ENERGY AND CLIMATE CHANGE - InfluenceMap...Energy policy and climate action are cornerstones for...

POSITION PAPERS / FACTS AND FIGURES

ENERGY AND CLIMATE CHANGE

FOREWORD

Energy policy and climate action are cornerstones for building a sustainable future for Europe.

The challenges in both fields remain huge and are interlinked. The availability of a sustainable and affordable low carbon fuel mix is crucial for the European Union to enable its economy to meet the climate targets without putting at stake the competitiveness of its industries.

Moreover, the evolution towards a low carbon society requires important decisions to make Europe’s energy markets more sustainable, resilient and future-proof while maintaining a secure access to energy.

We should also not lose sight of the fact that Europe is part of a global market and we need to find ways to keep Europe growing while limiting our carbon footprint and increasing energy efficiency. Climate change is foremost a global challenge and the EU should keep convincing other regions to make similar commitments and putting in place policies such as carbon pricing to reach the objectives.

The European Round Table of Industrialists (ERT) wants to be part of the energy and climate action debate. This folder contains the views, illustrated with facts and figures, of the CEOs and Chairmen of some of Europe’s leading industrial companies.

Bruno LafontChairman and Chief Executive Officer, LafargeChairman, ERT Energy and Climate Change Working Group

These messages build upon the key points in ERT’s ‘Agenda for Action 2014-2019’ and the specific positions on ‘Energy Security’, the ‘Single Energy Market’, the ‘2030 Framework for Energy and Climate Policy’ and the ‘International Climate Agreement’.

• Growth, competitiveness and climate policy: mutually reinforcing!Industrial growth and competitiveness are essential to support the EU’s climate change commitments. An EU agenda for growth helps to maintain an industrial base in Europe and attracts investments for sustainable and low-carbon technologies.

• Energy cost and prices: essential drivers of the EU’s industrial competitiveness!Energy costs and prices have an important impact on the EU’s industrial competitiveness. EU specific regulatory costs leading to higher energy prices should be reduced and harmonised across the EU. Moreover, European industry exposed to global competition should be exempted from any EU specific regulatory cost affecting energy prices in order to safeguard its international competitive position.

• Energy efficiency: unleash untapped potential!Appropriate incentives are needed to promote energy efficiency in those sectors with the largest potential, such as transport, buildings and agriculture.

• Energy policies: coordinate EU action!Energy policies and preferences in the EU Member States need to be better coordinated and monitored, as decisions in one Member State will impact the energy supply in another.

• Predictability to unlock investment and innovation! A stable and predictable energy and climate policy framework is key to enable European industries to make long-term investment decisions in Europe.

• Energy supply must be diversified: a matter of cost and security!The availability of a secure, sustainable, competitive and diversified energy supply is crucial. Europe should prioritise natural gas within the energy mix and allow the safe and environmentally responsible exploration of indigenous resources. Also, make intelligent use of existing assets, including nuclear where it exists, operating under safe conditions.

• Gas and power: connect the EU! Energy networks need to be better connected and optimised throughout the European Union. A single European energy market would ensure a cost-effective use of all energy sources and increase Europe’s energy security. New technologies such as smart grids and smart meters contribute to this end.

• Climate commitment: engaging EU partners is a key success factor!Encourage the EU trading partners to commit to ambitious energy and climate policies. Limiting global warming to 2°C is a common global challenge and all economies should accept their responsibility.

• GHG emissions reduction: flexibility reduces costs!The most cost effective way to reduce Europe’s industrial GHG emissions is (1) a market based cap and trade system leading to predictable carbon pricing and (2) offsetting schemes based on a reformed CDM (Clean Development Mechanism). Norms and standards have a role in tackling GHG emissions from both ETS and non-ETS sectors.

• Climate policy: an opportunity for the EU if innovation is European!Innovation and technology development are crucial for finding and deploying the climate and energy solutions of tomorrow and for keeping the value chain for providing and producing these solutions in Europe.

HIGH-LEVEL MESSAGES ON ENERGY AND CLIMATE CHANGE

JANUARY 2015

European Round Table of IndustrialistsPlace des Carabiniers 18a Karabiniersplein I B-1030 Brussels I Tel. +32 2 534 31 00 I www.ert.eu I [email protected] I Twitter - @ert_eu

The EU-28 depends on average for 54,8% of its gross inland energy consumption on external suppliers. A resilient EU energy policy would enable all Member States, despite their varying degree of dependency, to better cope with external supply shocks in both the long and short term.

Specifically for the electricity market, some Member States are net exporters while others rely on electricity imports. In addition, the increasing share of renewable electricity generation and the diverse regional geographical suitability for its production requires well-connected networks, aligned infrastructure and management across the EU.

The availability of sustainable low carbon energy both in terms of quantity and costs also impacts the EU industries’ competitiveness throughout the value chain. This is another reason why the question of energy security merits particular attention, and why ERT makes the following recommendations:

1. Conserve energy and increase energy efficiency of those parts in the economy with the largest potential

• Energy efficiency measures should focus more on sectors outside the EU ETS which are not sufficiently incentivised by the market, such as buildings and transport. Stimulated by the current market conditions, industry has, within technological limits, significantly improved its energy efficiency.

• Establish a harmonised framework that fosters further energy conservation and efficiency improvements by implementing available or new technologies, products and services for those sectors with the largest potential, and by supporting behavioural changes.

2. Focus on sustainable domestic energy production, while diversifying supply sources

• Europe needs a long-term political vision and legal continuity leading to a predictable and stable framework for exploiting domestic energy sources. This is essential to support existing operations and to attract new investment in Europe’s energy production assets, such as in new offshore installations (for example, oil and gas in the Black Sea or wind facilities). Legislative changes with a retro-active impact should be avoided.

• The use of support schemes should be gradually limited to only those innovative yet immature technologies having a credible pathway to a self-sustainable future so that a level playing field for all energy technologies is ensured.

• Allow the safe and environmentally responsible exploration of indigenous resources. Cooperation between government and industry could further encourage investment in new exploration, sustainable field development and production.

3. Move towards a single EU energy market for gas and electricity

• Member States’ technical and administrative capacity for energy to flow within the European Union without barriers needs to be improved. Also, the volatility of energy demand and supply triggered by the increased use of renewable energy has to be managed in the most efficient way. For this, further steps have to be taken towards the integration and interconnection of the EU’s energy markets.

• ERT has developed a separate paper with recommendations on how to come to a single European energy market.

ERT MESSAGES ON A EUROPEAN ENERGY SECURITY STRATEGY

JANUARY 2015


ERT MESSAGES ON A EUROPEAN ENERGY SECURITY STRATEGY

4. Expand and diversify Europe’s energy supply routes focusing on missing links and supra-regional connections

• Member States that have not yet done so should make the investments required for meeting the electricity interconnection target of at least 10%, as agreed in 2002. Furthermore the European Commission should propose a new evidence-based electricity interconnection objective of at least 15% that takes into consideration country and region-specific interconnectivity deficits and opportunities as well as cost effectiveness. The full achievement of “Projects of Common Interest (PCI)” and of electricity infrastructure projects on the list of the “Ten-Year Network Development Plan (TYNDP)” should be used as a benchmark. A clear timeframe and delivery mechanisms should equally be proposed to ensure the implementation of the objectives.

• Close the gaps in gas pipeline infrastructure within Europe connecting north with south, and east with west, allowing reverse flows and the coupling of networks. Develop sustainable energy infrastructure, such as a Central Eastern European corridor, supported by Intergovernmental Agreements based on EU law.

5. Develop strong and sustainable energy relations with supply countries

• The European Union needs a single voice when strengthening its relations with all regions and countries that can supply energy, for example: North Africa, Eastern Mediterranean, the Caspian Region, the Middle East, and also Australia, and North America, while maintaining a long-term dialogue with traditional suppliers, like Norway and Russia.

6. Establish a positive political environment stimulating research and development, as well as the safe and environmentally acceptable use of new advanced technologies

• The EU must maintain or regain its leading position as innovation provider for the world in energy, climate and environmental technologies, products and services. This requires a strong industrial backbone not only as provider, but also as convincing showcase.

• ERT Member companies are committed to carefully deploy new technologies while taking account of their impact on society, the environment or other areas. ERT is however concerned about a technology-adverse climate in which new technologies, products and services are automatically dismissed prior to any careful consideration of their potential and risk.

• Examples include: energy storage, CCS, power to gas, new renewable energy sources or energy efficiency technologies, etc.


5 000

10 000

15 000

20 000

25 000

30 000

0

Thou

sand

s TJ

450

400

350

300

250

200

150

100

50

0

Mill

ion

tonn

es o

f oil

equi

vale

nt (

TOE)

Source: Eurostat

Source: Eurostat

Source: Eurostat

∆ Share in total GIC as a %

1. Energy dependency by fuel, EU-28 - 1990 | 2012

2. Main non-EU-28 suppliers - 2012 (imports by country of origin)

Gross inland consumption (GIC): The quantity of energy consumed within the borders of a country. It includes deliveries to the energy transformation sector and to the energy industries themselves.

Final energy consumption: Final energy consumption includes all energy delivered to the final consumer's door (in the industry, transport, households and other sectors) for all energy uses. It excludes deliveries for transformation and/or own use of the energy producing industries, as well as network losses.

Derived Heat: Heat production in heating plants and in combined heat and power plants.

* Figures for 2012 add up to 99% due to the increased use of non-renewable waste heat (1%)

3. The evolution of final energy consumption, EU-28 - 1990 | 2012 Total in 2012: 1,1 Mtoe

Gas Nuclear Heat Renewable EnergiesLiquid FuelsSolid Fuels

38% 34% 18%

23% 12% 14%

4%

11%

Solid Fuels: RU CO US AU other

Oil: RU NO SA LB NG other

RU NO DZ QA otherNatural Gas:

Solid Fuels Gas Derived Heat Electrical Energy Waste(non-renewable)

Renewable Energies

Liquid Fuels

28%

17%

-62% -3% 10% -11% 108% 29% 430%% change

Share net imports in GIC

Gross inland consumption (GIC)

EUROPEAN ENERGY SECURITY STRATEGY

35

30

25

20

15

10

5

0

RUZAAUEUMXUSCADZARCNUKSEESROPLNLDEFRDKBG

Source: Eurostat

Source: US Energy Information Agency

4. Primary energy production - 2012Share in total primary energy production in EU-28:

Primary energy production: Any kind of extraction of energy products from natural sources to a usable form is called primary production. Primary production takes place when the natural sources are exploited, for example in coal mines, crude oil fields, hydro power plants or fabrication of biofuels. Transformation of energy from one form to another, like electricity or heat generation in thermal power plants or coke production in coke ovens is not primary production. (Eurostat)

5. Unproved technically recoverable shale gas resource

All figures in trillion cubic meters | Includes all countries, proved and unproved reserves

Shale gas relative to total gas reserves :

E U R E S E R V E S G L O B A L R E S E R V E S (INCL.EU)

647,91 - Total gas reserves

Shale Gas Reserves 31,90% Natural Gas Reserves 68,10%

Solid Fuels

Gas

Nuclear

Waste (non-renewable)

Renewable Energies

Liquid Fuels

Primary energy production by source:

Total: 33,27 million TJ

UKDE

PL

FR

NL

FR DE UK PL NL OTHER17% 16% 15% 9% 36%8%

EUROPEAN ENERGY SECURITY STRATEGY

The further coordination and full integration of the national energy markets in the EU remains a high priority for the European Round Table of Industrialists, and would bring significant advantages:

• The cost of the transition towards a sustainable low carbon economy would decrease when the energy production and distribution capacity in all EU Member States is optimised.

• The EU’s energy independence increases as EU Member States would be able to rely on each other and therefore get access to more diversified and reliable energy sources.

• Integration may lead to a more efficient regulatory framework and a more competitive energy cost that will enable European industry to remain competitive in global markets and to keep bringing jobs and growth to the benefit of European citizens.

The total potential efficiency gains from a better integrated energy market are estimated to be at least 50 billion euro per year1.

1. The implementation of the Third Energy Package should proceed without delay

• Only a true liberalisation of the energy market based on a stable, harmonised regulatory framework can attract the necessary long-term investments in industry, deliver fair competition and more efficient energy at competitive prices.

• Support the Agency for the Cooperation of Energy Regulators (ACER) in playing a central role in the development of EU-wide network and market rules. ACER should aim at enhancing competition, coordinate regional and cross-regional initiatives which favour market integration, and optimise the supply of renewable energy on the basis of the natural circumstances in the EU Member States.

• The deployment of smart meters and smart grids as foreseen in the Third Energy Package should be further enhanced in the Member States.

2. Come to a better coordination and monitoring of national energy choices and the way they impact one another

• Energy policy choices in one Member State may impact the energy supply in another. A pan-European assessment of national energy policy preferences enables Member States to anticipate and take appropriate measures.

3. Final energy prices across Europe should foster EU competitiveness and reflect the unbiased cost of production and the access costs directly related to electricity supply

• Energy taxation, regulated tariffs, levies and price controls should be harmonised at EU level to ensure a level playing field for companies competing within the EU’s internal market, and to create an attractive investment climate for planned infrastructure. Regulated full-service tariffs should be limited to vulnerable customers.

• The use of support schemes should be limited to only those innovative yet immature technologies having a credible pathway to a self-sustainable future so that a level playing field for all energy technologies is safeguarded.

ERT MESSAGES ON THE EUROPEAN SINGLE ENERGY MARKET

JANUARY 2015

I European Added Value Unit, European Parliamentary Research Service, European Parliament, PE 563.350 second edition: July 2014


ERT MESSAGES ON THE EUROPEAN SINGLE ENERGY MARKET

4. Europe’s energy markets need to be better connected

• Build the missing infrastructure links both in gas and electricity markets in order to allow Europe to respond to energy supply disruptions quickly and to balance and redistribute energy flows in the EU where and when needed.

• Member States that have not yet done so should make the investments required for meeting the electricity interconnection target of at least 10%, as agreed in 2002. Furthermore the European Commission should propose a new evidence-based electricity interconnection objective of at least 15% that takes into consideration country and region-specific interconnectivity deficits and opportunities as well as cost effectiveness. The full achievement of “Projects of Common Interest (PCI)” and of electricity infrastructure projects on the list of the “Ten-Year Network Development Plan (TYNDP)” should be used as a benchmark. A clear timeframe and delivery mechanisms should equally be proposed to ensure the implementation of the objectives.

5. The single energy market should be flexible, future-proof, and able to accommodate in the most efficient way the increasing volatility of energy demand and supply

• To optimise renewable electricity generation, the EU’s electricity grid needs renovation and further large-scale development. Advanced ICT, such as smart grids and smart meters, should be deployed to manage varying power demand and supply. An appropriate policy framework should support its roll-out.

• Support the creation of fully functioning intra-day and balancing markets across Europe to increase overall market efficiency. Also, investigate options to level off peak demand and supply, which could include:

- Facilitate (voluntary) demand response, optimised across the EU, and incentivise investments in more flexible installations. (Large consumers or aggregated smaller consumers may offer to stop or reduce production if the financial terms are right.)

- Allow ancillary services in order to guarantee the security of the electricity system and the uninterrupted power supply to consumers.

- Develop an EU-wide view on energy storage to build and optimise the needed capacities.


2007-semester 2

1. Average electricity price for industrial consumers, EU-28 in €/MWh - 2007 semester 2 and 2014 semester 1

2. Policy support costs (levies) for industrial electricity consumers - 2012

3. Retail electricity and gas prices for industrial consumers - 2012

Gas

Excluding all taxes and levies Non-recoverable taxes and levies

Average price including all taxes and levies:

Average breakdown of price:

VAT and other recoverable taxes and levies

2014-semester 1

2014-semester 1 €106,1

2007-semester 2 €87,7

€64,4

€66,3

€7,3 €16

€18,9 €20

159%5%

21%

31%

Source: Eurostat

Source: Eurelectric

Source: EU Commission

€/M

Wh

40-60 €/MWh

20-40 €/MWh

0-20 €/MWh

Electricity

100+ €/MWh

75-100 €/MWh

50-75 €/MWh

25-50 €/MWh

Consumption band IC: 500 MWh < consumption < 2000 MWh

Average

0

5

10

15

20

25

30

35

40

NLFIMTNOIECHSESILUATHUBGEEFRPOGRUKLTLVSKDKCZCYESBEDEIT

THE EUROPEAN SINGLE ENERGY MARKET

4. Natural gas prices for industrial consumers in €/kWh - 2007 semester 2 | 2014 semester 1

3,7% 4,6% 9,1% 0,1% 0,9% 2,6% 14,3%

Source: Eurostat

Source: Eurostat

Source: ENTSO-E - 2012 TYNDP plan

Euro

/kw

h

5. Electricity prices for industrial consumers in €/kWh - 2007 semester 2 | 2013 semester 2

6. Progress towards the electricity interconnection target

7. Renewables share of power generation by region - 1990 | 2013

Band IF : 70 000 MWh < Consumption < 150 000 MWh - Excluding VAT and other recoverable taxes and levies. Prices not corrected for inflation

Source: BP Statistics

Euro

/kw

h

% change

>15%

≥10% & ≤15%

≥5% & ≤10%

<5%

Import capacity / net generation capacity

Band I4 : 100 000 GJ < Consumption < 1 000 000 GJ - Excluding VAT and other recoverable taxes and levies. Prices are not corrected for inflation

0,00

0,01

0,02

0,03

0,04

0,05

UK

0,00

0,05

0,10

0,15

0,20

EU-28 IT DE MTUKNO SE FI BG HR

HR AT GR

2007 2014

2007 2014

RO BE CZ EU-28 LT SE FI

0

3

6

9

12

15

%

European UnionAsia PacificAfricaMiddle EastEurope & EurasiaSth & Cent. AmericaNorth America

< 5 L O W E S T 5 H I G H E S T >

< 5 L O W E S T 5 H I G H E S T >

CY

2011 2020

THE EUROPEAN SINGLE ENERGY MARKET

The 2030 energy and climate package is a major opportunity for Europe to balance and monitor global competitiveness, security of supply and climate objectives more successfully than in the past. European companies accept their responsibility and under the right conditions they will continue investing and bringing to the market technological solutions for climate change.

At the moment the excessively high energy prices (compared to some competitors, especially the USA) hampers the international competitiveness of European business. Unilateral EU regulatory costs add to the burden.

The EU needs to facilitate innovation and technology development while ensuring that the value chain for providing and producing the solutions for “climate change” and “energy” remains in Europe, so as to foster growth and employment.

1. A strong industrial base in a fully functioning Single Market is vital for Europe’s recovery and long-term growth

• Any climate or energy policy must be coherent with the goal to increase industry’s share of EU GDP to at least 20% by 2020.

• A stable and predictable energy and climate framework is essential to give European industries the necessary long-term security for making investment decisions. Most industrial installations’ lifetime exceeds 20 years.

2. Carbon markets, market mechanisms, and the EU ETS in particular, remain the most efficient way to achieve emission reductions of a growing industry at the lowest cost

• To avoid carbon leakage, industries exposed to global competition should be exempted from the cost consequences of unilateral EU climate policies, such as EU specific regulatory measures that affect energy costs and prices, and thus the EU’s industrial competitiveness.

• Effectively addressing a global issue such as climate change requires accessible global CO2 markets for efficient resource allocation. The EU ETS has to be integrated in a global mechanism that allows optimisation at international scale (e.g. CDM).

• The post-2020 EU ETS should allocate allowances to industry on the basis of actual output, which allows industry to grow.

• Achievable reduction potentials in the short and long term as well as physical limitations must be taken into account.

3. A number of principles should be respected when setting a GHG reduction target:

• EU industrial growth and global competitiveness should be safeguarded.

• Ensure a better coherence of energy and climate policies.

• Improve access to a competitive, sustainable and reliable low carbon energy and feedstock

• The EU’s level of ambition must take into account the commitments and actions by major EU trading partners.

• All sectors of the economy – public, private, ETS and non-ETS – should contribute.

• Explore the role of norms and standards for reducing GHG emissions in both ETS and non-ETS sectors.

• Technical mitigation potential as well as economic and social effects must be taken into account to find the most efficient and effective pathway to a low carbon society.

ERT MESSAGES ON THE 2030 FRAMEWORK FOR ENERGY & CLIMATE CHANGE

JANUARY 2015


ERT MESSAGES ON THE 2030 EUROPEAN FRAMEWORK FOR ENERGY AND CLIMATE CHANGE


The Climate and Energy Package should come with incentives for innovation, for deployment and dissemination of innovative solutions and technologies

ERT supports introducing competitiveness indicators to monitor the EU’s position compared to its main competitors

EU climate policy should include actions aimed at reducing global CO2 emissions, while maintaining EU competitiveness

4.

5.

7.

• The revenues from the auctioning of allowances in the EU ETS should be completely re-invested in innovation support schemes.

• Innovative solutions for mitigating GHG emissions may be found in all sectors, not only in those covered by the EU ETS.

• Policies should be aligned with the time needed to put on the market new technologies and solutions at industrial scale. In that sense, the role of the EU ETS is essential in the long-run as a stable and credible framework for investments in GHG reductions. In the short run however, artificially increased CO2 prices only diminish affected industries’ ability to invest in innovation and new technologies.

• To be truly effective, these indicators must be closely and regularly monitored and policies must be readjusted if Europe is not on track to deliver. In that case a mechanism should be put in place to ensure some form of policy adjustment.

• An international climate agreement aimed at global GHG reductions is the most effective way to limit global warming to 2°C if it covers the main global emitting countries and includes GHG reduction commitments that are verified in practice.

• The international climate agreement and the commitments made by the different signatories should lead to comparable levels of carbon pricing for at least the main international competitors for EU industry.

• Moreover, behavioural changes and social acceptance are key to turn GHG mitigation policies into a success. The EU should support a shift to more sustainable lifestyles by promoting innovation and the deployment of sustainable products and solutions. Governments should lead by example pursuing an appropriate public procurement policy.

6. Measures to increase energy efficiency should be cost-effective

• Energy efficiency measures should focus more on sectors outside the EU ETS which are not sufficiently incentivised by the market such as buildings, transport and agriculture. Stimulated by the current market conditions, industry has, within technological limits, significantly improved its energy efficiency.

• Further improvements in energy efficiency may be obtained by supporting the development and implementation of advanced technology solutions, innovative services and behavioural changes.

1. GHG emissions, EU-28 - 2012

2. GHG emissions by sector, EU-28 - 1990 | 2012

Source: EEA /EUTL

Source: EEA

3. Large-scale CCS projects, number of projects - 2014 Sources: Global CCS Institute

OtherAgricultureResidentialTransportIndustryEnergy industries (e.g. power, oil refining)

30,01% 10,67% 19,65% 9,36% 12,04% 18,27%

Mill

ions

of t

onne

s CO

2eN

umbe

r of

pro

ject

s

0

500

1000

1500

2000

14

12

10

8

6

4

2

0

OtherAgriculture/Forestry/FisheriesResidentialTransportAll Industry Energy Industries

Identify Evaluate Define Execute Operate

-16% -35% 14% -19% -23% -31%% change

E T S N O N - E T S

Total: 4.544 million tonnes CO2e

CN CN CN CA CA

CA

CA

US

NL UK NO

NL UK NO NL UK

NO

US

US

SA AE

AU KRAU KR

US

DZ

BR

Total CO2 capture capacity (all projects): 107 Mtpa

THE 2030 EUROPEAN FRAMEWORK FOR ENERGY AND CLIMATE CHANGE

5. Manufacturing's share of total value added in the EU and the Member States - 2007 | 2012 Source: Eurostat

7. Gas prices 6. Carbon budget: 2900 Gt CO2*

Source: BP Statistical Review of World Energy ( June 2014)Source: UNEP / World Resource Institut

* This figure provides an approximately 66% chance of keeping global temperatures below 2°C according to the IPCC Fifth Assessment Synthesis Report.

4. Energy intensity of the economy: primary energy consumption - 1990 | 2013 Sources: BP Statistical Review / Worldbank

* based on percentage reduction

Mill

ion

TOE

/ 10

00

USD

(20

05)

GD

P

US

dolla

rs p

er m

illio

n B

tu

0

0,5

1,0

1,5

2,0

-12%

IT

-19%

FR

-4%

ES

9%

PT

-13%

GR

-74%

LT

-53%

SK

-59%

PL

-60%

RO

-49%

BG JP

-12%

AU

-35%

US

-35%

CA

-22%

IN

-21%

CN

-52%

RU

-31%

UA

-39%

E U B O T T O M 5 * E U T O P 5 * I N T E R N A T I O N A L

30

25

20

15

10

5

0

%

2007 2012 Increase

20% of GDP target line

CZ ROFISKDE SIHU AT SEIE ITPLLT LVHR EE EU BEES MTPT DKNL FRUK GR LU CY

Remaining Margin: < 1000 Gt CO2

CO2 emissions emitted since pre-industrial times: 1900 Gt CO2

Europe 25%

North America 21%

Asia 18%

Oceania, Sth. America & Africa 5%

Deforestation & land-use change 32%

Total global GHG emissions in 2012: 54 Gt CO2e

Conclusion: Budget will be completely consumed in less than 20 years if total global GHG emissions do not increase compared to 2012 0

2

4

6

8

10

12

14

16

18

2005 2006 2007 2008 2009 2010 2011 2012 2013

Average German Import Price cif

UK (Heren NBP Index)

US Henry Hub

Canada (Alberta)

Japan cif

THE 2030 EUROPEAN FRAMEWORK FOR ENERGY AND CLIMATE CHANGE

Despite its declining share in global GHG emissions, the EU firmly keeps its ambition to be a leader in climate policy and to provide the world with low carbon solutions. The EU’s model of “leading by example” implies the setting of firm domestic GHG emission reduction targets while convincing other countries to follow suit. Although some countries or regions are working on their own GHG emissions trading scheme or other carbon reduction policies, the EU has to remain vigilant that the competitiveness of its own economy is safeguarded.

In recent years international climate negotiations were centred on the search for a successor to the Kyoto Protocol (1997), which was in itself never ratified by the United States, while Canada withdrew from it in 2011. Japan, New Zealand and Russia were part of the Kyoto Protocol’s first round (2008-2012) but did not sign up for the second commitment period (2012-2020), leaving behind only the EU, Australia and a few other countries. Instead, several developed and developing countries (including the US, China, Japan, etc) committed to voluntary targets for reducing their GHG emissions by 2020.

The signatories of the United Nations Framework Convention on Climate Change (UNFCCC) agreed at the Durban Conference of the Parties (COP17) that a new international climate agreement should be in place by the end of 2015 with effect as of 2020. It seems however that this new “Paris agreement” will not be a single global system in the sense of an extended Kyoto protocol, but rather a bottom-up framework with common elements and a multitude of national and regional approaches, instruments and measures.

1. The ‘intended nationally determined contributions’ should cover a sufficiently long timeframe and be legally binding. The signatories’ progress towards achieving their commitments should be monitored

• Legally binding ‘intended nationally determined contributions’ motivate the signatories to act on their commitments. All main emitters both developed and advanced developing countries, including the EU’s main trading partners, should make a commitment so that the overwhelming majority of worldwide GHG emission sources are covered.

• The UN should put in place a transparent mechanism to monitor, report and verify the signatories’ progress towards their commitment. Signatories should regularly report on their achievements to date and allow an occasional audit of their figures.

• The impact of at least the main signatories’ commitments on their own national economy and on individual key industry sectors in particular, needs to be assessed. Such a cost/benefit assessment shows if the signatories’ targets are sufficiently ambitious and may identify remaining reduction potential, while safeguarding a signatory’s competitiveness. This may be particularly relevant in case of a gap between the bottom-up commitments and the GHG reductions needed for limiting global warming to 2°C.

2. An international climate agreement should not only focus on GHG mitigation, but should stimulate a broad debate, also in other policy areas, on coping with the changing climate.

• Signatories to the international climate agreement should not only commit to mitigating greenhouse gas emissions but should also take measures to make their economies more climate-resilient. They should assess on a scientific basis the need for a national adaptation strategy and take the appropriate steps towards its development.

• Developing countries should have a long-term vision and be motivated to immediately install the most climate friendly solutions without putting at risk their social and economic development. (For example, how to convince developing countries to build the most energy efficient houses). The Green Climate Fund may play a role to develop tailor-made and innovative solutions.

ERT MESSAGES ON THE INTERNATIONAL CLIMATE AGREEMENT

JANUARY 2015


ERT MESSAGES ON THE INTERNATIONAL CLIMATE AGREEMENT

3. The EU’s climate diplomacy should be reinforced and focus on reducing worldwide GHG emissions while safeguarding the EU’s competitiveness

• There is no benefit for the global climate when reductions in EU GHG emissions are outweighed by an increase in the amount of GHG emissions of imported products consumed in the EU. Carbon leakage should be avoided.

• The EU should continuously assess, with the involvement of the stakeholders, the required conditions for ensuring the compatibility and potential linkage of different national emissions trading schemes.

• European companies have solutions both for climate change mitigation and adaptation. This potential should be exploited as part of the EU’s climate diplomacy. In particular, technologies, products or services “made in Europe” should be given fair access to the global market, while their intellectual property rights are sufficiently protected.

• To ensure globally efficient and effective GHG mitigation, the EU should recognise verified and sustainable GHG reductions in non-EU countries.


1. Fuel combustion CO2 emissions - 1990 | 2012

2. Fuel combustion CO2 emissions per capita - 1990 | 2012

Source: IEA

Source: IEA

Source: IEA

Mill

ion

Tonn

es o

f CO

2Pe

r C

apita

in T

onne

s of

CO

2

Share in global fuel combustion CO2 emissions

INWorldCNEU-28JPRUUS

3. Fuel combustion CO2 intensity of the economy - 1990 | 2012

Kg F

uel C

O2 /

GD

P (1

00

0 U

SD |

200

5)

INWorldCNEU-28JPRUUS

5,0% 3,9% 10,9% 26,0%

2,8% 6,2% 10,4% 5,2% 23,2%

16,0% 19,4% 11,0%

0

2000

4000

6000

8000

0

5

10

15

20

CA US AU JP KR RU IN BR EU-28CN

0

1

2

3

44

THE INTERNATIONAL CLIMATE AGREEMENT

4. Carbon pricing systems worldwide

5. Comparing eorts 6. Examples total carbon footprints

Source: World Bank - State and Trends of Carbon Pricing 2014

This is an adaptation of an original work by The World Bank – The status for Chile and Australia have been updated.

Source: UNFCCC - GHG Data

Source: Data from Trends in Global CO2 emissions: 2013 report (PBL and JRC - IES)

Sources: MEDDE, DEFRA

ETS implemented or scheduled for implementation

Carbon tax implemented or scheduled for implementation

ETS or carbon tax under consideration

Carbon tax implemented or scheduled, ETS under consideration

ETS and carbon tax implemented or scheduled

BRITIS H C OLUMBIA

WAS HINGTONOREGON

C ALIFORNIA

MEXICO

CH ILE

BRAZIL

RIO DE JANEIROS ÃO PAU LO

RGGI

ALBERTA MANITOBA

ONTARIO

QUÉBEC

ICELAND

IRELANDUK DENMAR K

NOR WAYSWEDEN

FINLAND

FRANCE

EU

SW ITZERLANDTURKEY

UKRAINE

KAZAKHSTAN

CHINA

THAILAND

JAPAN

S OUT H AFRICA

AUSTRALIA

NEW ZEALAND

REBUB LIC OF KOREA

KYOTO

SH ANG HAI

BEIJINGTIANJIN

HUBEICHONG-

QING

SH ENZHEN

G UANGDONG

TOKYOS AITAMA

REBUBLIC OF KOREA

Country Climate Pledge Adjusted to comparative baselines

2025/1990 2025/2005 2030/1990

26% to 28% by -15% -27% - 2025 / 2005

40% by -34% -29% -40% 2030/1990

Peak in 2030 - - -

01990

1990 2007 1993 2010’95 ’00 ’05 ’10 ’15 ’20 ’25 2030

2

4

6

8

10

12

14

16

18

Tota

l CO

2 em

issi

ons

(10

00

meg

aton

)

0

100

200

300

400

500

600

700

800

Car

bon

foot

prin

t (

Emis

sion

s kt

CO

2eq.

)

Private motoring & household heatingImports Domestic

productionChina growth emissions estimated at 3% until 2030

THE INTERNATIONAL CLIMATE AGREEMENT

AE United Arab EmiratesAR ArgentinaAT AustriaAU AustraliaBE BelgiumBG BulgariaBR BrazilCA CanadaCN ChinaCO ColombiaCY CyprusCZ Czech Rep.DE GermanyDK DenmarkDZ AlgeriaEE EstoniaEL Greece

ES Spain FI FinlandFR France HR CroatiaHU HungaryIE IrelandIN IndiaIT ItalyJP JapanKR Republic of KoreaLB LebanonLT LithuaniaLU LuxembourgLV LatviaMT MaltaMX MexicoNG Nigeria

NL NetherlandsNO NorwayPL PolandPT PortugalQA QatarRO RomaniaRU RussiaSA Saudi ArabiaSE SwedenSI SloveniaSK SlovakiaUA UkraineUK U.K. US United StatesZA South Africa

COUNTRY CODES

ACKNOWLEDGEMENTS

This document has been prepared by the ERT Energy and Climate Change Working Group, chaired by Bruno Lafont. We are grateful to the ERT Member companies for their valued participation and contribution.

WHAT IS ERT?

ERT is a forum bringing together around 50 Chief Executives and Chairmen of major multinational companies of European parentage covering a wide range of industrial and technological sectors. Companies of ERT Members are widely situated across Europe, with a combined turnover exceeding € 1.300 billion, sustaining around 6,8 million jobs in the region. They invest more than €51 billion annually in R&D, largely in Europe; which is equivalent to 18% of total EU R&D expenditure.

European industry cannot flourish unless it can compete in a global economy. This capacity to compete cannot be determined solely by the efforts of individual companies. The prevailing economic and social policy framework is crucially important and must be flexible enough to adapt swiftly to changes in global conditions. ERT aims to strengthen and support key enabling conditions which trigger innovation and entrepreneurship in the European economy.

ERT advocates policies, at both national and European levels, which help create conditions necessary to improve European growth and jobs.

POSITION PAPERS / FACTS AND FIGURES

ENERGY AND CLIMATE CHANGEEuropean Round Table of Industrialists I Place des Carabiniers 18A Karabiniersplein I B-1030 Brussels I Tel. +32 2 534 31 00 I www.ert.eu I @ert_eu I [email protected]

Jean-Paul Agon L’OréalCésar Alierta Izuel TelefónicaPaulo Azevedo SONAEBen van Beurden Royal Dutch ShellKurt Bock BASFJean-François van Boxmeer Heineken Carlo Bozotti STMicroelectronicsSvein Richard Brandtzaeg Norsk HydroAntonio Brufau RepsolTon Büchner AkzoNobelPaul Bulcke NestléJean-Pierre Clamadieu Solvay Michel Combes Alcatel-Lucent Ian Davis Rolls-RoyceRodolfo De Benedetti CIRPierre-André de Chalendar Saint-GobainMarijn Dekkers BayerClaudio Descalzi EniJohn Elkann FCATom Enders Airbus GroupIgnacio S. Galán IberdrolaAntti Herlin KONE CorporationZsolt Hernádi MOLHeinrich Hiesinger ThyssenKruppTimotheus Höttges Deutsche TelekomFrans van Houten Royal Philips

Chairman

Secretary GeneralBrian Ager

Pablo Isla InditexLeif Johansson EricssonJoe Kaeser SiemensJacek Krawiec PKN Orlen Bruno Lafont LafargeThomas Leysen UmicoreBill McDermott SAPGary McGann Smurfit Kappa GroupNancy McKinstry Wolters KluwerGérard Mestrallet GDF SUEZLakshmi N. Mittal ArcelorMittalDimitri Papalexopoulos Titan CementOlof Persson VolvoJan du Plessis Rio TintoPatrick Pouyanné TOTALNorbert Reithofer BMW GroupStéphane Richard OrangeGerhard Roiss OMVKasper Rorsted HenkelGüler Sabanci Sabanci HoldingSeverin Schwan F. Hoffmann-La RocheRisto Siilasmaa Nokia CorporationUlrich Spiesshofer ABBCarl-Henric Svanberg BPJohannes Teyssen E.ON Jacob Wallenberg Investor AB

ERT Members

Nils S. Andersen - A.P. Møller-Maersk

Benoît Potier - Air Liquide

Vice-Chairmen

Vittorio Colao - Vodafone Group

step

hens

on d

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