Tag Archives: carbon
Europe: Draining Energy
by Steve Kingshott 27 Jun 2013 Europe was fast out of the blocks with its carbon emissions schemes but the financial downturn and the emergence of Asia and Latin America is threatening its future, Steve Kingshott writes. The number of countries and regions proposing cap-and-trade carbon emissions schemes is growing. Australia, India, the US and China are among those who have established or proposed plans to rival Europe. Yet while the EU Emissions Trading Scheme was the first to be established, its long-term future is in jeopardy. The start of the financial crisis has lowered industrial production, resulting in a significant oversupply of carbon allowances. This has caused the price of carbon to plummet and served to question the viability of the trading scheme. This uncertainty is threatening Europe’s ambition to become a world leader in renewable energy. Falling prices From a high point of €30 a tonne, the carbon price fell to the all-time low of €2.75 the day after the European Parliament voted to reject a plan to “backload” allowances. This would have involved withholding 900 million allowances from the market over the next two years in an attempt to boost the carbon price. Since that setback, energy and environment ministers from nine EU states – including the UK, France and Germany – have published a joint statement calling for a new timetable for ETS reform. These calls need urgently to be heeded. The EU should work quickly to address the surplus of ETS allowances and send a clear signal that Europe is committed to a low-carbon economy. “This uncertainty is threatening Europe’s ambition to become a world leader in renewable energy.” The EU’s vision for the ETS extends as far as 2020 but not beyond. Without a defined carbon incentive, investors are understandably wary of making appropriate commitments. Large-scale projects such as offshore wind farms can take up to ten years from planning to operation and so are dependent upon long-term stability. For the insurance industry, this uncertainty and lack of investment will mean lower insurance premium revenues from the renewable energy sector. An increase in carbon emissions is also likely to mean insurers will more frequently have to take account of climate change risk factors such as major weather events and flooding. Significant investment Focused properly, the ETS has the potential to drive significant investment in low-carbon energy and renewables. This would help to stimulate economic growth as well as enable Europe to achieve security of supply and meet its carbon-reduction targets. Extending the scheme beyond 2020 would send positive market signals while a strategic Europe-wide approach to support energy-intensive industries will prevent carbon leakage to less regulated parts of the world. However, as long as the glut of carbon permits continues to depress the price and while MEPs stall on the issue of backloading, the viability of many projects will be in doubt. With the European Commission estimating the renewables sector could create five million jobs across the region by 2020, it is clear that action is needed now to ensure we do not miss out on opportunities for green growth. Investment in renewables can have significant economic impacts, both directly and indirectly through the supply chain. For example, it is estimated that the UK onshore-wind sector alone could contribute £1.2bn through the supply chain by 2020. “For the insurance industry, this uncertainty and lack of investment will mean lower insurance premium revenues from the renewable energy sector.” New jobs are being created in the insurance industry itself, and firms are recruiting and training underwriters specialised in renewable energy. By taking the initiative to insure renewables in the early stages of development, the industry can build a cluster of expertise and established market-leading positions across the globe including in offshore wind. However, continued job creation and growth will only be realised if there is a stable regulatory and policy environment to support investment in the transition to a low-carbon economy. If we don’t keep up with the rest of the world, then competitors will grow in emerging markets and capitalise on this opportunity. Not enough The UK Government, for its part, has introduced a carbon floor price. This move is very welcome, but unilateral action is not enough. We need politicians across Europe to see the opportunities that exist and realise that any further delay and uncertainty is bad news for business, investors and most of all for consumers. With rapid reform, the ETS can return to being a flagship scheme for carbon trading around the world and help put more economies on a shared low-carbon pathway. Ministers need to work quickly to address existing problems with the ETS while also setting out a vision for the scheme beyond 2020. That is the right way to go and UK Energy Secretary Ed Davey should be supported in this ambition. “UK Energy Secretary Ed Davey should be supported in this ambition.” Ministers need to work quickly to address existing problems with the ETS while also setting out a vision for the scheme beyond 2020. If they do not, investment in renewables will increasingly flow to other territories, including Asia and Latin America, and the UK and Europe will miss out on the significant benefits this can bring. Steve Kingshott, global director for renewables, RSA Continue reading
Carbon Permit “Backloading” Fight Continues in European Parliament
A European Commission plan to delay the auctioning of millions of carbon permits received a new boost last week, after a European Parliament committee signed off on the proposal. The legislation must still be approved by the full Parliament later this summer, which had rejected an earlier version. The move to delay permit auctions – a practice known as backloading – is aimed at boosting the prices of such permits, which underpin the EU’s Emissions Trading System (ETS). An oversupply of permits, combined with the bloc’s broader economic struggles, has led permit prices to hover at dangerously low levels, reaching less than €3 per tonne in April and generally about €5 per tonne. The plan approved by the Parliament’s environment committee last week includes various changes from the original proposal, which EU parliamentarians had rejected in April. (See Bridges Weekly, 18 April 2013 ) One of the most notable modifications involves language assuring that backloading will only be a one-off event, if done at all. The European Commission would also need to conduct an impact assessment showing there to be no “significant risk” of companies in the sectors concerned relocating outside the EU. In addition, carbon credits would need to be returned to the market “in a predictable and linear manner,” beginning from the year after the last permit has been withheld. The original legislation had called for reintroducing these permits in 2019-20. As in the original plan, only 900 million carbon permits would be withheld – out of 1.7 billion currently in the market. Six hundred million of these would need to be made available for funding the development of low-carbon technologies. “We now have broader support for a solution that will allow the ETS to fulfil its purpose and support innovation to tackle climate change,” said Matthias Groote, a German member of the S&D group who serves as the legislation’s rapporteur in Parliament. Plenary vote in July The proposal will next face a vote by the full Parliament during its 3 July plenary session in Strasbourg. However, even if EU lawmakers sign off on the revised measure, it will still need the approval of individual EU governments, under the bloc’s co-decision rules. The proposal has been controversial in the EU, over concerns that delaying permit auctions could increase energy costs and lower confidence in the overall ETS. Others have also argued that the EU emissions scheme has broader structural problems that backloading alone cannot solve. “As I have always said, backloading is a quick, temporary fix,” Groote said last week. “Structural reform of our Emissions Trading System will follow to ensure it remains the cornerstone of EU’s climate policy and an inspiration to others around the world.” Opposition to the plan is largely expected to come from Poland, a country heavily reliant on coal, and Germany, which has spoken out about the potential for rising energy costs. The United Kingdom, meanwhile, has been a strong backer of the plan, calling also for deeper reform of climate change policy. Compromises render the proposal “toothless,” critics say Observers say that the upcoming plenary vote is likely to have important ramifications for the credibility of Europe’s carbon market and the bloc’s overall efforts to meet its climate change goals. The EU has said that it aims to have almost carbon-free electricity by 2050, and has pledged to reduce emissions by 20 percent from 1990 levels by 2020. However, the “watered down” nature of the new backloading proposal has drawn criticism from some environmentalists, who say that the compromises made in order to win over previous opponents have rendered the plan “toothless.” The new version “is now only a shadow of what it should have been,” said Greenpeace EU climate policy director Joris den Blanken. Though some environmentalists find that the proposal does not go far enough to address the ETS’ problems, private sector critics have argued that the proposed backloading could drive up the cost of doing business in the EU and push economic opportunities elsewhere. BusinessEurope, a lobby group of industrial and employers’ federations, has opposed the initiative, calling it an “unnecessary political intervention into the ETS market.” The group added that European industry is on track for meeting its 2020 carbon reduction target. ICTSD reporting; “EU politicians to try again to rescue carbon market,” REUTERS, 19 June 2013; “EU Parliament Committee Approves Proposal to Fix Carbon Market,” WALL STREET JOURNAL, 19 June 2013. Continue reading
Funds Warn EU Energy Policy Is Not Investment Friendly
Thu Jun 27, 2013 6:01am EDT * Commission has issued 2030 policy discussion document * Debate on firm policy goals displaced by cost worries * Major investment decisions must be taken before 2020 By Barbara Lewis BRUSSELS, June 27 (Reuters) – Pensions, insurers and other funds responsible for 7.5 trillion euros ($9.75 trillion) in assets said investment is likely to shun the European Union unless it can draw up new energy and climate policy before the end of the year. Representing more than 80 of Europe’s largest investors, including HSBC Investments, Mercer Global Investments Europe and the BT Pension Scheme, the group on Thursday urged the EU executive not to delay draft law on 2030 policy. “The longer the delay, the more investors will start to doubt Europe’s resolve to make its low carbon roadmap a reality,” Craig Mackenzie, head of sustainability at Scottish Widows Partnership, said in a statement. Mackenzie is also board director of the Institutional Investors Group on Climate Change (IIGCC), which published its reaction to a European Commission document that launches the debate on how to follow climate and energy legislation after it runs out in 2020. Without detailed policies, long-term investment needed for the multi-year planning cycles of the energy sector might not be forthcoming, the IIGCC said, adding its members are much better able to provide that than short-term financial markets . The group helps to fund heavy industry, including chemicals and steel , as well as infrastructure for green energy. To upgrade networks to absorb higher levels of renewable energy, the Commission, the EU executive, has estimated around 1 trillion euros is needed by 2020 and that figure rises to 7 trillion euros over the next 40 years, the IIGCC said. Debate on the goals the Commission outlined early this year has been sluggish as financial crisis has prioritised cost, competitiveness and saving jobs over climate and energy policy. Uncertainty has been aggravated by the collapse of the Emissions Trading Scheme (ETS), the European Union’s carbon market, which is too weak to drive low carbon investment. The European Union has been unable to agree on a rescue plan, although the European Parliament will hold another vote to try to resolve the issue next week. The IIGCC wants structural reforms of the carbon market, as well as a 2030 goal for a 40 percent cut in carbon emissions compared with 1990 levels and a system to ensure investors always have a target 15 years ahead. To achieve 2030 goals, major investment decisions must be taken before 2020, the group said, adding substantial progress on new law was needed before 2014 to ensure that happens. In 2014, the European Union has a change of parliament and Commissioners, which creates a hiatus in the law-making process. Commission officials have acknowledged the need for urgency. They also hope 5.1 billion euros of EU money, set aside in the multi-annual budget for energy infrastructure, can lure further investment. “We want to be able to (by the end of year) get energy markets back on track by a stable political framework up to 2030 with as much commitment as we can,” Philip Lowe, a director general in the European Commission, said on the sidelines of a London conference. Continue reading
