Climate Change Policy in Europe

Today's climate change lecture will be in CC policy in Europe, which we've already done with the EU ETS last semester. Hopefully this time around emphasis will be put on the 202020 deal agreed last December and powers of the European Commission to ensure that Europe meets in 2020 targets.

A nice review of the current EU climate change deal can be found at the following link:

http://www.caissedesdepots.fr/?article656

In short summary, the EU has committed to a 20% reduction of GHG from 1990 levels by 2020, and 37% in an international agreement can be reached. All of the permits for electricity utility companies will be auctioned, except for special cases such as Poland who are emerging economies dependent on coal. Heavy industries will see gradual rises in % of permits auctioned (20%-70%), depending on their exposure to foreign competition. There will be caps on CERs allowed into the trading system to prevent the carbon price from falling excessively and to prevent EU companies from "buying" their way out of their obligations.

The deal has been criticised for being too lenient to countries like Poland, and also the inclusion of eastern european states Estonia, Lativia and Czech Republic etc. who are still below their 1990 emission levels (because of the collapse of communism post 1990) makes the actual ambition of the emission cuts questionable...the amount of power that an uncooperative Italy waved around was also farcical.

However, it does look to be a HUGE improvement on Phase I and II with 100% auctions from the utility sector. It probably does need a price floor to ensure a stable price for carbon. This is totally reasonable since the permits will be auctioned anyway, meaning they must have some value. Another breakthrough was the EC taking control of NAP (National Allocation Plan) from the individual member states. This should lesson the perverse incentives of giving one's own country more permits than they need.

On another note, check the following:

http://www.alertnet.org/thenews/newsdesk/LM448772.htm

So a levy of around 2-3 Euros per tonne of CO2 in the EU ETS could raise up to EURO200 billion for a climate change fund, such is the size of the market. It could then be used for mitigation and adaptation for developing countries. How to allocate that 200 billion will be a logistical and political nightmare but let's not go there yet. The crucial question is will this carrot (fund) bring China on board to actually place caps on its GHG emissions as an "emerging developing country", as the EU hopes. My guess is probably not. China is open to being more energy efficient and for the west to help fund its ambitious renewable energy targets. But they are not going to place a cap, especially in current economic tough times where growth has "slowed" from 9% to 7%.

I do generally agree with such a fund as it could be used to provide the funding that the CDM needs to handle thousands of applications per year. Also it should help the least developing countries already suffering the effects of climate change, such as Bangladesh. Further there are some crucial technologies that need special help such as CCS, CSP and cellulosic biofuels (and biofuels from algae) to help it get running at commercial scale all over the world. These initiatives need not only funding but palpable targets and goals.

But equally important is the investment environment that individual EU govts have to make in order to incentivise clean tech. This requires brave policies so that entrepreneurs will take the risk to implement clean tech projects not only in the EU, but all over the world.

Finally, hurray for Obama!!

http://www.theaustralian.news.com.au/story/0,25197,24965380-601,00.html