CEEP’s position in view of an International Climate Change Agreement at the UN Climate Conference (COP 21) in Paris

CEEP’s position in view of an International Climate Change Agreement at the UN Climate Conference (COP 21) in Paris

A new global agreement is expected to be signed at COP-21 in Paris and implemented from 2020. The result of a global agreement should be an obligation of all countries of the world to deal with the problem of greenhouse gas emissions.

The world faces many challenges – population growth, impoverishment, lack of nutrition and energy poverty. Challenges related to climate change draw the public’s attention to the fight against climate changes, and solutions should be implemented that will also help to solve other major global problems. Such efforts should aim to reduce differences in the economic development of regions and countries. To achieve this, targets must be based on global agreements. Climate targets should take into account the transition from today’s GHG emissions reduction presented in percentages, to targets based on GHG emissions per capita. Countries with lower GDP per capita should have greater limits on GHG emissions, than the richest countries, in order to equalize differences in economic development and the standard of living of citizens. Consumption based GHG emissions will eliminate the carbon leakage problem. Therefore, adequate efforts should be made to develop methodologies for consumption based GHG emissions assessment.

The concept of ‘climate neutrality’ should be included in the final COP 21 agreement, as it provides a balance between emissions and absorption. This allows industry to develop and makes the world more green.

Central Europe Energy Partners (CEEP) supports the kind of agreement that fosters a global ‘level playing field’ economically, and minimizes ‘carbon leakage’. From our point of view, the participation of all countries in the world is key to the agreement.

Reflections

The European Council in October 2014 adopted ambitious targets for the EU’s Climate and Energy Policy. The package was announced one year prior to the COP21 United Nations Climate Conference to be held in Paris in November and December 2015. The EU’s Climate and Energy Framework can thus be seen as an attempt by the EU to take the lead in reducing worldwide GHG emissions.
The objectives behind the future agreement are very ambitious, and the role of Europe in this conference is very important, in promoting the adoption by all the participating countries of collective commitments which are crucial to fighting global warming. The EU will obviously set out to take a leading role in Paris, with its stated target of an “at least 40%” reduction on 1990 levels. The EU’s Climate Commissioner recently called upon the major emerging economies to follow suit, and all the EU countries, plus Norway, have agreed to his call.

Achieving the goals of reducing GHG emissions, improving energy efficiency and increasing the share of renewable sources in the energy mix represents a particular challenge for the EU-11 due to a number of specific characteristics of the region's current energy system. Most importantly, carbon intensive fuels account for a much higher share of the energy mix in the EU-11 compared to the
EU-17. This is primarily due to a considerably higher overall reliance on solid fuels. While solids account for only 12% of Gross Inland Energy Consumption in EU-17 countries, they represent 36% of the EU-11's energy mix. However, it is worth pointing out that EU-11 countries emit per capita significantly smaller amounts of greenhouse gases than the EU-17. Moreover, absolute energy consumption per capita is still significantly lower in the EU-11 than in the EU-17.

Turning to the energy efficiency of production processes in the economy, the EU-11 countries are characterized by significantly higher levels of energy intensity in comparison with their EU-17 peers. On average, 206 kgoe are consumed by the industry sector per EUR 1,000 of GDP generated in industry in the EU-11, compared to only 131 kgoe in the EU-17. This reveals significant energy efficiency shortcomings in the EU-11 industry sector. Furthermore, transmission losses are significantly higher in the EU-11 than in the EU-17, reflecting problems in the grid infrastructure. While transmission losses amount to 9% of Total Net Production of electricity in the EU-11, they only account for 6% in the EU-17 economies. In sum, relatively low energy efficiency of industrial production and transmission make the energy system transformation required to achieve the
EU targets, a much bigger challenge for the EU-11, compared to the EU-17.

Ongoing debates in Europe, which we have been witnessing for a number of years, focusing on whether it is better to decrease CO2 emissions by 30%, or perhaps even 40%, have been deprived of the solid calculations behind their potential impact on the European economy, and Europe’s competitiveness in relation to other global players. In 2014, we witnessed an unexpected success in the “battle” for data transparency. In recent years, we have been arguing that CO2 emissions should be reported annually, and in “tonnes per capita”, as only this provides a clear image of where we stand, and the data duly becomes more transparent and comprehensible. For many years, our argument has only manifested itself at specialised debates. However, in late 2014, identical thinking was displayed by scientists from the Paris Dauphine University. Hopefully, it is a sign of things to come. CEEP’s publications and papers are characterised by their scientific rigour, and they present an in-depth analysis of the described issues. We hope that our forthcoming publications will be met with similar appreciation.

Facts to be taken into consideration

 A comprehensive international agreement on global climate protection must be achieved: There is a real risk that EU CO2 policies may prove ineffective in terms of changing the global emissions landscape, as over 90% of emissions will take place outside the EU. Concerted efforts at the global level which translate into an international deal are the best way to address climate change. Global warming cannot effectively be combated at national or European level alone. It is crucial that other major countries, such as China and the USA, commit to comparable ambitious targets, such as those of the EU.

Replacement of the oldest and obsolete generation facilities: Most of the EU-11 countries’ energy generation facilities were built many years ago. After that, due to the transformation of their economies, the demand for electricity dropped significantly, which caused those countries to discourage large investments in the energy generation sector. The units under operation are now becoming obsolete. Based on the publicly available information regarding the age of generation units in the EU, over 38% of generation capacity in EU-28 countries is over 30 years old. Therefore, the need for replacement of large power plants in a relatively short period, is substantially higher in the EU-11 region, and it will require considerable funds to be invested.

Investment and innovation funds: Using existing EU funds is a starting point – however, more needs to be done to provide access to financing instruments, and to move a larger share of the EU budget into funds to support the modernisation of the energy system, including coal power plants with 46% of their efficiency, enjoying derogation from ETS till 2030.The threshold of the EIB for acquiring funds for coal power plants is not realistic at all. We are convinced that innovations will contribute substantially to CO2 emissions reductions.

Co-generation: The development of high-efficiency cogeneration in the EU-11 is one of the more effective factors in CO2 reduction, so a significant effort should be made towards developing a support system for optimal high-efficiency cogeneration after 2018. This support system should give the opportunity for development of cogeneration power productions , while it would not cause excessive costs to customers.

Carbon leakage list: Energy-intensive industries in Central Europe such as, chemical, fertilizers, steel, aluminum, refineries, etc., should be included in the Carbon Leakage List covering 100% of these industries and their capacities, in order to maintain international competitiveness

Renewable energy sources: The development of RES is currently heavily supported by the EU. Wind and solar technologies should be supported where needed. The real potential of biomass and hydro power plants (including pump power plants) should be also properly assessed. At the current stage of their development, RES cannot replace the existing, traditional power system, but their potential should be used as far as it is economically, ecologically and technically possible.

Gas-fired power plants: Thanks to the possibility of a fast start up, gas -fired units should be developed to support the development of RES and improve the security of the grid operation. The confirmation of significant and economically viable LNG imports from the US can significantly influence its price and change the role of gas as an energy carrier. In that case, the extensive use of gas as a base load fuel could be possible. None of the above cited energy generation technologies can satisfy all electricity demand and a mix of it has to be created.

Energy price – affordable energy: Climate policy influences energy prices which is a crucial factor for the development of industry, competitiveness and social aspects. That is why, it is so important for the EU countries that the economic burden connected with climate policy will concern at least the world’s key players, and CO2 should be measured equally per capita.

Marcin Bodio, CEO, CEEP


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