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EU Energy Policy perspectives

5th Congress of the European Chemical Regions Network

30 November 2007 in Ludwigshafen

Peter Botschek

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Energy Policy Perspectives

• Global challenges: International Energy Agency (IEA) Outlook• Chemical industry energy and emissions profile• EU policy in the pipeline: ‘January Package’• Implications for EU chemical regions

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China & India in Global CO2 Emissions

Around 60% of the global increase in emissions in 2005-2030 comes from China & India (IEA 2007)

Cumulative Energy-Related CO2 Emissions

0 100 200 300 400 500

United States

European Union

Japan

China

India

billion tonnes

1900-20052005-2030

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World’s Top Five CO2 Emitters

  2005 2015 2030

  Gt rank Gt rank Gt rank

US 5.8 1 6.4 2 6.9 2

China 5.1 2 8.6 1 11.4 1

Russia 1.5 3 1.8 4 2.0 4

Japan 1.2 4 1.3 5 1.2 5

India 1.1 5 1.8 3 3.3 3

China becomes the largest emitter in 2007 & India the 3rd largest by 2015 (IEA 2007)

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Global Energy-Related CO2 Emissions

Global emissions will increase by 57% in the Reference Scenario, but they level off in the Alternative Policy Scenario (IEA 2007)

10

15

20

25

30

35

40

45

50

1980 1990 2000 2010 2020 2030

billio

n to

nnes

(Gt) Reference Scenario 42 Gt

Alternative Policy Scenario

34 Gt

19%

27 Gt

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CO2 Emissions - 450 Stabilisation Case

By 2030, emissions are reduced to some 23 Gt, a reduction of 19 Gt compared with the Reference Scenario

(IEA 2007)

10

15

20

25

30

35

40

45

2005 2010 2015 2020 2025 2030

Gt o

f CO 2

CCS in industryCCS in power generationNuclearRenewablesSwitching from coal to gasEnd Use electricity efficiency

End Use fuel efficiency

Reference Scenario

450 Stabilisation Case27 Gt

42 Gt

23 Gt

Energy-Related CO2 Emissions

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Average Annual Power Generation Capacity Additions in the 450 Stabilisation Case, 2013-2030

A large amount of capacity would need to be retired early, entailing substantial costs (IEA 2007)

22 CCS coal-fired plants (800 MW)

20 CCS gas-fired plants (500 MW)

30 nuclear reactors (1000 MW)

2 Three Gorges Dams

400 CHP plants (40 MW)

17 000 turbines (3 MW)

0 10 20 30 40 50 60

Other Renewables

Wind

Biomass and waste

Hydropower

Nuclear

Gas CCS

Coal CCS

GW

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Global Industrial Manufacturing Energy Use

Chemical Industry accounts for 30% (IEA 2007)

Industry sectors energy useincl. Feedstock use

Source: IEA

0.0

20.0

40.0

60.0

80.0

100.0

120.0

1971 1976 1981 1986 1991 1996 2001

EJ

/yr

Non-specified (Industry)

Textile and Leather

Construction

Wood and WoodProductsPaper, Pulp and Print

Food and Tobacco

Mining and Quarrying

Machinery

Transport Equipment

Non-Metallic Minerals

Non-Ferrous Metals

Chemical andPetrochemicalIron and Steel

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EU Industrial Manufacturing CO2 emissions

Chemical Industry accounts for 16% (IEA 2007)

CO2 emissions from sectors (EU 25) in 2004

IRONSTL23%

CHEMICAL16%

NONFERR2%

NONMET20%

TRANSEQ2%

MACHINE5%

MINING1%

FOODPRO11%

PAPERPRO6%

WOODPRO1%

CONSTRUC3%

TEXTILES2%

INONSPEC8%

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EU chemical* industry greenhouse gas emissions, energy consumption and production

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EU chemical* industry greenhouse gas emissions per unit of energy consumption and per unit of production

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Chemical* industry greenhouse gas emissions per production: EU versus US

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EU Energy and Climate Policy

In March 2007, the European Council agreed on an integrated climate and energy policy:

Creating binding, regional targets for energy and climate policy :• By 2020: at least 20% GHG reductions (EU)• By 2020: 30% GHG reductions (if comparable efforts by other countries)

• By 2020: 20% energy efficiency increase• By 2020: 20% renewable energies in energy consumption (today 7%) Biofuels: min. 10% until 2020

…EC legislative package announced for January 2008

Aim: to create low-carbon EU economy

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Accelerating Pace EU Timeline 2007 - 2008

Nov 07 Sep 07 Oct 07 Dec.07 Mar 08 Apr 08 May 08 June 08

Energy Markets: EC

proposal

ETS Review:ECCP

recommen-dations

EC proposal

1st Reading EP/Council

Jan 08 Feb 08

8-14 Dec.

CC UN Conference

Bali

24 Sept. Intern. Conference

Energy Efficiency

July 08 Aug 08 Sep 08

1st Reading in Council and EP

SET : EC Communi-

cation

Discussion in EP & Council

EC proposal

EP Discussion

Renewable Energy: EC

proposal

1st Reading in Council and EP

20 Nov HLG CEE

4 Dec. HLG

01-02 Oct.

Energy Council

29-30 Nov.

Energy Council

03 Dec.

Energy Council

18-19 Oct.

EU Summit

Events

Emissions/climate change

Energy Market Liberalisation Package

Strategic Energy Technology Plan (SET)

Renewable Energy

HLG

Council Meetings

LEGEND

Review of Environmental State Aid Guidelines

State Aid Guidelines : Member States Consultation

Final Version produced

27 Nov.: HLG Closing

Conference

3 Dec.

EU Summit

8 Apr.

Feedstock Energy &

Infrastructure

HLG Chemicals CHEM4 EU

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January Package: Renewables

EC Mandate: Build legislation that achieves by 2020 20% renewable energies in energy consumption; Biofuels: min. 10% until 2020

EC works on mandatory formula to enforce increase of renewables share towards 20% by 2020:Macroeconomic model will take economic parameters, level of current and potential renewable energy share, certificate trading consideredGeneral ‘Big Picture’ impact assessment announcedIndustry concerned about access to raw material

Sector impacts to be ignored in impact assessment?

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January Package: ETS Review under development

 Chemical industry processes to be includedThreat: Allocation of emission rights by auctioning:Steep curve towards full auctioning of allowances for the power sector. No special provision for on-site energy installations (e.g. CHP): Our industry’s power production facilities may be treated similar to the power sector.

Only few “exposed sectors” may qualify for receiving free allocation based on benchmarks.

“Energy-intensive/exposed sectors”:• Possibly extra allowances compensating indirect ETS costs• Free allocation according to a benchmark: 90% in 2013; the rest will be auctioning with increasing share of 5% per year until 50% auctioning is achieved in 2020.

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January Package: ETS Review

 

Action (1):

• Cefic presented together with EFMA the case of European Fertilizer Manufacturers to EC.

• Cefic presents work on benchmarks in the petrochemical sector to EC.

• Cefic introduces systematic structure for data to be submitted to EC.

• Cefic safeguards submission of data on soda ash and petrochemicals

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January Package: ETS Review

 Action (2):

• Cefic sent letters to Commissioners on 6 November and Alliance letter, prepares high level advocacy action. Key messages:

- The chemical industry is an enabling industry in terms of climate change solutions.

- The ETS needs be enabling too by granting free allocation of CO2 certificates to major large homogeneous chemical processes based on benchmarks (covering 80-90% of emissions).

- We propose chemical processes and benchmarks.- Exclude small emitters- We want to discuss solutions for globally competing energy-

intensive sectors heavily impacted by the indirect effects of the ETS, i.e. the pass-through of CO2 costs through electricity prices.

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January Package: ETS Review

 

Action required:

• Defend principle of free allocation of CO2 certificates based on benchmarks

• Submit data to the EC demonstrating the exposure to international competition of the chemical processes.

• Develop EU benchmarks for major processes.

• Take action vis-à-vis national governments:- Reinforce need for free allocation for chemical processes

based on benchmarks.

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Summary

• EC January package is being negotiated in EC.

• Chemical industry to be included in ETS.

• Safeguard focus on major processes and bulk of emissions.

• Conditions of allowance allocation are being determined.

• The EU chemical industry needs free allocation based on benchmarks for safeguarding our sectors’ future perspectives in Europe.

Thank you!

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January Package: ETS Review

ETS scope further to be enlarged: Inclusion of importers.

EC want to ensure a global level playing field by imposing benchmarks (developed by the EU) to imported products at the customs office.

Cefic rejects inclusion of importers: This may violate WTO law It is not feasible to make this distinction at the border (e.g. how to evaluate carbon footprint of plastic parts in imported car)Such measures threaten to be seen as protectionist by the EU trade partners which may retaliate with protectionist measures that can even be WTO compatible whilst harming EU exports Processed goods would undermine border measures and lead to relocation and CO2 leakage