
provisions for control of MS which projects “come
in”
European Commission: Environment Directorate General Slide: 22
bio-energy scenario 2010 – 2020 :
GHG emission reductions
http://europa.eu.int/comm/energy/res/sectors/doc/bioenergy/bioenergy_role_2000_2010_2020.pdf
European Commission: Environment Directorate General Slide: 23
bio-energy scenario 2020 : energy
European Commission: Environment Directorate General Slide: 24
outlook for bio-energy
Review RES-E Directive
 Biomass action Plan
 Common Agricultural Policy & Rural
Development Policy
 Structural&Cohesion Funds 2007-2013
 Future 2020 targets for RES

European Commission: Environment Directorate General Slide: 25
Well-to-Wheels analysis
of future automotive fuels and
powertrains
in the European context
09/2005
A joint study by
EUCAR / JRC / CONCAWE
Overview of Results
Slide 26
General Observations: Costs



09/2005
A shift to renewable / low carbon sources is currently costly
 However, high cost does not always result in high GHG emission
reductions
 At comparable costs GHG savings can vary considerably
The cost of CO2 avoidance using conventional biofuels is around
 150-300 €/ton CO2 when oil is at 25 €/bbl
 50-200 €/ton CO2 when oil is at 50 €/bbl
Syn-diesel, DME and ethanol from wood have the potential to save
substantially more GHG emissions than current bio-fuel options at
comparable or lower cost per tonne of CO2 avoided.
 Issues such as land and biomass resources, material collection, plant
size, efficiency and costs, may limit the application of these processes
Slide 27
Potential of biomass residues




09/2005
Availability of biomass for biofuels is less than for bio-energy:
 Advanced biofuels plants need to be large for reasonable economics
 Crop residues are mostly highly dispersed: better suited to local heating.
STRAW is the most concentrated residue
 can be taken when soil water-retention is not critical
 that means in the best cereals-growing areas: 37% of EU 25 wheat
 Straw/grain ratio about 0.65 in these high-yield regions
 total about 600 PJ/y
FOREST RESIDUALS cost rises steeply with transport distance
 above 365 PJ/y in EU 25 it becomes more expensive than pulp wood
 practically all wood-industry waste is recycled inside the industry
BIOGAS availability depends on price:
 much of the potential feedstock is too dispersed for economic plant size
Slide 28
Alternative use of primary energy resources Biomass
Potential for CO2 avoidance from 1 ha of land
25
Using biomass for
electricity generation
offers even greater
savings
20
t CO2 avoided / ha/a
CO2 savings per hectare
are better for advanced
biomass than ethanol or
biodiesel
Wood
processing
15
Electricity
Conventional biofuels
10
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Reference case:
2010 ICE with
Conventional fuel
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Wood gasification or direct use of biomass for heat and power
offers greatest GHG savings
09/2005
Slide 29
Conclusions




09/2005
A shift to renewable/low fossil carbon routes may offer a significant GHG reduction
potential but generally requires more energy. The specific pathway is critical
No single fuel pathway offers a short term route to high volumes of “low carbon”
fuel.
 Contributions from a number of technologies/routes will be needed.
 A wider variety of fuels may be expected in the market
 Blends with conventional fuels and niche applications should be considered if
they can produce significant GHG reductions at reasonable cost
Transport applications may not maximize the GHG reduction potential of renewable
energies
Optimum use of renewable energy sources such as biomass and wind requires
consideration of the overall energy demand including stationary applications
 More efficient use of renewables may be achieved through direct use as
electricity rather than road fuels applications
Slide 30
Well-to-Wheels analysis
of future automotive fuels and powertrains
in the European context
The study report will be available on the WEB:
http://ies.jrc.cec.eu.int/WTW
For questions / inquiries / requests / notes
to the consortium,
please use the centralised mail address:
[email protected]
09/2005
Slide 31