EU Energy Policy Blog

Three interrelated developments in the world’s energy system and energy-related emissions should be recognized as critical signals regarding international action on climate change: (1) coal has been the fastest growing fossil fuel for the past 7 years; (2) the carbon intensity of the world’s total primary energy supply has been increasing in the past decade; (3) previous emissions reduction efforts have fallen short and emissions have been (and still are) rising in almost all countries in the world.
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Climate negotiators recognize that, at root, the climate problem is a free-rider problem. Each country would prefer that the others do more. But the free-rider problem is not immutable, and that has been overlooked. The design of agreements can exacerbate it or alleviate it. Instead, the implicit assumption has been that it must be overcome by moral suasion and scientific argument, both of which are weak instruments when dealing with national self-interest. Because of this oversight, both Kyoto and Copenhagen negotiations followed a global cap-and-trade framework, which has proven ineffective. We find that adopting cap-and-trade rules polarizes the free-rider incentive and discourages cooperation.
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In promising on a unilateral level to reduce the energy intensity of its economy by more than 40% from 2005 levels by 2020, China has positioned itself among the political leaders in the debate about climate change. Is China’s target ambitious and achievable?

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Reflecting on recent meetings in Asia and recalling meetings I’ve previously had in Brussels and Washington, some important opportunities and ironies about national and international climate policy come to mind.

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As the Copenhagen Accord makes emphatically clear, developing countries are not accepting emission caps. This will make passing a strong national cap more difficult. Economically cap and trade is a carbon tax with the tax rate set by the permit market to make sure the cap is met. This results in a highly volatile tax rate, which slows investment, makes it more costly, and will likely create political problems as the price of carbon increases over the years.
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Financial markets may be depressed and unemployment high but investment keeps pouring into GreenTech field – loosely defined to include renewable energy technologies, energy efficiency including in-home automaton and energy management systems, smart meters/smart grid, electric cars, storage, batteries, biofuels and a host of supporting technologies.
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Being now the largest CO2 emitter in the world, China’s actions toward climate change are particularly important to reduce GHG emissions at the global level. The recent announced target to reduce the carbon intensity of its economy by 40 to 45% by 2020 seems rather more difficult to achieve than first calculations would suggest.

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Both our energy use and CO2 emissions can be reduced by using and producing energy in different ways. Implementing these improvements is associated with changes in our technology and energy use. It has been shown that the public is, to a large extent, unaware of the essential role played by energy in society, of the challenges that we face with our energy supply, and the steps we can take to increase energy efficiency.
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Google has a habit of surprising its competitors. The fast moving company is known for launching into new forays not always knowing where it may end up. In this sense, it is not only the competitors who are trying to read what the company’s latest move may entail.
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On January 1st, 2010, the Spanish Government took over the presidency of the European Union. Shaping the future political agenda at a European level is especially important in the field of energy and sustainability. The current unsustainable energy models, both European and global, and especially their consequences on climate change, need an urgent action on this field, which must be agreed at a European level from a long-term approach.
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