The EU as Climate Change Leader The EU ETS

1
The EU as Climate Change Leader? The EU ETS

• Dr Charlotte Streck
• 1 March 2006
• Brodies Lecture

2
The Climate Change - History

• 1988 Intergovernmental Panel on Climate Change
• 1992 UN Framework Convention on Climate Change
• 1995 Berlin Mandate
• 1997 Kyoto Protocol to the UNFCCC
• 1998 Buenos Aires Plan of Action
• 2000 Break Down of CoP-6
• 2001 Bush announces US withdrawal from the KP
• 2001 Bonn Political Agreements
• 2001 Marrakesh Accords
• 2005 Entry into force of Kyoto Protocol
• 2005 Official start of post Kyoto negotiations

3
The International Response

• UNFCCC/Kyoto Protocol recognize global climate
  change as a high priority area. Built on the
  following principles
• Act based on reasonable scientific evidence and
  Precautionary Principle.
• Recognition of the Right of Future Generations as
  well as right of Sustainable Development of the
  South.
• Implementation based on Common but
  Differentiated responsibility and Polluter
  Pays principle

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UNFCCC/KP CONTEXT
UN Framework Convention on Climate Change
Kyoto Protocol
Domestic Policy Actions
Non Annex I Countries
Annex I Countries
Emissions Trading
Joint Implementation
Binding Emission Targets
CDM
5
The Kyoto Protocol
Annex B

• 3 Flexible Mechanisms

Non-Annex B

• Assigns GHG emission targets to Annex I
  countries between 2008 and 2012

6
The Market Incentive

• Industrialized countries are subjected to legally
  binding emission targets (2008/12)
• Costs of abatement or reduction of emissions
• Industrialized Countries U 50-200/ton
• Developing Countries U 1-10/ton
• Reductions much cheaper in developing countries
• Due to un-localized nature of CO2it does not
  matter for environment where reduction occurs
• Strong market incentive present
• Emission trading chosen as the economic concept
  to capitalize this incentive reduce where
  cheaper and trade

7
CDM Concept

• CDM is going to be a system of rules procedures
  aided by an international board overseeing the
  transactions

Developing Country Party
Industrialized Country Party
CERs
Project
Emission Limit
Sustainable Development Financing
Cost Effective Compliance
Source Envork. A research and development
organization
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Emissions Trading US-EU Flip Flop

• Yesterday
• U.S. establishment of an emissions trading
  scheme for Sox/Nox in 1990, advocated for ET in
  Kyoto
• Europe traditionally cautious with respect to
  ET, opposed ET in Kyoto, in favour of carbon
  taxation.
• Today
• U.S. has withdrawn from the Kyoto Protocol
• EU is about to implement an ET ten times bigger
  than the US Sox/NOx program

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EU Climate Change PolicyInstruments

• Formulation of strategies and programs
• Environmental Action Programmes (1987/ 1993/
  1998)
• White Paper on Renewable Energies (1997), ALTENER
  SAVE Programmes, Intelligent Energy Europe
  (2002)
• European Climate Change Programme (2000)
• White Paper on a Common Transport Policy
• Formulation of a joint EU position in the context
  of the UNFCCC negotiations
• Adoption of legislation
• Decision on GHG Monitoring
• Directives on energy efficiency with respect to
  fridges, freezers, boilers.
• Directives on energy labeling
• Directive Establishing an EU Emissions Trading
  Scheme (10/2003)
• Directive on the use of Combined Heat and Power
  (2/2004)
• Proposed Directive on fluorinated GHG (8/2003)

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Kyoto Protocol and EU ETS

• EU ETS is a domestic policy measure with the
  objective to reduce energy related CO2 emissions
  in the EU
• From 2008 EU Allowances (EUAs) come as disguised
  Assigned Amount Units
• ICTL linked to the ITL
• Linking Directive
• Authorizes Member States to allow the use of
  CERs/ERUs for compliance under the EU ETS
• Regulates the approval of CDM/JI projects

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EU ETS

• Key regulation EU ETS Directive, Registry
  Regulation, Linking Directive
• Main Elements
• Timing
• Participation
• Coverage
• Uniform Penalties
• Allocation
• Permits Allowances
• Technical Infrastructure
• Linkage Project Mechanism

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Analysis EU ETS

• Pro
• prices of GHG emissions
• Influences investment decisions
• sets a reference price
• creates awareness
• builds partnerships through linking with Kyoto
  Protocol
• sets example
• Contra
• distorts competition
• not sufficiently harmonized
• high transaction costs
• creates windfall profits
• limited effectiveness due to regional coverage

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More info

• Contact us
• Charlotte Streck
• e-mail c.streck_at_climatefocus.com
• Phone [phone]
• Web-site www.climatefocus.com