Joint EU-China conference “Tackling Greenhouse Gas Emissions From pilots to nation-wide emission trading in China”, Beijing, 4 February 2015 1 | P a g e Briefing paper for Workshop 1 “Interaction of Emissions Trading Systems with other climate and energy related policies” Introduction An emissions trading system ETS does not exist in an isolated policy setting, where it is neither the only policy instrument driving greenhouse gas GHG emissions reductions nor GHG emissions reduction is the only energy policy goal. Energy policies to stimulate lower carbon energy sources e.g. renewable energy, energy efficiency, natural gas, etc., energy efficiency policies to reduce energy intensity of production and air quality policies to reduce emissions of air pollutants exist at the same time in China, influencing directly or indirectly the same issue - the reduction of GHG emissions. It is increasingly important when China is making a transition from the pilot based ETS program to a national one, to understand how the various policies drive GHG emissions reductions, how to avoid costly overlaps and how to take advantage of beneficial synergies. This requires taking a holistic view of the policy landscape and not developing individual policies in isolation. This will help emissions trading deliver what it is supposed to deliver achieving the emissions reductions that are targeted by the system at the lowest possible cost whilst supporting China’s broader climate, energy and environmental objectives as efficiently as possible. Cost effectiveness of Emissions Trading Systems The ‘cap-and-trade’ approach of an ETS gives enterprises the flexibility they need to cut their emissions in the most cost-effective way. Under an ETS a wide range of options are available to do this including trading allowances or taking low carbon action such as energy efficient technology, low carbon fuels, fuel savings, GHG abatement etc. As such an ETS is inherently more cost effective than policies that impose mandatory technical or perance requirements for each enterprise e.g. via standards. There is a limit, however, to the extent to which an ETS is the most appropriate tool. This includes sectors and enterprises where transaction costs including monitoring, reporting and trading are relatively high per tonne of CO2 emitted, where entities are unlikely to respond to the carbon price signal and where other policies are already established and operating efficiently or certain energy market designs would trigger high infra-marginal distributional effects if low-carbon energies should be driven by CO2 prices alone. Last but not least, markets as short-term optimization mechanisms may not necessarily give appropriate incentives for long-lived assets buildings, infrastructures etc.. In practice, an ETS may need to be flanked by energy efficiency policies to drive cost-effective measures that would not otherwise be taken up due to certain barriers and technology support policies that bring forward new mitigation technologies essential for mitigating emissions in the long run or for other strategic reasons, such as energy security. Joint EU-China conference “Tackling Greenhouse Gas Emissions From pilots to nation-wide emission trading in China”, Beijing, 4 February 2015 2 | P a g e This situation leads toward a twofold challenge. What policies will be needed to complement an ETS in some cases the ETS even will be of complementary natures and how policy interactions between an ETS and other policies need to be reflected in the design of an ETS to ensure its long-term effectiveness and efficiency. Climate and energy policy objectives and the role of the ETS China’s 12th Five-Year Plan sets forth green and low-carbon development as an important guiding policy. Targets set for 2015, compared to 2010 include  17 reduction in CO2 emissions per unit of GDP  16 reduction in energy consumption per unit of GDP  11.4 increase in non-fossil energy The ETS has a natural position at centre stage for achieving climate mitigation objectives. This is shown in the EU, where the EU ETS is the core policy for achieving GHG reductions in the power, industrial and aviation sectors. As well as supporting climate mitigation objectives, the renewable energy and energy consumption targets support objectives to improve energy security including reducing exposure to oil price shocks. The carbon price will contribute to these other objectives but may need to be supplemented by additional policies to ensure they are met. The design of these additional policies should firstly consider what the ETS will achieve itself, to ensure an effective and efficient overall policy mix. The ETS will also contribute to China’s targets for reducing air pollutant emissions by at least 30 in heavy-polluting industries by the end of 2017, especially by incentivising natural gas over coal. However, the ETS should be seen as a supplementary policy to support air quality objectives. This is because it is unlikely to address all significant air pollution sources eg road transport and does not control the location of emissions reductions. However, there is scope for extending the ETS in the future to also cover air pollutants SO2, NOx and particulate matter given that power and energy intensive industry are also major sources of air pollution. Studies in US and EU have demonstrated the economic advantages of ETS as an industrial emission control policy, compared to mandatory technology standards, when complemented by air quality limit values. Future importance of ETS For an ETS to be successful in the long run it will be important that enterprises are able to make sound long term decisions on low carbon investments. This will require an appropriate, stable and accountable carbon price, policy certainty and relatively long trading periods. It will also require a ‘learning by doing’ mind-set involving periodic reviews of perance and improvements where necessary. Joint EU-China conference “Tackling Greenhouse Gas Emissions From pilots to nation-wide emission trading in China”, Beijing, 4 February 2015 3 | P a g e As China’s climate mitigation objectives become more stringent in time, the ‘in-built’ cost efficiency of the ETS compared to policies imposing mandatory technical standards, will become more important. As the cap declines to achieve these objectives the carbon price will rise. In time, the ETS will make currently expensive techniques like CCS cost-effective. China’s ETS can also become more important through its potential role as a source of financial support, in particular that can support the commercialisation and cost reduction of more advanced low carbon techniques. Examples from the EU ETS experience include  Funds generated from the value of allowances set aside for these purposes - such as ‘NER300’1, the proposed ‘Modernisation Fund’ and the proposed ‘Innovation Fund’ under the EU ETS.  Free allocation instead of auctioning - such as for the power sector in less developed EU Member States.  Auction revenue - if China moves towards auctioning this will create a major opportunity as auction revenue can be ‘recycled’ and used for various beneficial funding purposes including low carbon action. In the future the ETS will also become more important if a global carbon market develops from a ‘bottom-up’ linking of individual ETSs. This will improve the cost-efficiency of the overall ETSs and create a more level playing field for industry that competes internationally. Questions for discussion  To what extent and for what sectors can ETS be the driving force for other policy objectives such as renewable energy and energy efficiency  What is the specific role of ETS in China’s climate and energy policy portfolio  Could ETS in China assume a more important role in the future  How should interactions with existing and future complementary policies be addressed in the design in an ETS Disclaimer The opinions and the views on this paper are responsibility of the authors and do not necessarily reflect the views of the European Commission and/or the NDRC 1 A system which funds innovative renewable and CCS projects from the proceeds from 300 million EU ETS allowances. This is currently being expanded to ‘NER400’ to include additional funding and a wider scope including low carbon technology in industry. 中欧联合会议“应对温室气体排放从试点到全国性排放交易”，北京， 2015年 2月 4 日 1 | P a g e 分论坛 I 简报 -“排放交易 与其他气候 和 能源相关政策 的交互作用 ” 介绍 排放交易体系（ ETS）并非存在于一个孤立的政策系统中，在这个系统中它不是温室气体（ GHG）减排的唯一政策手段，而温室气体减排也不是唯一的能源政策目标。在中国， 鼓励 更低碳能源（例如可再生能源、能源效率和天然气等）的能源政策、降低生产能耗的能源效率政策和减少空气污染物排放的空气质量政策同时并存，它们直接或间接地影响着温室气体减排。 随着中国正在从基于试点的排放交易体系计划过渡到一个国家性的体系，了解各种推动温室气体减排的政策、如何避免成本高昂的重复开发 ， 以及如何利用有益的协同效应变得越来越重要。这需要全盘考虑政策格局，而不是孤立地发展个别政策。这将有助于排放交易达到它应该达到的效果，即以尽可能低的成本实现系统的减排目标，同时尽可能有效地支持中国更广泛的气候、能源和环保目 标。 碳排放交易系统的成本效益 排放交易体系 “总量控制和与 交易”的方式为企业提供了灵活性，他们需要这种灵活性以最具成本效益的方式减少碳排放。在一个排放交易体系之下，有 广泛的选择 可以实现这一目标，包括交易排放限额或者采取低碳行动，例如 节能技术， 低碳燃料，燃料节约和温室气体减排等。因此，这样的排放交易体系本质上比对每个企业实施强制性技术或者绩效要求（例如通过标准）的政策更具成本效益。 但是排放交易体系 也 存在限制的。一些行业 和企业 具有相对较高的二氧化碳排放量交易成本（包括监测、报告和交易） ， 从而 不太可能对碳排放价格信号做出反应 ， 并且其他的政策 已经发挥着作用 ，或者某些能源市场的设计中 碳价格促进低碳能源 发展 ，引发较高的超边际 分配效应。但最后 同样重要的是，市场作为短期优化机制不一定能够对长期资产（建筑物、基础设施等）提供适当的激励。 在实践中，一个排放交易体系可能需要能源效率政策的支持以促进由于某些障碍而无法以其他方式实施的具备成本效益的措施，以及对长期减排或者其他战略因素必不可少的新减排技术的技术支持政策，例如能源安全等。 这种情况下可能会 带来 一个双重的挑战。 需要 什么政策 对排放交易体系进行补充（ 在某些 情况下 ，排放交易体系 甚至 具有补充性） ， 以及需要排放交易体系 的设计 反映排放交易体系 和其他政策之间 的哪些交互作用 ，以 确保其长期的有效性和效率。 中欧联合会议“应对温室气体排放从试点到全国性排放交易”，北京， 2015年 2月 4 日 2 | P a g e 气候和能源政策目标 以及排放交易体系 的 作用 中国“十二五”规划将绿色和低碳发展作为重要的指导政策。其所设定的目标（与 2010 年相比 2015的目标）包括 单位国内生产总值二氧化碳排放量降低 17 单位 GDP 的能耗减少 16 非化石能源增长 11.4 排放交易体系在实现减 缓气候变化目标的中心舞台拥有天然的地位。这一点在欧盟得到了体现。 欧盟排放交易体系在电力、工业和航空领域是实现温室气体减排的核心政策。 就像减缓气候变化的目标一样，可再生能源和能源消耗目标也有助于提高能源安全，包括减少石油价格冲击所带来的风险。碳排放价格将有助于实现这些目标，但可能需要额外政策的补充，以确保这些目标得到实现。这些额外政策的设计应该首先 考虑排放交易体系本身将会达到哪些效果，以确保一个有效、高效的 政策组合。 排放交易体系 还将有助于中国 实现 在 2017 年年底 将 重污染行业 的 空气污染物排放量至少 减少 30的目标， 特别 是通过 鼓励 以 天然气 替代 煤。 但是，排放交易体系 应被视为 空气质量目标 的 补充 性 政策。这是因为它不 太 可能解决所有 重大 的空气污染来源 （例 如道路运输 ），也无法 控制 碳 减排的 具体 位置。 但是，由于 电力和能源密集型产业也是空气污染的主要来源 ，在未来亦有可能进一步扩展 排放交易体系，将 空气污染物 （ 二氧化硫、氮氧化物和颗粒物 ）包括在内。 美国和欧洲的 相关 研究已经证明了 作为空气质量限额的补充 ，排放交易体系 作为 工业排放控制政策 与 强制性技术标准相比 存在 经济优势。 排放交易体系 在未来的重要性 对于一个能够在长期取得成功的排放交易体系来说，让企业能够对低碳投资的长期决策发出声音将至关重要。这将需要一个适当、稳定和值得信赖的碳排放价格、政策确定性和相对较长的交易时间。它还需要一个“在实践中学习”的心态，包括在必要时定期检查绩效和改进情况。 随着时间的推移中国减缓气候变化的目标将变 得更加严格，与实施强制性技术标准的政策相比，排放交易体系的“内置 ”成本效率将变得更加重要。随着排放总量逐步下降以实现这些目标，碳排放价格将上升。随着时间的推移，排放交易体系将使目前昂贵的技术更具成本效益，如二氧化碳捕获封存技 术。 中国排放交易体系作为潜在财政支持来源的作用逐渐体现出来 ，尤其是它能够支持更先进的低碳技术的商业化和成本降低。欧盟排放交易体系的经验包括 由排放限额产生的资金专款专用，如“ NER300” 1，即在欧盟排放交易体系提出的“基金现代化”和“创新基金”。 中欧联合会议“应对温室气体排放从试点到全国性排放交易”，北京， 2015年 2月 4 日 3 | P a g e 免费 分配，而不是拍卖，如在欠发达欧盟成员国的电力行业所采取的做法。 拍卖收入 如果中国走向拍卖这条路，这将产生一个重大的机遇，因为拍卖收入可以被“回收”并用于各种有益的行动，例如低碳行动。 如果未来“自下而上”的连接各个排放交易体系进而 发展出一 个全球性的碳排放市场，排放交易体系也将变得更加重要。这将提高整个排放交易体系的成本效率并为参与国际市场竞争的行业创造一个更公平的竞争环境。 问题讨论 排放交易体系在哪些部门 莉， 可以 对 其他政策目标的实现 有多大程度的促进作用 例如可再生能源和能源效率 排放交易体系在中国气候和能源政策系统中的具体作用是什么 未来排放交易体系能否在中国发挥更重要的作用 在设计排放交易体系时，如何解决它与现有和未来补充性政策之间的交互作用 免责声明 本 文 主要反映作者 的观点和意见 ，但并 不一定反映欧 盟 委员会和 /或 中国国家发展和改革委员会 的意见 1 该体系利用来自欧盟碳排放交易体系排放限额的三亿欧元的资金资助创新、可再生和二氧化碳捕获封存项目，目前正拓展为“ NER400”，拓展后将拥有更多的资金来源和更广泛的范围，包括工业的低碳技术。