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Sanjeev Kumar [email protected] +32 499 539731. Managing risk: Why the 30% GHG target is important for GDP, political security and economic growth. Climate Summit, Budapest. 19 January, 2011. E3G - PowerPoint PPT Presentation
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E3G - Third Generation Environmentalism
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Managing risk:
Why the 30% GHG target is important for GDP, political security and economic growth.
Climate Summit, Budapest. 19 January, 2011 Sanjeev [email protected]+32 499 539731
E3G - Third Generation Environmentalism
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E3G
• Independent, non-profit European organisation working to
accelerate the transition to sustainable development. Based in
London, Brussels, Berlin, Washington and Beijing.
• Programmes of work on climate diplomacy, climate security and
low carbon economy
• Advises on international climate strategy to major EU governments,
Most Vulnerable Countries, International NGOs and charitable
foundations
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Contents
• What are the risks?
• The case for doing nothing
• Expectations from the Hungarian Presidency
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Risks facing the EU
External
Economic
Competitiveness
Source: Climate Change impacts in Europe. PESETA (2010).
6
Large Uncertainty around Climate Sensitivity – mainly on negative side
Source: NOAA, 2009
Source: UK CCC, 2008
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Estimates of likely impacts have been growing over time
Source: Smith et al., 2007 Dangerous Climate Change: An Update of the IPCC Reasons for Concern
2C
Economic: Annual damage to GDP from climate change impacts Source: Climate Change impacts in Europe. PESETA
(2010).
Source: Climate Change impacts in Europe. PESETA (2010).
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Competitiveness: Innovation, markets and wealth
• Producing products and services to satisfy demand. Protectionism and delaying investment reduces gives competitive advantage to the EU’s economic rivals.
• Global market for low carbon goods & services was worth over €3.4 trillion in 2008/2009 (Source: UK Business Dept for Business & Enterprise 2009).
• At €467 billion, climate revenues from the equity market have now outstripped the aerospace and defense sector, and could exceed $2 trillion (€1.76 trillion) by 2020 (Source: HSBC Annual review index 2009).
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Competitiveness: Investment drivers
Stimulus funding(Source: HSBC)
Smart Grids(Source: KEMA)
EU €17 billion €1.4 billion
US €84 billion €5.3 billion
China €166 billion €5.6 billion
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Competitiveness: China’s importance
• 14% of EU GDP is dependent on Chinese imports. (Chatham House 2008).
• China is major export market and greater value to EU than US as of 2008.
• China plans to spend $300 billion into dedicated high-speed-rail corridors by 2020. (Business Green)
• 2010 target to create 1 million electric cars by 2020 from 10bn Yuan fund. (China Daily)
• China spending more than any other G20 on low carbon energy (Pew Centre). Most attractive centre for Renewables beating US and Germany.
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External: European security most at risk than other OECD economies
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External: Africa is extremely vulnerable
2000 2050
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End of cheap conventional oil
© OECD/IEA - 2009
Oil productionOil productionin the Reference Scenarioin the Reference Scenario
Sustained investment is needed mainly to combat the decline in output at existing fields, which will drop by almost two-thirds by 2030
NGLsUnconventional oilCrude oil – fields yet to be developedor foundCrude oil – currently producing fields
0
20
40
60
80
100
120
2000 2008 2030
mb/d
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External: Energy geopolitics
• Oil:– EU is major importer of energy. IEA estimates EU energy
imports cost €54bn in 2010. OPEC agreed to produce more to keep prices below $100 barrel (18 January 2011 – FT).
– EU produces 14% of oil that it consumes. 44% imported from Russia (29%) and Norway (15%).
– Since 1998, diesel consumption growing and gasoline consumption falling. Refining capacity has remained split since. So diesel subsidy policy driving closure of gasoline refining capacity increasing oil dependence.
• Gas: – 26% of gas is imported. Main EU producers are UK and
Netherlands. Imports come from Russia (42%), Norway (24%), Algeria (18%) and Nigeria (5%).
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Contents
• What are the risks?
• The case for doing nothing
• Expectations from the Hungarian Presidency
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The case against: It’s too costly
• 40-80% of the additional target can be delivered through no cost measures (CE Delft). Additional 16MtCO2 can come from lucrative and high-value electric car market (Ecofys).
• Energy savings are immense: EU energy import savings of €68bn per year (European Commission). Additional €96bn per can be saved if oil price increases to $148 per barrel (E3G).
• High-value 30% target should generate €45bn. Additional €30.5bn from health-related benefits (HEAL and HWCH Europe).
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The case against: Our companies will leave if no one else does anything….
• EU ETS is largest industrial subsidy in the history of the EU with all sectors making windfall profits.
• Commission estimates 2.4 Gt CO2 of banked allowances and unused international credits in the system by 2020. So ETS not effective until after 2028. (European Commission, May 2010).
• ETS 3rd Phase oversupplied by 99 MtCO2 of allowances. Even if the EU moves to a 30% reduction target and imposes quality restrictions on CDM credits, it would take until 2017 for the market to absorb the excess allowances from 2nd Phase. (Societe General 2010).
• PRIMES model estimates EUA price of €16 by 2020 and €18 by 2020. Today’s is €14. (PRIMES 2010).
• Cement, steel, power generation sectors subject to serious cartel abuse which damages the rest of the EU economy. .
• Other regions are implementing polices: China 5 year plan, Indian energy efficiency scheme, Californian ETS.
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Contents
• What are the risks?
• The case for doing nothing
• Expectations from the Hungarian Presidency
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Expectations from the Hungarian Presidency
Climate
Climate
Finance
Energy
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The priorities for the Hungarian presidency
• Functioning internal market: liberalisation and competition in the cement, steel and power generation sectors. New regulatory system needed to reward energy savings, drive grid investment in electricity markets.
• Financing transformation: Maximising use of EU Budget to deliver transformative change.
• Low carbon industrial policy: Electric car market is vanguard of low carbon world. Large source of green jobs, reduces oil dependence, stimulates new regional infrastructure investments.
• Climate target: Identifying the optimal design of the climate target. • Securing Head of State Commitment for unilateral move to a
domestic 30% GHG target in the March European Council meeting.