Carbon trading

Fallout and climate policy

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It’s no exaggeration to say that the Fukushima nuclear reactor disaster in March has cast a shadow over plans for new nuclear power capacity globally, and it is too early to say whether this will fade with time. But it’s also having much wider indirect consequences which could yet cause a shift in Europe’s energy and climate policy and complicate global climate talks.

Many of the accident’s extreme circumstances were unique to Japan, so there may or may not be lessons to learn in other countries. But, rightly or wrongly, that message is rapidly becoming politically irrelevant amid the understandable trauma. (more…)

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Conflicting objectives

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Conventional wisdom among climate policymakers holds to the idea that greenhouse gas mitigation, energy efficiency, and renewable energy targets will combine to deliver the EU’s 20% emissions reduction goal for 2020 relative to 1990, with a higher 30% target still on the table.

But the reality is that there is a long-standing and unresolved tension at the heart of the EU’s 2008 20/20/20 energy and climate package. And the bloc’s roadmap for 2050 (ENDS Report, March 2011), aimed at cutting emissions by at least 80% relative to 1990, has brought matters to a head. It’s not just about whether to go for 30% or a near offer, but about how the three elements work together, or do not.

The European Commission is deeply concerned that a renewed drive for energy efficiency, together with a continuing surge in renewable energy investment across the EU, will undermine carbon price signals in phase III of the EU emissions trading scheme (ETS) from 2013. Already in Germany, the power sector is battling low profitability from its conventional power plants which must now power down inefficiently when renewable electricity is available. These utilities are struggling to find the cash to invest in the vast amount of new low-carbon plant needed to decarbonise its grid, not least in back-up and baseload plants. (more…)

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Climate change agreements revisited

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Latest thinking by the energy and climate department (DECC) over climate change agreements (CCAs) smacks of blue-sky thinking. It has floated ideas not only to reform but even potentially to scrap the instruments. The government should be careful before reinventing this particular wheel.

Last December, DECC organised a closed workshop including representatives of sectors covered by CCAs to discuss their future. It released a report on the meeting last week.

There is general consensus that CCAs need reform. The voluntary agreements to cut emissions now signed with 52 industry sectors have various shortcomings. These include difficulties with monitoring and benchmarking of progress and an uneasy mixture of absolute and relative targets in different agreements. (more…)

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Good intentions, wrong kind of cuts

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The phrase ‘greenest government ever’ has become a mantra for the Coalition, not least for David Cameron and energy and climate secretary Chris Huhne. And we are assured that at the heart of the vision is Britain’s commitment to a low carbon future.

Emissions should be cut by at least 34% by 2020 relative to 1990. Low-carbon businesses and technologies should help drive the UK out of recession and towards green growth.

We will see whether these ambitions translate into reality or get lost in a fog of fiscal expediency when the government publishes its spending review in less than a week’s time. (more…)

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Trading away the future

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2010 has been a bad year for the climate.

Not just for climate treaty negotiations – few expect a deal in Cancún in Mexico this December after the failure in Copenhagen last December. But also for the carbon markets that ultimately depend on strong policies.

Huge interests are at stake. Pioneering investors feel let down and are warning they could go to the wall. The uncertainty could go on until Cancún, or even longer.

This is on top of uncertainty over the post-2012 status of the UN clean development mechanism. The CDM’s future is further clouded by European Union proposals to stop many types of UN offsets from entering the EU Emissions Trading Scheme after 2012.

Why should we worry? There are several reasons. (more…)

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Britain’s energy challenge

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Energy policy in the UK is at a crossroads, and the decisions made now will reverberate for decades. At least 43 gigawatts of new electrical generation capacity, equivalent to half of Britain’s current total, will be needed by 2020, as all but one of its nuclear plants are retired and coal-fired power stations closed to meet EU air pollution standards.

A staggering £200bn of investment will be needed not only to maintain energy security against price spikes as North Sea resources dwindle and energy imports grow, but also to deliver the largest single contribution to a low-carbon economy. (more…)

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Climate talks – mending the ‘broken record’

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The latest inter-sessional climate talks at Bonn revealed just how much the future of global climate and energy action still hangs by a thread – and a badly frayed one at that.

Until now, the international offset market has limped along despite the looming threat of a gap between the first Kyoto Protocol commitment period, which ends in 2012, and the beginning of a new global agreement. There had been signs of a recovery in momentum at the June talks in Bonn (ENDS Report July 2010), with progress on rationalising negotiating texts. (more…)

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Simplify the CRC but don’t drop the cap!

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The air has been thick ahead of the summer parliamentary recess with talk of a fundamental review of the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. Some are even calling for it to be scrapped altogether.

The smart money, though, is on simplification, mooted as a possibility by energy and climate secretary Chris Huhne in his July annual energy statement. That is something most businesses would welcome wholeheartedly in principle. There is much less agreement on how. (more…)

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Climate talks: the road to Cancun just got rockier

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The chances of even an outline global climate deal at Cancun in December 2010 look slim after America’s Democrats failed to garner the 60 votes needed for a cap and trade bill in the dying days of July. Short of a miracle, President Obama will in effect go naked into that conference chamber.

The passage of the House of Representatives bill in 2009 was a high watermark (ENDS Report, May 2009). Since then, the US Senate, which must also get a version through before a unified bill can pass into law, has struggled against strong fossil fuel interests (ENDS Report, June 2010). (more…)

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Hacking back the green shoots of recovery

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Traditionally, research, development and training are among the first things to go in hard times. Squeezed by falling sales, businesses look to consolidate by relying on mature technology.

This pays in the short term but provides little hope of competing with new technologies, often developed overseas, when good times return. And government investment in basic research, which translates only indirectly into cash in the long term, is another soft touch.

Why does this matter? Because if we really are serious about a more diverse, energy-efficient and low-carbon economic recovery then we must stop expediently cutting back the wrong shoots when we look to make savings.

And even where the investment means continued borrowing in the short term, we need to recognise that there is nothing wrong with that if it transforms the economy and provides the future jobs so desperately needed. (more…)

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The ENDS Carbon & Energy Efficiency blog provides news and comment for carbon and energy management professionals in business and the public sector, covering the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme and other carbon and energy management and regulation issues. The blog is part of the ENDS Report Carbon & Energy Efficiency channel.

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