Modeling Carbon Leakage Risk in Poland

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Modeling Carbon Leakage Risk in Poland Technical workshop Karsten Neuhoff Warsaw, 3.4.2013

description

Technical workshop. Karsten Neuhoff. Warsaw , 3.4.2013. Modeling Carbon Leakage Risk in Poland. Avoid job and emission leakage. Untill 2020 with free allocation, then revisit options. 50%. Casting of iron. Lime. Preparation of yarn. 40%. Allocation dependent (direct) CO 2 costs / GVA. - PowerPoint PPT Presentation

Transcript of Modeling Carbon Leakage Risk in Poland

Page 1: Modeling Carbon Leakage Risk in Poland

Modeling Carbon Leakage Risk in Poland

Technical workshop

Karsten NeuhoffWarsaw, 3.4.2013

Page 2: Modeling Carbon Leakage Risk in Poland

Avoid job and emission leakage

2

Po

ten

tial M

axi

mu

m V

alu

e a

t S

take

(M

VA

S)

an

d N

et

Va

lue

at

Sta

ke (

NV

AS

)

Ce

me

nt

Ba

sic

iron

& s

tee

l

Lime

Fertilisers & Nitrogen

Alu

min

ium

Other inorganicbasic chemicals

Pulp &paper

Malt

Coke ovenIndustrial gases

Non-wovens

Refined petroleum

Household paper

Hollow glass

Finishing of textiles

Rubber tyres & tubes manufact.

Copper

Casting of iron

UK GDP

Allocation dependent (direct) CO2 costs / GVAElectricity (indirect) CO2 costs / GVA

Flat glassVeneer sheets

0%

10%

20%

30%

40%

0.2% 0.4% 0.6% 0.8% 1.0%

4%2%

50%

Starches& starch products

Preparation of yarn

Other textile weaving

Retreading/rebuilding tyres

Industrial activities with the highest cost increase from carbon pricing, and their contribution to UK GDP, assumed carbon price increase 20 €/t CO2, electricity price increase 10 €/MWh. Only sector with more than 0.5 Mill. tonnes CO2/EU27 added by Commission: Other organic chemicals (NACE 2414)

Value of free allocation relative to cost of emission 2009

Untill 2020 with free allocation, then revisit options

Ba

sed

on

Clim

ate

Str

ate

gie

s w

ork

fro

m 2

00

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Page 3: Modeling Carbon Leakage Risk in Poland

Value chain of concrete production

3

Illustrative for UK

0%

10%

20%

30%

40%

50%

60%

70%

0 500 1000 1500 2000 2500 3000 3500Cumulative gross value added (mio €)

Cos

t in

crea

se r

ela

tive

to v

alu

e ad

ded

(20

€/t

CO

2)

Cost increase from higher electricity prices

Clin

ker

Cem

ent

Concrete products (concrete products for construction; mixed concrete etc)

Total cost increase

Cost increase passed on fromfirst production stage (clinker)

Source: Climate Policy after Copenhagen – The role of Carbon Pricing, Cambridge University Press 2011

Page 4: Modeling Carbon Leakage Risk in Poland

Value chain of steel production using BOF process

4

0%

10%

20%

30%

40%

50%

0 500 1000 1500 2000 2500 3000

Semi finished Hot rolled Iron and steel

Illustrative for UK

Cumulative gross value added (mio €)

Cos

t in

crea

se r

ela

tive

to v

alu

e ad

ded

(20

€/t

CO

2)

Total cost increase from higher electricity prices

Total cost increase from CO2 pricing

Cost increase from passed on CO2

pricing of first production stage only

Source: Climate Policy after Copenhagen – The role of Carbon Pricing, Cambridge University Press 2011

Page 5: Modeling Carbon Leakage Risk in Poland

Source: TNO – Greenhouse gas efficiency of industrial activities in EU and Non-EU

Distortions from different C-efficiency in EU countries?

Page 6: Modeling Carbon Leakage Risk in Poland

Leakage concerns differ accross sectors

Potential leakage channels illustrated at the example of some potentially effected commodities

Page 7: Modeling Carbon Leakage Risk in Poland

Main options to address leakage for sectors with concern

Karsten Neuhoff, 22.3.20127Regenerativwirtschaft im europäischen Verbund?

Page 8: Modeling Carbon Leakage Risk in Poland

Focus use of measures to address leakage

4. Limit how far down the value chain

2. Limit scale to emissions of best available technology

3. Limit to costs incurred from tax / allowance auction

1.Limit to com-modities with leakage risk

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Energy intensive products

Karsten Neuhoff, 22.3.20129Regenerativwirtschaft im europäischen Verbund?

•Poland currenttly net-importer from rest of Europe•Additional investment pre-empted by imports from ROE•New investment if product/process requirements change•Then likely close to demand -> Poland

-> Credible vision is necessary

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The Need for European Perspective for Investment

Karsten Neuhoff, 22.3.201210

- Other regions accelerate implementation of carbon pricing

Graph: Left: Michaelowa et a., right: Andreas Türk, Sonja Klinsky, Michael Mehling, Xin Wang 2012, Climate Strategies

EU ETS

WCI (2013)

RGGI PRChina(2013?)

NSW

NZ ETS

TokyoKorea(2015?)Taiwan(201x?)

Australian ETS 2012

South African Carbon Tax

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Economy wide – energy prices drive efficiency

Karsten Neuhoff, 22.3.201211Regenerativwirtschaft im europäischen Verbund?

Source: Newbery, D. M. (2003). Sectoral Dimensions of Sustainable Development: Energy and Transport. Economic Survey of Europe 2: 73-93

Denmark

JapanNorway

Austria

ItalyGermany Luxembourg

Switzerland SwedenPortugalFrance Finland

Spain

United

Kingdom

Netherlands

Greece

New Zealand

Belgium

United States

Australia

Mexico

Turkey

Hungary

Korea

Canada

Slovakia

Czech RepublicPoland

0

200

400

600

800

1,000

1,200

1,400

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0Average energy intensity (kg oil equivalent/US $1995 GDP)

Ave

rage

ene

rgy

pric

e U

S$/

t oil

equi

vale

nts

Best fit constant price

elasticity of -1.0 a

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Macro impact – replacing fuel imports with local activity

Karsten Neuhoff, 22.3.201212

Fuel import costs relative to GDP (2011)

Source: Based on BP Statistical Review of World Energy June 2012Assuming average gas price matches average oil price (most LT gas contracts track oil price with 6 months lag)

0%

1%

2%

3%

4%

5%

6%

Poland Germany

Coal import costs

Gas import cost

Oil import cost

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Employment in Renewables – driver in Germany

Karsten Neuhoff, 22.3.201213

Philip Ulrich [GWS] Martin Distelkamp [GWS] Dr. Ulrike Lehr [GWS] Dr. Peter Bickel [ZSW]Andreas Püttner [ZSW] (2012) Erneuerbar beschäftigt in den Bundesländern, Bericht zur daten‐und modellgestützten Abschätzung der aktuellen Bruttobeschäftigung in den Bundesländern

Wind Power

Bio MassSolar

Total382.000 (2011)

101.000 (2011)

125.000 (2011) 124.000 (2011)

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1985 - 1994 1995 - 1998 1999 - 2003 2004 - 2007

Founding members

Unite

d Ki

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m 1

973

Portu

gal 1

986

Aust

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995

Swed

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Irela

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Spai

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Unite

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Joining during 20th century

Rom

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200

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Rom

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Benefits of an integrated European approach

GDPgrowth

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Joining 2004

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Vielen Dank für Ihre Aufmerksamkeit.

DIW Berlin — Deutsches Institutfür Wirtschaftsforschung e.V.Mohrenstraße 58, 10117 Berlinwww.diw.de

RedaktionKarsten [email protected]