Matthias Duwe of the German Think Tank Ecologic recently spoke on the future of European climate policy making as part of our EPC Forum Series. The presentation is available on our You Tube channel: http://www.youtube.com/watch?v=lyqtdryZdJM

For instructors who include a module on the European Union’s Emissions Trading System (EU-ETS), and/or critiques of cap and trade mechanisms, the Fondazione Eni Enrico Mattei, an Italian research institute, published an excellent report in 2012 assessing the effectiveness of the EU-ETS in driving low carbon technology options. The report summarizes a study conducted by the institute in which it used a constructed data set linking 8.5 million European companies with their patenting history and regulatory status to test the thesis that the EU-ETS has helped to drive development of low-carbon technologies.  

Among the take-aways from the report:

1. The most important determinant of the long-run cost of emissions abatement may be the potential for environmental policies to drive technological innovation;
2. The EU-ETS to date “appears to have had virtually no impact” on low-carbon technological change;
3. The primary impact of the EU-ETS to date appears to be driving some fuel-switching. However, fuel-switching only has the potential to reduce greenhouse gas emission by 300 tons annually, which is only 10% of the cuts that must be effectuated in the EU to meet its goal of reducing emissions by 80% by 2050 from 1990 levels;
4. As currently configured, “demand-pull policies” such as the EU-ETS may not be sufficient to drive low-carbon technological change. As is the case with pollution, which is driven by market failures, “under-innovation” is driven by the same phenomenon.

This reading could stimulate some good discussion on both the future of the EU-ETS and cap-and-trade policies more generally. Among potentially pertinent discussion questions:

1. This study was limited to the first phase of the EU-ETS; is there reason to believe that it contributed more to technological innovation during the second phase  of implementation, maybe in the upcoming third phase?;
2. What additional measures should the EU take either within or outside the framework of the EU-ETS to drive technological innovation?;
3. What has been the experience to date of other cap and trade systems (e.g. RGGI) in driving technological change?

An excellent new student reading for measuring the effectiveness of the European Union’s Emissions Trading System could be a very recent posting on theenergycollective.org’s website. The article sought to assess the relative importance of the EU-ETS and other incentive mechanisms to reduce greenhouse gas emissions in the European Union during the past 15 years.

Among his conclusions:

1. While EU-15 aggregate emissions declined by 6.5% in 2010 from 1990 levels, two nations, the UK and Germany, account for ALL of these emissions reductions. If these two nations were removed from the equation, emissions of the remaining founding EU members actually ticked up 1.9% during this period;
   1. Moreover, the majority of emissions declines in the UK and Germany occurred prior to either the signing of the Kyoto Protocol or implementation of the EU-ETS, with 80% of these declines prior to institution of the EU-ETS
2. The article suggests that the principal driver of Europe’s rapid expansion of clean energy resources has not been the EU-ETS, but rather robust feed-in tariffs provided to solar, wind and other low-carbon sources. While the allowance price of the EU-ETS during Phase II fluctuated between 8-32 euros/ton from 2008-2012, German feed-in tariffs ranged from an implicit carbon price of $69-342/ton, 3-18x as high as the average EU-ETS carbon price in 2010;
3. The article also suggests that it’s not surprising that nations with generous feed-in tariffs, such as Germany, have experienced much more robust growth in clean energy than in nations e.g. Romania and Finland, which lack such policies, yet are parties to the EU-ETS;
4. Overall, the article concludes that “it is clear that direct government investment in technology provides a more powerful and effective market signal for clean energy investment than the more modest and fluctuating carbon prices established by an Emissions Trading Scheme or cap-and-trade system.

This would be an excellent article to launch a discussion of feed-in tariffs also, and their role in policy making. Given the efforts to rein in feed-in tariffs costs in countries e.g. Germany, it would be interesting to ask students whether they think this is ill-advised in the face of the data in this article. Also, do students think there is an incremental benefit to cap-and-trade programs that justify continuing to use them in tandem with incentive mechanisms, e.g. feed-in tariffs, or would it make more sense to focus on the former mechanisms?

Wil Burns, the director of the Energy Policy & Climate program at Johns Hopkins, was interviewed last week by WYPR Baltimore’s Tom Pelton on climate geoengineering. The interview can be found on the WYPR website.

The International Carbon Action Partnership and Ecofys have developed a map of the emissions trading schemes throughout the world, at the regional, national and sub-national levels.The Interactive ETS Map allows users to visualize the status of ETSs around the world, to access information on the schemes and to compare key design elements across ETS. It includes links to the websites of the systems, greenhouse gas emissions by sector in each system’s participants, and facilitate comparisons of the stringency of commitments and covered sectors between systems.

Navigant Research has released its annual 180+ page BTM wind report International Wind Energy Development: World Market Update 2012.

Among the report’s findings:

·        More than 285 GW of wind power is now installed globally:

• 45GW of new capacity was added in 2012, including 1.1 GW from offshore wind;
• The United States surpassed China as the largest market in terms of new installations in 2012;
• Europe lost its position as the largest world region in terms of new installations;
• Wind installations in the Americas grew by 12.3 percent compared with 2011;
• The penetration of wind power in the world’s electricity supply has reached 2.62 percent;
• However, there are storm clouds on the five-year horizon.  The study, for the second year in a row, projects a reduction in market size for the upcoming 5-year period. The World Market Update 2012 forecasts that 241,620 MW will be added through 2017, 10 percent less than the forecast made in 2011.

A senior official in China’s Ministry of Finance has announced that China intends to introduce a set of environmental taxes, including one on carbon dioxide, providing some more grist for China and carbon tax lectures in climate change courses. Details of the tax remain sketchy; however, it’s likely to be an extremely modest given a proposal by the Ministry in 2011 that would have initially set such a tax at at 10 yuan ($1.60) per ton of carbon, rising to only 50 yuan ($8) per ton by 2020.  The proposal would initially add less than $1 to the price of a ton of coal, rising to about $4.40 by 2020. By contrast, coal in China currently trades for around $86.50 a ton.

Also, the Financial Ministry has raised the possibility of more modest taxes for specially affected industries, which as we have seen in the context of the European Union’s Emissions Trading Scheme, often results in excessive protection of industry that, in reality, faces little threat of carbon leakage. Moreover, Chinese provinces have a proclivity for obviating the bite of taxes and fees on industry to attract or keep them within their jurisdictions.

A recent study by the Chinese Academy for Environmental Planning projected that a carbon tax rate of 20 yuan per ton of carbon could reduce Chinese carbon emissions by 4.5% of the nation’s 2010 emissions.  A 50 yuan per ton assessment could reduce emissions by a hefty 9.5% of 2010 emissions, or 18.6% below baseline in 2030.  The study also indicated that economic impacts would be de minimis and would stimulate the development of new industries. Moreover, a 50 yuan tax would raise approximately 180 yuan in revenue that could be used for projects to reduce carbon emissions and develop innovative energy technologies.

It will be interesting to see if the Chinese have the will to enact a carbon tax high enough to send a price signal that incentivizes fuel switching and technological innovation. It will also be interesting to see how it stitches together a carbon tax with its pilot emissions trading system and other initiatives to reduce greenhouse gas emissions. Ultimately, success may portend more substantive commitments than those proffered under the Copenhagen Accord, but only time will tell.

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Energy is the defining issue of the 21st century. Our cities, the powerhouses of our economies and home to more than half of humanity, require large, reliable sources of energy to meet the needs of individuals, companies and institutions. Our current reliance on fossil fuels, for the generation of electricity and to power our industries and transportation systems, is at the heart of the climate change challenge. How we develop our energy sources, distribute and use energy will impact our future on the planet.

Organizations and cities around the globe report that the technical challenges of sustainable energy systems are not the greatest barriers to implementation, rather it is in the lack of capacity in the organizations and individuals that can move these ideas into action.

The Sustainable Cities International (SCI) Energy Lab is a program designed to improve this capacity through a series of learning exchanges between cities as well as providing a framework for analysis, action and evaluation to assist cities to move forward with their work on sustainable energy. Working with an initial cohort of 10-12 cities, the SCI Energy Lab aims to go well beyond being a simple exchange of pre-existing “best practices.” Structured as an Innovations Lab, the goal is to provide a multi-disciplinary forum for collaborative problem solving and idea generation around all aspects of the design, implementation and regulation of urban renewable and local energy systems.

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The call for candidate cities is directed at intermediate cities with 200,000 to 5 million inhabitants.

In order to qualify, a candidate city:
1. Has the capacity to undertake sustainability energy planning within the city (capacity includes expertise you can provide in the fields of: planning, sustainability, energy, engineering and/or finances);
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Travel costs provided for two city representatives to attend the annual SCI Energy Lab workshop.

Instructors who include a climate geoengineering module usually seek to engage students on ethical and moral issues associated with research and/or potential deployment of geoengineering technologies. Professor Stephen Gardiner of the University of Washington has done some of the most interesting work in this context. In his most recent article, Gardiner examines one of the primary arguments advanced by proponents of geoengineering, that deployment would be ethical if those countries most vulnerable to climatic impacts either opted to initiate geoengineering, or requested that other countries do so on their behalf. Gardiner labels this the “desperation argument.”

Among the take-aways from the article:

1. From an ethical perspective, it is problematic to argue that the desperation argument provides a measure of consent by vulnerable countries to deploy geoengineering technologies:

• There’s usually only a small percentage of countries invoked as candidates for “desperation” appeals for geoengineering. However, the universe of those potentially affected by geoengineering’s impacts are much broader, including future generations and other vulnerable States;
• The concept of “consent” is attenuated when one is essentially doing it at “gunpoint,” i.e. when the only alternative is the full force of climate impacts;
• There are far broader normative considerations at stake in this debate, including the moral implications of deploying technologies that “exert control over the planetary system;”

2. A second interpretation of the desperation argument is that it comports with a right to “self-defense. However, this is also ethically and morally questionable:

• The right only applies where other strategies have proved unavailing; it is not clear that other options don’t exist to address climate change;
• Self-defense, even when it can be invoked, must be proportionate; it is not clear that geoengineering approaches that exert profound influence on the environment, e.g. sulfur dioxide injection, meet this test;
• The right to self-defense can be invoked by many parties, some of whom may wish to defend themselves with different kinds or levels of intervention. This can “give rise to a new emergency scenario, that of competition and conflict . . .”

3. It would likely be a fiction to argue that a vulnerable State could unilaterally deploy geoengineering technologies given the logistical issues involved. Moreover, powerful states would have the military and economic capability to shut down such deployment if they wished.

I think this piece would generate some good class discussion. Among the questions that might be pertinent:

• How should principles of intergenerational equity be considered in the context of climate geoengineering?
• Given how close we are to the 2C “cliff,” is it legitimate to invoke “self-defense” to justify climate geoengineering on the grounds that is now a “last resort” option?;
• What are the moral and legal grounds for requiring the consent of other States to deploy geoengineering technologies?
  • What constitutes “consent” in this context?  Does it require unanimity? If not, what is the pertinent metric?