1. UCD Emissions Trading Workshop “Enterprise Perspective” 25 th April 2012

2. Policy And Politics Services* Useful Energy Fossil Fuels ClimateCO2 RES Energy Efficiency * Mobility, Heating/Cooling, Electrical/ICT etc. Everything Else Energy Policy (mainly National) Climate Policy (mainly EU) Nuclear

3. Long-term Carbon Price Formulation € “PRIMES” output: Assumes global CO2 market link Delayed CCS build More rapid technology Development curve Early RES, nuclear build Higher 2020/30 cap Higher GDP growth Regulatory risk Slow energy efficiency uptake Theoretical price evolution response (closed system) ……….

4. Background Views are primarily ESI (~70% of ETS) Enterprise does not have common view –Traders vs. compliance operators vs. exposed sectors EU Electricity Supply Industry –Accepts science –Committed (2009) to decarbonisation by 2050 (ESB 2035) –Promoted ET concept to EU policy-makers (vs. tax) Informal Environment Council (17 th April) –Carbon market is bust, needs to be fixed

5. A Broken Market? ETS basic concept: –Binding cap to reduce emissions; –Cost efficiency through trading within cap –Discovered carbon price informs operational and investment decisions Divergent views on current low price –By Country, by sector, by company strategy But… cap not breached, price reflects the supply (fixed cap): demand balance And.… future investments not determined by price alone (trajectory to zero, extreme penalties) However…. Cion responded to political pressure –Something will be done (by December 2012)!!!

6. Recession €/t 0 Quantum to be Abated (Mt) Reduction Target (Mt) @ marginal price of €x/t x PostPre Recession x1x1

7. Policy coherence (lack of …) €/t 0 Quantum Abated (Mt) Reduction Target (Mt) @ marginal price of €x/t x Reduction Target (Mt) @ marginal price of €x/t

8. Policy coherence (lack of …) €/t 0 Quantum Abated (Mt) Reduction Target (Mt) @ marginal price of €x/t x x2x2 Reduction Target (Mt) @ marginal price of €x/t

9. Regulatory interference – future shock? Supply Demand balance (Mt CO2) €/t 0 ETS CapEUA Price “Set-aside” adjustment Equilibrium point Model projections Reality? HistoricCurrentFuture Time Crisis Real Crisis

10. Beyond 2020 … Principles –Recognise science –Least cost –Coherent system approach to energy transformation Policy approach –Instrument coherence – single “driver” for decarbonisation –Well-functioning markets –Early agreement on 2030 targets Outcomes –Internal Energy Market + ETS drives decarbonisation and innovation? –Mandatory RES share (40%+ in 2030) undermines IEM and collapses ETS?

11. Decarbonised Electricity for a Decarbonised Economy: Climate Change Mitigation New Techn- ologies Flexible Systems “Invest- ability” Smart Grids Market Design Adaptation Impacts v-RES CCS Nuclear… Demand Storage Cycling… Networks Meters ICT… Energy Carbon Services… Available Affordable …. Utilities v. others Europe v. RoW Integration RD&D Interconn- ection Plant Conflicts RD&D Acceptability RD&D Science Policy Can everything be connected….