EU Effort-Sharing:required system transformations
and implied carbon pricesRenato Rodrigues
Luderer GunnarRobert Pietzcker
12th Annual IAMC ConferenceTsukuba, Japan, December 2nd-4th, 2019
Renato Rodrigues – [email protected]
m e t h o d
s c e n a r i o s
r e s u l t s
c o n c l u s i o n s
b a c k g r o u n d
b a c k g r o u n d
Emission Trading System
2010 2012 2014 2016 2018 2020 2022
ETS carbon price
Pric
e
0
10
20
30 Carbon price for heavy energy-using installations
21% lower than 2005
2020
42% lower than 2005
2030
Emissions
Effort Sharing Decision
ETS
b a c k g r o u n d
100%
~40%
100%
~40%
Emissions
regulation
ETS
ESD
Effort Sharing Decision
b a c k g r o u n d
Effort Sharing Decision
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Luxe
mbo
urg
Swed
en
Denm
ark
Finl
and
Ger
man
y
Uni
ted
King
dom
Fran
ce
Net
herla
nds
Aust
ria
Belg
ium
Italy
Irela
nd
Spai
n
Cypr
us
Mal
ta
Port
ugal
Gre
ece
Slov
enia
Czec
h Re
publ
ic
Esto
nia
Slov
akia
Lith
uani
a
Croa
tia
Hung
ary
Pola
nd
Latv
ia
Rom
ania
Bulg
aria
First phase (2020 emission reduction) Second phase (2030 emission reduction)
Country specificemission reduction targets
Ger
man
y
ETS
ESD
b a c k g r o u n d
Countries with carbon taxregulation under ESD sectors
Effort Sharing Decision
2020 2022 2024 2026 2028 2030
Ger
man
y
ESD
Carb
on P
rice
(€/t
CO2e
q)
0
50
100
150
PIK report on carbon pricing necessary to achieve the German
ESD target (middle path)
German announcedClimate Action Programme
carbon pricing20
3535
60
b a c k g r o u n d
2020 2022 2024 2026 2028 2030
Pric
e (€
/tCO
2eq)
0
50
100
150
20
3535
60
• Substitution elasticities are limited to describe economies and energy use under strong structural change
• There is the need to test the reliability and validate current country policies in place to comply with the Effort Sharing Decision regulation
• It is important to identify bottlenecks and required efforts for a effective mitigation policy design
There was the need to estimate a mitigation based implicit carbon price
necessary to comply with the European ESD regulation
b a c k g r o u n d
b a c k g r o u n d
m e t h o d
Integrated Assessment Model (IAM)
REMIND
b a c k g r o u n d
m e t h o d
Integrated Assessment Model (IAM)
REMIND - EU
b a c k g r o u n d
m e t h o d
Integrated Assessment Model (IAM)
REMIND - EU
b a c k g r o u n d
m e t h o d
s c e n a r i o s
20 40 60 100
Scenarios based on main uncertainty sourcesF E
L o wF E
M e d i u mF E
H i g h
Sensitiveness to Final Energy demand levels
We assume three different FE demand trajectories compatible with the SSPs for industry, buildings and transportation demandsFi
nal E
nerg
y pe
r cap
ita (G
J/yr
)
0
50
100
150
GDP PPP per capita (kUS$2005)
1995
2005
20152030
205021002070
Low
Medium
High
b a c k g r o u n d
m e t h o d
s c e n a r i o s
Main sources of uncertaintyF E
L o wF E
M e d i u mF E
H i g h
C o o p . S e g .
S u p p . p o l i c i e s .
N o s u p p . p o l i c i e s
Sensitiveness to Final Energy demand levels
Cooperation to achieve European target – country level
emission allowance trade
Supporting Policies can represent the difference between the adoption or failure
of alternative decarbonization pathways
p o l i c y
s c e n a r i o s
r e s u l t s
2020 2022 2024 2026 2028 20302016 2018
ES
D C
arbo
n P
rice
(€/tC
O2e
q)
0
100
200
300
400 F E L o w
F E M e d i u m
F E H i g h
C o o p .
N o s u p p . p o l i c i e s
10
99
318Under the cooperative scenario there
is a single European wide optimal carbon tax level
p o l i c y
s c e n a r i o s
r e s u l t s
2020 2022 2024 2026 2028 20302016 2018
ES
D C
arbo
n P
rice
(€/tC
O2e
q)
0
100
200
300
400 F E L o w
F E M e d i u m
F E H i g h
C o o p .
N o s u p p . p o l i c i e s
10
99
318
Final energy demand levels are extremely important to current
carbon price policy effectiveness
p o l i c y
s c e n a r i o s
r e s u l t s
2020 2022 2024 2026 2028 20302016 2018
ES
D C
arbo
n P
rice
(€/tC
O2e
q)
0
100
200
300
400 F E L o w
F E M e d i u m
F E H i g h
C o o p .
N o s u p p . p o l i c i e s
10
99
318Under the cooperative scenario there
is a single European wide optimal carbon tax level
Final energy demand levels are extremely important to current
carbon price policy effectiveness
EU country cooperation to achieve the ESD targets implies:
public acceptance for meaningful money transfers between countries; perfect ESD market allowances mobility; implementing mitigation measures that affect national champion
industries and beliefs; extra difficulties to achieve post 2030 emissions reduction targets because
postponed policies.
p o l i c y
s c e n a r i o s
r e s u l t s
ES
D C
arbo
n P
rice
(€/tC
O2e
q)
0
100
200
300
400
2020 2030
F E L o w
F E M e d i u m
F E H i g h
S e g .
N o s u p p . p o l i c i e s
coop
erat
ive
segr
egat
ed
2020 2022 2024 2026 2028 20302016 2018
93
234
416Under national only mitigation
ESD carbon policy must be much stronger
Ger
man
cas
e
10
99
318
p o l i c y
s c e n a r i o s
r e s u l t s
ES
D C
arbo
n P
rice
(€/tC
O2e
q)
0
100
200
300
400
2020 2030
F E L o w
F E M e d i u m
F E H i g h
S e g .
S u p p . p o l i c i e s .
coop
erat
ive
segr
egat
ed
2020 2022 2024 2026 2028 20302016 2018
Ger
man
cas
e
The importance of supporting policies cannot be underestimated
p o l i c y
s c e n a r i o s
r e s u l t s
ES
D C
arbo
n P
rice
(€/tC
O2e
q)
0
100
200
300
400
2020 2030
F E L o w
F E M e d i u m
F E H i g h
S e g .
S u p p . p o l i c i e s .
coop
erat
ive
segr
egat
edG
erm
an c
ase
2020 2030
econ
omy
wid
e ta
x
2020 2030
ETS emissions have lowershort-term mitigation costs
however transfers betweenETS and ESD markets increase
pressure on longer-term targets
p o l i c y
r e s u l t s
c o n c l u s i o n s
• Future final energy demand levels are of summary importance for the ESD sectors carbon pricing policy;
• Implementing supporting policies in parallel to carbon pricing is a must for the success of emission reductions;
F E L o w
F E M e d i u m
F E H i g h
C o o p . S e g .
S u p p . p o l i c i e s .
N o s u p p . p o l i c i e s
F E L o w
F E M e d i u m
F E H i g h
C o o p . S e g .
S u p p . p o l i c i e s .
N o s u p p . p o l i c i e s
€/tC
O2e
q
p o l i c y
r e s u l t s
c o n c l u s i o n s
• Future final energy demand levels are of summary importance for the ESD sectors carbon pricing policy;
• Implementing supporting policies in parallel to carbon pricing is a must for the success of emission reductions;
• Emission mitigation in Effort-Sharing sectors is more costly than current ETS targets;
• Delayed action could put pressure in ESD national trade allowances permissions;
• Policy sequencing is crucial to the definition of Effort Sharing Decision policy.
Thank you!
