When gold turns to sand : A review of the challenges for fossil fuel rich states posed by climate policy

Petrostates face an unprecedented crisis as oil and gas revenues, on which their economies and states are built upon, are set to diminish rapidly the coming 20 years. The decline in revenues is an effect of the adopted climate policies in the major oil consuming countries that, together with a strong development of renewable energy, reduces the future demand for oil and gas. The challenges that this change create are not only the financial losses but equally important are political and institutional challenges. The dependence on oil and gas have formed both the goverance and the economic structures and thus neglected alternative developments that could have fostered a diverse and competitvie economy.Petrostates need quickly to adopt green industrial polices to diversify their economies. A few petrostates have started to prepare for a future beyond oil and gas. These diversification strategies can be grouped into either diversification of existing industrial structures, or a developmental strategy to diversify the whole economy to become more robust and innovative. The effectiveness of these diversification ambitions is still unclear. The political changes needed are first to reduce the abundant consumption subsides to fossil energy. This is not easy as this is part of the social contract of a petrostate. In the longer-term, an institutional upgrading is needed to create the right domestic incentives for developing a diverse and competitive economy.Several areas needs more and deeper understanding in order to formulate effective responses. More in-depth knowledge of the main petrostates, and how the political economy and state model is evolving, is needed. The geopolitical dimension of this transition cannot be understated and requires further efforts

Free allocation in hte 3rd EU ETS period: assessing two manufacturing sectors

This paper provides an analysis of the EU ETS harmonised benchmark-based allocation procedures by comparing two energy-intensive sectors with activities in three Member States (MS); the cement industry (CEI) and the pulp and paper industry (PPI) in UK, Sweden and France. Results show that the new procedures are better suited for the homogenous CEI, for which allocation is to decrease in a consistent manner. For the heterogeneous PPI – with diverse product portfolios, technical infrastructure and fuel-mixes – the allocation procedures cause dispersed outcomes. The lack of product benchmark curves, biased reference values on fuel-mix and specific energy use as well as other issues, leads to allocations that do not represent the average performance of the 10% most GHG efficient installations. Another issue with the 3rd phase allocation procedure is that grandfathering is still present via the historically based production volumes. How to deal with structural change and provisions regarding capacity reductions and partial cessation is an issue, which is highly relevant for the PPI but less so for the CEI. In manufacturing sectors such as cement industry (CEI) and pulp and paper industry (PPI), the new banchmark-based allocation procedures have managed to reduce the EU-wide free allocation in the 3rd period compared with the 2nd period. For the homogenous CEI the outcome of stricter allocation is consistent between Member States. However, free allocation based on grandfathering of prerecession activity levels and CO2 performances is likely to create long positions in coming years. Our results disclose differing outcomes between sectors and Member States, with cases of conspicuous supply of allowances in the heterogeneous PPI. Lack of product benchmark curves, biased reference values on fuel-mix and specific energy use etc., leads to allocations that do not represent the average performance of the 10% most GHG efficient installations

Basic materials in the low carbon society transition

For the production of basic materials a deep decarbonization fundamentally requires the development of new process technologies. However, the climate policies currently adopted in G8 countries mainly reward incremental improvements and preserve industrial structures rather than induce innovation and preparations for a low-carbon transition. The current policy approach is motivated by fear of carbon leakage and loss of competitiveness but will not be very effective in the longer term as carbon costs increase. There are several reasons why maintaining production capacity of basic materials in developed economies is a necessary strategy. These include technology development, keeping integrated value chains intact, protecting employment, and taking a responsibility from a consumption perspective. We argue that G8 countries should take the initiative to get a global policy response that shifts the current focus beyond short-term problems to a long-term innovation focus for developing zero-carbon process technologies

Elmarknadens omvandling : Reglering, vägval och drivkrafter för elsystemets utveckling till 2050

Elsystemet står inför en stor förändring som kommer av omställningen till ett utsläppsfritt samhälle. Elsystemet är en central del av vår samhälleliga infrastruktur och dess utveckling har till stor del styrts av politiska beslut även om marknaden fått allt större utrymme sedan 1990-talet. Stora tekniska system utvecklas alltid i samklang med samhällets institutioner där samhällets ramar och regleringar både anpassas efter tekniken och påverkar vilken teknik som utvecklas. Dagens omställning är ett tydligt exempel på detta. Rapporten tar som utgångspunkt att vi 2050 ska ha ett utsläppsfritt energisystem och analyserar från det hur elsystemet kan förändras och vilka krav detta ställer dels på samhällets institutioner i form av stöd till utveckling, reglering av marknadsregimer m.m. och dels på nya affärsmodeller hos marknadens aktörer såsom elbolag, energitjänsteföretag m.fl. Ett framtida elsystem utan CO2 utsläpp kan utvecklas efter tre principiellt olika (men inte uteslutande) spår; (i) centraliserat, storskaligt med fossil energi med CCS eller kärnkraft; (ii) centraliserat, storskaligt förnybart med vind- och solkraftparker; eller ett (iii) decentraliserat förnybart system med kraftverk i mindre skala. Dessa tre spår kommer att kräva olika marknadslösningar och regleringar. Graden av centralisering/decentralisering och skalan på produktionsanläggningarna är de viktigaste parametrarna. I dagsläget styr klimat- och energipolitiken inom EU mot ett system byggt på förnybar variabel el som har helt annan karaktär jämfört med det system som byggdes upp under 1900-talet baserat på stora reglerbara och centrala kraftverk. Ett förnybart elsystem ställer stora krav på både elbolag och regleringar som behöver anpassas efter den nya tekniken. Utvecklingen av elsystemet hittills har formats av den övergripande klimat- och energipolitiken och valet står nu mellan att bejaka en fortsatt förändring mot ett mer decentraliserat elsystem eller att bevara den existerande strukturen med stora centrala kraftverk. Samhället kan inte vara teknikneutralt i den här utvecklingsprocessen. Det framtida elsystemets tekniska utformning kommer att definieras av de strategiska val samhället gör i utformning av regler och styrmedel. Att det är mer än bara klimatmål som styr politiskt märks tydligt inom EU om man jämför medlemsländernas och EU-kommissionens respons på utmaningarna hittills. Oavsett vilka val som görs står det dock klart att elsystemets i framtiden kommer ha betydligt större fokus på distributionsdelen och på användarna jämfört med idag

International cooperation for decarbonizing energy intensive industries – Towards a Green Materials Club : A working paper on sectoral cooperative approaches

The energy intensive industry, producing basic materials, is responsible for 25 to 30% of today's global greenhouse gas emissions. The future supply of GHG neutral basic materials (e.g. steel, cement, aluminium, plastics, etc.) is a necessity for building a sustainable modern society. Deep decarbonisation of the energy intensive industries is technically possible but will require a major systemic shift in production processes and energy carriers used, which will require large public support in the form of subsidies and high carbon prices. A key barrier for implementing ambitious climate policies targeting energy intensive industries is the inherent conflict between the global nature of energy intensive industries and the existing climate policy framework that is based on nation states taking action according to the principle of “common but differentiated responsibilities”. This approach could lead to carbon leakage and the introduction of carbon trade measures has been the default proposition from academics to ameliorate these concerns. However, another way is to define the task of decarbonizing EIIs as a global task and not as a purely national matter and to cooperate internationally. In this paper we analyse what it takes to decarbonize energy intensive industry and what implications this transition can have for trade. From here we explore the opportunities for enhanced cooperation for deep decarbonisation for EIIs within the Paris Agreement. We argue for international cooperation by establishing a green materials club that would focus on long-term technology development. This could be a viable way to ease the current shortterm conflicts and mitigate the need for carbon tariffs. However, a green materials club should still be a part of a wider discussion around what is considered fair trade practices under the climate convention and how this relates to national interest and industrial policy for the decarbonisation of basic materials production

International cooperation for decarbonizing energy intensive industries: the case for a Green Materials Club

Basic materials are traded globally and responsible for roughly 22 % of global carbon emissions. It is technically possible for the energy intensive industries (EIIs) that produce these materials to reach zero emission, but at a cost. So far, the fear of carbon leakage has been a barrier for implementing ambitious domestic climate policies that targets theses globally traded commodities. The introduction of border carbon adjustments (BCAs) for levelling the global playing field has been suggested to ameliorate these concerns. However, another way is to focus more on innovation, adopting green industrial policies and to cooperate internationally for developing technologies for net zero EIIs. In this chapter we explore the opportunities for enhanced cooperation for enabling deep decarbonisation for EIIs and how that links to BCAs. We argue for establishing a green materials club focussing on long-term technology development and discusses limitation and opportunities for this approach. A green materials club could ease the conflicts between trade and ambitious climate policy and complement BCAs