The production of basic materials accounts for around 25\% of global greenhouse gas emissions. Existing measures to reduce emissions from industry are limited due to a combination of competitiveness concerns and a lack of technological options available to producers. In this paper, we assess the possibility of implementing a materials charge to reduce demand for basic industrial products and, hence, also reduce industrial emission levels. The modelling shows that a charge equivalent to around €80/tCO2 could reduce the EU's total (energy plus process) CO2 emissions by up to 10\% by 2050, depending on the substitution options available. The materials charge could lead to small GDP increases and a minor reduction in overall employment levels.Key policy insights Full carbon price pass through along the materials value chain creates incentives for resource efficiency and substitution in the value chain of material use.Most macroeconomic models ignore mitigation opportunities in the value chain, as do carbon pricing mechanisms for industrial emitters, which largely mute incentives for mitigation opportunities with free allowance allocation.Including consumption at a benchmark level in emission trading systems reinstates a full carbon price incentive for all mitigation opportunities while avoiding competitive distortions and carbon leakage risks.Macroeconomic modelling shows that this allows for an additional 10\% emission reduction accompanied by a slight GDP increase and employment reduction. Long-term clarity on carbon leakage protection furthermore strengthens low-carbon investment frameworks.
As part of its Green Deal, the European Commission is considering the introduction of border carbon adjustments and alternative measures. The measures, which would primarily apply to basic materials like steel and cement, pursue a double objective: they are aimed at enhancing the effectiveness of carbon pricing for the transition to climate neutrality but also at avoiding carbon leakage risks. When implementing carbon adjustment mechanisms and alternative measures, various design options might be considered to reform the EU Emissions Trading Scheme (EU ETS). In this paper, we have decided to focus on three main models, which help to highlight the main differences between the available options. Under the first model, importers of basic materials would be required to surrender carbon allowances at the level of a product benchmark or, where lower, at the verified level of foreign carbon intensity. In parallel, allocation of free allowances would be phased out. Under the second model, a symmetric adjustment mechanism for exports and imports would be adopted, including refund to exporters for the carbon costs incurred on basic materials embodied in products. Finally, under the third model, the EU ETS would be complemented with a climate contribution charged for materials sold in the European Union (EU) at the product benchmark level related to the carbon intensity of each material. The free allowance allocation regime would then be modified to be directly linked to the volume of material production at the product benchmark level. In order to contribute to the current policy debate, we evaluate for each of these three models, their legality, coherence with EU climate objectives, effectiveness in carbon leakage prevention, potential international implications, as well as their administrative complexity and compliance costs.
Die Technologiekosten erneuerbarer Energien sind in den letzten Jahren stark gefallen. Es hängt jedoch vom Vergütungsrahmen ab, in welchem Umfang StromverbraucherInnen von diesen Kostensenkungen profitieren können. Berechnungen mit einem Finanzierungsmodell zeigen, dass die derzeit geltende gleitende Marktprämie zunehmend zu erhöhten Finanzierungskosten führt, was den sinkenden Technologiekosten entgegenwirkt. Zudem können steigende Eigenkapitalanforderungen sich negativ auf die Akteursvielfalt bei Investitionen in erneuerbare Energien und die Realisierungsraten von Projekten auswirken. Abhilfe kann eine Weiterentwicklung des Vergütungsrahmens hin zu Differenzverträgen schaffen. Differenzverträge führen zu geringen Finanzierungskosten und verringern damit auch die Gesamtkosten der erneuerbaren Stromversorgung in der Größenordnung von jährlich 0,8 Milliarden Euro im Jahr 2030. Zudem sichern sie StromverbraucherInnen gegen hohe Zahlungen für erneuerbaren Strom im Fall hoher Strompreise ab. Mit einem Übergang zu Differenzverträgen ergibt sich zugleich die Chance, die Anreize für eine systemfreundliche Standortwahl und Auslegung der Anlagen wirksamer und einfacher zu gestalten.
The cost of renewable energy technology has plunged in recent years. But the extent to which electricity consumers can benefit from the reduced costs depends on the design of renewable remuneration mechanisms. Calculations of a financing model show that the current sliding premium is leading to increasingly higher risks for investments and in turn, increasing equity requirements. As a result, financing costs increase, which counteracts the lower cost of technology. Furthermore, increased equity requirements could negatively affect the diversity of players investing in renewable energy and thus the level of competition as well as the rate of project realization in the sector. A change towards contracts for difference (CFDs) can remedy the situation. CFDs lead to low financing costs and therefore reduce overall costs of supplying renewable electricity, reducing expected annual costs for German consumers by approximately 0.8 billion euros per year by 2030. They also safeguard consumers against high payments for renewable electricity in case of high electricity prices. A transition to CFDs provides the opportunity to create more effective and simpler incentives for system-compatible site selection and plant design.
The costs of renewable energy technologies have fallen sharply. Now the financing costs of new installations are playing an increasing role in the overall cost of Germany's energy transition. This has put the primary focus of support instruments for renewable energy on creating more affordable financing conditions for investments. This report compares the effects of various policy instruments on risk factors and on the costs of financing investment in the energy transition. Based on a survey evaluation and calculations, our analysis shows significant increases in the financing costs under green certificates and fixed premiums. These are passed on to end customers. For this reason, the further development of support instruments, as currently discussed within the context of the EU Renewable Energy Directive for the period 2020-2030, should avoid unnecessary risks for investors that could lead to higher financing costs.
Die Kosten erneuerbarer Energien sind stark gefallen. Nun spielen die Finanzierungskosten neuer Anlagen eine immer größere Rolle für die Gesamtkosten der Energiewende. Dadurch wird das primäre Ziel von Förderinstrumenten für erneuerbare Energien die Realisierung kostengünstiger Finanzierungsbedingungen für Investitionen. Dieser Bericht vergleicht die Auswirkungen verschiedener Politikinstrumente auf Risikofaktoren und somit auf Finanzierungskosten für Investitionen in die Energiewende. Insbesondere für so genannte grüne Zertifikate und fixe Marktprämien zeigt die Analyse - basierend auf der Auswertung einer Umfrage und auf Berechnungen - signifikante Zuschläge bei den Finanzierungskosten. Diese werden an EndkundInnen weitergegeben. Bei der Weiterentwicklung der Fördermechanismen, wie aktuell im Kontext der EU-Erneuerbare-Energien-Richtlinie für die Periode 2020 bis 2030 diskutiert, sollten deswegen unnötige Risiken für Investoren vermieden werden, die zu höheren Finanzierungskosten führen.
The European Union Emission Trading Scheme (EU ETS) has been implemented to provide a common climate policy instrument across European Union countries, to contribute to a credible investment perspective for low-carbon investors and support further European integration of energy markets. Thus the EU ETS is a key element of the European Energy Union.However, given the accumulation of a large surplus in the EU ETS, there is now a consensus between the EuropeanCommission, the European Council and the European Union Parliament (ENVI vote) that a Market Stability Reserve (MSR) needs to be implemented. The Latvian Presidency announced on March 26th a mandate to start trilogue negotiations onthe implementation of an MSR. Yet there remains discrepancy on the design parameters which will determine how quickly the MSR can respond to the surplus and restore consistency, price credibility, and robustness for investors of EU ETS.If Europe misses the opportunity to secure a timely restoration of EU ETS, then individual member states are likely to implement national measures to deliver energy and climate objectives. For example Germany has started to debate a Carbon Price add on for very carbon intensive power production to secure modernization and efficient power production should the EU ETS price not recover by the end of the decade. In this Roundup, we explore five design elements of the MSR that will determine the speed at which the most prominent European energy and climate policy instrument, the EU ETS, can deliver consistency, price credibility, and robustness for investors. The discussion of these design elements in the trilogue process that begins today will show how serious EU member states are not only about Climate Policy but equally about the Energy Union as a common policy framework to enhance investment and energy security across Europe.
Der Wärmemarkt spielt eine zentrale Rolle für die Erreichung der energie- und klimapolitischen Ziele der Bundesregierung. Insbesondere bei der Raumwärme in Wohngebäuden müssen große Einsparerfolge erzielt werden, wenn bis 2050 ein weitgehend klimaneutraler Gebäudebestand erreicht werden soll. Vor diesem Hintergrund hat das DIW Berlin gemeinsam mit der ista Deutschland GmbH eine aktuelle Datengrundlage geschaffen, die auf Heizenergieabrechnungen von Mehrfamilienhäusern in Deutschland basiert. Zwischen 2003 und 2013 wurden deutliche Einsparungen realisiert. Deutschlandweit sank der flächenspezifische Heizenergiebedarf von Mehrfamilienhäusern um knapp 16 Prozent. In Anbetracht der Entwicklungen der letzten Jahre und der sich weiter vergrößernden Wohnfläche erfordern die Ziele der Bundesregierung mittel- und vor allem langfristig jedoch noch deutlich größere Einsparungen. Der gesunkene Energiebedarf spiegelt sich allerdings nicht in niedrigeren Heizkosten wider. Grund hierfür sind insbesondere deutlich gestiegene Heizölpreise, die die Einsparungserfolge im Durchschnitt sogar überkompensieren. Vor diesem Hintergrund stellen energetische Sanierungsmaßnahmen nicht nur eine Versicherung gegen steigende Energiepreise dar, sondern sind langfristig auch ein wichtiges Instrument, um die Marktfähigkeit einer Immobilie zu erhalten. Regional zeigen sich differenzierte Entwicklungen: Während in den neuen Bundesländern der Heizenergiebedarf im Durchschnitt niedriger ist, weisen die alten Ländern eine höhere Dynamik bei den Einsparungen auf. Einzelne Regionen, beispielsweise in Süddeutschland, haben besonders große Fortschritte erzielt. Bei den Heizkosten zeigt sich ein abweichendes regionales Muster. In Teilen der neuen Länder und in einigen ländlichen Regionen, in denen Heizöl eine relativ hohe Bedeutung hat, müssen Haushalte höhere Energiekosten tragen. ; The heating market plays a key role in achieving the Federal Government's energy and climate policy objectives. In particular, major savings need to be made in heating residential buildings if the majority of buildings are to be climate-neutral by 2050. In light of this, DIW Berlin and ista Deutschland GmbH have created an up-to-date data basis that is based on the heating energy bills of apartment blocks in Germany. Significant savings were achieved between 2003 and 2013. Demand for area-specific heating energy in Multifamily buildings throughout Germany fell by around 16 percent. Given developments in recent years and the continuing increases in floor space, however, the Federal Government's medium-term and, in particular, long-term objectives require significantly greater savings. Nevertheless, decreasing energy demand does not necessarily lead to lower heating costs. The reason for this is largely a rise in oil prices which, on average, has actually overcompensated for energy savings. Given these circumstances, energy-efficiency upgrades to buildings not only provide insurance against soaring energy prices but are also an important long-term tool for maintaining real estate marketability. There are also differences in regional developments: while heating energy demand in the East German states is lower on average, savings in the West German states are more dynamic. Individual regions, for example, in southern Germany, have made substantial progress. The pattern of heating costs varies from region to region. Households in some parts of the East German states and in rural areas, where fuel oil is used more frequently, have higher energy costs.
The study aims to identify suitable regulatory frameworks and business models for transmission investment to enable international exchange and local use of renewable energy across the EU and MENA regions. The analysis explores how policy frameworks can support the realization of individual transmission lines and their use to support renewable project investment and energy transport in the short-term, e.g. next ten years. The current ten year network development plan of ENTSO-e envisages such lines between Italy and Tunisia and between Italy and Algeria with a total capacity of 1.5 GW. An interconnection of similar scale already exists between Spain and Morocco. Grid and renewable projects could facilitate closer cooperation between the EU and MENA regions to support their economic development, job prospects and reducing reliance on domestic subsidized gas purchases. For the longer-term, large scale transmission between EU and MENA can lead to large cost savings, as it can enable an arbitrage in the daily and seasonal profiles of wind and solar plants and demand in the EU and MENA countries, and can allow to access some of the better resource potentials (DII, 2012). Such large scale energy cooperation requires early projects to develop trust, experience on institutional and technology sides and continuous dialog among all stakeholders involved. Therefore policy frameworks to support individual projects also need to be assessed with regard to their ability to contribute towards such a longer-term perspective.
The building sector is a key focus area of the Energy Concept of the German Federal Government, among other reasons because it has the potential to avoid a large share of CO2 emissions while also saving costs. Thus far, however, only a small percentage of residential building owners have undertaken comprehensive thermal retrofits, and the target retrofit rate of 2% remains a distant goal. In order to address this low retrofit rate, the Conciliation Committee of the Parliament is currently discussing whether to offer residential building owners a tax incentive for undertaking retrofits that are in line with KfW 85 (roughly 15% better than the new build standard). The main point of contention in the current discussions is the distribution of costs for these tax incentives between the federal and state government levels. In addition, some critics have raised questions about the cost and effectiveness of the current proposal, including whether single or comprehensive retrofits shall be supported, what retrofit depth shall be supported, how much flexibility for the completion of projects shall be granted, and what additional support for stepwise retrofits needs to be given. Because retrofit practitioners have experience with these questions, we have undertaken a survey of 78 thermal retrofitting practitioners (architects, engineers, craftsmen, energy consultants, etc.) ; Der Gebäudesektor ist ein Schlüsselsektor des Energiekonzepts der Bundesregierung, unter anderem da sich in diesem Sektor ein Großteil der CO2 Emissionen mit Gewinn einsparen lässt (Levine et al. 2007). Bisher führt allerdings nur ein geringer Teil der Wohngebäudebesitzer umfassende energetische Gebäudesanierungen durch; die angestrebte Sanierungsrate von 2% liegt somit noch in weiter Ferne (BBSR 2011; Diefenbach et al. 2010). Um dies zu ändern, diskutiert der Vermittlungsausschuss zurzeit, ob Wohngebäudebesitzer eine steuerliche Förderung für Sanierungen auf KfW 85 erhalten sollen. Kern der derzeitigen Diskussionen ist die Kostenverteilung der Steuerförderung über Bund und Länder. Neben dieser Verteilungsfrage wirft der gegenwärtige Gesetzesentwurf aber weitere Fragen auf, die für die Kosten und Nutzen des Gesetzes entscheidend sind. Aufgrund der Erfahrung von Praktikern der Gebäudesanierung mit den folgenden Fragen, haben wir eine Umfrage unter 78 Architekten, Bauingenieuren, Handwerkern, Energieberatern und weiteren Praktikern durchgeführt.
Der Gebäudesektor ist ein Schlüsselsektor des Energiekonzepts der Bundesregierung, unter anderem da sich in diesem Sektor ein Großteil der CO2 Emissionen mit Gewinn einsparen lässt (Levine et al. 2007). Bisher führt allerdings nur ein geringer Teil der Wohngebäudebesitzer umfassende energetische Gebäudesanierungen durch; die angestrebte Sanierungsrate von 2% liegt somit noch in weiter Ferne (BBSR 2011; Diefenbach et al. 2010). Um dies zu ändern, diskutiert der Vermittlungsausschuss zurzeit, ob Wohngebäudebesitzer eine steuerliche Förderung für Sanierungen auf KfW 85 erhalten sollen. Kern der derzeitigen Diskussionen ist die Kostenverteilung der Steuerförderung über Bund und Länder. Neben dieser Verteilungsfrage wirft der gegenwärtige Gesetzesentwurf aber weitere Fragen auf, die für die Kosten und Nutzen des Gesetzes entscheidend sind. Aufgrund der Erfahrung von Praktikern der Gebäudesanierung mit den folgenden Fragen, haben wir eine Umfrage unter 78 Architekten, Bauingenieuren, Handwerkern, Energieberatern und weiteren Praktikern durchgeführt.