managing interactions between carbon pricing and energy ... · carbon price integration when...
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© OECD/IEA 2013
Managing interactions between carbon pricing
and energy policies
Takashi Hattori
Head, Environment and Climate Change Unit, IEA
Achieving ambition: Pre-2020 policies and technologies for the energy sector
COP19 Side Event 18 November 2013
© OECD/IEA 2013
A growing issue worldwide
© OECD/IEA 2013
A growing issue worldwide
Carbon tax operating
Switzerland
Denmark
Norway
Finland
Sweden
Ireland
United Kingdom British
Columbia
Japan
Netherlands
© OECD/IEA 2013
A growing issue worldwide
Carbon tax operating Carbon tax under consideration
Switzerland
Denmark
China
Norway
Finland
Sweden
Ireland
United Kingdom British
Columbia
South Africa
Japan
Netherlands
Kazakhstan
Republic of Korea
ETS operating/soon to launch
Alberta
RGGI
EU ETS
Tokyo
New Zealand
California
Australia
Quebec
ETS under consideration
Thailand
Chile
Brazil
Turkey
Ukraine
Ontario
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Poor policy integration can…
• Energy markets are undermined
• Affects performance of policies
Carbon pricing policies
Energy policies
• Lead to policy uncertainty
• Reduce investment in low-carbon assets
© OECD/IEA 2013
Poor policy integration can…
• Energy markets are undermined
• Affects performance of policies
Carbon pricing policies
Energy policies
• Lead to policy uncertainty
• Reduce investment in low-carbon assets
© OECD/IEA 2013
Poor policy integration can…
• Energy markets are undermined
• Affects performance of policies
Carbon pricing policies
Energy policies
• Lead to policy uncertainty
• Reduce investment in low-carbon assets
© OECD/IEA 2013
EMISSIONS CAP 30% BELOW BAU
BAU EMISSIONS
Reductions from: energy efficiency polices technology policies price response in trading scheme
10 %
15 %
SUPPLEMENTARY POLICIES UNDERACHIEVE
(a)
5 %
SUPPLEMENTARY POLICIES OVERACHIEVE
(b)
Policies interact…
e.g. Carbon price level depends on supplementary policy delivery
Source: Summing up the Parts, 2011
© OECD/IEA 2013
EU ETS CAP 2008-2020
EXPECTED BAU EMISSIONS 2008-2020
5 G
t A
BA
TEM
ENT
Domestic abatement in response to price ~0.9Gt
Renewables Directive ~2Gt
Energy Efficiency Directive ~0.5Gt
Offset entitlement ~1.65Gt
Data Source: Energy Efficiency, renewable energy and CO2 allowances in Europe: a
need for coordination, CDC Climat ClimateBrief No18, Nicolas Berghmans
)
Renewables
Energy Efficiency
Offsets
ECONOMIC CRISIS
And, variety of factors affect…
Carbon price level more sensitive to economic conditions
© OECD/IEA 2013
Price of CO2
€/tCO2e
MtCO2
Policies to unlock cost-
effective energy efficiency
potential that is blocked by
non-economic barriers
Carbon price mediates
action economy-wide Technology support
policies to:
• reduce long-term costs
• Enable timely scale-up
Reduced long-term
marginal abatement
cost
Policy packages for energy sector
decarbonisation
© OECD/IEA 2013
Mapping
the energy
and climate
policy
landscape
Initial
alignment
of energy
policies
and the
carbon
price
Integration
when
phasing-in
a carbon
price
Design to
maintain
alignment
over time
Insitutional co-ordination between climate and energy policymakers
Energy
policy and
carbon
pricing
policy
reviews
How to deliver better policy integration
•Energy policies
•Policy objectives
•Policy performance
•Underpinning issues
(markets, infrastructure,
finance)
•Carbon price settings
•Adjust energy policies
•“Room to move”
•Effect of revenue
recycling
•Reference to actual or
shadow carbon price?
•Avoiding lock-in?
•Energy policy design
for greater certainty
•Stress-testing
•Flexible cap
•Efficiency vs simplicity
•How often ?
•Balancing certainty and
flexibility
•What would justify
intervention outside
scheduled reviews ?
•Which agencies?
•What levels of
government?
•What structure for co-
ordination?
© OECD/IEA 2013
In summary
• Be aware that carbon pricing policies are affected by existing energy policies, and vice versa.
• Think policy packages for decarbonization in energy sectors.
• Consider each of the 5 Key Steps to deliver policy coordination carefully.
• Throughout steps, better coordination among relevant agencies is crucial.
