eu climate package: consequences for the polish economy warsaw, 8 s eptember 2008
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EU Climate Package: consequences for the Polish economy Warsaw, 8 S eptember 2008. Agenda. EU c limate package – what is it? Main obligations for Poland Who should pay for that? Price of the carbon emission allowances – main risk factor Forecasts of the impact on Polish economy. - PowerPoint PPT PresentationTRANSCRIPT
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EU Climate Package: consequences for the Polish economy
Warsaw, 8 September 2008
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Agenda
1. EU climate package – what is it?
2. Main obligations for Poland
3. Who should pay for that?
4. Price of the carbon emission allowances – main risk factor
5. Forecasts of the impact on Polish economy
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EU Climate package – what is it?
European Union’s „Climate action and renewable energy package” strategic objective is to limit the global average temperature increase to not more than 2°C above pre-industrial levels.
According to the European Council, in the area of Energy Policy for Europe it should pursue the following objectives:
► Increasing security of supply;
► Ensuring the competitiveness of European economies and the availability of affordable energy;
► Promoting environmental sustainability and combating climate change.
Source: European Council, 8-9 March 2007: Presidency Conclusions, Brussels.
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To achieve these objectives, European Council proposed the following measurable targets:
► At least a 20% reduction of greenhouse gas emissions in EU by 2020 compared to 1990
► 20% share of renewable energies in overall EU energy consumption by 2020
► Saving 20% of the EU's energy consumption compared to projections for 2020, as estimated by the Commission
► 10% minimum target to be achieved by all Member States for the share of biofuels in overall EU transport petrol and diesel consumption by 2020, to be introduced in a cost-efficient way.
EU Climate package – what is it?
Source: European Council, 8-9 March 2007: Presidency Conclusions, Brussels.
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Main instruments that can be used to achieve those targets:
► European Emission Trading Scheme (EU ETS);
► Binding emission targets for non ETS sectors;
► Binding targets for the renewable energy development
► Support of the development of the Carbon Capture and Storage Technology (CCS)
► Revised guidelines on state aid for environmental and climate protection
EU Climate package – what is it?
Source: European Council, 8-9 March 2007: Presidency Conclusions, Brussels.
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Main EU Climate package obligations for Poland:
► Revision of the EU ETS:
► Introduction of the single EU-wide emission cap and central EU emission allocation (instead of National Allocation Plans)
► Gradual replacement of free allocation of emission allowances by the auctioning of allowances from 2013, reaching full auctioning by 2020 (in case of power stations full auctioning already in 2013)
► Emission cap for the non-ETS sectors at the 114% of the 2005 emission level
► 20% share of renewable energy in overall energy consumption by 2020
► CCS installation obligation for 330 MW and above units
EU Climate package – main obligations for Poland
Source: ‘Raport 2030’, EnergSys, 2008.
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49
.5
38
.3
25
.5
24
.4
15
.2
13
.1
9.9
1.7
1.2
1.2
-2.6
-4.0
-6.0
-8.9
-16
.0
-18
.5
-23
.7
-28
.9
-31
.9
-32
.1
-43
.7
-46
.2
-53
.0
-55
.1
-55
.7
-2.7
-80
-60
-40
-20
0
20
40
60
Spain
Portu
gal
Irela
nd
Gre
ece
Austri
a
Finlan
dIta
ly
Denm
ark
Luxe
mbo
urg
Slove
nia
Nethe
rland
s
Franc
e
Belgiu
m
Sweden
United
Kin
gdom
Ger
man
y
Czech
Rep
.
Polan
d
Hunga
ry
Slova
kia
Roman
ia
Bulga
ria
Lith
uani
a
Latv
ia
Estoni
a
EU-15
Source: Annual European Community greenhouse gas inventory 1990-2006 and inventory report 2008.
EU Climate package – who should pay for that?
Reduction of carbon emissions between Kyoto Protocol base year and 2006
New Member States are much more advanced in fulfilling Kyoto targets than EU-15 countries :
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Price of the carbon emission allowances in ETS – main risk factor
ENTERPRISE SECTOR
investment decisions
CO2 MARKET PRICE
SUPPLY AND DEMAND
coal/gas price ratio, existing infrastructure, etc.
short-term
medium-term
► Limited quantity of allowances determines its above-zero price.► Upper-boundary of CO2 price will determined by the expected cost of penalty
► Relation between CO2 market price and investment decisions is complex:
longer-term
Source: Voorspools K., ‘CO2 market price logic in 2020’, Fortis.
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Price of the carbon emission allowances in ETS – main risk factor
Publication CO2 price per tone
European Commission 39 EUR in 2020
FORTIS Bank30-70 EUR in 202050 EUR – the most probable
Deutsche Bank40 EUR in 2008; 67 EUR in 2020price above 100 EUR also possible
PointCarbon43-70 EUR in the years 2013-202055 EUR – the most probable
Prof. Żmijewskiprice above 100 EUR possible in case of allowance shortages
Source: ‘Annex to the Impact Assessment’, European Commission, 2008; Voorspools K., ‘CO2 market price logic in 2020’, Fortis; ‘Carbon Emissions’, Deutsche Bank, 2008; Sikorski T., ‘Post 2012 price assessment: Phase 3 Prices’, PointCarbon; Żmijewski K., ‘CO2 potrzeba przełomu negocjacyjnego – wyzwania dla Polski’, 2008.
Summary of main forecasts
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Economic impact
Enterprises
► higher production costs (due to higher energy and intermediate goods prices)
► lower international competitiveness of enterprises
► lower production in the energy intensive sectors
Households
► higher share of energy in the consumer expenses basket
► higher growth of consumer prices
► lower personal disposable incomes
► lower employment
Gen. Government
► higher incomes due to allowance sale
► lower incomes due to slower economic growth
► higher social transfers and subsidies or lower taxes (?)
Whole economy
► lower GDP level and growth
► higher level and growth rate of prices
► lower level and productivity of new investments in the production capacities
► deterioration of trade balance
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Economic impact – energy costs
The cost of energy production will rise due to:
► obligation of allowance purchases or low-carbon investments;
► investments in the renewable energy sources.
European Commission
Increase of energy production costs by 23-33% and of average energy price in the EU by 10-15% in 2020 (assumption about CO2 price: 30-47 EUR).
No estimates for single EU countries available.
ENERGSYSIncrease of energy price by 43-60% (assumption about CO2 price: 39 EUR)
Prof. ŻmijewskiIncrease of energy wholesale price by 55% in case of CO2 price at 30 EUR and by more than 100% in case of CO2 price at 47 EUR
Source: ‘Annex to the Impact Assessment’, European Commission, 2008; ‘Raport 2030’, EnergSys, 2008; ‘CO2 potrzeba przełomu negocjacyjnego – wyzwania dla Polski’, Żmijewski K., 2008.
Summary of main forecasts
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Economic impact – enterprises
Impact on enterprises through:
► increase of energy costs – the more severe, the more energy intensive industry is;
► CO2 allowance purchases in case of some sectors.
EUROPEAN COMMISSION
ENERGSYS
EU2020
Poland2020
Poland2030
Ferrous metals -8.0% -20% -24%
Paper products -1.1% -7% -8%
Mineral products -2.8% -16% -14%
Chemicals output -4.3% -10% -15%
Source: ‘Raport 2030’, EnergSys, 2008; ‘Annex to the Impact Assessment’, European Commission, 2008.
Output changes in comparison to baseline scenario
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Economic impact – enterprises
Energy costs changes in comparison to baseline scenario in 2020 (%)
CO2 price 39 EUR 35 EUR 30 EUR
Iron & Steel 18.2% 16.0% 12.5%
Non-ferrous metal 3.9% 3.7% 3.5%
Chemical 6.3% 5.8% 4.9%
Non-metallic minerals of which: 9.2% 7.9% 6.0%
cement 8.9% 7.6% 5.7%
ceramics 8.8% 7.6% 5.8%
glass 8.9% 7.8% 6.1%
Paper and Pulp 14.0% 13.1% 10.5%
Source: ‘Annex to the Impact Assessment’, European Commission, 2008.
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Economic impact – households
Impact on households mainly through:
► Larger share of energy expenses in total household expenses;
► Lower energy usage increases and thus slower catching-up process;
► Lower disposable income increase due to lower GDP growth.
2005-2030 changewithout package
2005-2030 change
with package
Electricity price for households +80% +123%
Households disposable incomes +136% +111%
Electricity use per capita +97% +80%
Economic impact on households in Poland
Source: ‘Raport 2030’, EnergSys, 2008.
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Economic impact – households
Structure of households expenses in Poland
2005 2010 2020 2030
EU ETS without social transfer of incomes from auctions
Housing, water, electricity, gas and other fuels, of which:
19.6 21.6 24.2 23.3
energy, of which: 11.0 13.2 16.2 16.2
electricity 3.7 5.2 7.5 7.1
EU ETS with social transfer of incomes from auctions
Housing, water, electricity, gas and other fuels, of which:
19.6 21.6 22.2 21.4
energy, of which: 11.0 13.2 14.1 14.4
electricity 3.7 5.2 6.6 6.2
Source: ‘Raport 2030’, EnergSys, 2008.
Social transfers financed by the incomes from auctions are not sufficient to fully eliminate the adverse impact of climate and energy package on households
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Economic impact – whole economy
2010 2015 2020 2025 2030
Direct costs
Additional investment in the energy sector (annual, in mln PLN)
162 2 262 8 536 12 801 14 381
Average cost of CO2 emission reduction (in PLN/tone)
81 126 190 164 133
Indirect costs – impact on GDP
Change in GDP level compared to baseline scenario (in bln PLN)
16 71 154 368 503
Change in GDP level compared to baseline scenario (in %)
-1.3 -4.3 -7.6 -13.6 -14.8
Average annual GDP growth rate difference (in 5 year periods)
-0.3 -0.7 -0.7 -1.4 -0.3
Aggregated costs of climate and energy package for the Polish economy
Source: ‘Raport 2030’, EnergSys, 2008.
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► EU climate and energy package hinders the pace of economic growth of the Polish economy and impedes the convergence process.
► Analysis of the economic costs of the package conducted by the European Commision are strongly underestimated.
► The adverse economic consequences of the package may be higher than the benefits for the environment.
Conclusions
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Thank you for your Attention!