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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
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Modeling Carbon Leakage Risk in Poland
Technical workshop
Karsten NeuhoffWarsaw, 3.4.2013
Avoid job and emission leakage
2
Pot
entia
l Max
imum
Val
ue a
t Sta
ke (M
VAS
) a
nd N
et V
alue
at S
take
(NVA
S)
Cem
ent
Bas
ic ir
on &
ste
el
Lime
Fertilisers & Nitrogen
Alu
min
ium
Other inorganicbasic chemicals
Pulp &paper
Malt
Coke ovenIndustrial gases
Non-wovens
Refined petroleum
Household paper
Hollow glassFinishing 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
Bas
ed o
n C
limat
e S
trate
gies
wor
k fro
m 2
007,
ver
ified
with
rece
nt d
ata
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 inc
reas
e re
lativ
e to
val
ue a
dded
(20
€/t C
O2)
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
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 inc
reas
e re
lativ
e to
val
ue a
dded
(20
€/t C
O2)
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
Source: TNO – Greenhouse gas efficiency of industrial activities in EU and Non-EU
Distortions from different C-efficiency in EU countries?
Leakage concerns differ accross sectors
Potential leakage channels illustrated at the example of some potentially effected commodities
Main options to address leakage for sectors with concern
Karsten Neuhoff, 22.3.20127Regenerativwirtschaft im europäischen Verbund?
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
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
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
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
UnitedKingdom
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
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
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)
-6%
-3%
0%
3%
6%
9%
Belgi
um Fo
undin
gGe
rman
y Fou
nding
Luxe
mbo
urg F
ound
ingDe
nmar
k 197
3
Slove
nia 20
04
Fran
ce Fo
undin
gIta
ly Fo
undin
gNe
ther
lands
Foun
ding
Belgi
um Fo
undin
gGe
rman
y Fou
nding
Luxe
mbou
rg Fo
undin
gDe
nmar
k 197
3
Fran
ce Fo
undin
gIta
ly Fo
undin
gNe
ther
lands
Foun
ding
1985 - 1994 1995 - 1998 1999 - 2003 2004 - 2007
Founding members
Unite
d King
dom
1973
Portu
gal 1
986
Austr
ia 19
95Sw
eden
1995
Irelan
d 197
3Gr
eece
1981
Spain
1986
Finlan
d 199
5
Unite
d King
dom
1973
Portu
gal 1
986
Austr
ia 19
95Sw
eden
1995
Irelan
d 197
3Gr
eece
1981
Spain
1986
Finlan
d 199
5Cy
prus
2004
Joining during 20th century
Rom
ania
2007
Bulga
ria 20
07
Rom
ania
2007
Bulga
ria 20
07
2007
Benefits of an integrated European approach
GDPgrowth
Czec
h Rep
ublic
2004
Hung
ary 2
004
Lithu
ania
2004
Polan
d 200
4
Cypr
us 20
04Es
tonia
2004
Latv
ia 20
04M
alta 2
004
Slova
kia 20
04
Czec
h Rep
ublic
2004
Hung
ary 2
004
Lithu
ania
2004
Polan
d 200
4Slo
venia
2004
Esto
nia 20
04La
tvia
2004
Malt
a 200
4Slo
vakia
2004
Joining 2004
Vielen Dank für Ihre Aufmerksamkeit.
DIW Berlin — Deutsches Institutfür Wirtschaftsforschung e.V.Mohrenstraße 58, 10117 Berlinwww.diw.de
RedaktionKarsten [email protected]
