Leakage Implications for climate policy IFO-PIK Workshop: Transition towards global carbon pricing and fossil energy markets Karsten Neuhoff Leiter Abteilung Klimapolitik DIW Berlin
Feb 23, 2016
Leakage Implications for climate policy
IFO-PIK Workshop: Transition towards global carbon pricing and fossil energy
markets
Karsten NeuhoffLeiter Abteilung Klimapolitik DIW Berlin
Technology „Leakage“ – example RE investment
Karsten Neuhoff, 22.3.20122Source: Bloomberg, New Energy Finance, Jan 2013
1
142.578.3
18.8
9.74.5 1.8 7.6
solar
wind
smart tech
biomass
biofuels
geothermal
small hydro
$ Billion Investment in 2012
16,3
8,36,25,5
5,34,3
2
80,6 JapanUkAustraliaSouth AfricaBrazilFranceMexicoOther countries
67,7
China
44,2
US
22,8
Germany
Policy leakage - example feed-in tariff
Karsten Neuhoff, 22.3.20123Source: http://www.pv-tech.org/tariff_watch/list
2
Modernisation leakage – example slavery
Karsten Neuhoff, 22.3.20124
•accurate, publicly available information about the impact of slavery on lives - also against attempts by slavery's defenders
• the role of discounting the value of slave lives•gradually more ambitious action against slavery, penalties
£100/head in 1807 to the death penalty for traders in 1827•compensation for slave owners (£20 million in 1838)•not with a global treaty, but country by country
3
Cos
t inc
reas
e re
lativ
e to
val
ue a
dded
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 glass
Finishing of textiles
Rubber tyres & tubes manufact.
Copper
Casting of ironImpact from direct emissions
Impact from indirect emissions (electricity)
Flat glass
Veneer sheets
0%
10%
20%
30%
40%
0.0% 0.2% 0.4% 0.6% 0.8%1.0%
4%2%
Starches& starch products
Preparation of yarn
Other textile weaving
Retreading/rebuilding tyres
Commodities with significant carbon cost
Share of GDP of UK
Production/Investment leakage – sectors potentially at risk4
Ist all about the detail in analysis, model and policy
Karsten Neuhoff, 22.3.20126Climate Policy after Copenhagen – The role of Carbon Pricing, Cambridge University Press
5
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
Conditions for green paradoxon (I/II)
Increase production
Investment
5 years
Lower revenue for resource extraction due to carbon price
Strongcarbon price
Time frametoo short?
Uncertaintytoo high?
Demand Response too big?
Difficult to see how this should work
Conditions for green paradoxon (II/II)
Karsten Neuhoff, 22.3.20128
Requirement IScarce resource/increasing cost curve
Oil - Iran- Saudi - Russia- Stans
Requirement IIOptimizationhorizon
Requirement IIIAbility to control
Coal
No?
Gas Oil
No?
T&T NoAlgeria No
US No US No
Yes?
Difficult to find actor meeting requirements
Summary on leakage channels
9
6
Country A(with cap)
Country B
Fossil fuel channel• Oil (+)• Coal (0)• Gas (?)• Invest uncertainty(-)Modernisation
leakage
Product./investment leakage
(-)
(+?)
(?)
Climatepolicy
Direct Emission reductions
Potential leakage
Policy leakage
Technology leakage
(-)(-)
Dominant effect: Unilateral climate policy triggers additional international emission
reductions
Vielen Dank für Ihre Aufmerksamkeit.
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RedaktionKarsten [email protected]