Carbon pricing and complementary mechanisms
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© OECD/IEA 2010 Carbon pricing and complementary mechanisms Christina Hood, International Energy Agency ECF Roundtable “From Roadmaps to Reality” Brussels 23 October 2012
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Carbon pricing and complementary mechanisms. Christina Hood, International Energy Agency. ECF Roundtable “From Roadmaps to Reality” Brussels 23 October 2012. Outline From climate models to real-world policy: the case for policy packages in climate change - PowerPoint PPT Presentation
Transcript of Carbon pricing and complementary mechanisms
© OECD/IEA 2010
Carbon pricing and complementary mechanisms
Christina Hood, International Energy Agency
ECF Roundtable “From Roadmaps to Reality”Brussels 23 October 2012
© OECD/IEA - 2010
OutlineFrom climate models to real-world policy:
the case for policy packages in climate change
Policy interactions : mutually reinforcing, or undermining ?
Promoting investment under uncertainty
© OECD/IEA - 2010
Price of CO2€/tCO2e
MtCO2
Policies to unlock cost-effective energy efficiency potential that is blocked by non-economic barriers
Carbon price mediates action economy-wide
From MAC curves to policy packages
Technology support policies to: • reduce long-term costs • Enable timely scale-
up
Reduced long-term marginal abatement cost
Infrastructure, Financing
Source: Summing up the Parts, 2011
© OECD/IEA - 2010
What investments are we trying to drive?
Source: Energy Technology Perspectives 2012
© OECD/IEA - 2010
Policy Interactions:
Energy efficiency policies and carbon pricing can be mutually reinforcing.
Carbon price reduces rebound from energy efficiency policies
Energy efficiency policies keep carbon prices from being unnecessarily high
© OECD/IEA - 2010
Price of CO2€/tCO2e
MtCO2
Conventional TechnologiesNew Technology
(a)
Price of CO2€/tCO2e
MtCO2
(b)
Ambitious target
Carbon price ambitious target
Modest target
Carbon price modest target
Ambitious target
Carbon price ambitious target
Modest target
Carbon price modest target
Technology support can lower long-term carbon prices
Source: Energy Technology Perspectives 2012
© OECD/IEA - 2010
EMISSIONS CAP 30% BELOW BAU
BAU EMISSIONS
Reductions from: energy efficiency polices technology policies price response in trading scheme
10 %
15 %
SUPPLEMENTARY POLICIES UNDERACHIEVE
(a)
5 %
SUPPLEMENTARY POLICIES OVERACHIEVE
(b)
Policies interact, so design as a package e.g. Carbon price level depends on supplementary policy
delivery
Source: Summing up the Parts, 2011
© OECD/IEA - 2010
EMISSIONS CAP 30% BELOW BAU
BAU EMISSIONS
Reductions from: energy efficiency polices technology policies price response in trading scheme
10 %5 %
BAU 5% LOWER THAN FORECAST
(a)
Adjust cap downward to restore scarcity in trading scheme?
(b)
e.g. Carbon price level more sensitive to economic conditions with supplementary policies
Source: Summing up the Parts, 2011
© OECD/IEA - 2010
Questions on policy interactions
Policy packages can reduce costs and improve the feasibility of climate policy in the short and long term. But…
1. Can policy overlaps and interactions be adequately managed?
… and if not, when is it better to choose a simpler policy package and sacrifice some mitigation potential?
2. How does the answer depend on whether policies are implemented at EU or member state level?
© OECD/IEA - 2010
0
5
10
15
20
25
30
35
40
2010 2020 2025 2030 2035
Delay until 2017Delay until 2015
2015
Emissions from existinginfrastructure
The door to 2°C is closing,but will we be “locked-in” ?
Without further action, by 2017 all CO2 emissions permitted in the 450 Scenariowill be “locked-in” by existing power plants, factories, buildings, etc
456°C trajectory
2°C trajectory
CO2 e
miss
ions
(gig
aton
nes)
Source: World Energy Outlook 2011, IEA
© OECD/IEA - 2010
Question - how to best deliver investment in low-carbon despite current uncertainties?
1. Improve long-term certainty of domestic policy… ? … but until there is greater consensus internationally there will still be discounting … but mixed messages based on today’s political actions
2. Supplement with transitional policies to steer investment (e.g. UK CFDs) until there is greater international consensus on climate policy? Should this be explicitly acknowledged at EU level?
© OECD/IEA - 2010
Thank you
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