Energy transformation at times of austerity
ETUI workshop
Brussels
25 November 2013
Béla Galgóczi
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Background: Revision of growth model
Long term challenge: a fundamental revision of previous resource depleting growth model, above all face the challenge of climate change: we have one planet, not five!
The Great Transformation of the next decades will be the
transition to low (zero) carbon economy
Green growth – a strategy to promote ‚eco-industry‘, clean energy and also give push to green restructuring of traditional sectors
Energy transformation (the way we produce, transmit and consume energy) is key for the green transformation
At the same time it offers a huge investment opportunity and it is also a job creation machine
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Project objectives
In 2011-2013 we see the danger of a reversal of green policies in Europe: what we see is ‚black austerity‘ where not just public investments, but incentives and subsidies for the green economy are cut back for sake of fiscal consolidation and ‚affordable energy‘ gets ‚fake‘ priority
This is in sharp contrast with 2009 ‚green stimulus‘ packages
We also see a revival of fossil fuel (shale) gas and coal and an intensifying race for mineral resources – an excuse to abandon ambitious objectives and a way of „environmental dumping“
The main objective of the project is to demonstrate that „black austerity“ is the worst possible combination: it brings the economy down, lives up the future (lost generation, irreversible climate consequences), creates „social meltdown“ and puts democracy at stake
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Project objectives
Mapping experiences of key countries is one aspect
Getting an overview of energy efficiency measures their implementation and progress
Pointing to the untapped job-creation potential
The gap between investment need and progress in reality
But we need to address also:
What are the right incentives to promotee investment into clean energy
What elements of the regulatory/subsidy system do not function and need revision
What about the role of the energy price: it should provide an incentive for energy efficiency, but there is a social component (affordable energy) and a „fake“ business component (energy price as a factor of competitiveness)
Global total new investment in clean energy (2005-2012)
Source: BNEF, 2013
New investment in clean energy 2012 (USD bn), 2012/2011 change (%)
Source: BNEF, 2013
country New investment in clean energy (bn bn USD)
Yearly change %, compared to previous year
world 268,7 -11
China 67 +20
USA 44,2 -32
Germany 23 n.a.
Japan 16,3 +75
Italy 14,7 -51
South Africa 5,5 Cca +5000
Spain 3 -68
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Resource extraction boom
The priority of a greening economy is to produce (more) value out of less material and resource input through higher resource productivity and efficiency, through changing behaviour, consumption and mobility patterns…
AND NOT CHASING FOR MORE RESOURCES..TO COVER THIS
What we see nowadays is a new race for resources, a mining and gas boom…
- US and Canada gas fracking boom, new oil pipeline to boost consumption
- Extraction in Africa by Chinese firms is expanding rapidly
- Brazil sees ist future in the new oil and gas field explorations
Create jobs and growth at any price (coal, fracking, controversial mining projects) - trade unions also face this challenge!
Prope Lack of progress in EU2020 headline targets020 headline targets (I)
EMPLOYMENT 75% of the population aged 20-64 should be employed
INNOVATION 3% of the EU's GDP should be invested in R&D
CLIMATE / ENERGY A reduction of CO2 emissions by 20%
Share of renewable energies up to
20%
An increase in energy efficiency
by 20%
EDUCATION The share of early school leavers should be under 10%
At least 40% of the younger generation should
have a tertiary degree or diploma
POVERTY 20 million fewer people at risk of poverty
Performance in decoupling economic growth from resource and material use in Europe
No major progress in decoupling, as the next graph for Europe shows
Only Germany, Italy, the Netherlands, Hungary and Luxembourg achieved absolute decoupling (economy grew with less resource use)
In decoupling, Nordic countries were not performing well: DK, SE and FI all performed worse than the EU27 average and with economic growth they also used higher resources
It is a general problem that no (hard-core) incentives for higher resource productivity exist; companies are good in increasing labour productivity, but not resource productivity!
Yearly average change of domestic material consumption and GDP between 2000 and 2007 by member state
Source: Eurostat (2011)
no decoupling
relative decoupling
absolute decoupling
Looking beyond 2020: the 2050 Low-Carbon Roadmap (ghg emissions in % of 1990 level)
LONG WAY TO GO
Efficient pathway and milestones:
-25% in 2020-40% in 2030-60% in 2040
80% domestic reduction in 2050 is feasible:
•With currently available technologies,
•With behavioural change only induced through prices•If all economic sectors
contribute to a varying degree & pace.
0%
20%
40%
60%
80%
100%
1990 2000 2010 2020 2030 2040 2050
0%
20%
40%
60%
80%
100%
Current policy
Power Sector
Residential & Tertiary
Non CO2 Other Sectors
Industry
Transport
Non CO2 Agriculture
Four requirements regarding EU energy policy
Energy landscape
Policy priorities
Job potential
Austerity and investment crisis undermine the transition
Price issue
Key issues for long-term energy policy
● Increasing long-term investment need within the EU● If the business case is there the capital will come● But, low-carbon investments feature particularly high risks● Crisis challenges the private long-term finance (as risk
aversion grows)
=> important and challenging role of public banks
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If the business case is there, the capital comes
● Deregulation, market demand: US shale gas● Technology pull policies: German renewables
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US gas production in bcm Installed Wind Capacity in Germany in MW
Source: BP Statistical Review of World Energy June 2012
Increasing long-term investment need within the EU/OECD
● US & EU oil and gas imports expected to decline due to:● Domestic production (US shale)● Energy efficiency● Shift to domestic sources (renewables)
=> Shift from investment in foreign fossil fuels to investments in domestic fuels, efficiency and renewables
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Change in EU energy balance 2010-2050
Net Imports -48%Renewable Energy Sources +225%
Source: EU Energy Roadmap, Note: Diversified technologies decarbonisation scenario 2050 vs. Reference scenario 2010
Additional average annual EU investment needs in 2011-2050 (€ bn, 2008 prices)
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• Total more than €1tn p.a.
• Addition~ 1.2-2.1% GDP
=> In transition, energy efficient appliances and low-carbon generation more expensive – how can this be financed?
EIB/Bruegel 2012 based on European Commission (2011)
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Challenge for trade unions in the broader context of the green transformation
EU energy policy:
Binding emission targets (2030) necessary to match long term targets
Comprehensive policiy mix: ETS (upgrade), emission targets, standards and carbon tax
Balanced approach with view to affrodability, social aspects and competitiveness
Competitiveness should not be based on cheap energy and cheap labour
All this should not compromise targets towards a low carbon economy
Short term challenge: austerity and „environmental dumping by US and China“
Policy framework should deal with this, implement social tariffs and border compensation
Controversy abour car emission targets/ supercredits
300 bn yearly investment need – clarification of economic fundaments