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Impact of the coronavirus crisis on climate action and the European Green Deal

14-04-2020

Measures to contain the COVID-19 (novel coronavirus) pandemic have led to a dramatic reduction in travel and economic activity. In consequence, energy consumption and greenhouse gas emissions have fallen sharply. This in turn had an impact on the prices of energy commodities and emissions allowances, which have also dropped rapidly. Thanks to lessons learned after the 2009 economic crisis, which caused a massive surplus of carbon emission allowances in the EU Emission Trading System, a market stability ...

Measures to contain the COVID-19 (novel coronavirus) pandemic have led to a dramatic reduction in travel and economic activity. In consequence, energy consumption and greenhouse gas emissions have fallen sharply. This in turn had an impact on the prices of energy commodities and emissions allowances, which have also dropped rapidly. Thanks to lessons learned after the 2009 economic crisis, which caused a massive surplus of carbon emission allowances in the EU Emission Trading System, a market stability reserve was put in place in 2019 to automatically adjust the supply of allowances to actual demand and prevent a collapse of the carbon price. The handling of the COVID-19 crisis had already led to an economic downturn, reduced tax receipts and increased government spending to support companies and citizens. Stimulus programmes are considered necessary to relaunch the economy after the crisis. While some governments consider that ambitious programmes like the European Green Deal will hinder economic recovery after the crisis, the European Commission and others maintain that the European Green Deal is the growth strategy that can help Europe's economic recovery while at the same time addressing the global climate emergency. The restrictions on travel and large-scale gatherings may also slow down legislative activity related to the European Green Deal, as EU institutions change their calendars, agendas and priorities. Decision-making under the United Nations Framework Convention on Climate Change, the International Civil Aviation Organization and the International Maritime Organization are also affected by the cancellation and postponement of important meetings and conferences.

Four briefings on Trade-related aspects of carbon border adjustment mechanisms

14-04-2020

Compilation of four briefings made up by European Parliament's external contractors to the attention of INTA Committee, on trade-related aspects of carbon border adjustment mechanisms.

Compilation of four briefings made up by European Parliament's external contractors to the attention of INTA Committee, on trade-related aspects of carbon border adjustment mechanisms.

Ulkopuolinen laatija

Dr. Cecilia Bellora and Prof. Lionel Fontagné, Centre d'Etudes Prospectives et d'Informations Internationales (CEPII) ; Prof. Gabriel Felbermayr and Prof. Sonja Peterson, Kiel Institute for the World Economy (IfW Kiel); Prof. Joost Pauwelyn, The Graduate Institute of International and Development Studies (IHEID) and Georgetown University Law School and Dr. David Kleimann, Johns Hopkins School of Advanced International Studies; Prof. André Sapir and Prof. Henrik Horn, Bruegel.

Economic assessment of Carbon Leakage and Carbon Border Adjustment

14-04-2020

The European Union is the world’s largest importer of virtual CO2-emissions: its net imports of goods and services contain more than 700 million tons of CO2 emitted outside of the EU’s territory. This is more than 20 % of the EU’s own territorial CO2 emissions. Therefore, shifting carbon pricing away from pricing the EU’s territorial emissions to pricing the EU’s CO2-footprint (by means of carbon border adjustment) enhances the reach of European climate policy activities and increases their effectiveness ...

The European Union is the world’s largest importer of virtual CO2-emissions: its net imports of goods and services contain more than 700 million tons of CO2 emitted outside of the EU’s territory. This is more than 20 % of the EU’s own territorial CO2 emissions. Therefore, shifting carbon pricing away from pricing the EU’s territorial emissions to pricing the EU’s CO2-footprint (by means of carbon border adjustment) enhances the reach of European climate policy activities and increases their effectiveness for promoting global abatement activities. The above result relies only on the EU being a net importer of CO2 emissions embodied in international trade. It does not rely on the answer to the question, whether stronger unilateral CO2 mitigation efforts in the EU cause the imports of embodied carbon to increase (direct carbon leakage). Direct carbon leakage refers to the possibility that stringent unilateral CO2 policies in the EU, e.g. in the form of high carbon prices or regulatory measures, might lead to an increase in the carbon imports embodied in trade of goods and services: as European firms’ relative production costs are driven up relative to firms in non-committed foreign countries, domestic production is replaced by imports and domestic emissions are replaced by foreign ones. This compromises the effectiveness of the EU’s climate policies and endangers jobs and value added in exposed sectors. Ex post evaluations of existing carbon policies arrive at mixed conclusions. On the one hand, emission pricing in the EU ETS, so far, is mostly not found to cause direct carbon leakage. On the other hand, studies based on a broader focus of climate policies (not just carbon prices) suggest that measures, e.g., in the context of the Kyoto Protocol, have indeed led to carbon leakage. In countries that have committed to emission targets, imports of goods have gone up by about 5 % and the carbon-intensity of imports has gone up by 8 %. Ex-ante predictions by simulation models indicate that direct leakage is indeed likely. Its size depends on the difference between the EU’s carbon prices and those of its trading partners. On average, studies indicate that about 15 % of domestic emission savings are offset by additional foreign emissions. However, the range of estimates is very large. In most studies, indirect carbon leakage that operates through global markets for fossil fuels, however, is quantitatively more important than direct carbon leakage operating through international markets for goods and services. Ex-ante models show that carbon border adjustment can reduce carbon leakage. In complete setups, it can fully eliminate direct leakage. It does little to reduce leakage through energy markets, or to incentivise countries to engage into more ambitious climate policies. Results depend crucially on the design of the mechanism. Moreover, simulations also show that the adjustment burden is shifted to non-abating countries, many of which are poor and underdeveloped. The note concludes that carbon leakage is an empirically relevant concern. Carbon border adjustments (CBAs) can lower carbon leakage occurring through goods markets. CBAs need to be treated very carefully because they might provoke retaliation by non-committed countries and because they may shift the burden of adjustment to poor countries. In the context of the EU ETS, one promising strategy could be to grant free allocations of emission permits to leakage-prone industries but combine this with a consumption tax, applied to domestic and foreign goods produced by those exempted industries.

Ulkopuolinen laatija

Prof. Gabriel Felbermayr and Prof. Sonja Peterson, Kiel Institute for the World Economy (IfW Kiel)

Trade Related Aspects of a Carbon Border Adjustment Mechanism. A Legal Assessment

14-04-2020

This briefing provides a legal assessment – under WTO and EU law - of three policy options for an EU carbon border adjustment mechanism. These options are, first, a carbon tax adjusted at the border; second, the inclusion of importers under the EU emission trading scheme; and, third, import tariffs on products from third countries that do not pursue climate policies in line with the Paris Agreement. In the first part of the briefing, these three policies are evaluated against the benchmark of vulnerability ...

This briefing provides a legal assessment – under WTO and EU law - of three policy options for an EU carbon border adjustment mechanism. These options are, first, a carbon tax adjusted at the border; second, the inclusion of importers under the EU emission trading scheme; and, third, import tariffs on products from third countries that do not pursue climate policies in line with the Paris Agreement. In the first part of the briefing, these three policies are evaluated against the benchmark of vulnerability to WTO legal challenge. The second part of the briefing assesses the EU decision-making procedures that are applicable to the three policies and the varying degrees of efficiency and democratic participation they imply.

Ulkopuolinen laatija

Prof. Joost Pauwelyn, The Graduate Institute of International and Development Studies (IHEID) and Georgetown University Law School and Dr. David Kleimann, Johns Hopkins School of Advanced International Studies

Political Assessment of Possible Reactions of EU Main Trading Partners to EU Border Carbon Measures

14-04-2020

This briefing discusses the possible reactions of the European Union’s larger trading partners to carbon border measures. Section 1 discusses experiences of carbon border adjustment-like regimes prior to the European Commission’s announcement of the Green Deal. It focuses on the EU Aviation Directive, the US policy debate, and the Californian CBA for electricity. Section 2 considers reactions to the Green Deal announcement, based on informal discussion with officials from major trading partners to ...

This briefing discusses the possible reactions of the European Union’s larger trading partners to carbon border measures. Section 1 discusses experiences of carbon border adjustment-like regimes prior to the European Commission’s announcement of the Green Deal. It focuses on the EU Aviation Directive, the US policy debate, and the Californian CBA for electricity. Section 2 considers reactions to the Green Deal announcement, based on informal discussion with officials from major trading partners to the EU. It identifies positive and negative reactions to the principle of an EU CBA, concerns about its design, criticisms and potential policy responses by these partners. Section 3 discusses the implications of our findings. It points to several features in the design and introduction of an EU CBA mechanism that we believe will importantly affect how partners will react to such mechanism.

Ulkopuolinen laatija

Prof. André Sapir and Prof. Henrik Horn, Bruegel

Commitments made at the hearing of Adina-Ioana VĂLEAN, Commissioner-designate - Transport

22-11-2019

The Commissioner-designate, Adina-Ioana Vălean, appeared before the European Parliament on 14 November 2019 to answer questions put by MEPs from the Committee on Transport and Tourism. During the hearing, she made a number of commitments which are highlighted in this document. These commitments refer to her portfolio, as described in the mission letter sent to her by Ursula von der Leyen, President-elect of the European Commission, including: - a sustainable, safe and affordable transport.

The Commissioner-designate, Adina-Ioana Vălean, appeared before the European Parliament on 14 November 2019 to answer questions put by MEPs from the Committee on Transport and Tourism. During the hearing, she made a number of commitments which are highlighted in this document. These commitments refer to her portfolio, as described in the mission letter sent to her by Ursula von der Leyen, President-elect of the European Commission, including: - a sustainable, safe and affordable transport.

Sector coupling: how can it be enhanced in the EU to foster grid stability and decarbonise?

19-11-2018

Sector coupling involves the increased integration of energy end-use and supply sectors with one another. This can improve the efficiency and flexibility of the energy system as well as its reliability and adequacy. Additionally, sector coupling can reduce the costs of decarbonisation. To foster the full potential of sector coupling in several end-use and supply applications, it is important that existing techno-economic, policy and regulatory barriers are removed. Furthermore, a more integrated ...

Sector coupling involves the increased integration of energy end-use and supply sectors with one another. This can improve the efficiency and flexibility of the energy system as well as its reliability and adequacy. Additionally, sector coupling can reduce the costs of decarbonisation. To foster the full potential of sector coupling in several end-use and supply applications, it is important that existing techno-economic, policy and regulatory barriers are removed. Furthermore, a more integrated approach to energy systems planning is needed. This document was provided by Policy Department A at the request of the Committee on Industry, Research and Energy.

Ulkopuolinen laatija

Luc VAN NUFFEL, João GORENSTEIN DEDECCA, Tycho SMIT, Koen RADEMAEKERS, Trinomics B.V.

The EU, a world leader in fighting climate change

29-05-2018

The European Union is at the forefront of international efforts to reduce greenhouse gas emissions and thus safeguard the planet's climate. Greenhouse gases (GHG) – primarily carbon dioxide but also others, including methane and chlorofluorocarbons – trap heat in the atmosphere, leading to global warming. Higher temperatures then act on the climate, with varying effects. For example, dry regions might become drier while, at the poles, the ice caps are melting, causing higher sea levels. In 2016, ...

The European Union is at the forefront of international efforts to reduce greenhouse gas emissions and thus safeguard the planet's climate. Greenhouse gases (GHG) – primarily carbon dioxide but also others, including methane and chlorofluorocarbons – trap heat in the atmosphere, leading to global warming. Higher temperatures then act on the climate, with varying effects. For example, dry regions might become drier while, at the poles, the ice caps are melting, causing higher sea levels. In 2016, the global average temperature was already 1.1°C above pre-industrial levels.

Ulkopuolinen laatija

Klugman, Cornelia;

Plenary round-up – Strasbourg, February I 2018

09-02-2018

Highlights of the session included the second in a series of debates with EU leaders on the future of Europe, with Croatian Prime Minister, Andrej Plenković; and the debate and vote on the composition of the European Parliament after Brexit. The European Commission also made statements on fair taxation packages and the manipulation of scientific research by multinationals in the wake of revelations on emission tests on monkeys and humans by the German car industry. Parliament decided to set up a ...

Highlights of the session included the second in a series of debates with EU leaders on the future of Europe, with Croatian Prime Minister, Andrej Plenković; and the debate and vote on the composition of the European Parliament after Brexit. The European Commission also made statements on fair taxation packages and the manipulation of scientific research by multinationals in the wake of revelations on emission tests on monkeys and humans by the German car industry. Parliament decided to set up a special committee on the Union's authorisation procedure for pesticides (PEST). Parliament adopted agreed first-reading positions on, inter alia, a regulation on ending unjustified geo-blocking and two regulations on EU external action funds – among the priorities for 2018 in the Joint Declaration agreed by the Council, Commission and Parliament.

CO2 emissions from aviation

23-01-2018

CO2 emissions from all flights to and from airports in the European Economic Area (EEA) have been included in the EU Emissions Trading System (ETS) since 2012. Although this would include flights between an airport within the EEA and an airport outside it, the application of the ETS to such flights was temporarily suspended, until the end of 2016, to allow for the development of emission-reduction measures with a global scope by the International Civil Aviation Organization (ICAO), and to avoid conflicts ...

CO2 emissions from all flights to and from airports in the European Economic Area (EEA) have been included in the EU Emissions Trading System (ETS) since 2012. Although this would include flights between an airport within the EEA and an airport outside it, the application of the ETS to such flights was temporarily suspended, until the end of 2016, to allow for the development of emission-reduction measures with a global scope by the International Civil Aviation Organization (ICAO), and to avoid conflicts with international trading partners. In October 2016, ICAO adopted a global market based measure (GMBM), which would become operational in 2021. In February 2017, the European Commission proposed a regulation to prolong the derogation for extra-EEA flights, gradually reduce the number of aviation allowances from 2021 onwards, and prepare for the implementation of the GMBM. After its adoption by Council and Parliament, the regulation entered into force on 29 December 2017.

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