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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 Presentation
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EU Climate Package: consequences for the Polish economy
Warsaw, 8 September 2008
Page 2
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
Page 3
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.
Page 4
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.
Page 5
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.
Page 6
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.
Page 7
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 :
Page 8
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.
Page 9
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
Page 10
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
Page 11
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
Page 12
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
Page 13
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.
Page 14
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.
Page 15
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
Page 16
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.
Page 17
► 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
Thank you for your Attention!