Unlocking the synergies between EE, RE and Emission target Energy Day Karsten Neuhoff, Dresden,...

Unlocking the synergies between EE, RE and Emission target

Energy Day

Karsten Neuhoff,Dresden, 19.4.2013

1 The role of targets for policy implementation

2 Multiple targets to achieve one objective

3 Multiple objectives motivating one target

4 Translating targets into action

5 The role of EU ETS – a target turned instrument

6 Possible implications for formulation of energy and climate targets


Strongly Disagree

Disagree Strongly Agree

Agree

NOTE: 80% of respondents agreed that the data collection process for the indicators was labour intensive

Ability of indicators to facilitate policy/project management 1

What type of indicators are commonly used?1

Lester, S. and K. Neuhoff, 2009, Understanding the roles of policy targets in national and international governance. Climate Policy, 9 (5), p. 464-480.

Policy target applied to

Ou

tco

me

Inp

ut

Time frame (years)1 3 1510

PSA

PRSP

EU Acc

essio

n

MDGResponsetime

GPRA

GPRA Government performance result act

PSA Public Service Agreements PRSP Poverty Reduction Strategy

Papers MDG Millennium Development Goals

What trade-offs are involved in selecting indicators?1

• Allow comparison of policy effectiveness

• Often more difficult to define

• Easier to measure

• Can ignore important interactions / focus to narrowly

• Response time

• Identify barriers

Lester, S. and K. Neuhoff, 2009, Understanding the roles of policy targets in national and international governance. Climate Policy, 9 (5), p. 464-480.

Eur

opea

n C

O2

emis

sion

s ye

ar

2020today 2050

Conventional coal

Oil

Gas

Illustrative

EE and RE targets make LT emission targets viable2

BAU

Energy Efficiency

RenewablesCCS/ additional nuclear

Political objective Targets Policies / Programms

Climateprotection Emission

Technology

Energy efficiency

Illustration

Multiple targets to achieve one objective2

Example RE deployment

See also : Ensuring renewable electricity investment: 14 policy principles for a post-2020 perspective www.remunerating-res.eu

2

Principle A: 2030 targets needed

0

10

20

30

40

50

60

70

80

90

100

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Reference scenario

Policy scenarios

% o

f EU

Pow

er fr

om R

E

National Renewable Energy Action Plans

EU Roadmap 2050

Political objectives Targets Policies / Programms

Climateprotection

Reducing inequality

Emission

Technology

Employment Energy efficiency

Reduction of fuel poverty

Illustration

Industry development

Energy security

Multiple objectives motivating one target3

Short-term job multiplier effects of green investments3

Spencer T. , K. Bernoth, L. Chancel, E. Guerin, K. Neuhoff (2012) Green investments in a European Growth Package, IDDRI Working Paper 11

Translating targets into action

11

4


EU ETS

RE support

Buiding standardInformation program

Support for retrofit

Illustration

Climateprotection

Reducing inequality

Emission

Technology




Energy security

What is necessary to deliver targets – example RE 4

Global Input:Technically-Feasible RE Generation Capacity

Global Output:Installed /

Target RE Capacity

PlanningAccess to Grid and

Energy Market Supply Chain Project Finance

Barriers

Lack of effective legal / regulatory framework

Lack of private participation and professional institutions

Uncertainty with government policies

Lack of coordination between authorities

Lack of consumer/social acceptance of RE technologies

Barriers

Highly controlled energy sector

Lack of grid access for RE technologies

Lack of clear practises and procedures (related to planning barriers)

Lack of available grid capacity

High grid connection costs for RE developers (poor cost allocation)

Lack of access to energy market

Barriers

Lack of competition and lack of standards and codes of certification

Lack of entrepreneurs, skilled labour, and training and O&M facilities

Lack of R&D capacity

Restricted access to technologies

Lack of reliability of products

Lack of institutions / mechanisms to disseminate information

Barriers

Financial Support(costs, risks, ...)

Energy Market(access, structure, long-term costs, ....)

Capital Market(perception of technical risk, perception of regulatory risk, ...)

Visibility(uncertainty, ....)

Barriers along the RE pipeline4

Global Input:Technically-Feasible RE Generation Capacity

PlanningAccess to Grid and

Energy Market Supply Chain Project Finance

Barriers

Lack of effective legal / regulatory framework

Lack of private participation and professional institutions

Uncertainty with government policies

Lack of coordination between authorities

Lack of consumer/social acceptance of RE technologies

Barriers

Highly controlled energy sector

Lack of grid access for RE technologies

Lack of clear practises and procedures (related to planning barriers)

Lack of available grid capacity

High grid connection costs for RE developers (poor cost allocation)

Lack of access to energy market

Barriers

Lack of competition and lack of standards and codes of certification

Lack of entrepreneurs, skilled labour, and training and O&M facilities

Lack of R&D capacity

Restricted access to technologies

Lack of reliability of products

Lack of institutions / mechanisms to disseminate information

Barriers

Financial Support(costs, risks, ...)

Energy Market(access, structure, long-term costs, ....)

Capital Market(perception of technical risk, perception of regulatory risk, ...)

Visibility(uncertainty, ....)

Quantitative and qualitative indicators

Qualitative indicators

Global Output:Installed /

Target RE Capacity

Not covered

Barriers along the RE pipeline:Indicators provided in NREAPs:4

Source: IEA, GWEC, Worldwatch Institute

Installed wind power per year (MW)

China

U.S.

SpainIndiaGermanyU.K.ItalyFrance

Denmark

2nd Purpose of targets: Creating confidence for investors in supply chain4

The role of EU ETS – a target turned policy

16

5


EU ETS

RE support



Illustration

Climateprotection

Reducing inequality

Emission

Technology




Energy security

How does EU ETS impact on investment process?

17

I. Capturing Companies’ AttentionII. Providing Clarity for Decision MakingIII. Creating enabling environment for Low-Carbon Investment

5

See Climate Strategies Project Summary: Carbon pricing for low carbon investment

The surplus of unused allowances is „piling“ up

18

5

Source: Banking of Surplus Emissions Allowances: Does the Volume Matter? DIW Discussion paper 1196

Early auctioning (120 m)Early phase III NER (300 m)Retained phase II NER (350 m)

0,0

0,5

1,0

1,5

2,0

2,5

3,0

Vol

ume

of u

nuse

d al

low

ance

s (b

illio

n)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Cap exceeds emissions

Uncertainty about future emissions will remain

International offsets add to surplus

Timing of auctions increases surplus in 2012/13

High Renewables

Reference

Current Policy Initiative

CDM/ JI credits linked to EU (1.7 bn)

Where do unused allowances go?5

Source: Banking of Surplus Emissions Allowances: Does the Volume Matter? DIW Discussion paper 1196

19

0,0

0,5

1,0

1,5

2,0

2,5

3,0

Vol

ume

of u

nuse

d al

low

ance

s (b

illio

n)

Speculative investment

Banks buy allowances to sell forward/ future/ option contracts No impact on demand

I Industry sector banks free allowances

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Power sector uses allowances to hedge future power sale(flexibility on volume)

I

1 The role of targets for policy implementation

2 Multiple targets to achieve one objective

3 Multiple objectives motivating one target

4 Translating targets into action

5 The role of EU ETS – a target turned instrument

6 Possible implications for formulation of energy and climate targets


Implicatinos of multiple drivers for targets

•Consistency of targets:•Could limit scope for political compromise

•Might be difficult to test with real data/projections

•Could limit link from specific political objective to target

-> Coherence is guiding principle

How to model this?

Jose Ramon San Cristobal (2012) A goal programming model for environmental policy analysis, Energy Policy

6

Political objective:2°C / - 80-95% CO2

20502010 2020 2030 2040

CO

2 em

issi

ons

2020 emission target ~ no further action

Current initiatives (EE, RE)

Illustration

Discrepancy crystalizes in 2030 discussion

Discrepancy can trigger discussion to increase consistency6

Retain options for flexiblity

23

•Capacity of political process is limited -> allow for renegotiation of a sub-set of targets at a time •For some targets long-term matters -> but if all targets set long-term = inflexible -> allow for different time frames for different targets•Avoid artificial simplification of target frameworks -> build on historic development of objectives and targets Continue & further develop current set of targets.

See: H. Meyar-Naimi, S. Vaez-Zadeh (2012) Sustainable development based energy policy making frameworks, a critical review, Energy Policy

6

Considerations for future target development

24

•Enhance predictabilty of future adjustement of targets -> formulate minimum levels of attributes nec. for society -> link targets more closely to policy objectives•Enhance credibility of targets -> balance „ambition“ with credibility/effectiveness -> develop track record of delivery against targets -> show committment with complementing short-term pol.

Integrate multiple actors more closely in 2030 process.Track and support delivery against targets. Create transparency around process of target adjustment.

6

Summary

25

6


EU ETS

RE support



Illustration

Climateprotection Emission

Technology

Energy efficiency


Reducing inequality

Employment


Energy security

Vielen Dank für Ihre Aufmerksamkeit.

DIW Berlin — Deutsches Institutfür Wirtschaftsforschung e.V.Mohrenstraße 58, 10117 Berlinwww.diw.de

RedaktionKarsten [email protected]

Unlocking the synergies between EE, RE and Emission target Energy Day Karsten Neuhoff, Dresden,...

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Transcript of Unlocking the synergies between EE, RE and Emission target Energy Day Karsten Neuhoff, Dresden,...