Representing the European electricity industry at expert, strategic and policymaking levels.

1. Representing the European electricity industry at expert, strategic and policymaking levels.

2. General Principles Governing a post-2012 Climate Policy: Participation - based on the GETS4 analysis Stakeholder Conference “Post-2012 Climate Policy for the EU” Brussels, 22 November 2004 Dr Bill KYTE, OBE Chairman Environment and Sustainable Development

3. Principles for a Future post-2012 Regime • A genuine global approach • Longer timelines • Emissions reduction goals • Market-oriented policies • Participation of all sectors • Increased R&D and technology transfer & dissemination • Encourage changes in consumer behaviour 3/15

4. GETS4 Aims • To assess the impacts of future world GHG emissions reduction schemes to 2012 and beyond • - In a quantitative manner (€ and tCO2eq) • - To 2022 • > Kyoto Commitment Period 1 + 10 years • - Using a wide range of scenarios & sensitivities • - Within a single analytical framework • > results from all scenarios & sensitivities directly comparable 4/15

5. Principles for a Future post-2012 Regime • A Genuine Global Approach [the key issue!] • EU emits only 14% of global emissions • Common objectives for the environment, but also for competitive reasons • Developing countries need to play an increasing role 5/15

6. GETS4 conclusions: • Impacts are dominated by the positions of Russia and US • If Russia does not participate, compliance costs and market traded prices would double • If US enacted McCain-Liebermann, it would increase world system compliance costs by 3-6 times 6/15

7. Principles for a Future post-2012 Regime • 2. Longer Timelines • Absence of certainty creates excessive commercial risk • Clarity is needed on long-term aim (2050) and on goals and instruments over a long-period of time • 3. Emissions Reduction Goals • Reduction goals must be based on sound scientific and economic analyses 7/15

8. Targets and Abatement Potential 2020 McCain- 45.0 Lieberman 40.0 eq) US 2 35.0 30.0 25.0 Kyoto Bloc - Price (Euro/tCO 20.0 Russia Out 15.0 10.0 Kyoto Bloc - 5.0 Russia In 0.0 0 400 800 1200 1600 2000 2400 2800 3200 3600 4000 4400 4800 Quantity (MtCO eq) 2 • GETS4 conclusions: • Compliance costs increase exponentially with severity of targets - Increasing all targets in all schemes by 50% leads to system compliance costs 3-5 times higher 8/15

9. GETS4 conclusions: • A 2ºC target has a dramatic effect • GETS4 has simulated targets based on: • - Stabilising atmospheric GHG concentration • - Equal world per capita emissions (“contraction & convergence”) • If the EU-25 alone transfers to its share of a 550 ppm CO2eq target in the period 2013-22, EU-25 compliancecosts treble: • - Leading to a doubling of world compliance costs • - The potential costs of “going it alone” are very high 9/15

10. Principles for a Future post-2012 Regime 4. Market-Oriented Policies • Market-based instruments ensure compliance at the lowest cost. They should be the preferred tool to achieve emissions reductions worldwide. • Kyoto’s flexible mechanisms must be available under simplified procedures • - Global emissions trading will be an important policy instrument to achieve emissions reductions. 10/15

11. GETS4 conclusions: • Linking significantly reduces costs for participants • Highest benefits accrue when linked schemes all have significant targets • 6-17% reductions in system compliance costs are projected from linking the Kyoto scheme to the relatively minor “Other” schemes modelled 11/15

12. Principles for a Future post-2012 Regime 5. Participation of all sectors - Specific sectors should not be exempted from contributing to emissions reduction goals • GETS4 conclusions: • - A number of factors greatly alter costs of meeting a given set of absolute commitments • Supplementarity (minimum domestic action) is a costly constraint as it restrains trading • High GDP projection increases system compliance costs 2-4 times 12/15

13. Principles for a Future post-2012 Regime 6. Increased R&D and technology transfer & dissemination • - Accelerated and increased funding, and international coordination are needed • Increase the use of energy end-use efficient technologies and non- or low-emitting generation technologies, such as: • - Renewables • - Nuclear power • - Combined heat and power (CHP) • - High-efficiency natural gas • - Advanced clean coal (including CO2 capture and storage). 13/15

14. Principles for a Future post-2012 Regime 7. Encourage changes in consumer behaviour - Consumers and their choices make markets - Policies and measures should be designed to influence consumers to adopt a more climate-friendly behaviour - Promotion of education and training on more efficient use of resources and environmental awareness 14/15

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