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Risk and Governance in the transition process towards a post carbon society Deliverable 4.2

Risk and Governance in the transition process towards a post carbon society Deliverable 4.2. Risk Governance and technologies: associated risks in the transition to an EU post carbon society PACT Mid-term assessment meeting Brussels, 17-18 May 2010 European Commission

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Risk and Governance in the transition process towards a post carbon society Deliverable 4.2

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  1. Risk and Governance in the transition process towards a post carbon societyDeliverable 4.2 Risk Governance and technologies: associated risks in the transition to an EU post carbon society PACT Mid-term assessment meeting Brussels,17-18 May 2010 European Commission Dr. Michael LaBelle milabelle1@gmail.com

  2. How do results fit into PACT? Exposes what needs to be done in regulatory institutions and in the energy market to enable the post carbon society to emerge

  3. Research Questions • What are the risks associated with regulation in fostering a zero carbon economy by 2050? • What are the risks associated with market forces in fostering a zero carbon economy by 2050? • The carbon reduction equation: • Pace of Carbon Reduction = institutional change + technological development + (political/social capital)

  4. Types of Risk

  5. Qualitative Sources

  6. Outline: carbon reduction efforts and risks • Third Internal Energy Market Legislative Package (Regulations) • Emissions Trading System (EU ETS) (Market) • Energy efficiency efforts (Regulations + Market) • Current/future technologies and distant energy sources • Smart grids • Carbon Capture and Storage • Biofuels • Hydropower • Distant energy sources (Desertec and gas imports) • Conclusion/recommendations

  7. Outline: carbon reduction efforts and risks • Third Internal Energy Market Legislative Package(Regulations)

  8. Regulatory Instability and Carbon Reduction • Engagement of regulators in infrastructure projects • More authority should be granted for ACER • Increase coordination in renewable energy • Regional regulatory coordination in infrastructure is essential for smart grid technology • Regional markets are necessary with regulatory participation

  9. Stakeholder Perspective • “Regional energy markets help each country. In summertime you can import peak load from neighboring countries. Even if you have regional networks it makes it easier to make a European network. The advantage of knowing exactly where and how we produce that power, and the advantage of controlling the European countries’ security of supply. This is why it is good to have a regional body for regulation” (Chebbo 2010).

  10. Outline: carbon reduction efforts and risks • Third Internal Energy Market Legislative Package (Regulations) • Emissions Trading System (EU ETS)(Market)

  11. EU ETS: Markets and Carbon Reduction • Depressed trading price due to political in/decisions contributes to uncertainty of long term price of CO2 • Short term and long term risks influence and are influenced by the trading price of CO2 credits. • Transparent allocation procedures are necessary • Investments into carbon reducing technologies are linked to the price of CO2

  12. Stakeholder Perspective: EU ETS • “In Europe they push for dramatic and rapid CO2 targets, but no nuclear, no coal, whatever technological mix is left is costly and will not support European industry” (Energy Utility Executive A 2009).

  13. Outline: carbon reduction efforts and risks • Third Internal Energy Market Legislative Package (Regulations) • Emissions Trading System (EU ETS) (Market) • Energy Efficiency efforts(Regulations + Market)

  14. Energy Efficiency and Carbon Reduction • Localized solutions • Pricing signals (consumer pricing linkage) • Financial incentives and mechanisms involving national, international and financial institution • Effective EU targets • Regulatory based system • Institutional capacity • Energy efficiency can boost security of supply

  15. Stakeholder Perspective: EE • “We need to do a lot to improve energy efficiency. We need strong compliance in supply side and demand side policies where energy efficiency plays a central role. The 20/20 goal is the right thing, but we need to see if we can do better than that. Energy efficiency should be at a higher amount regardless of international negotiations” (Martins 2009).

  16. New Tech and Energy Sources • Third Internal Energy Market Legislative Package (Regulations) • Emissions Trading System (EU ETS) (Market) • Energy Efficiency efforts (Regulations + Market) • Current/future technologies and distant energy sources • Smart grids • Carbon Capture and Storage • Biofuels • Hydropower • Distant energy sources (Desertec and gas imports)

  17. Associated risks/issues of CCS Technically, according to stakeholders, there are many problems and issues associated with CCS that must be resolved before it reaches maturity and widespread use. These are: • Power plant efficiency (efficiency drops with CCS technology installed) • High subsidies required (seen as both positive and negative) • Public acceptance must be secured • New regulations but with significant regulatory lag • Tremendous demand for CCS technology, in particular for Germany and Poland

  18. Conclusion 1 • The role of regulatory institutions is essential to reduce a range of risks present in the policy making process and within the marketplace. • Technological and regulatory lock-in, due to the sunk costs of utility companies and the evolutionary method of rule making can be both a benefit and a hindrance, for the widespread deployment of low carbon technologies. • Security of supply risks can be reduced by establishing long term strategies. • The pricing of carbon is essential.

  19. Conclusion 2 • The pursuit of low price energy for political gain risks undermining reduction in energy intensity and long term market signals for carbon pricing. • Cross border regulatory cooperation is essential • Unproven technologies must cope with high levels of performance risk. • Local communities will determine whether new technologies and policies conform to their local societal norms.

  20. Moving Forward: Scenarios • 2030-2050: How will regional markets operate? • Smart grid success relies on cooperation • Regional energy markets • Regional infrastructure • CCS technology operates regionally • Desertec/Nabucco/South Stream: + imports • How will institutions be interacting? • Cooperative decision making • Regional and national financial schemes for EE • Institutional inertia for zero carbon energy systems

  21. “Look how long it took to make the transition from wood to coal, coal to oil and gas: 50-60 years. We cannot make this transition in another 50 or 60 years. It will be too late for the climate,” United States Energy Secretary, Steven Chu. Thank you for your attention

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