EU Energy Policy Blog

The international climate negotiations in Cancun, Mexico, have concluded, and despite the gloom-and-doom predictions that dominated the weeks and months leading up to Cancun, the Sixteenth Conference of the Parties (COP-16) of the United Nations Framework Convention on Climate Change (UNFCCC) must be judged a success. It represents a set of modest steps forward. Nothing more should be expected from this process.
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With the usual fanfare, Paris-based International Energy Agency (IEA) released its 2010 World Energy Outlook (WEO), a flagship publication that gives a global perspective on energy prospects through 2035. And as usual, it is a good read with a compilation of facts and figures that are hard to find in a single document anywhere else.
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Economic evaluations of alternative electric generating technologies typically rely on
comparisons between their expected life-cycle production costs per unit of electricity supplied. The standard life-cycle cost metric utilized is the “levelized cost” per MWh supplied. This metric is inappropriate for comparing intermittent generating technologies like wind and solar with dispatchable generating technologies like nuclear, gas combined cycle, and coal. It fails to take into account differences in the production profiles of intermittent and dispatchable generating technologies and the associated large variations in the market value of the electricity they supply. Levelized cost comparisons overvalue intermittent generating technologies compared to dispatchable base load generating technologies. They also overvalue wind generating technologies compared to solar generating technologies.
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One of the reasons to support renewable energy resources in general, and wind the current front-runner in particular, is that they typically replace thermal generation and therefore reduce greenhouse gas emissions. But the question of “by how much” turns out to be complicated.
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The absence of federal leadership to tackle GHG emissions in the US has left the room free for regional and state level policy initiatives. These initiatives include policies to reduce and monitor GHG emissions, increase energy efficiency and promote renewable energy. In particular, Renewable Portfolio Standards (i.e., a target related to the share of electricity produced from renewable energy sources) have experienced a large success across the US. They have been adopted to date by about 30 American States. How can we explain this trend ?
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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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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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