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?
ETS as the key driver
Strong innovation policy
MARKETS ARE FRAGMENTED AND POLICIES
ARE START/STOP
ENERGY MARKET INTEGRATION
AND (MORE) PREDICTABLE POLICIES
Today: internal energy market or x28 chaos?
UK carbon
price floor
NL coal
tax
National RES and EE schemes
National carbon price floors/taxes
National capacity mechanisms
Alternatives for the 2030 package
ETS
IED
AQ
ETS
EPS (IED, AQ)
RES
innov.
support
RES support
EE regl.
demand
-side
EE regl. supply-side and
demand-side
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
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
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
ETS is preferable versus other emissions policies
Carbon tax (x28
national, not EU)
Cap-and-trade market
= ETS
Emissions limit values
(portfolio/plant)
The ETS does three jobs in one…
Global linking
(potential)
Emissions reduction
Revenues (for lowcarbon investment)
Global success of the ETS
What’s wrong with the ETS today…?
Alternative policies?
Investment signal?
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
ETS reforms
Step by step through 5 policy processes (so far)
Process
Impact
Status
In force
Goals
1.
Back-loading
Cosmetic fix, helps market
confidence
Done
2014-18
//
2.
Market stability
reserve
Useful re price volatility, slow
impact on surplus
In Co-Decision
2021?
From 2017,
include backload
3.
Set-aside
Could solve surplus, no impact on
linear factor
Political debate
n/a
Member State
consensus?
4.
Linear factor
revision
Crucial, but only slow impact on
surplus
White paper
2021?
Stronger %?
5.
Extension to more
sectors
Would help secure the ETS system,
could solve surplus and linear
factor
Under
consideration
After 2021
COM White Paper
€ carbon price
Getting to the goal on ETS
When can we get real changes?
Take-off?
Threshold carbon price which can impact opex + capex
2014
2015
2016
2017
2018
2019
2020
2021
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
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….
The RES increase challenge
21% of electricity mix today to 45% by 2030
EU RES 2013 – approx 21%
5% biomass
10% hydro
5% biomass
10% hydro
6% intermittent
EU RES 2030 – approx 45%
a x5 increase in intermittent generation ?
30% intermittent