1. EU Climate Change Policy
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EU Climate Change Policy
Jürgen Lefevere
International and Institutional Coordinator
Climate, Ozone and Energy Unit
Environment Directorate General
European Commission, Brussels

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Overview
The Commission’s Communication “Winning the Battle Against Global Climate Change”
The EU’s response to Climate Change
EU Emissions Trading (EU ETS) and its link with the Kyoto Mechanisms
“post-2012” – “post-Montreal”

3. The EU’s post-2012 strategy
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The EU’s post-2012 strategy
“Winning the Battle against Global Climate Change”
9 February 2005
The Climate Challenge
Benefits & costs
The Participation Challenge
The Innovation Challenge
The Adaptation Challenge
On 9 February 2005 the European Commission adopted a report setting out its recommendations for a future climate change regime – this Communication addresses the key challenges we face and provides a first assessment of the benefits and costs of tackling climate change
As for the benefits and costs of tackling climate change, the Communication concludes that there is increasing scientific evidence that the benefits of limiting the global average temperature increase to 2 degrees celcius outweigh the costs of abatement policies – some studies say that the avoided damages can be up to four times as high as the costs of action. And the study shows that the costs can be minimised if all sectors and greenhouse gases are covered, participation in reducing emissions is broadened to include all major emitting countries, emissions trading and project-based mechanisms are fully used and synergies with other policies are fully exploited (eg. Air quality, energy security etc.)

4. The importance of the 2°C target

5. “Millions at Risk”

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Approx. annual mean surface temperature distribution for a global increase of 2°C
2°C might not sound a lot
“Average” mean cooler in some places, hotter in others
2°C global averages might correspond to 3.5°C and more over some land areas.
In perspective: Last ice age, average European temperature about XXXX 5°C cooler than today
Key climate impacts that we might want to avoid:
disintegration of ice sheets: e.g. Greenland ice sheet. Once started  runaway effect.
.. BILL’s PRESENTATION..
Keep in mind: Temperature is a good, but certainly on a regional basis not a perfect indicator for climate impacts. Developing countries likely to be hit targets.
Citation: ‘The sad truth is that the developing countries, who are least responsible for climate change due to their low per capita (and even absolute) emissions, are nonetheless likely to be those most affected.’ Margot Wallström, SPEECH/01/496, Date: 26/10/2001
Key message:
Global average temperature increase by 2°C implies that land warms even more.

7. The probability to reach the 2°C target
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The probability to reach the 2°C target
X-axis: CO2 equivalence stabilization level
Y-axis: Probability to reach 2°C.
I’m not making this up. This graph immediately follows from published climate sensitivity PDFs.
Only additional formula used is the logarithmic relationship between CO2 concentration levels and radiative forcing, as given in IPCC TAR (RF=5.35*ln(C/278)
Sharply increasing probabilities for lower stabilization levels
IPCC Terminology on likelihoods: “likely” between 66% and 90% chances.
“Likely” to achieve 2°C target only for stabilization levels lower than 450 ppmv. For middle range studies only for levels lower than 400 ppm CO2eq.
This is NOT in contradiction to the study “Greenhouse Gas Reduction Pathways in the UNFCCC Process up to 2025”, which has been commissioned by the EU.
There is a 550 and 650 CO2 equivalence stabilization pathway presented.
It states explicitly that the consistency with 2°C is only given for low climate sensitivities.
Thus, there is no contradiction. This presentation simply goes a step further and attaches probabilities to the different climate sensitivity values by using published research.
Today about 370 ppmv CO2 equivalence (~1.5W/m2 including ghgs and aerosols)
Key Message:
It is only “likely” to achieve 2°C target for stabilization levels lower than 450 ppmv CO2 equivalence.

8. EU international climate policy: Winning the battle against climate change
Five essential elements:
Build on Kyoto
Broaden participation
Include more sectors and all gases
Deploy and develop technologies
Adapt to the effects of residual climate change

9. 1st element: Build on Kyoto
Build a truly global carbon market
Emissions trading
Joint Implementation
Clean Development Mechanism
Clear rules for monitoring and reporting
Multi-lateral compliance regime

10. 2nd element: The top 25 ‘climate footprints’
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2nd element: The top 25 ‘climate footprints’
Top 25 in
Population
Netherlands,
(Taiwan)
Top 25 in GDP
Thailand
Canada,
S.Korea,
Australia,
S.Africa,
Spain,
Poland,
Argentina
USA, China, EU25, Russia, India, Japan, Germany, Brazil, UK, Italy, Mexico, France, Indonesia, Iran, Turkey
Bangladesh, Nigeria, Viet Nam, Philippines, Ethiopia,
Egypt,
Congo
Courtesy of WRI and Pew Centre. Data for 2000.
A comment on inclusiveness: demographic, economic and ecological footprints – overlying differentiated responsibilities and capacities to respond, in particular per capita measures.
Note EU in central overlap – must be core of meaningful deal.
Top 25 in
Emissions
Ukraine,
Pakistan
S. Arabia
WRI/Pew Center; data for 2000

11. Lower Stage of development Higher Stage of development
2nd element: Common but differentiated responsibilities and respective capabilities
Qualitative
non-binding
Partial
not strict
Lower Stage of development
Business As Usual
No-regret PAMs
Sustainable Development (eg via CDM)
SD-PAMs
S-CDM
Non-binding target (~> dual target)
Sectoral target
Relative emission ceiling
Absolute emission ceiling + price ceiling
Absolute emission ceilings
Possible indicators:
GNP per capita, CO2/Joule
CO2 per capita
Human Development Index
Relative importance of sectors
Quantitative
binding
All-inclusive
strict
Higher Stage of development

12. 3rd element: Include more sectors
aviation
maritime transport
deforestation

13. 4th element: Deploy and develop technologies!
PUSH FACTORS
PULL FACTORS
Subsidise new technologies (e.g. guarantee demand, set standards, large scale demos, public-private partnerships for technology development, tax reductions)
Emissions trading
Level playing field (abolition of fuel subsidies, carbon taxes, feed in tariffs)
Co-benefits (security of supply, rising oil prices)

14. 4th element: Don’t miss near-term opportunities
EU: Build and refurbish 700 GW of electricity generation by 2030 (equal to current installed capacity).
China: 562 coal- fired plants -- nearly half the world's total – by 2013
India: 213 coal-fired power plants by 2013
United States is expected to build 72 until 2013
$ 16 trillion investment into the world’s energy systems until 2030

15. 4th element: There is no silver bullet
Emissions (Gt CO2)

16. 5th element: Adapt to the adverse effects of climate change
identify vulnerabilities
implement measures to increase resilience

17. No time to loose…. Concrete steps:
Immediate and effective implementation of agreed policies (e.g. EU Energy Efficiency Initiative)
Increased public awareness
More and better focussed research
Stronger co-operation with 3rd countries
New phase of the European Climate Change Programme in 2005 (review, cars, aviation, carbon capture and storage, adaptation)

18. The EU’s response to Climate Change
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The EU’s response to Climate Change
So how has the EU reacted to the increasing threat that climate change poses?
By providing international leadership in supporting the development of a multilateral framework to tackle climate change
And by acting domestically to show that greenhouse gas emissions can be reduced

19. Ratification on 31 May 2002 (Decision 2002/358/EC) The Bubble:
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Ratification on 31 May 2002 (Decision 2002/358/EC) The Bubble:
EU-15 Member State
QELRC commitment (% reduction of base year/period emissions)
Austria
-13
Belgium
-7.5
Denmark
-21
Finland
France
Germany
Greece
+25
Ireland
+13
Italy
-6.5
Luxembourg
-28
The Netherlands -6
Portugal
+27
Spain
+15
Sweden +4
United Kingdom
-12.5
Total EU-15 Commitment: -8%

20. European Climate Change Programme (ECCP): main elements
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European Climate Change Programme (ECCP): main elements
Objectives
Identify and develop cost effective elements of EU strategy to meet our Kyoto target
Major Milestones
Launch March 2000
May 2003 : second progress report
New phase started on 24 October 2005 (review, aviation, transport, adaptation and carbon capture and storage)
Major Achievements
Total reduction potential of identified measures: Mt CO2eq./year = twice Kyoto ‘-8%’
EU Measures currently “in implementation”: Mt CO2eq./year
Once Kyoto was adopted, the EU set out to identify a series of cost-effective measures to implement the EU’s targets under the Protocol through the European Climate Change Programme (ECCP)

21. Domestic action: Recently adopted measures
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Domestic action: Recently adopted measures
Cross-cutting issues
Directive on GHG emissions trading within the Community (Oct. 2003)
Linking project-based mechanisms to GHG emissions trading (Oct. 2004)
Decision for monitoring Community GHG emissions and for
implementing the Kyoto Protocol (Feb. 2004)
Energy
Directive on the promotion of renewable energy sources (Sept. 2001)
Directive on taxation of energy products (Oct. 2003)
Directive on energy performance of buildings (Jan. 2003)
Directive on the promotion of cogeneration (CHP) (Feb. 2004)
Transport
Promotion of the use of bio-fuels for transport (May 2003)
As a result of the ECCP a series of new policies and measures was adopted, including

22. Domestic action: Ongoing work….
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Domestic action: Ongoing work….
Energy
Proposal for a framework directive on eco-efficiency requirements for energy-using products
Proposal for a Directive on energy end-use efficiency and energy services
Commission Green Paper on energy efficiency or doing more with less
Transport
Proposal for improvements in infrastructure use and charging
Proposal on special tax arrangements for diesel fuel used for commercial purposes and on the alignment of excise duties on petrol and diesel fuel
Proposal for a regulation on the granting of Community financial assistance to improve the environmental performance of the freight transport system (Marco Polo I and II program)
Products
Proposal for legislative action on fluorinated gases
And a number of further measures are still being elaborated, including

23. Implementation challenge ahead: The EU’s projected progress
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Implementation challenge ahead: The EU’s projected progress
As a result of these measures, and further measures implemented by the Member States, the EU’s emissions are now 2.9% below 1990 emissions and with the implementation of a number of additional policies and measures and the use of the Kyoto Protocol’s Kyoto mechanisms, the EU is projected to meet its Kyoto target
Slide 3/96

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Distance-to-target in 2010 (percentage points) for the EU-25, including Kyoto mechanisms
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Notes: Data exclude emissions and removals from land-use, land-use change and forestry. All EU-15 Member States provided projections assuming existing domestic policies and measures. Several countries provided projections with additional domestic policies and measures. For following Member States the additional effects of the use of Kyoto mechanisms is included: Austria, Belgium, Denmark, Finland, Ireland, Italy, Luxembourg, the Netherlands and Spain),. For EU-15 the effect of use of Kyoto mechanisms is calculated based on information from these nine countries. Projections for Poland cover only CO2 and N2O and include LULUCF. Projections for Spain cover only CO2. Projections for Cyprus and Malta are not available. Source: EEA, 2005

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Use of Kyoto Mechanisms: Planned purchases by Member States (in addition to company use!)
Million tonnes of CO2 eq.
Austria
35.00
Belgium
42.00
Denmark
22.50
Finland
At least 3.0
Ireland
18.50
Italy
198.00
Luxembourg
15.00
Netherlands
100.00
Spain
Sweden
At least 5.0
Almost 520 Million tonnes of CO2eq ( )
Allocated resources thus far: 2.7 billion €

26. EU Emissions Trading &file 16/04/2017
So how has the EU reacted to the increasing threat that climate change poses?
By providing international leadership in supporting the development of a multilateral framework to tackle climate change
And by acting domestically to show that greenhouse gas emissions can be reduced

27. Why emissions trading? It is a modern environmental policy:
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Why emissions trading?
It is a modern environmental policy:
It rightly places a greater emphasis upon cost-effectiveness and encouraging innovation
The larger the cuts, the more difficult to stick to “old style” regulation
The world is becoming a "global village" where companies compete internationally and are based themselves across different continents
Tackling a global environmental problem requires environmental policies which work in conjunction with these international markets

28. Irrelevant where GHG are emitted!
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Cap and Trade
Irrelevant where GHG are emitted!
Set overall target covering group of sources
Allocate allowances
Sources can choose:
Emit as allocated
Reduce emissions below allocation and sell or bank
Emit more than allocation and buy

29. EU ETS: scheme coverage
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EU ETS: scheme coverage
CO2 emissions from energy intensive industry above specific capacity thresholds (45 – 50 % of EU CO2 emissions)
11,500 or more installations
electricity generators
heat & steam production
mineral oil refineries
ferrous metals: production & processing
cement, lime glass, bricks and ceramics
pulp & paper sector

30. Simple and transparent:
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EU Greenhouse Gas Emissions Trading
Simple and transparent:
Subsidiarity – important role for Member States
Based on and linked to other Community legislation (Integrated Pollution and Prevention Control – IPPC Directive)
Starts with known large emitters, measurable emissions
Building blocks – easy to expand
Lower costs & guaranteed environmental outcome

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Key Instruments
Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC
[Emissions Trading Directive]
Directive 2004/101/EC of the European Parliament and of the Council of 27 October 2004 amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community, in respect of the Kyoto Protocol's project mechanisms
[Linking Directive, amending Emissions Trading Directive]
Commission Decision of 29 January 2004 establishing guidelines for the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council
[Monitoring and Reporting Guidelines]
Commission Regulation of 21 December 2004 for a standardised and secured system of registries pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision 280/2004/EC of the European Parliament and of the Council
[Registries Regulation]

32. Key Terms Activity (Annex I) Installation (IPPC definition) Operator
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Key Terms
Activity (Annex I)
Installation (IPPC definition)
Installation means a stationary technical unit where one or more activities listed in Annex I are carried out and any other directly associated activities which have a technical connection with the activities carried out on that site and which could have an effect on emissions and pollution
Operator
Operator means any person who operates or controls and installation or, where this is provided for in national legislation, to whom decisive economic power over the technical functioning of the installation has been delegated
Activities in Annex I leading to GHG emissions cannot be undertaken unless the operator holds a permit
The operator must hold sufficient allowances to cover GHG emissions from installation

33. 2008 – 2012 & subsequent 5-year periods Initially limited to CO2 only
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Timing & Coverage
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2005 – 2007
2008 – 2012 & subsequent 5-year periods
Initially limited to CO2 only
Large sources, mostly covered by IPPC (Annex I)
(45% of EU CO2 emitting activities, around 11’500 installations)
Add in additional sectors/gases through:
Unilateral inclusion (below thresholds, new gases and activities)
amendments

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Coverage

35. Allocation By Member States, but:
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Allocation
By Member States, but:
National Allocation Plan (NAP) (total allocation and allocation methodology), draft by 31 March 2004
95% of allocation free of charge (90% after 2008)
Guidelines for Allocation in Annex III
Commission Allocation Guidance by 31 December 2003 (7 Jan 2004) – further guidance expected soon
State aid provisions
3 month assessment of NAPs by Commission
Allocation 3 months before start of trading period
[Issue annually by 28 February]

36. The NAP decisions…. Last NAP approved on 20 June 2005 (Greece) &file
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The NAP decisions….
Last NAP approved on 20 June 2005 (Greece)

37. Monitoring, Verification, Compliance
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Monitoring, Verification, Compliance
Monitoring, Reporting:
Calculation, basic guidelines in Annex IV (Commission Decision of 29 January 2004)
Verification:
Basic guidelines in Annex V, Member States to decide on role authorities/private verifiers (voluntary coord?)
Compliance:
Member State competence, harmonized penalty
(€ compensating for shortfall + “naming and shaming” )
Existing EU compliance framework
(Member State implementation – penalties for failure to do so)

38. Registries Regulation!
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The Registry System
Combined EU-UNFCCC registry system
EU allowances, AAUs, CERs (+ lCERs, tCERs), ERUs, RMUs
UNFCCC Independent Transaction Log
Community Independent Transaction Log
26 National Registries
Registries Regulation!
18 Registries online thus far (10 February 2006)

39. Membership of the Trading Scheme
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Membership of the Trading Scheme
25 EU Member States
Future Member States (Bulgaria, Romania, Turkey, Croatia)
EEA (Norway, Iceland, Liechtenstein)
Art 25: bilateral agreements with other regimes:
Switzerland, Canada, New Zealand, Japan…..
Regime potentially has very broad coverage – provide important trend-setter for international emissions trading between private entities under Kyoto Protocol

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The Linking Directive
Direct use of JI and CDM credits by operators in the EU ETS to achieve compliance with their targets (1 CER or ERU = 1 EU Allowance)
CDM from 2005, JI from 2008
All project credits, except Nuclear energy projects (up to 2012) and LULUCF projects (review in mid-2006
From 2008 use limited to % of allocation of allowances to each installation

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The result….

42. Carbon prices & traded volumes 260 million allowances approx.
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Carbon prices & traded volumes
3 February 2006 EUA 2005 spot
(€/tCO2)  €27.18
2005 total volume:
260 million allowances approx.
2005 market valuation:
€5.4 billion
Source: Point Carbon's Carbon Market Daily

43. Close to 6.6 billion allowances will be allocated in 2005-2007
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Facts and figures
Close to 6.6 billion allowances will be allocated in
Total asset value over € 140 billion
1-3 million allowances traded daily
14 national registries online, all expected to be operational by the end of 2005

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The next steps…..
Commission issued additional allocation guidance on 22 December 2005
Compliance:
Submission of verified emissions report by 31 March annually
Surrender of allowances by 30 April annually
New NAPs by 30 June 2006
Commission Communication of 27 September 2005 “Reducing the Climate Change Impact of Aviation” (COM(2005) 459)
Review of ETS by 30 June 2006

45. What the review is about
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What the review is about
Improve the functioning of the scheme based on practical implementation experience
Streamline current scheme …
More predictable allocation rules through
stable baseline years and/or
longer allocation period and/or
derive future allocation from past allocation
More harmonised approach to new entrants and closures, based on experience during period
Further harmonisation in the area of verification
…and expand to other sectors and gases, beyond aviation

46. Main results of the EU ETS stakeholder survey (McKinsey and Ecofys, 2nd half 2005)
EU ETS has an impact on corporate behaviour – all sectors price in value of allowances
Long-term topics have highest priority for all stakeholders
However no clear consensus – harmonise allocation, but how?
Companies vote for longer allocation periods (ten years or more)
Benchmarking seen as interesting alternative, however most companies think more than 3 benchmarks per sector are needed
More auctioning disliked by companies but favoured by other stakeholders
Wide consensus that scheme design changes should be brought in with sufficient lead-time

47. Action on Climate Change “post-2012”
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Action on Climate Change “post-2012”
The EU is working hard on meeting its Kyoto target – but we also realise that the Kyoto Protocol is only a start – it will not stop climate change.

48. Implement: Improve Innovate
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COP President Stéphane Dion’s Three “I”s Results of Montreal (December 2005)
Implement:
Adopt the “Marrakech Accords”
Adopt the compliance regime
Improve
Strengthen the Clean Development Mechanism
Innovate
Start a dialogue on future action to tackle climate change both under the Convention and the Protocol

49. The results: Implementation
Adoption of the Marrakech Accords: the rulebook for the Kyoto Protocol adopted in full on Wednesday of the first week.
Adoption of the Compliance Decision: discussions on the Saudi proposal to amend the Kyoto Protocol started to be finalised by COP/MOP-3.
Five-year adaptation work programme: agreed full set of activities, including work to further enhance our knowledge on the impacts of and vulnerabilities to climate change and contains concrete measures to plan for adaptation and take adaptation measures.
Adaptation Fund: details on the Fund’s management will be elaborated during 2006

50. The results: Improvement
Strengthening the Clean Development Mechanism (CDM): clarification and strengthening of the CDM Executive Board’s executive and supervisory role. Parties pledged US$ 8,188,050 to the operation of the CDM (US$ 5 million from the EU, and US$ 890,000 from the Commission).
Carbon Capture and Storage (CCS): presentation special report on CCS by Intergovernmental Panel on Climate Change (IPCC). Follow-up workshops in May to disseminate its results and to consider role of CCS under the CDM. The inclusion of CCS in the CDM will be further considered at the next COP/MOP.
Kick-starting Joint Implementation (JI): JI institutions set up. Preparatory work done for the CDM can also be used for the approval of JI projects. EU pledged over US$ 700,000 (incl. US$ 250,000 from the Commission) to the JI Supervisory Committee, Canada pledged US$ 500,000.

51. The results: Innovation
The Convention Track: forward-looking dialogue under the Convention, up to four Workshops over the next two years, results reported back to the COP.
The Kyoto Track: ad-hoc working group under the Kyoto Protocol, will complete its work as early as possible and in time to ensure that there is no gap between the first and the second Kyoto commitment period, next year’s full review of the Kyoto Protocol prepared with submissions of views in September.

52. More information on EU climate change policy
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More information on EU climate change policy