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European climate and energy strategy beyond 2020

European climate and energy strategy beyond 2020. Jesse Scott, EURELECTRIC. The big picture – decoupling growth from emissions. …all call for strong, stable carbon pricing. What’s driving price rises?. Today: internal energy market or x28 chaos?. UK carbon price floor. NL coal tax.

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European climate and energy strategy beyond 2020

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  1. European climate and energy strategy beyond 2020 Jesse Scott, EURELECTRIC

  2. The big picture – decoupling growth from emissions …all call for strong, stable carbon pricing

  3. What’s driving price rises?

  4. Today: internal energy market or x28 chaos? UK carbon price floor NL coal tax MARKETS ARE FRAGMENTED AND POLICIES ARE START/STOP ENERGY MARKET INTEGRATION AND (MORE) PREDICTABLE POLICIES ETS as the key driver Strong innovation policy National RES and EE schemes National carbon price floors/taxes National capacity mechanisms

  5. Alternatives for the 2030 package ETS IEDAQ ETS EPS (IED, AQ) RES innov. support RES support EE regl. demand-side EE regl. supply-side and demand-side

  6. The road to a 2030 framework Step 1: 22 Jan 2014: Commission proposals on goals Step 2: October 2014: European Council political decision on goals Step 3: 2015: Commission drafts legislation to implement goals, spread burdens (Publication before/after Paris COP21?) Step 4: 2016-17: Parliament and Council Co-Decision on legislation Step 5: 2018-19: National transposition where necessary

  7. The road to a 2030 framework Step 1: 22 Jan 2014: Commission proposals on goals Step 2: October 2014: European Council political decision on goals September 2014-Q1 2015: ETS MSR Co-Decision Step 3: 2015: Commission drafts legislation to implement goals, spread burdens (Publication before/after Paris COP21?) Step 4: 2016-17: Parliament and Council Co-Decision on legislation Step 5: 2018-19: National transposition where necessary

  8. The road to a 2030 framework Step 1: 22 Jan 2014: Commission proposals on goals …includes carbon leakage list 2015-20 Step 2: October 2014: European Council political decision on goals September 2014-Q1 2015: ETS MSR Co-Decision Step 3: 2015: Commission drafts legislation to implement goals, spread burdens (Publication before/after Paris COP21?) ...includes new ETS linear factor …includes carbon leakage list 2021-30 Step 4: 2016-17: Parliament and Council Co-Decision on legislation Step 5: 2018-19: National transposition where necessary

  9. ETS is preferable versus other emissions policies Cap-and-trade market = ETS Carbon tax (x28 national, not EU) Emissions limit values (portfolio/plant)

  10. The ETS does three jobs in one… Emissions reduction Global linking (potential) Revenues (for low-carbon investment)

  11. Global success of the ETS

  12. What’s wrong with the ETS today…? Alternative policies? Investment signal?

  13. ETS problems and reforms 3 different problems, 3 different solutions Short-term: Surplus of 2.6bn EUAs by 2020 Solution: permanent set-aside Medium-term: Fixed supply and demand shocks result in price volatility Solution: market stability mechanism Long-term: The ETS cap is not coherent with the EU 2050 goal Solution: strengthen the linear factor

  14. ETS reforms Step by step through 5 policy processes (so far)

  15. Getting to the goal on ETS When can we get real changes? Take-off? € carbon price Effective ETS track Threshold carbon price which can impact opex + capex Commission track 2018 2017 2020 2014 2015 2016 2019 2021

  16. Competitiveness, energy and climate What’s at issue? • There is no such thing as a global level playing field on energy • Europe and the US have different energy situations, so need different energy strategies • Competitiveness is a whole-economy issue • Policies favouring/exempting one sector may have a negative impact on other sectors • Intra-European tax/price/policy differentials result in intra-European leakage • Dutch and German steel compete in the same market but under different renewables, carbon and power prices

  17. Four possible outcomes re the RES target 1: EU RES target delivered through national targets and support schemes Market fragmented and distorted 2: EU RES target with EU harmonisation of support schemes (not yet clear how this would work) Market distorted but not fragmented 3: EU RES target delivered through ETS (mature RES) and innovation support (immature RES) Fully market compatible 4: No EU RES target Unlikely in light of Commission, German, and European Parliament opposition….

  18. The RES increase challenge 21% of electricity mix today to 45% by 2030 EU RES 2013 – approx 21% EU RES 2030 – approx 45% 5% biomass 10% hydro 6% intermittent 5% biomass 10% hydro a x5 increase in intermittent generation ? 30% intermittent

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