Raimund Bleischwitz

Projektseminar

Europäische Umweltpolitik:ökonomische Aspekte der Klimapolitik

BU Wuppertal 2008/09

Department of European Economic Studies

Heutige Agenda• Anreizinstrumente in der EU

– Legitimation

– Ökonomische Instrumente

– Erneuerbare Energien

• Hausarbeit Till Ruhkopf

• Diskussion

Scoping the problem

• Target orientation• Long term• Global• Basic options:

– Ignoring the issue– Adaptation or mitigation– Technology breakthrough (backstop)– Targets and timetables

Concentration - temperature increase - impacts - emissions

Drivers of Climate Change

• Energy: burning fossil fuels inpower, heat generation andtransport

• Land Use• Agriculture• The reference scenario of the

IEA’s World Energy Outlookprojects increase of over 50% inglobal energy related CO2emissions by 2030

• Agriculture accounts for 14%,Land use change for 18% andEnergy for 61 % of totalgreenhouse gases, energy use isdriven by private households,buildings, transportation, industry

14%

61%

7%

18%

Agriculture

Change in Land Use

Energy

other(industrial processes, waste)

Drivers for energy use in the EU

Final energy consumption inthe EU-25 increased byalmost 12 % over the period1990 to 2003. Transport hasbeen the fastest-growingsector since 1990 and isnow the largest consumer offinal energy.

European Union – Energy-EnvironmentOld Targets compared to new targets as of

2007 – 20 20 till 2020Reducing GHGEmissions by20% till 2020

Triple shareto target of

20% in EU till2020, 10 % for

biofuels

Objective to save 20% of EU’s Energyconsumption compared to projections for

2020

A short look back

• 2nd WCC, IPCC late eighties

• UNCED Rio Conference 1992 – signingthe UNFCCC

• Early action by some countries (e.g.Germany: unilateral reduction by 25 %CO2 by 2005 based on 1990 levels)

• First EU programmes prepared forUNCED conference 1992

=> Climate policy is not entirely new(theory on „policy cycles“)

Relevant EU Policies

• EU Emissions Trading Directive 2003/87/EC• Energy taxation: minimum taxation for oil, electricity,

coal and natural gas 2003/96/EC• Renewable Energy Directive 2001/77/EC: targets for

REN share in electricity consumption• Directive on the promotion of cogeneration 2004/8/EC• Directive on energy end-use efficiency

– Directive on the ecodesign of energy-usingproducts

– Action Plan for Energy Efficiency COM(2006)545final

EU past and projectedemissions (EEA 2008)

RIA on 20 20 2020 PlanSEC(2008) 85/3

• The cost efficient reference option reaches both the 20%GHG reduction target and the 20% renewable energy targetsimultaneously at a direct economic cost of 0.58% of EU GDPor € 91bn in 2020.

• These objectives are projected to be reached at a carbonprice of € 39 per tonne of CO2 and at a renewable energyincentive of €45 per MWh.

• Oil and gas imports are expected to go down by some € 50bnin 2020, air pollution control costs drop by around €10bn in2020 while electricity prices are likely to go up by 10-15% incomparison to today’s level.

• Overall, this leads to an energy intensity improvement ofapproximately 32% between 2005 and 2020

Why economic incentives

• Adjusting market prices to account for negativeexternalities - induce behavioral change

• Allocating financial and technical resources to mostefficient purposesMBIs create incentives that encourage people actingin their own interests, simultaneously, to treat theenvironment in a way that is in the best interests ofsociety.-> Lowest-possible MAC

„At the heart of good policy will be a price for GHGs“— Stern 2008

Figure 8. Gasoline Price versus Use in Industrial Countries, 2003

Note: Shaded area represents price/consumption range typical of West European countries.

Source: U.S. Department of Energy, 2004. Adapted from Roodman, 1997, with updated data.

Harris 2008

Merits of MBIs

Definition provided by the OECD (1997): "Those policyinstruments which may influence environmental outcomesby changing the cost and benefits of alternative actionsopen to economic agents. They aim to do so by making theenvironmentally preferred action financially more attractive."

• Cost-signal to users: MBIs assign a price to the 'unpaidfactor' of production, thus translating the polluter paysprinciple in practice.• Cost minimisation: equate MAC across individuals• Dynamic efficiency: incentive to innovate• Reduced bureaucracy (compared to CAC)• Generator (under certain conditions) of funds

EC Green Paper (2007)

• on advancing the use of MBIs across Member Statesto support environment and energy policies. Itconcluded that there should be an increased use ofmarket-based instruments to achieve environmentaland other policy objectives and recommendedestablishing an MBI forum to stimu-late exchanges ofexperience and best practice between MemberStates.

• ‚Brussels Tax Forum‘ (2007) also has promoted MBIs• World Ecotax Conference 2007 in Munich

Possible drawbacks

• Other existing incentives may encourage overuse of nature(e.g. via investment tax credits, subsidies on energy &transport) => need for consistency among MBIs

• If the price (or the target) is too ambitious, industries mightcollapse or relocate

• People might not respond to prices as assumed by economictheory (bounded rationality, managers might direct theirattention to other issues, low elasticity of demand, X-inefficiencies)

• Prices signals from MBIs might be overcompensated by otherfactors (price decrease due to technological progress, marketliberalisation etc.)

• Spatial variation might call for regionally differentiated MBIs –may contradict internal market and tax harmonisation

MBIs: Two main Approaches

• Tax / fee / charge(Pigou): higher prices forenvironmental pressure

• Types: input taxes,output or product taxes,export taxes, importtariffs, tax differentiation(VAT)

• Task: Define a quantity(tax base) & tax payers

• Tradable permits(Coase, Demsetz):bilateral bargainingamong polluters

• Types: emissionpermits, land usepermits, input permits

• Task: define an(emission) target, anallocation mechanism& legal framework

How do Taxes and Tradable Permits work?

Other market-basedincentives

• Deposit-refund systems (EU waste policy, e.g.beverage containers, batteries)

• Non-compliance fees (pollution & waste, e.g. inCzech Republic, Greece, Poland, Sweden)

• Performance bonds (mainly mining rehabilitation)

• Liability payments and compensation schemes(EU liability directive – MS will had comply by 2007)

• Subsidies (R&D, market introduction, ‘greenpurchasing’ e.g. Denmark, France, Greece,Netherlands)

Difficulties to select among policy options

• Information deficits...about scoping the problem,damage costs / externalities, setting targets, chosesolutions, changing preferences, etc.

• Government failures: self-interests of politicians andbureaucracy, weak administrations, limited steeringcapacities, short-term perspective...call for second-bestand market-based approaches (Fullerton, Carraro,Convery, Faure/Skogh)

• Industry has started to respond, tools are developed, best-practise can be identified -> need for dissemination andimprovements, industry needs to cope with ‘doubleburden’ of set up costs and cost for changing production

• Distributional effects and other unintended outcomes mayundermine credibility.

Five „Design Syndroms“(source: Andersen 2000)

• Tax base (design to respect big, influential polluters, puttingthe burden on the smaller ones, and to accommodateadministrative feasibility),

• Tax rate (design to pursue fiscal rather than environmentalpurposes),

• Revenue destination (hypothecation such as keeping therevenues under control of those liable to the tax),

• Tax agent (unfamiliarity with or marginality of green taxes),and

• Link with other policy instruments (lack of interplay with orentangling with other policy instruments).

EU Energy TaxationMinimum tax directive (entry into force 2004,

see Hasselklippe/Christiansen 2004)

• The minimum rates are set at a relatively low level• Some Member States benefit from tailor made implementation

agreements and long transitional periods• Some energy-intensive industries can benefit from exemptions;

the tax rates for business and industry are generally lower thanthose for other economic actors

• A return of revenue to companies/industries is possible if theyenter into energy

• Efficiency agreements (100% return to energy-intensive industrieswith agreement, 50% return to other industries)

• Discussions on whether some exemptions from the Directivewould qualify as illegal

• state aid were settled by the removal of these industrial sectorsfrom the Directive

• Ecological Tax Reform (ETR) in 1999. Aims:– environmental protection and in particular the reduction of

greenhouse gas emissions as a means of climate changemitigation

– the reduction of the statutory pension contributions in order toreduce labour cost and to increase employment

Case Study: GermanEcological Tax Reform

10016000181002004

10016100187002003

20013700143002002

20011200118002001

100840088002000

100450043001999

Supportingrenewables

Pension FundsIncome

(mill. Euro)

Year

In principle the German ETR isdesigned to be revenue neutralexcept for a small amount topromote renewable energies.Remaining share used forreduction of statutory pensioncontributions.1 Billion was used for budgetconsolidation as a temporarymeasure

German ET: some results,evaluation

• Proponents of the scheme argue that it has beensuccessful and cite the reductions in level of car use(less use of gasoline in absolute terms!).

• BUT– Some exemptions are hardly justified– Air traffic: even with high environmental impact exempted from

tax subsidy of air traffic.– Border areas: eco tax can be circumvented petrol tourism– A clear direction towards new technologies is not evident except

for the increased demand for fuel efficient vehicles– ‘Double Dividend’ not clearly visible (employment effects,

stability of social security systems)– In general: indirect taxes are regressive income distribution,

poor people are hurt

Secrets to successful MBIs I

1. Having an instrument champion

2. 'Picking winners‘: Focus on the issues for which there isagreement and pressure

3. Making optimal use of added value of MBIs in policymixes.

4. Keeping it simple and understandable.

5. Keeping it realistic.

6. Giving advanced notice of the introduction of a newinstrument.

7. Minimising changes.

Secrets to successful MBIs II

(Source: EEA 2005)

8. Understanding the potential of trade-offs

9. Keeping stakeholders on board.

10. Maintaining equity in implementation.

11. Making sure that people can respond.

12. Indexing of tax/charge rates to inflation to avoid theerosion of value over time as has happened withsome environmental taxes.

13. Consistency. Plan compatibility. Emissions tradingworks better the larger the market is. Schemes thatemerge nationally should aim for internationalcompatibility.

=> Combination of MBIs withother policy instruments

• Why? (1) Economic incentives tend to be second-best in reality, (2) pricemechanism imperfect - does not necessarily foster learning anddisseminate best-practice management

• New Types of regulation: dynamic standard setting, information-based &knowledge creating, flexible, closer to innovation & industrial economics Standards for Top Runners Information (e.g. Triple bottom line reporting, accounting requirements,

indicator & measurement harmonisation) Networks (e.g. technology platforms, ‘EnergyPlus’, ‘EcoProfit’) Agencies: qualification programmes, SME checks, dissemination of best

practices, support implementation of eco-efficiency potentials Transition management (Rotmans/Kemp): unlock systems, align

responsibilities among various actors

Challenges: international value chains, competition for low-costproduction, differing priorities (see e.g. Lisbon Agenda)

Combination of MBIs withlegal instruments ?!

• Can spur efficiency and innovation, too!See e.g. Californian clean car regulation.

• Do have an economic dimension, areprice-relevant. See e.g. liability law,permissions / property rights, safetyregulation.

=> Integrated assessment: law andeconomics

Towards a Policy mix

• Should the EU strive for a combination of all kinds of policymeasures? No, this might lead to inconsistencies andoverdeterrence. But: abatement has a price! Economists shouldidentify least-cost options, advocates of long-termimprovements“ (Avinash Dixit)

• Centralization (EU level) vs. Subsidiarity (MS or local level,Pelkmans-Test):– Efficiency of the law, economies of scale, costs of regulation,

public good character of the environment, risk of race to thebottom, common market requirements = in favour of EU level

– Non-transboundary character of many environmental problems,competition and specialisation, comparative advantages, need forvariety, early markets & niche markets = in favour of MS resp. locallevel.

Policy Mix at different levels

• Guarantee of common EU environmental qualitycan go along with differentiated emission limitationsor reduction, thus with different instruments. Thereare good reasons not to harmonise all instrumentsin the EU!

• Different emission standards might be achievedwith different instruments => while some MS mayhave to limit growth of emissions, others are obligedto reduce and to introduce new solutions (see e.g.climate policy)

Status and targets of GermanEnergy and Climate Policy

• Status quo: 18.5 % C02 reduction compared to 2000, though reduction rateshave drastically slowed down since the mid 90s

• Kyoto target: 21% C02 reduction up to 2008-12; additional activities in theresidential and transportation sector are needed

•• Increase of the share of renewables at least to 27% (2020)

• Increase of the share of cogeneration from 10% to 25% (2020)

• Double energy and resource productivity by 2020 compared to 2000

• 40% C02 reduction by 2020 provided all other EU member states achieve 30%

• 80% C02 reduction by 2050 in Germany; temperature rise not more than 2degrees Celsius (corresponds to 450ppm; 50% C02-reduction by 2050 globally)

Ecoprofit - A Local Public PrivatePartnership Programme forSustainable Development

• Offers SME‘s consultativesupport

• Strengthens companies bycost reduction throughminimisation of waste,emissions, etc.

• Creates social environmentof qualification, innovationand trust via stakeholderdialogues

=> High adaptation flexibility,high involvement of SME’s,horizontal diffusion

Addressing the Barriers to Eco-innovationInvolvement from civil society

Food and Drink

Housing

Mobility

Mainstreaming of Eco-innovation

Civil Societyinvolvement

The main barriers to the examplesof eco-innovations mentioned areinformational, or socio-economic

Lack of understanding of benefits

Lack of internal coordination

Resistance to change of internalsystems

Low awareness /education abouteco-innovation

Price of the eco-innovation beinghigher than the alternative

High transaction costs forinformation or advice

Active regions (e.g. HFC)

Policies in active regions

• Support to formulating a vision and strategic aim to helpthe direction of search – e.g. through foresight exercises

• “catalytic role”: promotion of networks• Stimulation of regional markets and brands for innovative

products• Facilitation of administrative procedures for pioneering

companies• Establishment of regional research and innovation centres

on sustainable energy• Support advocacy coalitions• Facilitation access to financing and give seed money

Policies in active regions II

• Congestion charges and zero emissionzones

• Parking lot management

• Policies for public buildings and streetlightening systems

• Alignment with waste policy, agricultureand biomass

What for? Policy instruments andmarket barriers

concept of negative externalities

information and adaptation deficits

user / investor dilemma

splitted incentives (tenant - landlord, value chain management, technicalnorms

Rebound effect and Jevons Paradox: Efficiency gains are thwarted at leastpartly by higher demand

distortions through depreciation rules

too short calculated payback periods

R&D risks for special facilities

path dependency at the replacement parts production of capital goods

misemployment of market power

Big billsleft on thesidewalk?

Management often is not aware of the full LCC impact of inefficiency. Cost accountingsystems are rarely suited to show these impacts fully.

Cause

costsunderestimated

"Nobody is perfect" is as valid for companies as forindividuals

Structural short comings

cost reduction= lay offs

Incentives notconveyed in …

… and betweencompanies

lack ofknow-how

obstacles tocontracting

Cost reduction is traditionally considered equivalent to reducing head count - in theextreme, head count is reduced at the “expense” of cost reduction.

Internal incentive systems tend to blend out cost impacts of inefficiency (e.g. Inpurchasing, production management, distribution).

2 billion €/a could be saved alone by using more cost effective motors and motorcontrols*. Product & real estate developers experience lack of client LCC-valuation.

University students typically graduate with inadequate command of the state of the art intheir field for improving energy efficiency.

Low degree of modularization of production systems (see logistics). Insufficientlyestablished measuring and contracting standards.

* Estimate of the German Association of the Electronics Industry

Reasons for policyintervention

...BUT: interest of businessregarding cost reduction forenergy, material and waterinput

positive externalities(Baumol/Oates, 1988)

=> Instruments can be designed to overcome specific

market barriers and to stimulate business and

market development

Directive on energyend-use efficiency

Directive on theecodesign of energy-using productsAction Plan forEnergy EfficiencyCOM(2006)545 final

Renewable Energy Consumption

• The share total energyconsumptionincreased over theperiod 1990-2003, butstill remains at a lowlevel.

• Significant furthergrowth will be neededto meet the EUindicative target of a20 % share by 2020.

Renewable Energies

• EU set in 2001 the target of a 21% renewableenergy share of total electricity consumptionby 2010 (Directive 2001/77/EC).

• Based on current predictions, it seems veryunlikely that the 12% target of primary energyconsumption or the target of a 21% share inelectricity consumption can be reached by2010

• New goal: to meet 20% of the overall energyneeds by the use of renewable energy by2020

Quantitative targets concerning renewableenergies in EU Member States by 2020

2,2

9,4

6,1

17,0

5,8

3,1

6,98,7

10,3

5,2

2,9

34,9

15,0

0,9

4,3

0,0

2,4

23,3

7,2

20,5

17,816,0

6,7

28,5

39,8

1,3

13

16

13

30

25

1618

20

23

17

13

42

23

1113

10

14

34

15

31

2425

14

38

49

15

1818

0

10

20

30

40

50

60

Be

lgiu

m

Bulg

aria

Czech R

epublic

Denm

ark

Ge

rma

ny

Est

onia

Irela

nd

Gre

ece

Spain

Fra

nce

Ita

ly

Cyp

rus

La

tvia

Lithunia

Luxem

bourg

Hungary

Ma

lta

Neth

erlands

Austr

ia

Pola

nd

Port

ugal

Rom

ania

Slo

ve

nia

Slo

va

kia

Fin

lan

d

Sw

eden

United K

ingdom

source: EU Commission, 2008.

Sh

are

in

fin

al e

ne

rgy in

%

share 2005 share 2020

Market barriers

• Technological readiness often needs to beimproved – market development beyonddemonstration projects

• Lack of financing – financial insecurity• Market power of dominant suppliers• Existing power stations can sell at low prices

(operating costs mainly)• Externalities of prevailing energy sources

insufficiently taken into account• Additional investments needed for

transmission

Feed-in Tariffs Systems

• As a response to market barriers and deficits– risk of sunk costs, market developmentafter successful demonstration, financial gaps

• Fixed renumeration fee for producers leads toinvestment certainty

• Creates incentive for financial markets too

• Usually at a degressive rate taking intoaccount learning curve effects

Internal market for energy• Two 2003 directives:

– For non-household customers the markets forelectricity and gas must be liberalised by 1 July2004.

– The respective markets for the remainingcustomers, above all private households, must beliberalised by 1 July 2007

• However a truly competitive, interconnected andsingle Europe-wide internal energy market […] hasnot yet been achieved

• New proposals on unbundling energy and onestablishing a European “Agency for the Cooperationof Energy Regulators”

• May have positive effect on mature alternativeenergies (such as cogeneration)

EU Energy Efficiency Policy

• Directive on energy end-use efficiency andenergy services of 2005 sets the target thatevery member state must on averageimprove by 1% its EE every year.

• Market barriers in form of information deficits,splitted incentives (user-investor dilemma andothers), rebound effects, too short calculatedpayback period / irrationally high discountingrates, misuse of market power

Directive on the ecodesign of energy-

using products (2005/32/EU)

• Establishing a framework for setting ecodesignrequirements that products must fulfil in order to receive the“CE” label

• focuses on energy-using products with annual sales ofindicatively more than 200,000 units (not incl. transport)

• the European Commission, in interaction with a consultationforum and a regulatory committee, defines product groupsto be worked on in preparatory studies,

• First mandatory requirements will probably become effectivein spring 2009 (e.g. on boilers)

• Expert assessment: concentrates on cutting off the worstproducts from the market and market transformation(dissemination) of existing products than stimulating eco-innovative “top runners”

Economics of labels:UK fridge freezer market and energy labels

49

Fridge Freezers Market Shares

0%

20%

40%

60%

80%

97 98 99 00 01 02 03 04 05 06

Financial Year Ending

Energy Label A

Energy Label B

Energy Label C

Energy Label D

Energy Label E

Energy Label F

Energy Label G

Achievements of settingstandards

Directive on the energy performance ofbuildings (EPBD, 2002/91/EC)

• Buildings sector is responsible for about 40% of the EU’sfinal energy consumption.

• Aims at minimising the energy consumption of residentialand tertiary buildings in the EU Member States through anumber of requirements (methodology of calculation of theintegrated energy performance, minimum requirements onthe energy performance of new buildings, minimumrequirements on the energy performance of large existingbuildings (>1000 m2), Energy performance certification ofbuildings

• Expert assessment: national implementation differs,roadmaps not well developed, needs overall strengthening

Housing – case

•Deep Renovation•Refurbishment of older buildings -leads to net zerogreenhouse gas emissions

Goals Include:

To significantly reduce greenhouse gas emissions from buildings To reduce energy input in building materials To implement high recycling quotas To improve indoor air quality

Project examples:

Sonnenschiff ‘Sunship’ Freiburg, office building constructed in 2005, floor covermade of natural rubber, PVC free mobility infrastructure suitable for bicycleswww.sonnenschiff.de

Housing Barriers and Drivers

Refurbishment ofold buildings

BarriersCultural-

institutional

BarriersSocio-

economic

DriversSocio-

Economic

DriversTechnical

DriversNatural

DriversCultural-

institutional

Willingness ofresidents toparticipate inshared housingconcepts

Lifecycle thinking isnot widespread

Climatic zonewhere building islocated

Lack ofinformation aboutexisiting supportmeasures fortenants andlandlords

Availability of low-impact technologiesand materials

Development ofinfrastructuresaffecting locationof residential andnon-residentialbuildings

Insufficient financialmeans for initialinvestment

Long paybackperiods of eco-innovations inhousing andconstruction

Limited incentives forlandlords or tenants to investin eco-innovations

Number ofhouseholds and firms

General economicdevelopment

Demand for housing/ building space

Development ofenergy andmaterials prices(incl. energy oremissionstaxes), andinterest rates

Readiness for public administrationsto develop green building andinfrastructure concepts on formerindustrial areas in city centres insteadof further following the strategy ofurban sprawl

Transactioncosts forreceivinginformation,advice andfinancialsupport oftenhigh

Insufficient motivation, trainingand qualification of plannersand installers

Insufficient information oftenants and building ownersabout eco-innovations

BarriersFinancial

Hours of use peryear

Transportation – Vehicles• proposal stipulates that by 2012 the average

emissions of new cars sold in the EU shall notexceed 120g

• Existing scheme on labelling for energy use(1999/94/EU)

• Excluded from ETS, no incentive for light-weight• Energy use part of eco-taxation – however

gasoline use has been increasing over the lastyears (with exceptions!)

• Various other regulation on air pollutants andend-of-life vehicles

• Given that this is the fastest growing sector,radical innovation is needed

Drivers and barriers - thegreen electric car

Climate Policy: Strategic STD,instruments ought to deliver innovation

Scenario „radicalchange“

Scenario„intelligent STD

policy“

time2010 2020 2030

costs

Standards

STD needs clear andlong-term targets,new instruments

(information-based&network type)for early majorities,economic incentives

for long-term diffusion

Source: Bleischwitz et al. 2009

An overall gap and opportunity analysis onEU capacities for eco-innovation

Stages

Businessdevelopment

Value Added

FP 7

CIP-EIPETAP

SCP-AP

EPBD

EuP

Massmarket

DiffusionProblems!

Earlystage

GAP!Start-upGAP!R&D/Pre-seed

CIP-IEE

Policies for System InnovationJacobsson / Bergek (2004)

1. Creation and diffusion of new knowledge;2. Orientation and credible commitments of policies;3. Provision of financial resources and required capacities;4. Mediation of division of benefits from positive externalities;5. Creation of new markets (e.g., as niche markets by dint of

trustworthy certification and signaling of quality, abatementof administrative restraints, public procurement, lead marketpolicy and other more)

6. Forming legitimacy among relevant actors and stakeholders(social acceptance),

7. Entrepreneurial experimentation to increase the sociallearning process.

Co-evolution: policies, corporate and civilaction as mutually reinforcing

Source: Bleischwitz 2004

Conclusions

• Policy Mix seems justified because of– the multitide of market barriers

– the challenge to combine dissemination of bestpractices and radical innovation

– the need to take into account the internationaldimension, competitiveness concerns and pioneeradvantages

• Policy analysis is able to assess strengths andweaknesses and to conclude on improvements

The case of Biofuels –a radical eco-innovation?

• In 2003, the EU set the indicative target to increase the share ofbiofuels in transport to at least 5,75% by 2010.

• At the EU summit of March 2007, the Council proclaimed that itaims to reach a 10% share of biofuels in transport by 2020.

• A progress report of 2007 shows that for 2010 a share of 4,2%seems more likely. In fact, the EU 25 reached a biofuels share ofonly 1% in 2005.

• 2003 Directive on energy taxation allows Member States to applyreduced excise duty rates to biofuels when those are used intransport or for heating.

• EU also supports its production through the CAP; EU premium forenergy crops of up to 45 Euros per hectare. The EU furthermoresupports investment and training in biofuels via its RegionalDevelopment Fund and its Rural Development policy

Biofuels – definition,characteristics

• Biofuels = liquid fuels from organic matter• not fossil fuels no resource scarcities

• Food , fodder crops

Classification1st generation, 2 types:

– Biodiesel : oils from rendered animal fat, rapeseed, palmoil

– Bioethanol : fermentation of products that contain sugars:sugarcane, maize, sugar beat, barley, wheat.

2nd generation = from the whole plant (not just the oily orsugar rich part; also from biomass); not yet technically (in 5 –10 years)

• Biomass = solid organic mass; used for heating or electricitybiofuel & biomass=bioenergy

RegulatoryImpactAssessment–IMPACTSOFBIOFUELS

• Not an effective way of using bioenergy resources (cuttinggreenhouse gas emission + value for money, ROI

• 1st generation = detrimental to the environment

• Neglect of biomass (more effective way to reduce GHG) by EU,UK – misguided; => change the policy to efficientize theproduction of energy with lowest possible GHG emissions

• Biofuels from local crops => no economic sense to receivesubventions from GOV; GOV focus should be on developingtechnologies

• Biofuels policies problems not foreseen by Com, StavrosDimas!

• Certification will be made for the negative impacts of biofuels

Are biofuels really sustainable?

Biofuels–CountryAttractivenessIndices

Biofuels–CountryAttractivenessIndices(II)

Conclusions on biomass andbiofuels

• Can be seen as a policy failure: too hastyregulation with unexpected internationalresults

• Cost effective solutions:– Preventing deforestation & reforestation –

compensation payments– Cascading use of biomass (materials first), heating

the residuals and biomass waste– integrated ecosystem management⇒Biomass and land use management rather than

biofuel production⇒ alternative fuels, new cars, new mobility patterns

...climate policy ought to takeinto account the international

dimension of consumptionand regional action

“Grey Energy”: Greenhouse gases associated withUK imports and exports, 1992–2006

Source: Helm et al. 2007, Figure 8, p.20

70

UK greenhouse gas emissions on a consumption basis,1990–2003

Source: Helm et al. 2007, Figure 11, p.24

71