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Unlocking the synergies between EE, RE and Emission target

Energy Day. Karsten Neuhoff,. Dresden, 19.4.2013. Unlocking the synergies between EE, RE and Emission target. The role of targets for policy implementation Multiple targets to achieve one objective Multiple objectives motivating one target Translating targets into action

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Unlocking the synergies between EE, RE and Emission target

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  1. Energy Day Karsten Neuhoff, Dresden, 19.4.2013 Unlocking the synergies between EE, RE and Emission target

  2. The roleoftargetsforpolicyimplementation • Multiple targetstoachieveoneobjective • Multiple objectivesmotivatingonetarget • Translatingtargetsintoaction • The role of EU ETS – a target turned instrument • Possible implications for formulation of energy and climate targets • Unlocking the synergies between EE, RE and Emission target

  3. Ability of indicators to facilitate policy/project management 1 NOTE: 80% of respondents agreed that the data collection process for the indicators was labour intensive Disagree Strongly Disagree Strongly Agree Agree

  4. 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.

  5. Allow comparison of policy effectiveness • Often more difficult to define Response time • Response time • Identify barriers • Easier to measure • Can ignore important interactions / focus to narrowly 1 What trade-offs are involved in selecting indicators? Policy target applied to MDG Outcome PRSP EU Accession PSA GPRA Government performance result act PSA Public Service Agreements PRSP Poverty Reduction Strategy Papers MDG Millennium Development Goals GPRA Time frame (years) Input 1 3 10 15 Lester, S. and K. Neuhoff, 2009, Understanding the roles of policy targets in national and international governance. Climate Policy, 9 (5), p. 464-480.

  6. BAU Energy Efficiency Gas Renewables Oil CCS/ additional nuclear Conventional coal EE and RE targets make LT emission targets viable 2 Illustrative European CO2 emissions year 2050 today 2020

  7. Multiple targets to achieve one objective 2 Illustration Political objective Targets Policies / Programms Climate protection Emission Technology Energy efficiency

  8. Principle A: 2030 targets needed Example RE deployment 2 Policyscenarios % of EU Power from RE Reference scenario National Renewable Energy Action Plans EU Roadmap 2050 See also : Ensuring renewable electricity investment: 14 policy principles for a post-2020 perspective www.remunerating-res.eu

  9. Multiple objectives motivating one target 3 Illustration Political objectives Targets Policies / Programms Climate protection Emission Industry development Technology Energy security Energy efficiency Employment Reducing inequality Reduction of fuel poverty

  10. Short-term job multiplier effects of green investments 3 Spencer T. , K. Bernoth, L. Chancel, E. Guerin, K. Neuhoff (2012) Green investments in a European Growth Package, IDDRI Working Paper 11

  11. Translating targets into action 4 Illustration Political objectives Targets Policies / Programms Climate protection Emission EU ETS Industry development Technology RE support Energy security Energy efficiency Buiding standard Information program Employment Reducing inequality Reduction of fuel poverty Support for retrofit

  12. What is necessary to deliver targets – example RE 4

  13. Barriers Barriers Barriers Barriers Lack of effective legal / regulatory framework Lack of competition and lack of standards and codes of certification Financial Support(costs, risks, ...) Highly controlled energy sector Lack of private participation and professional institutions Lack of grid access for RE technologies Energy Market(access, structure, long-term costs, ....) Lack of entrepreneurs, skilled labour, and training and O&M facilities Uncertainty with government policies Lack of clear practises and procedures (related to planning barriers) Capital Market(perception of technical risk, perception of regulatory risk, ...) Lack of R&D capacity Lack of coordination between authorities Restricted access to technologies Lack of available grid capacity Lack of consumer/social acceptance of RE technologies Visibility(uncertainty, ....) Lack of reliability of products High grid connection costs for RE developers (poor cost allocation) Lack of institutions / mechanisms to disseminate information Lack of access to energy market 4 Barriers along the RE pipeline Access to Grid and Energy Market Global Input: Technically-Feasible RE Generation Capacity Planning Supply Chain Project Finance Global Output: Installed / Target RE Capacity

  14. Barriers along the RE pipeline: Indicators provided in NREAPs: 4 Access to Grid and Energy Market Global Input: Technically-Feasible RE Generation Capacity Planning Supply Chain Project Finance Global Output: Installed / Target RE Capacity Qualitative indicators Quantitative and qualitative indicators Not covered

  15. 2nd Purpose of targets: Creating confidence for investors in supply chain 4 Installed wind power per year (MW) France Italy U.K. Germany India Spain China Denmark U.S. Source: IEA, GWEC, Worldwatch Institute

  16. The role of EU ETS – a target turned policy 5 Illustration Political objectives Targets Policies / Programms Climate protection Emission EU ETS Industry development Technology RE support Energy security Energy efficiency Buiding standard Information program Employment Reducing inequality Reduction of fuel poverty Support for retrofit

  17. How does EU ETS impact on investment process? I. Capturing Companies’ Attention II. Providing Clarity for Decision Making III. Creating enabling environment for Low-Carbon Investment 5 See Climate Strategies Project Summary: Carbon pricing for low carbon investment

  18. 5 The surplus of unused allowances is „piling“ up 3,0 Uncertainty about future emissions will remain High Renewables Current Policy Initiative 2,5 Reference International offsets add to surplus CDM/ JI credits linked to EU (1.7 bn) 2,0 Volume of unused allowances (billion) 1,5 Timing of auctions increases surplus in 2012/13 Early auctioning (120 m) Early phase III NER (300 m) Retained phase II NER (350 m) 1,0 0,5 Cap exceeds emissions 0,0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: Banking of Surplus Emissions Allowances: Does the Volume Matter? DIW Discussion paper 1196

  19. 5 Where do unused allowances go? Banks buy allowances to sell forward/ future/ option contracts  No impact on demand 3,0 2,5 Speculative investment 2,0 Industry sector banks free allowances Volume of unused allowances (billion) 1,5 Power sector uses allowances to hedge future power sale (flexibility on volume) 1,0 I I 0,5 0,0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: Banking of Surplus Emissions Allowances: Does the Volume Matter? DIW Discussion paper 1196

  20. The roleoftargetsforpolicyimplementation • Multiple targetstoachieveoneobjective • Multiple objectivesmotivatingonetarget • Translatingtargetsintoaction • The role of EU ETS – a target turned instrument • Possible implications for formulation of energy and climate targets • Unlocking the synergies between EE, RE and Emission target

  21. Implicatinos of multiple drivers for targets Consistencyoftargets: Couldlimitscopeforpoliticalcompromise Mightbedifficulttotestwith real data/projections Couldlimit link fromspecificpoliticalobjectivetotarget -> Coherenceisguidingprinciple Howtomodelthis? Jose Ramon San Cristobal (2012) A goalprogrammingmodelfor environmental policyanalysis, EnergyPolicy 6

  22. Discrepancy can trigger discussion to increase consistency 6 Illustration 2020 emission target ~ no further action Current initiatives (EE, RE) CO2 emissions Discrepancy crystalizes in 2030 discussion Political objective: 2°C / - 80-95% CO2 2010 2020 2030 2040 2050

  23. Retain options for flexiblity Capacityofpoliticalprocessis limited -> allowforrenegotiationof a sub-set oftargetsat a time Forsometargetslong-term matters -> but if all targetssetlong-term = inflexible -> allowfor different time framesfor different targets Avoidartificialsimplificationoftargetframeworks -> build on historicdevelopmentofobjectivesandtargets Continue & furtherdevelopcurrentsetoftargets. See: H. Meyar-Naimi, S. Vaez-Zadeh (2012) Sustainabledevelopmentbasedenergypolicymakingframeworks, a criticalreview, EnergyPolicy 6

  24. Considerations for future target development Enhancepredictabiltyoffutureadjustementoftargets -> formulateminimumlevelsofattributesnec. forsociety -> link targetsmorecloselytopolicyobjectives Enhancecredibilityoftargets -> balance „ambition“ withcredibility/effectiveness -> developtrackrecordofdeliveryagainsttargets -> showcommittmentwithcomplementingshort-term pol. Integrate multiple actorsmoreclosely in 2030 process. Track andsupportdeliveryagainsttargets. Create transparencyaroundprocessoftargetadjustment. 6

  25. Summary 6 Illustration Political objectives Targets Policies / Programms Climate protection Emission EU ETS Industry development Technology RE support Energy security Energy efficiency Buiding standard Information program Employment Reducing inequality Reduction of fuel poverty Support for retrofit

  26. Karsten Neuhoff kneuhoff@diw.de

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