South East Europe electricity roadmap – modelling energy transition in the electricity sectors

One of the most important challenges for the South East Europe region will be replacing more than 30% of its presently installed fossil fuel generation capacity by the end of 2030, and more than 95% by 2050 if its age structure is considered. This requires a strong policy framework to incentivise new investments in a region currently lacking investors, but also presents an opportunity to shape the electricity sector over the long term according to the broader energy transition strategy of the EU and the Energy Community. The aim of this paper is to assess what type of long-term pathways exist for electricity sector development in the region if they follow the energy transition process of the EU. In this model-based scenario assessment, long term electricity sector futures are explored using a set of interlinked electricity models evaluating the level of renewable energy investment required in the region to reach a deep decarbonization target, assuming emission reduction above 94% by 2050 compared to 1990 in line with the long term market integration and climate policy goals of the EU. It also explores what are the most important system wide impacts of the high deployment of renewable energy concerning generation adequacy and security of supply.

Key policy insights

• Energy policies in the South East Europe (SEE) region, both at the national and regional level, should focus on enabling renewable energy integration, as this will be a key component of the future energy mix.

• EU and Energy Community policies should be incorporated into national energy planning to ensure that SEE countries embark on the energy transition process at an early stage.

• Stranded costs should be carefully considered in decision-making on new fossil-fuel generation and gas network investment in order to avoid lock-in to carbon intensive technologies.

• If consistent decarbonization policy prevails, with a significant and persistent CO2 price signal, the role of natural gas remains transitory in the region.

• The SEE region offers relatively cheap decarbonization options: the power sector can reduce GHG emissions above 94% by 2050 in the modelled scenarios.

     

The transition of the electricity system towards decarbonization: the need for change in the market regime

The mainstream community of energy experts is not aware of the long-term impacts that carbon policies directly concerned with promoting the development of low-carbon technologies produce on the electricity market regime. Long-term market coordination should be replaced by public coordination with long-term arrangements. The current market coordination makes carbon pricing ineffective in orienting investors towards capital-intensive low-carbon technologies. Fossil fuel generation technologies are preferred because their investment risks are much lower in the market regime, even with a high but unstable carbon price. Thus, in order to avoid delaying investment that is aimed at the decarbonization of the electricity system, a number of new market arrangements that lower the investment risk of low-carbon technologies and provide output-based subsidization have or are being selected by governments. As the use of low-carbon equipment to produce electricity develops, long-term market coordination for other technologies (e.g. peaking units, combined cycle gas turbine) will fade away because they alter the market price setting. Thus it is likely that, in the future, public coordination and planning will replace the decisions of market players not only for low-carbon technologies but also for every other type of capacity development.

Policy relevance

The development of renewables as promoted by both feed-in tariffs and green certificate obligations, which answer to different market failures, is well known. Similar long-term arrangements, which both subsidize and de-risk low-carbon investments for every small-sized and large-sized technology, shift learning costs and risks onto consumers. Energy experts and regulators have ignored that the expansion and generalization of these arrangements are changing the coordination function of the electricity markets. Apart from those in the UK, they are still unaware of the impacts that such technology-focused policies produce on the electricity market regime. The transition from market coordination to public coordination, which is inconsistent with the market principles of European electricity legislation, and long-term contracting is inevitable and should be anticipated.     

Developing Africa’s energy mix

Africa is growing rapidly both in terms of population size and economically. It is also becoming increasingly clear that fossil fuels impose a high price on society through local environmental pollution and Africa’s particular vulnerability to climate change. At the same time, Africa has an excellent renewable energy potential and prices for renewable energy are reaching the price range of fossil fuels. Comparing results from state-of-the-art Integrated Assessment Models we find different options for achieving a sustainable energy supply in Africa. They have in common, however, that strong economic development is considered compatible with the 2°C climate target. Taking both challenges and appropriate solutions into account, some models find that a complete switch to renewable energy in electricity production is possible in the medium term. The continental analysis identifies important synergy effects, in particular the exchange of electricity between neighbouring countries. The optimal energy mix varies considerably between African countries, but there is sufficient renewable energy for each country. The intermittency and higher capital intensity of renewable energy are important challenges, but proven solutions are available for them. In addition, we analyse the political economy of a sustainable energy transition in Africa.

Key policy insights

• An almost complete shift towards renewable energy (RE) is considered feasible and affordable in Africa.

• By 2050, electricity generation could be sourced largely from solar, wind and hydro power.

• Prices for RE in Africa are now within the price range of fossil fuels, partly due to the excellent RE potential.

• The optimal energy mix varies strongly between countries, but RE is sufficiently available everywhere.

• Addressing intermittency is possible, but requires investments and cooperation on the grid.

     

气候变化约束下中国电力系统低碳转型路径及策略

为理清应对气候变化约束下推动电力系统转型中面临的挑战和潜力,形成有效精准抓手,研究从气候变化约束对电力需求的影响出发,系统梳理温升目标下电力系统转型路径相关研究,并通过综述在低碳转型过程中与电力系统密切相关的煤电退出问题、可再生能源并网问题以及电网优化问题提出相应政策建议。研究发现,温升约束下煤电规模需快速下降,可再生能源发电大规模并网及远距离输送将成为最显著的特征,气电将承担比现在更重大的责任,核电需抛开争议加速发展。加快完善市场化机制、严控煤电规模、着力提升能效、统筹加强灵活性资源管理以及优化跨区负荷管理应成为监管部门重点推进的方向。     

Assessing decarbonization pathways and their implications for energy security policies in Japan

For countries without sufficient fossil fuel resources such as Japan, climate policies in the mid- to long term need to satisfy requirements not only for decarbonisation but also for energy security in the context of limitations on renewable energies and nuclear power. This study assesses the feasibility of decarbonization pathways to 2050 and their effects on energy security, considering the latest energy and climate policies in Japan using the AIM/Enduse model. The analysis illustrates that deep decarbonization by 2050 is technically feasible even without nuclear power based on three elements: energy efficiency improvements, low-carbon electricity and electrification in end-use sectors. These decarbonization pathways, in the long term, could also contribute to enhanced energy security, reducing import dependency to less than a half of the total primary energy and reducing import bills for fossil fuels by around 70% compared with the current level. Notably, renewable energies could play a strategically significant role in satisfying both climate and energy security requirements. In the mid-term (to 2030), however, although GHG emissions are reduced by 14–20% from 1990 levels, import dependency is relatively stable at today's levels, particularly without the restart of nuclear power. Given the limited potential for renewable energies in the mid-term, it is suggested that the availability of nuclear power will have negative impacts on carbon intensity and energy security, and policies to enhance the security of fossil fuels, including diversification of fuel sources and supply routes, will be required for the foreseeable future.

Policy relevance

Considering the scarcity of indigenous fossil fuel resources and the uncertain availability of nuclear power in Japan, renewable energy could play a strategically significant role in replacing unabated fossil fuels, which would contribute to satisfying both climate and energy security requirements in the long term. However, the renewable energy potential is insufficient to eliminate the requirement for fossil fuels by 2030; therefore the unavailability of nuclear power would affect energy security considerably. Thus, policies in the mid-term would still require enhancement of the energy security of fossil fuels, including the diversification of fuel sources and supply routes, as well as alleviation of the impacts of price volatility.     

Challenges for hydropower-based nationally determined contributions: a case study for Ecuador

Hydropower is the dominant renewable energy source to date, providing over two-thirds of all renewable electricity globally. For countries with significant hydropower potential, the technology is expected to play a major role in the energy transition needed to meet nationally determined contributions (NDCs) for greenhouse gas (GHG) emission reductions as laid out in the Paris Agreement. For the Republic of Ecuador, large hydropower is currently considered as the main means for attaining energy security, reducing electricity prices and mitigating GHG emissions in the long-term. However, uncertainty around the impacts of climate change, investment cost overruns and restrictions to untapped resources may challenge the future deployment of hydropower and consequently impact decarbonization efforts for Ecuador’s power sector. To address these questions, a partial equilibrium energy system optimization model for Ecuador (TIMES-EC) is used to simulate alternative electricity capacity expansion scenarios up to 2050. Results show that the share of total electricity supplied by hydropower in Ecuador might vary significantly between 53% to 81% by 2050. Restricting large hydropower due to social-environmental constraints can cause a fourfold increase in cumulative emissions compared to NDC implied levels, while a 25% reduction of hydropower availability due to climate change would cause cumulative emissions to double. In comparison, a more diversified power system (although more expensive) which limits the share of large hydropower and natural gas in favour of other renewables could achieve the expected NDC emission levels. These insights underscore the critical importance of undertaking detailed whole energy system analyses to assess the long-term challenges for hydropower deployment and the trade-offs among power system configuration, system costs and expected GHG emissions in hydropower-dependent countries, states and territories.

Key policy insights

• Ecuador’s hydropower-based NDC is highly vulnerable to the occurrence of a dry climate scenario and restrictions to deployment of large hydropower in the Amazon region.

• Given Ecuador’s seasonal runoff pattern, fossil-fuel or renewable thermoelectric backup will always be required, whatever the amount of hydropower installed.

• Ecuador’s NDC target for the power sector is achievable without the deployment of large hydropower infrastructure, through a more diversified portfolio with non-hydro renewables.

     

Dynamics of energy sector and GHG emissions in Saudi Arabia

The energy sector is the main contributor to GHG emissions in Saudi Arabia. The tremendous growth of GHG emissions poses serious challenges for the Kingdom in terms of their reduction targets, and also the mitigation of the associated climate changes. The rising trend of population and urbanization affects the energy demand, which results in a faster rate of increase in GHG emissions. The major energy sector sources that contribute to GHG emissions include the electricity generation, road transport, desalination plants, petroleum refining, petrochemical, cement, iron and steel, and fertilizer industries. In recent years, the energy sector has become the major source, accounting for more than 90% of national CO₂ emissions. Although a substantial amount of research has been conducted on renewable energy resources, a sustainable shift from petroleum resources is yet to be achieved. Public awareness, access to energy-efficient technology, and the development and implementation of a legislative framework, energy pricing policies, and renewable and alternative energy policies are not mature enough to ensure a significant reduction in GHG emissions from the energy sector. An innovative and integrated solution that best serves the Kingdom's long-term needs and exploits potential indigenous, renewable, and alternative energy resources while maintaining its sustainable development stride is essential.

Policy relevance

The main contributor to GHG emissions in Saudi Arabia is the energy sector that accounts for more than 90% of the national CO₂ emissions. Tremendous growth of GHG emissions poses serious challenges for the Kingdom in their reduction and mitigating the associated climate changes. This study examines the changing patterns of different activities associated with energy sector, the pertinent challenges, and the opportunities that promise reduction of GHG emissions while providing national energy and economic security. The importance of achieving timely, sustained, and increasing reductions in GHG emissions means that a combination of policies may be needed. This study points to the long-term importance of making near- and medium-term policy choices on a well-informed, strategic basis. This analytical paper is expected to provide useful information to the national policy makers and other decision makers. It may also contribute to the GHG emission inventories and the climate change negotiations.     

The need for national deep decarbonization pathways for effective climate policy

Constraining global average temperatures to 2 °C above pre-industrial levels will probably require global energy system emissions to be halved by 2050 and complete decarbonization by 2100. In the nationally orientated climate policy framework codified under the Paris Agreement, each nation must decide the scale and method of their emissions reduction contribution while remaining consistent with the global carbon budget. This policy process will require engagement amongst a wide range of stakeholders who have very different visions for the physical implementation of deep decarbonization. The Deep Decarbonization Pathways Project (DDPP) has developed a methodology, building on the energy, climate and economics literature, to structure these debates based on the following principles: country-scale analysis to capture specific physical, economic and political circumstances to maximize policy relevance, a long-term perspective to harmonize short-term decisions with the long-term objective and detailed sectoral analysis with transparent representation of emissions drivers through a common accounting framework or ‘dashboard’. These principles are operationalized in the creation of deep decarbonization pathways (DDPs), which involve technically detailed, sector-by-sector maps of each country’s decarbonization transition, backcasting feasible pathways from 2050 end points. This article shows how the sixteen DDPP country teams, covering 74% of global energy system emissions, used this method to collectively restrain emissions to a level consistent with the 2 °C target while maintaining development aspirations and reflecting national circumstances, mainly through efficiency, decarbonization of energy carriers (e.g. electricity, hydrogen, biofuels and synthetic gas) and switching to these carriers. The cross-cutting analysis of country scenarios reveals important enabling conditions for the transformation, pertaining to technology research and development, investment, trade and global and national policies.

Policy relevance

In the nation-focused global climate policy framework codified in the Paris Agreement, the purpose of the DDPP and DDPs is to provide a common method by which global and national governments, business, civil society and researchers in each country can communicate, compare and debate differing concrete visions for deep decarbonization in order to underpin the necessary societal and political consensus to design and implement short-term policy packages that are consistent with long-term global decarbonization.     

Analysing the interaction between emission trading and renewable electricity support in TIMES

As the number of instruments applied in the area of energy and climate policy is rising, the issue of policy interaction needs to be explored further. This article analyses the interdependencies between the EU Emissions Trading Scheme (EU ETS) and the German feed-in tariffs (FITs) for renewable electricity in a quantitative manner using a bottom-up energy system model. Flexible modelling approaches are presented for both instruments, with which all impacts on the energy system can be evaluated endogenously. It is shown that national climate policy measures can have an effect on the supranational emissions trading system by increasing emission reduction in the German electricity sector by up to 79 MtCO₂ in 2030. As a result, emission certificate prices decline by between 1.9 €/tCO₂ and 6.1 €/tCO₂ and the burden sharing between participating countries changes, but no additional emission reduction is achieved at the European level. This also implies, however, that the cost efficiency of such a cap-and-trade system is distorted, with additional costs of the FIT system of up to €320 billion compared with lower costs for ETS emission certificates of between €44 billion and €57 billion (cumulated over the period 2013–2020).

Policy relevance

In order to fulfil ambitious emission reduction targets a large variety of climate policy instruments are being implemented in Europe. While some, like the EU ETS, directly address CO₂ emissions, others aim to promote specific low-carbon technologies. The quantitative analysis of the interactions between the EU ETS and the German FIT scheme for renewable sources in electricity generation presented in this article helps to understand the importance of such interaction effects. Even though justifications can be found for the implementation of both types of instrument, the impact of the widespread use of support mechanisms for renewable electricity in Europe needs to be taken into account when fixing the reduction targets for the EU ETS in order to ensure a credible long-term investment signal.     

Adaptation of California’s electricity sector to climate change

Climate change is likely to pose considerable new challenges to California’s electricity sector. This paper primarily focuses on the adaptation challenges of an important component of the energy arena: electricity demand in the residential and commercial sectors and electricity supply. The primary challenge to California’s electricity sector will likely be the increase in demand for air conditioning as a result of rising temperatures. In addition, renewable energy sources, which are an increasing share of the electricity portfolio, are particularly vulnerable to climate change. Many of the key players have been actively considering the implications of climate change. Because electricity generation accounts for nearly 30% of greenhouse gas emissions, this sector has been a target of the state’s efforts to reduce emissions. Fortunately, many of the same tools can simultaneously improve the sector’s resilience to a changing climate. Demand management strategies and supply diversification are both important strategies. Local governments can play a central role in encouraging the adoption of more energy efficient building codes and the use of more renewable sources, such as solar energy. The positive steps taken by many local governments are encouraging. Steps to increase public awareness are an important, often missing component, however. Increases in research, development, and demonstration to improve system resiliency and develop new energy conservation tools are also needed.     

The cost of achieving South Africa’s ‘fair share’ of global climate change mitigation

Global climate change mitigation action is hampered by systematic under-assessment of national ‘fair shares’, largely on the basis of perceived national interests. This paper aims to inform discussions centred on South Africa’s nationally determined contribution (NDC) by estimating (1) emissions reduction pathways for the country using the Climate Equity Reference Calculator (CERC) assuming a maximum 2°C aggregate warming target and (2) the likely economy-wide net mitigation costs or savings associated with reaching these pathways if known lower-cost mitigation measures, identified through the national mitigation potential analysis, are prioritised. The cumulative net savings associated with achieving the CERC ‘fair share’ emissions pathway, assuming the moderate use of low carbon power generation measures, would reach $5.3 billion by 2030. Net savings could be substantially greater reaching $46.8 billion by 2030 assuming power generation focuses on moving towards full decarbonisation. An unconditional commitment to the mitigation action implied by the ‘fair share’ emissions pathway therefore seems reasonable and prudent purely from the point of view of net country-wide savings. Only if power generation moves towards full decarbonisation would there be a reasonable chance of achieving the more ambitious CERC domestic emissions pathway. However, the significant additional cost associated with achieving the domestic emissions pathway should be conditional on international assistance.

Key policy insights

• South Africa can only achieve its ‘fair share’ of the global mitigation effort if greater use is made of renewable energy options, and can realise significant net savings if it does so.

• Further emissions reductions would incur costs and require significant upscaling of the share of renewable energy and full implementation of all non-power generation mitigation measures available.

• Committing to this further mitigation action contingent on international finance would both strengthen the nation’s position in climate negotiations and support the provision of finance for those vulnerable developing nations that bear little or no responsibility for climate change.

     

Uncertainty management and the dynamic adjustment of deep decarbonization pathways

Contrary to ‘static’ pathways that are defined once for all, this article deals with the need for policy makers to adopt a dynamic adaptive policy pathway for managing decarbonization over the period of implementation. When choosing a pathway as the most desirable option, it is important to keep in mind that each decarbonization option relies on the implementation of specific policies and instruments. Given structural, effectiveness, and timing uncertainties specific to each policy option, they may fail in delivering the expected outcomes in time. The possibility of diverging from an initial decarbonization trajectory to another one without incurring excessive costs should therefore be a strategic element in the design of an appropriate decarbonization strategy. The article relies on initial experiences in France and Germany on decarbonization planning and implementation to define elements for managing dynamic adjustment issues. Such an adaptive pathway strategy should combine long-lived incentives, like a pre-announced escalating carbon price, to form consistent expectations, as well as adaptive policies to improve overall robustness and resilience. We sketch key elements of a monitoring process based on an ex ante definition of leading indicators that should be assessed regularly and combined with signposts and trigger values at the subsector level.

Policy relevance

These research questions are of special interest and urgency following the Paris Agreement in 2015. It calls on all countries to monitor the implementation of their national contributions and review their ambition regularly. The regular revision of decarbonization pathways constitute a great research opportunity to gather experiences on decarbonization pathway implementation and on dynamic management issues to progress towards an operational dynamic adaptive policy pathway mechanism.     

Climate change may impair electricity generation and economic viability of future Amazon hydropower

Numerous hydropower facilities are under construction or planned in tropical and subtropical rivers worldwide. While dams are typically designed considering historic river discharge regimes, climate change is likely to induce large-scale alterations in river hydrology. Here we analyze how future climate change will affect river hydrology, electricity generation, and economic viability of > 350 potential hydropower dams across the Amazon, Earth’s largest river basin and a global hotspot for future hydropower development. Midcentury projections for the RCP 4.5 and 8.5 climate change scenarios show basin-wide reductions of river discharge (means, 13 and 16%, respectively) and hydropower generation (19 and 27%). Declines are sharper for dams in Brazil, which harbors 60% of the proposed projects. Climate change will cause more frequent low-discharge interruption of hydropower generation and less frequent full-capacity operation. Consequently, the minimum electricity sale price for projects to break even more than doubles at many proposed dams, rendering much of future Amazon hydropower less competitive than increasingly lower cost renewable sources such as wind and solar. Climate-smart power systems will be fundamental to support environmentally and financially sustainable energy development in hydropower-dependent regions.     

Low carbon scenarios and policies for the power sector in Botswana

The Government of Botswana has pledged a nationally determined contribution (NDC) as a commitment to the Paris Agreement. For the power sector, the NDC states that the government expects renewable energy (RE) to meet 25% of peak electricity demand by 2030. However, due to high initial cost of RE technologies, the government plans to maintain a coal-based power system in the future. Therefore, the purpose of this paper is to examine Botswana’s national plan from an economic perspective, using scenario and cost analysis, to explore the possibility of the power sector’s low carbon transition in the light of Botswana’s NDC. Five scenarios are designed to reflect a range of investment cost changes of RE technologies. While most scenarios only achieve 19% (P3, P4 and P5) and 54% (P6) of the NDC’s power sector target, the P7 scenario far exceeds the goal by achieving 188% of the NDC target. Furthermore, as the difference of levelized cost of electricity among the scenarios is minimal, the P7 scenario is the most attractive pathway for the government. Even for other scenarios, the government should still deploy the suggested capacity of solar photovoltaic (PV) as it is both economically and socially beneficial in the long term. However, in these cases, the government’s political will to meet the NDC’s power sector target and to promote the solar PV industry will be critical in designing future power sector policies.

Key policy insights

• Model results show coal as the cheapest resource for electricity generation in Botswana up to 2030, but the cost competitiveness of solar photovoltaic (PV) against coal will continue to increase over time.

• It is economically and socially beneficial to adjust the current national plan and substitute some share of coal with solar PV in the future energy mix.

• Government support is critical in achieving the power sector’s NDC target, as cost reduction of solar PV alone does not guarantee success.

• Encouraging independent power producers (IPP) with financial support mechanisms would be a suitable business model for developing the renewable energy industry.

     

A practitioner's guide to a low-carbon economy: lessons from the UK

Drawing primarily on the UK experience, five practical lessons are identified for policy makers who seek to decarbonize their economies. First, decarbonization needs a solid legal basis to give it credibility and overcome time inconsistency problems. Second, putting a price on carbon is essential, but low-carbon policies also have to address wider market, investment, and behavioural failures. This in turn raises issues of policy complexity and coordination. Third, the low-carbon economy is likely to be highly electrified. Clean electricity could be a cost-effective way of decarbonizing many parts of the economy, including transport, heating, and parts of industry. Decarbonization therefore starts in the power sector. Fourth, the low-carbon transition is primarily a revolution of production and not consumption. Both supply-side innovation and demand-side adjustments in lifestyle and behaviour are needed, though the former should dominate. Fifth, the transition to a low-carbon economy is economically and technologically feasible. Achieving it is a question of policy competence and having the political will to drive economic and social change.

Policy relevance

Practically all major GHG emitters now have climate change legislation on their statute books. Given what is at stake, and the complexity of the task at hand, it is important that policy makers learn from each other and establish a code of good low-carbon practice. The main lessons from the UK are distilled and presented. Carbon policy is considered for key sectors, such as electricity, buildings, and transport, and possible decarbonization paths are also outlined. It is shown that the transition to a low-carbon economy is economically and technologically feasible. Achieving it is primarily a question of policy competence and political will. This in turn means that climate change action needs a strong legislative basis to give the reforms statutory legitimacy. Low-carbon policies will have to address a wide range of market, investment and behavioural failures. Putting a price on carbon is an essential starting point, but only one of many policy reforms.     

Global sustainability,innovation and governance dynamics of national smart electricity meter transitions

Smart electricity meters are a central feature of any future smart grid, and therefore represent a rapid and significant household energy transition, growing by our calculations from less than 23.5 million smart meters in 2010 to an estimated 729.1 million in 2019, a decadal growth rate of 3013%. What are the varying economic, governance, and energy and climate sustainability aspects associated with the diffusion of smart meters for electricity? What lessons can be learned from the ongoing rollouts of smart meters around the world? Based on an original dataset twice as comprehensive as the current state of the art, this study examines smart meter deployment across 41 national programs and 61 subnational programs that collectively target 1.49 billion installations involving 47 countries. In addition to rates of adoption and the relative influence of factors such as technology costs, we examine adoption requirements, modes of information provision, patterns of incumbency and management, behavioral changes and energy savings, emissions reductions, policies, and links to other low-carbon transitions such as energy efficiency or renewable energy. We identify numerous weak spots in the literature, notably the lack of harmonized datasets as well as inconsistent scope and quality within national cost-benefit analyses of smart meter programs. Most smart meters have a lifetime of only 20 years, leading to future challenges concerning repair, care, and waste. National-scale programs (notably China) account for a far larger number of installations than subnational ones, and national scale programs also install smart meters more affordably, i.e. with lower general costs. Finally, the transformative effect of smart meters may be oversold, and we find that smart electricity meters are a technology that is complementary, rather than disruptive or transformative, one that largely does not challenge the dominant practices and roles of electricity suppliers, firms, or network operators.     

Global climate policy and deep decarbonization of energy-intensive industries

If we are to limit global warming to 2 °C, all sectors in all countries must reduce their emissions of GHGs to zero not later than 2060–2080. Zero-emission options have been less explored and are less developed in the energy-intensive basic materials industries than in other sectors. Current climate policies have not yet motivated major efforts to decarbonize this sector, and it has been largely protected from climate policy due to the perceived risks of carbon leakage and a focus on short-term reduction targets to 2020. We argue that the future global climate policy regime must develop along three interlinked and strategic lines to facilitate a deep decarbonization of energy-intensive industries. First, the principle of common but differentiated responsibility must be reinterpreted to allow for a dialogue on fairness and the right to development in relation to industry. Second, a greater focus on the development, deployment and transfer of technology in this sector is called for. Third, the potential conflicts between current free trade regimes and motivated industrial policies for deep decarbonization must be resolved. One way forward is to revisit the idea of sectoral approaches with a broader scope, including not only emission reductions, but recognizing the full complexity of low-carbon transitions in energy-intensive industries. A new approach could engage industrial stakeholders, support technology research, development and demonstration and facilitate deployment through reducing the risk for investors. The Paris Agreement allows the idea of sectoral approaches to be revisited in the interests of reaching our common climate goals.

Policy relevance

Deep decarbonization of energy-intensive industries will be necessary to meet the 2 °C target. This requires major innovation efforts over a long period. Energy-intensive industries face unique challenges from both innovation and technical perspectives due to the large scale of facilities, the character of their global markets and the potentially high mitigation costs. This article addresses these challenges and discusses ways in which the global climate policy framework should be developed after the Paris Agreement to better support transformative change in the energy-intensive industries.     

Electricity regulation in the Chinese national emissions trading scheme (ETS): lessons for carbon leakage and linkage with the EU ETS

Carbon leakage is central to the discussion on how to mitigate climate change. The current carbon leakage literature focuses largely on industrial production, and less attention has been given to carbon leakage from the electricity sector (the largest source of carbon emissions in China). Moreover, very few studies have examined in detail electricity regulation in the Chinese national emissions trading system (which leads, for example, to double counting) or addressed its implications for potential linkage between the EU and Chinese emissions trading systems (ETSs). This article seeks to fill this gap by analysing the problem of ‘carbon leakage’ from the electricity sector under the China ETS. Specifically, a Law & Economics approach is applied to scrutinize legal documents on electricity/carbon regulation and examine the economic incentive structures of stakeholders in the inter-/intra-regional electricity markets. Two forms of ‘electricity carbon leakage’ are identified and further supported by legal evidence and practical cases. Moreover, the article assesses the environmental and economic implications for the EU of potential linkage between the world’s two largest ETSs. In response, policy suggestions are proposed to address electricity carbon leakage, differentiating leakage according to its sources.

Key policy insights

• Electricity carbon leakage in China remains a serious issue that has yet to receive sufficient attention.

• Such leakage arises from the current electricity/carbon regulatory framework in China and jeopardizes mitigation efforts.

• With the US retreat on climate efforts, evidence suggests that EU officials are looking to China and expect an expanded carbon market to reinforce EU global climate leadership.

• Given that the Chinese ETS will be twice the size of the EU ETS, a small amount of carbon leakage in China could have significant repercussions. Electricity carbon leakage should thus be considered in any future EU–China linking negotiations.

     

Defining deep decarbonization pathways for Switzerland: an economic evaluation

This article simulates deep decarbonization pathways for a small open economy that lacks the usual avenues for large CO₂ reductions – heavy industry and power generation. A computable general equilibrium model is used to assess the energy and economic impacts of the transition to only one ton of CO₂ emissions per capita in 2050. This represents a 76% reduction with respect to 1990 levels, while the population is expected to be 46% larger and GPD to increase by 90%. The article discusses several options and scenarios that are compatible with this emissions target and compares them with a reference scenario that extrapolates already-decided climate and energy policy instruments. We show that the ambitious target is attainable at moderate welfare costs, even if it needs very high carbon prices, and that these costs are lower when either CO₂ can be captured and sequestered or electricity consumption can be taxed sufficiently to stabilize it.

Policy relevance

In the context of COP 21, all countries must propose intended contributions that involve deep decarbonization of their economy over the next decades. This article defines and analyses such pathways for Switzerland, taking into consideration the existing energy demand and supply and also already-defined climate policies. It draws several scenarios that are compatible with a target of 1 ton of CO₂ emissions per capita in 2050. This objective is very challenging, especially with the nuclear phase out decided after the disaster in Fukushima and the political decision to balance electricity trade. Nevertheless, it is possible to design several feasible pathways that are based on different options. The economic cost is significant but affordable for the Swiss economy. The insights are relevant not only for Switzerland, but also for other industrialized countries when defining their INDCs.     

International politics must be considered together with climate and fisheries regulation as a driver of marine ecosystems

Seafood is an essential source of protein globally. As its demand continues to rise, balancing food security and the health of marine ecosystems has become a pressing challenge. Ecosystem-based fisheries management (EBFM) has been adopted by the European Union (EU) Common Fisheries Policy (CFP) to meet this challenge by accounting for the multiple interacting natural and socio-economic drivers. The CFP includes both the implementation of regulatory measures to EU stocks and the establishment of bilateral fisheries agreements with neighbouring countries, known as sustainable fisheries partnership agreements (SFPAs). While the effects of fisheries management regulations are well acknowledged, the consequences of the SFPAs on EU ecosystems have been commonly overlooked. Here we investigate the development of the Gulf of Cadiz marine ecosystem over the last two decades and found evidence of the impact of both policy interventions. Our findings reveal the effectiveness of regulatory measures in reverting a progressively degrading ecosystem, characterised by high fishing pressure and dominance of opportunistic species, to a more stable configuration, characterised by higher biomass of small pelagics and top predators after 2005. Knock-on effects of the EU-Morocco SFPA and climate effects were detected before 2005, resulting in increased purse seine fishing effort, lower biomass of pelagic species and warmer temperatures. This southern EU marine ecosystem has been one of the latest to introduce regulations and is very exposed to fishery agreements with neighbouring Morocco. Our study highlights the importance of taking into consideration, not only the effects of in situ fisheries regulations but also the indirect implications of political agreements in the framework of EBFM.