eu energy and climate policy beyond 2020 & pvc industry

European energy and climate policy beyond 2020

Will Europe remain a competitive place for

industry?

26/04/2013

Maarten Neelis

© ECOFYS | |

Key messages

> Current impact of energy climate policies might be modest, but energy and

emissions are so important in the PVC chain that this could change in the

future. This can also influence the competitive position compared to other

materials.

> The coming 2 – 4 years will determine how the EU Energy and Climate policy

package will look beyond 2020 – important to be pro-active as a sector.

> Regardless of the direction the EU may take, a significant uncertainty

remains over what other regions will do and what the resulting differential in

energy related costs between Europe and the rest of the world will be over

time.

26/04/2013 Maarten Neelis 2

© ECOFYS | | © ECOFYS | | 26/04/2013 Maarten Neelis

Energy and climate policy and the PVC industry

Chlorine

Electricity

Electricity

Heat

Heat Ethylene

Oxygen

VC

PVC

Renewables

Energy efficiency

GHG emission

3

© ECOFYS | | © ECOFYS | | 26/04/2013 Maarten Neelis

Energy and climate policy and the PVC industry

Chlorine

Electricity

Electricity

Heat

Heat Ethylene

Oxygen

VC

PVC

Direct and indirect cost impact of

energy and CO2 can be substantial:

2 t CO2 / t PVC cradle to factory gate

is 60 Euro per t PVC with a CO2

price of 30 Euro per t of CO2

A renewable electricity levy of 10

Euro / MWh is 30 Euro / t of chlorine

and 20 Euro / t of PVC

4

© ECOFYS | | 26/04/2013 Maarten Neelis

> Share of renewable energy in

2010 at 10.6%, country plans add

up to 20% in 2020

> More challenging to reach the

20% energy efficiency target

> GHG reduction target likely to be

overshot by 2020 (resulting in low

CO2 prices at the moment)

EU on track with two of the 20/20/20 targets

5

© ECOFYS | |

Framework for 2030 and thereafter

26/04/2013

The Commission is currently setting up the 2030 energy

and climate policy framework:

2011

2015 2050

March 2011:

Publication of the EU Low

Carbon Roadmap for 2050

with 2030 and 2050 GHG

reduction targets

March 2013:

Publication of the Green Paper

for the 2030 framework;

start of public consultation

End of 2013: Possible

publication of draft

legislation on the

2030 framework

2015: Deadline international

climate change deal; the

Commission would want to have

some detail on 2030 framework

to strengthen negotiation

position

2014: Change of European

Commission, details on 2030

framework will most likely be

passed onto the new

Commission

2013 2020 2030

2020: End of 2020

package, 2030

package must be

ready before then

2030: GHG

reduction target

40% vs. 1990

levels ??

2050: GHG

reduction target

80–95% vs. 1990

levels ??

Maarten Neelis 6


The 2030 package: questions from the Green Paper

General – Which lessons from 2020

are most important?

Targets

Which targets and at which level (Europe,

Member States, sectors)?

Instruments

Which policy

instruments to ensure an effective

policy package?

Competitiveness and security of

supply

Which elements of the package should be strengthened to

promote job creation, growth and

competitiveness?

Capacity and distributional

aspects

How should the new framework ensure

equitable distribution of effort

among Member States?

7

© ECOFYS | |

EU ETS needs structural reform

EC Communication 14 Nov 2012

The state of the European carbon market in 2012

Options for reform:

a)Increasing the EU reduction target to 30% in 2020

b)Retiring a number of allowances in phase 3

c)Early revision of the annual linear reduction factor

d)Extension of the scope of the EU ETS to other sectors

e)Limit access to international credits

f)Discretionary price management mechanisms

Long term outlook on ambitious GHG target (i.e. beyond 2020) remains key



Diversity of RE support schemes in Europe with

some converging trends

9

© ECOFYS | |

Converging national RE support schemes hold many

benefits but also some risks and challenges

26/04/2013 Maarten Neelis

Potential benefits Potential challenges/risks

Support s

chem

e d

esig

n

Joint RES-E support methodology

could lead to increased transparency

and stability

RES-E investors could reduce their

transaction costs and tap economies

of scale

Increased RE investments and

reduced support costs per MWh

Reduced sovereignty of Member

States needs to be accepted by

national Parliaments

Support schemes could be less

suited to overcome local market

barriers

Windfall profits and increased

support costs if cross-country

support level is not well adjusted

RES a

llocatio

n

Tapping low-cost potentials

Increased efficiency of European

RES target achievement

Greater flexibility and lower cost for

reaching national RES targets

Challenge of balancing costs and

benefits between Member States

Negligence of domestic benefits

could lead to loss of public

acceptance and reduced willingness

to pay for RES

10

© ECOFYS | |

Competitiveness and carbon leakage – key issues


> Future of the free allocation beyond 2020 (benchmarks for VC and PVC)

> Future of the financial compensation in Europe for electricity related

emissions (chlorine!)

> Development of carbon price over time, depending on future design of ETS

(scope, off-sets, linking etc.)

> Price differential with rest of the world for fuels and electricity over time and

the impact policy has on this (exploitation conventional and unconventional

energy sources, development of energy market etc.)

11

© ECOFYS | |

Current policy assessment – EU versus non-EU


Disclaimer

There are many differences between countries.

Therefore, comparisons of ambition levels and costs

clearly have an indicative characteristics

Ambition level

energy and climate policy

Cost for industrySource: Ecofys

Spread for the

rest of the world

EU + Member State level

12

© ECOFYS | |

Typical industry view on 2030 package

> An effective framework to maintain competitiveness on the route towards

global action

> A European energy policy to ensure a diversified and competitive energy

supply

> Policy approaches that acknowledge the vital role of manufacturing industry

in sustainable consumption patterns

> An R&D and innovation framework towards market-oriented and cost-

efficient technology development


© ECOFYS | |

Key messages

> Current impact of energy climate polices might be modest, but energy and

emissions are so important in the PVC chain that this could change in the

future. This can also influence the competitive position compared to other

materials.

> The coming 2 – 4 years will determine how the EU Energy and Climate policy

package will look beyond 2020 – important to be pro-active as a sector.

> Regardless of the direction the EU may take, a significant uncertainty

remains over what other regions will do and what the resulting differential in

energy related costs between Europe and the rest of the world will be over

time.



Please contact us for more information

Ecofys Netherlands B.V.

Kanaalweg 15G

3526 KL Utrecht

The Netherlands

T: +31 (0)30 662-3241

E: [email protected]

I: www.ecofys.com

16

eu energy and climate policy beyond 2020 & pvc industry

Documents

ecofys ecofys

ecofys framework

ecofys eu ets

maarten neelisenergy

ecofys competitiveness

eu energy

maarten neelisdiversity

maarten neelisthe