decoupling growth from carbon

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  • 1. Decoupling Growth from Carbon: Possibilities and Policies
    • Presentation to the
    • Economy and Environment Panel
    • Seventh European Forum for Science and Technology
    • Efficiency of European Science and its Global Competitiveness
    • Professor Paul Ekins
    • Professor of Energy and Environment Policy
    • Kings College London
    • Thursday 22 nd May, 2008
    • University of Economics, Prague
  • 2. The Challenge of Carbon Decoupling
    • Decoupling: a decline in the ratio of the amount used of a certain resource, or of the environmental impact, to the value generated or otherwise involved in the resource use or environmental impact. The unit of decoupling is therefore a weight per unit of value.
    • Relative decoupling: in a growing economy, the ratio of resource use (e.g. energy consumption) or environmental impact (e.g. carbon emissions) to GDP decreases
    • Absolute decoupling: in a growing economy, the resource use or environmental impact falls in absolute terms
    • If GDP growth continues, climate stabilisation at levels of CO2 concentration that limit global average temperature increases to 2 o C will require a degree of absolute decoupling of GDP from carbon emissions that is outside all previous experience
  • 3. UK Carbon Emissions 2002 Domestic in home Business Aviation Source: The carbon emissions in all that we consume, Carbon Trust, 2006 Domestic transport Total = 165 mtc 18 88 47 11
  • 4. Business and public sector emissions (excluding transport, distribution and supply industries) Source: The UK Climate Change Programme: Carbon Trust, 2005 Manufacturing (direct) Manufacturing (electricity)
  • 5. UK emissions targets Millions of tonnes of CO2 equivalent Climate Change Bill Commitments Kyoto GGH Target (2008 2012) Domestic CO 2 goal: 20% by 2010 Domestic CO 2 goal: 60% by 2050 26% - 32% budget cut by 2020
  • 6. Categorisation of environmental policies
    • Market/incentive-based (also called economic) instruments : include emissions trading, environmental taxes and charges, deposit-refund systems, subsidies (including the removal of perverse subsidies), green purchasing, and liability and compensation (EEA (2006, p.13).
    • Regulation instruments , which seek to define legal standards in relation to technologies, environmental performance, pressures or outcomes. Can also include imposition of obligations, e.g. renewable and energy efficiency obligations in the UK.
    • Voluntary/self-regulation (also called negotiated) agreements between governments and producing organisations. Economic actors may enter into these in order to forestall the introduction of market-based instruments or regulation.
    • Information/education-based instruments e.g. Eco-labels, smart meters, may be mandatory or voluntary.
  • 7. Policies for carbon decoupling (1)
      • Economic instruments: importance of resource and emission prices, driver of efficient use, emission and waste reduction
        • Energy taxes: climate change levy (carbon reduced by 3.5 mtc by 2010), fuel taxes (EU emissions half what they would have been at US prices)
        • Emissions trading: EU ETS; Carbon Reduction Commitment
  • 8. Policies for carbon decoupling (2)
      • Regulation
        • Renewables Obligation
        • Energy Efficiency Commitment (Carbon Emissions Reduction Target)
        • Integrated Pollution Prevention and Control (control of non-carbon emissions may increase carbon emissions)
      • Voluntary agreements
        • Climate change agreements
        • EU fuel efficiency agreements (targets will not be met; targets will be mandatory in future, i.e. Regulation)
      • Information/education
        • Energy efficiency labels for appliances (e.g. A-rated fridge freezers 0-80% market share in 6 years)
  • 9. Combinations of policy instruments
      • Market transformation
        • Result of the combination of a number of policy measures affecting different actors, including: EU energy labelling; m arketing campaigns (e.g. Energy Efficiency Recommended branding and advertising) by the Government and its agencies (e.g. EST); consumer advice from Energy Efficiency Advice Centres; media coverage on climate change; retail staff training and point of sale material from the EST; EU Minimum Performance Standards; EEC funding for incentives for consumers to purchase the energy-efficient models.
      • EU Integrated Product Policy
        • SCP; state aid; voluntary agreements; standardisation; environmental management systems; eco-design; labelling and product declarations; greening public procurement; encouragement of green technology; and legislation in areas including waste and chemicals.
      • SCP (see next slide)
  • 10. UK SCP Strategy Products Strengthening domestic and international measures to improve the environmental performance of products and services, including improved product design Production Improve resource efficiency and reduce waste and harmful emissions across business sectors Consumption Influence consumption patterns, including proposals for new advice for consumers Procurement Sustainable procurement in the public sector, to make the UK a leader within the EU by 2009 Innovation Support for innovation to bring through new products, materials and services Sustainable business Increase transparency, corporate responsibility and skill in business and other organisations Waste Increased emphasis on reducing waste at source and making use of it as a resource
  • 11. Environmental Tax Reform (ETR)/ Green Tax and Budget Reform
    • EC 1993, Chapter 10: An insufficient use of labour resources and an excessive use of environmental resources, leading to the conclusion If the twin challenge of unemployment/environmental pollution is to be addressed, a trade-off can be envisaged between lower labour costs higher pollution charges.
    • Green taxes/charges are levied on resource use or polluting environmental emissions
    • Revenues from green taxes (or from reducing environmentally harmful subsidies) allow other taxes to be reduced
    • Some portion of the revenues can be used for essential environmental spending (e.g. on infrastructure) that is otherwise difficult to finance
  • 12. ETRs in Europe
    • Denmark, Finland, Germany, Netherlands, Sweden and UK all very small; different tax base (energy, CO2, sectors), tax rates, revenue recycling, exemptions; all have exemptions because of competitiveness fears (COMETR)
    • Economic and environmental effects of ETR
    • Green taxes reduce environmental resource use
    • Green taxes achieve efficient resource use and environmental improvement at least cost by promoting
      • Static efficiency (equal abatement cost)
      • Dynamic efficiency (incentives for innovation)
      • Awareness of inefficient resource use
      • Abatement technologies can lead to new industries
    • Reduction of other distorting taxes reduces net cost of abatement (revenue neutrality)
    • If innovation, awareness, industrial cost reduction, reduced distortions are greater than abatement costs, then environmental improvement can be achieved at net gain to the economy green economic growth (double dividend)
  • 13. Policy conclusions
      • Relative, but not absolute, carbon decoupling (carbon emissions have risen in UK since 1977, despite Climate Change Programme policies)
      • (Much) More stringent application of policy instruments (especially price-based to avoid rebound effects) is required
      • Environmental tax reform (ETR)
      • Political feasibility
      • Implications for economic growth
  • 14. Growth in UK living standards: business as usual GDP per capita 2006=100 Source: HM Treasury Assumption of 2% per annum productivity growth


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